10-K 1 hcp-20151231x10k.htm 10-K

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One) |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-08895

HCP, Inc.

(Exact name of registrant as specified in its charter)

Maryland | 33-0091377
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
1920 Main Street, Suite 1200 Irvine, California | 92614 (Zip Code)
(Address of principal executive offices) |
Registrant’s telephone number, including area code (949) 407-0700
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Name of each exchange on which registered
Common Stock | New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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. (check one):

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

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1 4.6 billion.

As of January 29, 201 6 there were 465,531,737 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the registrant’s 201 6 Annual Meeting of Stockholders have been incorporated by reference into Part III of this Report.

Table of Contents

HCP, Inc.

Form 10-K

For the Fiscal Year Ended December 31, 2015

Table of Contents

Cautionary Language Regarding Forward-Looking Statements |  | 1 |
Part I |  |  |  | 3 |
Item 1. |  | Business |  | 3 |
Item 1A. |  | Risk Factors |  | 12 |
Item 1B. |  | Unresolved Staff Comments |  | 27 |
Item 2. |  | Properties |  | 27 |
Item 3. |  | Legal Proceedings |  | 32 |
Item 4. |  | Mine Safety Disclosures |  | 32 |
Part II |  |  |  | 33 |
Item 5. |  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 33 |
Item 6. |  | Selected Financial Data |  | 36 |
Item 7. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 37 |
Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk |  | 64 |
Item 8. |  | Financial Statements and Supplementary Data |  | 67 |
Item 9. |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |  | 122 |
Item 9A. |  | Controls and Procedures |  | 122 |
Item 9B. |  | Other Information |  | 124 |
Part III |  |  |  | 124 |
Item 10. |  | Directors, Executive Officers and Corporate Governance |  | 124 |
Item 11. |  | Executive Compensation |  | 124 |
Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 124 |
Item 13. |  | Certain Relationships and Related Transactions, and Director Independence |  | 124 |
Item 14. |  | Principal Account ing Fees and Services |  | 124 |
Part IV |  |  |  | 125 |
Item 15. |  | Exh ibits, Financial Statement Schedules |  | 125 |

Table of Contents

All references in this report to “HCP,” the “Company,” “we,” “us” or “our” mean HCP, Inc., together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “HCP, Inc.” mean the parent company without its subsidiaries.

Cautionary Language Regarding Forward-Looking Statements

Statements in this Annual Report on Form 10-K that are not historical factual statements are “forward-looking statements.” We intend to have our forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with those provisions. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof. F orward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could significantly affect our future financial condition and results of operations. While forward-looking statements reflect our good faith belief and reasonable assumptions based upon current information, we can give no assurance that our expectations or forecasts will be attained. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this Annual Report, and such forward-looking statements are subject to known and unknown risks and uncertainties that are difficult to predict. As more fully set forth under “Item 1A, Risk Factors” in this report, risks and uncertainties that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include, among other things:

| · |  | HCR ManorCare, Inc.’s (“HCRMC”) ability to meet its contractual obligations under the HCRMC lease amendment and risks related to the impact of the United States (“U.S.”) Department of Justice (“DOJ”) lawsuit against HCRMC, including the possibility of larger than expected litigation costs, adverse results and related developments;

| · |  | our reliance on a concentration of a small number of tenants and operators for a significant portion of our revenues;

| · |  | the financial weakness of our tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases and borrowers’ loans;

| · |  | the ability of our tenants, operators and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations;

| · |  | competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

| · |  | competition for skilled management, nurses and other trained personnel;

| · |  | availability of suitable properties to acquire at favorable prices and the competition for the acquisition and financing of those properties;

| · |  | our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to replace an existing tenant or operator upon default;

| · |  | the risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners’ financial condition and continued cooperation;

| · |  | our ability to achieve the benefits of investments within expected time frames or at all, or within expected cost projections;

| · |  | the potential impact on us, our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments;

| · |  | the effect on healthcare providers of legislation addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements;

| · |  | changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations, of our tenants and operators;

1

Table of Contents

| · |  | volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions;

| · |  | changes in global, national and local economic conditions, and currency exchange rates;

| · |  | our ability to manage our indebtedness level and changes in the terms of such indebtedness; and

| · |  | our ability to maintain our qualification as a real estate investment trust.

We do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.

2

Table of Contents

PART I

ITEM 1. Business

General Overview

HCP, an S&P 500 company, invests primarily in real estate serving the healthcare industry in the U.S. We are a Maryland corporation organized in 1985 and qualify as a self-administered real estate investment trust (“REIT”). We are headquartered in Irvine, California, with offices in Nashville, Los Angeles, San Francisco and London. Our diverse portfolio is comprised of investments in the following healthcare segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital.

Portfolio Summary

At December 31, 2015, we have $23.5 billion of investments in our Owned Portfolio, Unconsolidated Joint Ventures and Developments and Redevelopments.

Owned Portfolio. At December 31, 2015, our real estate and debt investments in our owned portfolio consisted of the following (square feet and dollars in thousands):

|  | Number of |  |  |  |  | Investment(3) |  | Total |  | Adjusted |  | Interest |
Segment |  | Properties(1) |  | Capacity(2) |  | Real Estate(1) |  | Debt |  | Investment |  | (Cash) NOI(4) |  | Income |
Senior housing |  | 506 |  | 50,608 | Units |  | $ | 9,200,828 |  | $ | 90,805 |  | $ | 9,291,633 |  | $ | 653,811 |  | $ | 28,718 |
Post-acute/ skilled nursing |  | 311 |  | 38,163 | Beds |  |  | 4,389,570 |  |  | 780,896 |  |  | 5,170,466 |  |  | 454,371 |  |  | 83,466 |
Life science |  | 118 |  | 7,550 | Sq. ft. |  |  | 3,795,165 |  |  | — |  |  | 3,795,165 |  |  | 262,639 |  |  | — |
Medical office |  | 227 |  | 17,055 | Sq. ft. |  |  | 3,474,543 |  |  | — |  |  | 3,474,543 |  |  | 250,650 |  |  | — |
Hospital |  | 16 |  | 2,227 | Beds |  |  | 594,085 |  |  | — |  |  | 594,085 |  |  | 85,451 |  |  | — |
Total |  | 1,178 |  |  |  |  | $ | 21,454,191 |  | $ | 871,701 |  | $ | 22,325,892 |  | $ | 1,706,922 |  | $ | 112,184 |

| (1) |  | Represents 1,070 properties under lease with an investment value of $1 8.8 billion and 108 senior housing operating properties under RIDEA structure s which are permitted by the Housing and Economic Recovery Act of 2008 (commonly referred to as “RIDEA”) (see “Healthcare Segments—Senior housing” section below) with an investment value of $2.7 billion.

| (2) |  | Senior housing facilities are measured in available units (e.g., studio, one or two bedroom units). Post-acute/skilled nursing facilities and hospitals are measured in available bed count. Life science and medical office buildings are measured in square feet (“sq. ft.”).

| (3) |  | Property investment represents: (i) the carrying amount of real estate and intangibles, after adding back accumulated depreciation and amortization, and (ii) the carrying amount of direct financing leases. Debt investment represents the carrying amount of loans receivable and marketable debt securities.

| (4) |  | Adjusted (Cash) Net Operating Income from continuing operations (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate properties. For a reconciliation of net income to adjusted (cash) NOI, refer to Note 14 to the Consolidated Financial Statements.

Unconsolidated Joint Ventures. At December 31, 2015, we had interests in unconsolidated joint ventures representing 27 properties with an aggregate investment of $1.7 billion, of which our pro rata share was $848 million, primarily in our senior housing, life science and medical office segments.

Developments and Redevelopments. At December 31, 2015, we had an aggregate investment of $282 million in assets under development and redevelopment, including our unconsolidated joint venture developments, which are primarily in our life science, medical office and senior housing segments.

For a description of our significant activities during 201 5, see Item 7 in this report.

3

Table of Contents

Business Strategy

We invest and manage our real estate portfolio for the long-term to maximize the benefit to our stock holders and support the growth of our dividends. The core elements of our strategy are: (i) to acquire, develop, lease, own and manage a diversified portfolio of quality healthcare properties across multiple business segments and geographic locations (including Europe); (ii) to align ourselves with leading healthcare companies, operators and service providers, which over the long-term should result in higher relative rental rates, net operating cash flows and appreciation of property values; (iii) to allocate capital targeting a balanced portfolio between longer-term escalating triple-net leases with high-quality tenants, and operating businesses with shorter-term leases in our m edical office and l ife s cience segments; (iv) to maintain adequate liquidity with long-term fixed rate debt financing with staggered maturities, which supports the longer-term nature of our investments, while reducing our exposure to interest rate volatility and refinancing risk at any point in the interest rate or credit cycles; and (v) to continue to manage our balance sheet with a targeted financial leverage of 40% relative to our assets.

Internal Growth Strategies

We believe that our longer-term escalating triple-net leases with larger tenants and operators having scale enhance the quality, stability and growth of our rental income. Further, we believe many of our existing properties hold the potential for increased future cash flows as they are well maintained and in desirable locations within markets where the creation of new supply is limited by the lack of available sites and the difficulty of obtaining the necessary licensing, other approvals and/or financing. Our strategy for maximizing the benefits from these opportunities is to: (i) work with new or existing tenants and operators to address their space and capital needs; and (ii) provide high-quality property management services in order to motivate tenants to renew, expand or relocate into our properties.

We expect to continue our internal growth as a result of our ability to:

| · |  | Build and maintain long-term leasing and management relationships with quality tenants and operators. In choosing locations for our properties, we focus our attention on their physical environment, adjacency to established businesses (e.g., hospital systems) and educational centers, proximity to sources of business growth and other local demographic factors.

| · |  | Replace tenants and operators at the best available market terms and lowest possible transaction costs. We believe that we are well-positioned to attract new tenants and operators and achieve attractive rental rates and operating cash flow as a result of the location, design and maintenance of our properties, together with our reputation for high-quality building services and responsiveness to tenants, and our ability to offer space alternatives within our portfolios.

| · |  | Extend and modify terms of existing leases prior to expiration. We structure lease extensions, early renewals or modifications, which reduce the cost associated with lease downtime or the re-investment risk resulting from the exercise of tenants’ purchase options, while securing the tenancy and relationship of our high quality tenants and operators on a long-term basis.

Investment Strategies

The delivery of healthcare services requires real estate and, as a result, tenants and operators depend on real estate, in part, to maintain and grow their businesses. We believe that the healthcare real estate market provides investment opportunities due to the: (i) compelling long-term demographics driving the demand for healthcare services; (ii) specialized nature of healthcare real estate investing; and (iii) ongoing consolidation of the fragmented healthcare real estate sector.

While we emphasize healthcare real estate ownership, we may also provide real estate secured financing to, or invest in equity or debt securities of, healthcare operators or other entities engaged in healthcare real estate ownership. We may also acquire all or substantially all of the securities or assets of other REITs, operating companies or similar entities where such investments would be consistent with our investment strategies. We may co-invest alongside institutional or development investors through partnerships or limited liability companies.

We monitor, but do not limit, our investments based on the percentage of our total assets that may be invested in any one property type, investment vehicle or geographic location, the number of properties that may be leased to a single tenant or operator, or loans that may be made to a single borrower. In allocating capital to our multiple segments, we target opportunities with the most attractive risk/reward profile for our portfolio as a whole. We may take additional measures to

4

Table of Contents

mitigate risk, including diversifying our investments (by sector, geography, tenant or operator), structuring transactions as master leases, requiring tenant or operator insurance and indemnifications, and obtaining credit enhancements in the form of guarantees, letters of credit or security deposits.

We believe we are well-positioned to achieve external growth through acquisitions, financing and development. Other factors that contribute to our competitive position include:

| · |  | our reputation gained through over 30 years of successful operations and the strength of our existing portfolio of properties;

| · |  | our relationships with leading healthcare operators and systems, investment banks and other market intermediaries, corporations, private equity firms, non-profits and public institutions seeking to monetize existing assets or develop new facilities;

| · |  | our relationships with institutional buyers and sellers of high-quality healthcare real estate;

| · |  | our ability to act quickly on due diligence and financing due to the strength of our experienced management team and balance sheet liquidity;

| · |  | our track record and reputation for executing acquisitions responsively and efficiently, which provides confidence to domestic and foreign institutions and private investors who seek to sell healthcare real estate in our market areas;

| · |  | our relationships with nationally recognized financial institutions that provide capital to the healthcare and real estate industries;

| · |  | our control of sites (including assets under contract with radius restrictions); and

| · |  | in addition, we regularly conduct portfolio reviews that help identify assets ranked in the bottom tier(s). We look for opportunities to monetize such non-core assets to improve the overall quality of our portfolio.

Financing Strategies

O ur REIT qualification requires us to distribute at least 90% of our REIT taxable income (ex cluding net capital gains); therefore, we don’t retain capital. As a result, we regularly access the public equity and debt markets to raise the funds necessary to finance acquisitions and debt investments, develop and redevelop properties, and refinance maturing debt.

We may finance acquisitions and other investments through the following vehicles:

| · |  | borrowings under our credit facility;

| · |  | issuance or origination of debt, including unsecured notes, term loans and mortgage debt;

| · |  | sale of ownership interests in properties or other investments; or

| · |  | issuanc e of common or preferred stock or equivalent.

We maintain a disciplined balance sheet by actively managing our debt to equity levels and maintaining multiple sources of liquidity, such as our revolving line of credit facility, access to capital markets and secured debt lenders, relationships with current and prospective institutional joint venture partners, and our ability to divest of assets. Our debt obligations are primarily long-term fixed rate with staggered maturities, which reduces the impact of rising interest rates on our operations.

We finance our investments based on our evaluation of available sources of funding. For short-term purposes, we may utilize our revolving line of credit facility or arrange for other short-term borrowings from banks or other sources. We arrange for longer-term financing by offering debt and equity securities, placing mortgage debt and obtaining capital from institutional lenders and joint venture partners.

5

Table of Contents

Competition

Investing in real estate serving the healthcare industry is highly competitive. We face competition from other REITs, investment companies, pension funds, private equity and hedge fund investors, sovereign funds, healthcare operators, lenders, developers and other institutional investors, some of whom may have greater flexibility (e.g., non-REIT competitors), resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our objectives. Our ability to compete may also be impacted by global, national and local economic trends, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends.

Income from our investments is dependent on the ability of our tenants and operators to compete with other companies on a number of different levels, including: the quality of care provided, reputation, success of product or drug development, the physical appearance of a facility, price and range of services offered, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location, the size and demographics of the population in surrounding areas, and the financial condition of our tenants and operators. Private, federal and state payment programs, and government reimbursement, as well as the effect of laws and regulations, may also have a significant influence on the profitability of our tenants and operators. For a discussion of the risks associated with competitive conditions affecting our business, see “Item 1A, Risk Factors” in this report.

Healthcare Segments

Senior housing. At December 31, 2015, we had interests in 528 senior housing facilities, including 22 properties owned by our unconsolidated joint ventures. Our senior housing facilities are managed utilizing triple-net leases and RIDEA structures and include independent living facilities (“ILFs”), assisted living facilities (“ALFs”), memory care facilities (“MCFs”), care homes, and continuing care retirement communities (“CCRCs”), which cater to different segments of the elderly population based upon their personal needs. Services provided by our tenants or operators in these facilities are primarily paid for by the residents directly or through private insurance and are less reliant on government reimbursement programs such as Medicare and Medicaid.

We have entered into long-term agreements with operators, including Brookdale Senior Living, Inc. (“Brookdale”) to manage properties that are operated under a RIDEA structure. Under the provisions of RIDEA, a REIT may lease a “qualified healthcare property” on an arm’s length basis to a taxable REIT subsidiary (“TRS”), if the property is managed on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” RIDEA structures allow us to own the risks and rewards of the operations of healthcare facilities (as compared to leasing the property for contractual triple-net rents) in a tax efficient manner. We view RIDEA as a structure primarily to be used on properties that present attractive valuation entry points and/or growth profiles by: (i) transitioning the asset to a new operator that can bring scale, operating efficiencies, and/or ancillary services; or (ii) investing capital to reposition the asset. Brookdale provides comprehensive facility management and accounting services with respect to our senior housing RIDEA properties, for which we pay annual management fees pursuant to the aforementioned agreements. Most of the management agreements have terms ranging from 10 to 15 years, with 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (defined as earnings before interest, taxes, depreciation and amortization, and rent) thresholds. As of December 3 1, 2015, 127 properties were under RIDEA structures, 1 9 of which were owned by our unconsolidated joint venture s.

Our senior housing property types under both triple-net leases and RIDEA structures are further described below:

| · |  | Independent Living Facilities. ILFs are designed to meet the needs of seniors who choose to live in an environment surrounded socially by their peers with services such as housekeeping, meals and activities. Additionally, the programs and services may include transportation, social activities, exercise and fitness programs, beauty or barber shop access, hobby and craft activities, community excursions, meals in a dining room setting and other activities sought by residents. These residents generally do not need assistance with activities of daily living (“ADL”). However, in some of our facilities, residents have the option to contract for these services. At December 31, 2015, we had interests in 80 ILFs.

6

Table of Contents

| · |  | Assisted Living Facilities. ALFs are licensed care facilities that provide personal care services, support and housing for those who need help with ADL, such as bathing, eating, dressing and medication management, yet require limited medical care. These facilities are often in apartment-like buildings with private residences ranging from single rooms to large apartments. Certain ALFs may have a dedicated portion of a facility that offer s higher levels of personal assistance for residents requiring memory care as a result of Alzheimer’s disease or other forms of dementia. Levels of personal assistance are based in part on local regulations. At December 31, 2015, we had interests in 308 ALFs.

| · |  | Memory Care Facilities. MCFs address the unique challenges of our residents with Alzheimer’s disease or other forms of dementia. Residents may live in semi-private apartments or private rooms and have structured activities delivered by staff members trained specifically on how to care for residents with memory impairment. These facilities offer programs that provide comfort and care in a secure environment. At December 31, 2015, we had interests in 73 MCFs.

| · |  | Care Homes (United Kingdom). Care homes offer personal care services, such as lodging, meal services, housekeeping and laundry services, medication management and assistance with ADL. Care homes are registered to provide different levels of services, ranging from personal care to nursing care. Some homes can be further registered for a specific care need, such as dementia or terminal illness. At December 31, 2015, we had interests in 40 care homes.

| · |  | Continuing Care Retirement Communities. CCRCs offer several levels of assistance, including independent living, assisted living and nursing home care. CCRCs are different from other housing and care options for seniors because they usually provide written agreements or long-term contracts between residents and the communities (frequently lasting the term of the resident's lifetime), which offer a continuum of housing, services and healthcare on one campus or site. CCRCs are appealing as they allow residents to “age in place.” CCRCs typically require the individual to be in relatively good health and independent upon entry. At December 31, 2015, we had interests in 27 CCRCs.

Our senior housing segment accounted for approximately 42%, 39% and 36% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The following table provides information about our senior housing tenant/operator concentration for the year ended December 31, 2015:

|  | Percentage of |  | Percentage of |
Tenants/Operators |  | Segment Revenues |  | Total Revenues |
Brookdale(1) |  | 23 | % | 10 | %
HCRMC(2) |  | 7 | % | 23 | %

| (1) |  | Percentages do not include senior housing facilities that Brookdale manages (is not a tenant) under a RIDEA structure.

| (2) |  | Percentage of total revenues includes revenues earned from both senior housing and post-acute/skilled nursing facilities leased to HCRMC.

Post-acute/skilled nursing. At December 31, 2015, we had interests in 311 post-acute/skilled nursing facilities (“SNFs”). SNFs offer restorative, rehabilitative and custodial nursing care for people following a hospital stay or not requiring the more extensive and complex treatment available at hospitals. Ancillary revenues and revenues from sub-acute care services are derived from providing services to residents beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services. Certain SNFs provide some of the foregoing services on an out-patient basis. Post-acute/skilled nursing services provided by our tenants and operators in these facilities are paid for by private sources, third-party payors (e.g., insurance and Managed Care Organizations or “MC Os”) or through the Medicare (including Managed Care) and Medicaid programs. All of our SNFs are triple-net leased.

| · |  | Care Homes (United Kingdom). Our post-acute/skilled nursing property types include care homes in the United Kingdom (“U.K.”) that provide nursing care, which is care that (i) goes above and beyond that necessary to allow an individual to carry out their activities of daily living, (ii) needs to be administered by a qualified nurse or other medical professional, and (iii) may include management and administration of medicine, intravenous therapy, wound care or other medical services. At December 31, 2015, we had interests in 21 care homes.

7

Table of Contents

Our post-acute/skilled nursing segment accounted for approximately 24%, 27% and 29% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The following table provides information about our p ost-acute/skilled nursing tenant/operator concentration for the year ended December 31, 2015:

|  | Percentage of |  | Percentage of |
Tenants/Operators |  | Segment Revenues |  | Total Revenues |
HCRMC(1) |  | 80 | % | 23 | %

| (1) |  | Percentage of total revenues includes revenues earned from both senior housing and post-acute/skilled nursing facilities leased to HCRMC.

For a description of significant HCRMC updates during 2015, see Item 7 in this report.

Life science. At December 31, 2015, we had interests in and managed 122 life science properties, including four facilities owned by our unconsolidated joint ventures. These properties contain laboratory and office space primarily for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies and other organizations involved in the life science industry. While these properties have characteristics similar to commercial office buildings, they generally contain more advanced electrical, mechanical, and heating, ventilating and air conditioning (“HVAC”) systems. The facilities generally have specialty equipment including emergency generators, fume hoods, lab bench tops and related amenities. In many instances, life science tenants make significant investments to improve their leased space, in addition to landlord improvements, to accommodate biology, chemistry or medical device research initiatives.

Life science properties are primarily configured in business park or campus settings and include multiple buildings. The business park and campus settings allow us the opportunity to provide flexible, contiguous/adjacent expansion to accommodate the growth of existing tenants. Our properties are located in well-established geographical markets known for scientific research and drug discovery, including San Francisco and San Diego, California, Salt Lake City, Utah, Durham, North Carolina and Boston, Massachusetts. At December 31, 2015, 9 8% of our life science properties were triple-net leased (based on leased square feet).

Our life science segment accounted for approximately 13%, 14% and 14% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The following table provides information about our life science tenant concentration for the year ended December 31, 2015:

|  | Percentage of |  | Percentage of |
Tenants |  | Segment Revenues |  | Total Revenues |
Genentech, Inc.(1) |  | 17 | % | 2 | %
Amgen, Inc. |  | 15 | % | 2 | %

| (1) |  | Pursuant to a purchase and sale agreement in January 2016, the tenant exercised its purchase options under its lease. Accordingly, the percentage of segment revenues will decrease below 10% upon the completion of the sales.

Medical office. At December 31, 2015, we had interests in and managed 228 medical office buildings (“MOBs”), including a facility owned by our unconsolidated joint venture. MOBs typically contain physicians’ offices and examination rooms, and may also include pharmacies, hospital ancillary service space and outpatient services such as diagnostic centers, rehabilitation clinics and day-surgery operating rooms. While these facilities are similar to commercial office buildings, they require additional plumbing, electrical and mechanical systems to accommodate multiple exam rooms that may require sinks in every room, and special equipment such as x-ray machines. In addition, MOBs are often built to accommodate higher structural loads for certain equipment and may contain vaults or other specialized construction. Our MOBs are typically multi-tenant properties leased to healthcare providers (hospitals and physician practices), with approximately 83% of our MOBs, based on square feet, located on hospital campuses and 95% are affiliated with hospital systems. Occasionally, we invest in MOBs located on hospital campuses which may be subject to ground leases. At December 31, 2015, approximately 50% of our medical office buildings were triple-net leased (based on leased square feet).

8

Table of Contents

Our medical office segment accounted for approximately 17%, 16% and 17% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The following table provides information about our medical office tenant/operator concentration for the year ended December 31, 2015:

|  | Percentage of |  | Percentage of |
Tenants/Operators |  | Segment Revenues |  | Total Revenues |
HCA(1) |  | 14 | % | 3 | %

| (1) |  | Percentage of total revenues from HCA includes revenues earned from both our medical office and hospital segments.

Hospital. At December 31, 2015, we had interests in and managed 16 hospitals. Services provided by our tenants and operators in these facilities are paid for by private sources, third-party payors (e.g., insurance and HMOs) or through Medicare and Medicaid programs. Our hospital property types include acute care, long-term acute care, specialty and rehabilitation hospitals. All of our hospitals are triple-net leased.

Our hospital segment accounted for approximately 3%, 4% and 4% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The following table provides information about our hospital tenant/operator concentration for the year ended December 31, 2015:

|  | Percentage of |  | Percentage of |
Tenants/Operators |  | Segment Revenues |  | Total Revenues |
HCA(1) |  | 29 | % | 3 | %
Tenet Healthcare Corporation |  | 26 | % | 1 | %

| (1) |  | Percentage of total revenues from HCA includes revenues earned from both our medical office and hospital segments.

Sustainability

We believe that sustainability initiatives are a vital part of corporate responsibility, which supports our primary goal of increasing stockholder value through profitable growth. We continue to advance our commitment to sustainability, with a focus on achieving goals in each of the Environmental, Social and Governance (ESG) dimensions of sustainability.

Our environmental management programs strive to capture cost efficiencies that ultimately benefit our investors, tenants, operators, employees and other stakeholders, while providing a positive impact on the communities in which we operate. Our social responsibility team leads our local philanthropic and volunteer activities, and our transparent corporate governance initiatives incorporate sustainability as a critical component to achieving our business objectives and properly managing risks.

Our 2015 sustainability achievements include being named the Healthcare Leader in the Light Award winner by the National Association of Real Estate Investment Trusts (“NAREIT”) and constituency in the FTSE4Good Index series for the fourth consecutive year.

Additionally, we achieved constituency in the North America Dow Jones Sustainability Index (DJSI) for the third consecutive year, as well as the World DJSI for the first time. Accordingly, HCP was included in The Sustainability Yearbook, a listing of the world’s most sustainable companies which includes only those companies in the top 15% of their industry, as scored by the DJSI assessment. We were also named Industry Mover, as the company achieving the largest proportional improvement in sustainability performance in our industry as compared to our DJSI score in the previous year. For additional information regarding our sustainability initiatives, please visit our website at www.hcpi.com/sustainability.

Insurance

We obtain various types of insurance to mitigate the impact of property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. We attempt to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are,

9

Table of Contents

however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. In addition, we have a large number of properties that are exposed to earthquake, flood and windstorm occurrences for which the related insurances carry higher deductibles.

We maintain property insurance for all of our properties, and this insurance is primary for our medical office, life science and RIDEA facilities. Tenants under triple-net leases, primarily in our senior housing, post-acute/skilled nursing and hospital segments, are required to provide primary property, business interruption and liability insurance. We maintain separate general and professional liability insurance for our RIDEA facilities. Additionally, our corporate general and professional liability insurance program also extends coverage for all of our properties beyond the aforementioned. On an annual basis, we review whether we or Brookdale will bear responsibility for maintaining the required insurance coverage for the applicable properties, but the costs of such insurance are facility expenses paid from the revenues of those properties, regardless of who maintains the insurance.

Employees of HCP

At December 31, 2015, we had 18 7 full-time employees, none of whom were subject to a collective bargaining agreement.

Government Regulation, Licensing and Enforcement

Overview

Our tenants and operators are typically subject to extensive and complex federal, state and local healthcare laws and regulations relating to quality of care, licensure and certificate of need, government reimbursement, fraud and abuse practices, and similar laws governing the operation of healthcare facilities, and we expect that the healthcare industry, in general, will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services, among others. These regulations are wide ranging and can subject our tenants and operators to civil, criminal and administrative sanctions. Affected tenants and operators may find it increasingly difficult to comply with this complex and evolving regulatory environment because of a relative lack of guidance in many areas as certain of our healthcare properties are subject to oversight from several government agencies, and the laws may vary from one jurisdiction to another. Changes in laws, regulations, reimbursement enforcement activity and regulatory non-compliance by our tenants and operators can all have a significant effect on their operations and financial condition, which in turn may adversely impact us, as detailed below and set forth under “Item 1A, Risk Factors” in this report.

Based on information primarily provided by our tenants and operators, excluding our medical office segment, at December 31, 2015, we estimate that approximately 13% and 12% of the annualized base rental payments received from our tenants and operators were dependent on Medicare and Medicaid reimbursement, respectively.

The following is a discussion of certain laws and regulations generally applicable to our operators, and in certain cases, to us.

Fraud and Abuse Enforcement

There are various extremely complex U.S. federal and state laws and regulations (and in relation to our facilities located in the U.K., national laws and regulations of England, Scotland, Northern Ireland, and Wales) governing healthcare providers’ relationships and arrangements and prohibiting fraudulent and abusive practices by such providers. These laws include: (i) U.S. federal, state false claims acts and U.K. anti-fraud legislation and regulation, which, among other things, prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other U.S. federal or state or U.K. healthcare programs; (ii) U.S. federal, state anti-kickback and fee-splitting statutes, including the Medicare and Medicaid anti-kickback statute, which prohibit or restrict the payment or receipt of remuneration to induce referrals or recommendations of healthcare items or services, and U.K. legislation and regulations on financial inducements and vested interests; (iii) U.S. federal and state physician self-referral laws (commonly referred to as the “Stark Law”), which generally prohibit referrals by physicians to entities with which the physician or an immediate family member has a financial relationship; (iv) the federal Civil Monetary Penalties Law, which prohibits, among other things, the knowing presentation of a false or fraudulent claim for certain healthcare services; and (v) U.S. federal, state and U.K. privacy laws, including the privacy and security rules contained in the Health Insurance Portability and Accountability Act of 1996 (commonly referred to as “HIPAA”) and the U.K. Data Protection Act 1988, which provide for the privacy and security of personal health information. Violations of U.S. and U.K. healthcare fraud and abuse laws

10

Table of Contents

carry civil, criminal and administrative sanctions, including punitive sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid reimbursement and potential exclusion from Medicare, Medicaid or other federal or state healthcare programs. These laws are enforced by a variety of federal, state and local agencies and in the U.S. can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. Many of our tenants and operators are subject to these laws, and may become the subject of governmental enforcement actions if they fail to comply with applicable laws.

Reimbursement

Sources of revenue for many of our tenants and operators include, among others, governmental healthcare programs, such as the federal Medicare programs and state Medicaid programs and, in the U.K., the National Health Service (“NH S”) and local authority funding, and non-governmental third-party payors, such as insurance carriers and HMOs. As federal and state governments focus on healthcare reform initiatives, and as the federal government, many states, face significant current and future budget deficits, efforts to reduce costs by these payors will likely continue, which may result in reduced or slower growth in reimbursement for certain services provided by some of our tenants and operators. Similarly, in the U.K., the NHS and the local authorities are undertaking efforts to reduce costs, which may result in reduced or slower growth in reimbursement for certain services provided by our U.K. tenants and operators. Additionally, new and evolving payor and provider programs in the U.S., including but not limited to Medicare Advantage, Dual Eligible, Accountable Care Organizations (“ACO”), and Bundled Payments could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations.

Healthcare Licensure and Certificate of Need

Certain healthcare facilities in our portfolio (including our facilities located in the U.K.) are subject to extensive national, federal, state and local licensure, certification and inspection laws and regulations. In addition, various licenses and permits are required to handle controlled substances (including narcotics), operate pharmacies, handle radioactive materials and operate equipment. Many states in the U.S. require certain healthcare providers to obtain a certificate of need, which requires prior approval for the construction, expansion or closure of certain healthcare facilities. The approval process related to state certificate of need laws may impact some of our tenants’ and operators’ abilities to expand or change their businesses.

Life Science Facilities

While certain of our life science tenants include some well-established companies, other tenants are less established and, in some cases, may not yet have a product approved by the Food and Drug Administration, or other regulatory authorities, for commercial sale. Creating a new pharmaceutical product or medical device requires substantial investments of time and capital, in part because of the extensive regulation of the healthcare industry; it also entails considerable risk of failure in demonstrating that the product is safe and effective and in gaining regulatory approval and market acceptance.

Senior Housing Entrance Fee Communities

Certain of our senior housing facilities are operated as entrance fee communities. Generally, an entrance fee is an upfront fee or consideration paid by a resident, a portion of which may be refundable, in exchange for some form of long-term benefit. Some of the entrance fee communities are subject to significant state regulatory oversight, including, for example, oversight of each facility’s financial condition, establishment and monitoring of reserve requirements and other financial restrictions, the right of residents to cancel their contracts within a specified period of time, lien rights in favor of the residents, restrictions on change of ownership and similar matters.

Americans with Disabilities Act (the “ADA”)

Our properties must comply with the ADA and any similar state or local laws to the extent that such properties are “public accommodations” as defined in those statutes. The ADA may require removal of barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. To date, we have not received any notices of noncompliance with the ADA that have caused us to incur substantial capital expenditures to address ADA concerns. Should barriers to access by persons with disabilities be discovered at any of our properties, we may be directly or indirectly responsible for additional costs that may be required to make facilities ADA-compliant. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations pursuant to the ADA is an ongoing one, and we continue to assess our properties and make

11

Table of Contents

modifications as appropriate in this respect.

Environmental Matters

A wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare facility operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and any related liability therefore could exceed or impair the value of the property and/or the assets. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the value of such property and the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our earnings. For a description of the risks associated with environmental matters, see “Item 1A, Risk Factors” in this report.

Available Information

Our website address is www.hcpi.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the U.S. Securities and Exchange Commission (“SEC”).

Current copies of our Code of Business Conduct and Ethics and Vendor Code of Business Conduct and Ethics are posted in the Investor Relations section of our website at www.hcpi.com. In addition, waivers from, and amendments to, our Code of Business Conduct and Ethics that apply to our directors and executive officers, including our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, will be timely posted in the Investor Relations section of our website at www.hcpi.com.

ITEM 1A. Risk Factors

The section below discusses the most significant risk factors that may materially adversely affect our business, results of operations and financial condition.

As set forth below, we believe that the risks we face generally fall into the following categories:

| · |  | risks related to our business and operations;

| · |  | risks related to our capital structure and market conditions;

| · |  | risks related to other events; and

| · |  | risks related to tax, including REIT-related risks.

Risks Related to Our Business and Operations

We depend on a limited number of tenants and operators for a large percentage of our revenues and net operating income.

We manage our facilities utilizing lease and RIDEA structures. Under our lease arrangements, we generated 33% of our revenues from HCRMC (23%) and Brookdale (10%) during the year ended December 31, 2015. HCRMC is an operator that primarily provides post-acute care, skilled nursing care and assisted living services, and relies heavily on government reimbursement programs such as Medicare and Medicaid.

In addition to our lease arrangement with Brookdale, under RIDEA structures, we generated 8% of our net operating

12

Table of Contents

income from properties managed by Brookdale during the year ended December 31, 2015. Services provided by our tenants or operators in facilities managed under a RIDEA structure are primarily paid for by the residents directly or through private insurance and are less reliant on government reimbursement programs. We report the resident level fees and services revenues and corresponding operating expenses in our consolidated financial statements.

The inability or other failure of either HCRMC under its lease agreements, or Brookdale under its lease agreements and RIDEA structures, to meet their obligations to us could materially reduce our cash flow, net operating income and results of operations, which could in turn reduce the amount of dividends we pay to our stockholders, cause our stock price to decline and have other materially adverse effects on our business, results of operations and financial condition.

In addition, any failure by HCRMC or Brookdale to effectively conduct their operations or to maintain and improve our properties could adversely affect their business reputation and their ability to attract and retain patients and residents in our properties, which could have a materially adverse effect on our business, results of operations and financial condition. Furthermore, they each face an increasingly competitive labor market for skilled management personnel and nurses, which can cause operating costs to increase. While HCRMC and Brookdale generally have also agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses, they may have insufficient assets, income, access to financing and/or insurance coverage to enable them to satisfy their indemnification obligations.

The real estate portfolio that we have master leased to HCRMC accounts for a significant portion of our assets and revenues. Adverse regulatory and operational developments in HCRMC’s business and financial condition have had, and could continue to have, an adverse effect on us.

HCRMC, a provider of a range of healthcare services, primarily in post-acute care, skilled nursing care and assisted living, is our largest tenant, representing 23% of our gross assets and revenues as of and for the year ended December 31, 2015. In April 2011, we completed a $6 billion acquisition of substantially all the real estate assets of, and an equity interest in, HCRMC. In the first quarter 2015, we recorded an impairment charge of $478 million related to the real estate portfolio master leased to HCRMC, based on the present value of the future lease payments under the amendment to the master lease with HCRMC that became effective April 1, 2015. As a result of HCRMC’s fourth quarter 2015 performance deterioration and related decline in fixed charge coverage, we subsequently placed the real estate portfolio master leased to HCRMC on “W atch L ist” status effective at year-end 2015, and changed our accounting treatment to recognize rental income on a cash basis beginning January 1, 2016. Furthermore, HCRMC’s preliminary 2016 forecast indicates only limited improvement in its fixed charge coverage and free cash flow after capital expenditures in 2016. Accordingly, we assessed the value of this real estate portfolio, including obtaining an independent valuation appraisal of our post-acute/skilled nursing and senior housing facilities. As a result, we reduced the carrying value of this real estate portfolio to $5.2 billion, approximating its estimated market value, which resulted in an impairment charge of $817 million recorded in the fourth quarter of 2015.

In the fourth quarter of 2014 and the third quarter of 2015, we recorded impairment charges of $36 million and $27 million, respectively, for our equity ownership interest in HCRMC. These impairment charges resulted primarily from our review of their 2015 preliminary base financial forecast, operating results and other financial information provided by HCRMC, as well as market and industry data that, among other factors, showed a declining trend in admissions from hospitals and continuing trends in mix and length of stay driven by Medicare Advantage and other M anaged C are plans. As a result of HCRMC’s fourth quarter 2015 performance deterioration, we recorded an additional impairment charge of $19 million for our equity ownership in HCRMC, reducing its carrying value to zero.

On April 20, 2015, the DOJ unsealed a previously filed complaint in the United States District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not entitled to Medicare reimbursement. HCRMC incurred legal and regulatory defense costs of $3 million and $9 million during the fourth quarter and full year 2015, respectively. While the DOJ litigation is at an early stage and HCRMC has indicated that it believes the claims are unjust and it will vigorously defend against them, the ultimate outcome is uncertain and could, among other things, cause HCRMC to: (i) incur substantial additional time and costs to respond to and defend

13

Table of Contents

HCRMC’s actions in the litigation with the DOJ and any other third-party payors; (ii) refund or adjust amounts previously paid for services under governmental programs and to change business operations going forward in a manner that negatively impacts future revenue; (iii) pay substantial fines and penalties and incur other administrative sanctions, including having to conduct future business operations pursuant to a corporate integrity agreement, which may be with the Office of Inspector General of the Department of Health and Human Services; (iv) lose the right to participate in the Medicare or Medicaid programs; and (v) suffer damage to HCRMC’s reputation. In addition, any settlement in the DOJ litigation, with or without an admission of wrongdoing, may include a substantial monetary component that could have a material adverse effect on HCRMC’s liquidity and financial condition that makes it difficult or not possible for HCRMC to meet its obligations under its amended master lease with us.

Continued deterioration in HCRMC’s operating performance, business or financial condition, or adverse regulatory developments, could further reduce the revenues we earn under our master lease with HCRMC, further impair the value of our master lease with HCRMC, and result in, among other adverse events, acceleration of HCRMC’s indebtedness, impairment of its continued access to capital, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings by or against it under the U.S. Bankruptcy Code, any one or a combination of which could have a materially adverse effect on us.

See additional information regarding the aforementioned impairment charges, equity interest in HCRMC and master lease with HCRMC in: (i) Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—2015 Transaction Overview”; and (ii) Note 6 (Net Investment in Direct Financing Leases), Note 8 (Investments in and Advances to Unconsolidated Joint Ventures), Note 17 (Impairments) and Note 23 (Concentration of Credit Risk) to the Consolidated Financial Statements.

The properties managed by Brookdale account for a significant portion of our revenues and operating income. Adverse developments in Brookdale’s business and affairs or financial condition could have a materially adverse effect on us.

As of December 31, 2015, Brookdale managed 108 senior housing facilities that we own and 15 CCRCs owned by our unconsolidated joint venture pursuant to long-term management agreements. For the year ended December 31, 2015, these properties represented 12% and 10% of our gross assets and revenues, respectively. Although we have various rights as the property owner under our management agreements, we rely on Brookdale’s personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior living operations efficiently and effectively. We also rely on Brookdale to set appropriate resident fees, to provide accurate property-level financial results for our properties in a timely manner and to otherwise operate our senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations.

In its capacity as a manager, Brookdale does not lease our properties, and, therefore, we are not directly exposed to their credit risk in the same manner or to the same extent as a triple-net tenant. However, any adverse developments in Brookdale’s business and affairs or financial condition could impair its ability to manage our properties efficiently and effectively and could have a materially adverse effect on us. Brookdale is also one of our triple-net tenants. If Brookdale experiences any significant financial, legal, accounting or regulatory difficulties due to a weak economy or otherwise, such difficulties could result in, among other adverse events, acceleration of its indebtedness, impairment of its continued access to capital, the enforcement of default remedies by its counterparties or the commencement of insolvency proceedings by or against it under the U.S. Bankruptcy Code, any one or a combination of which indirectly could have a materially adverse effect on us.

The bankruptcy, insolvency or financial deterioration of one or more of our major tenants, operators or borrowers may materially adversely affect our business, results of operations and financial condition.

We lease our properties directly to operators in most cases, and in certain other cases, we lease to third party tenants who enter into long-term management agreements with operators to manage the properties. We are also a direct or indirect lender to various tenants and operators. Although our leases, financing arrangements and other agreements with our tenants and operators generally provide us the right under specified circumstances to terminate a lease, evict a tenant or operator, or demand immediate repayment of certain obligations to us, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization that may render certain of these remedies unenforceable, or at the

14

Table of Contents

least, delay our ability to pursue such remedies. For example, we cannot evict a tenant or operator solely because of its bankruptcy filing. A debtor has the right to assume, or to assume and assign to a third party, or to reject its unexpired contracts in a bankruptcy proceeding. If a debtor were to reject its leases with us, our claim against the debtor for unpaid and future rents would be limited by the statutory cap set forth in the U.S. Bankruptcy Code, which may be substantially less than the remaining rent actually owed under the lease. In addition, a debtor may assert in a bankruptcy proceeding that our lease should be re-characterized as a financing agreement, in which case our rights and remedies as a lender, compared to a landlord, generally would be more limited.

Also, if a debtor-manager seeks bankruptcy protection, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing our remedies against the manager unless relief is first obtained from the court having jurisdiction over the bankruptcy case. In any of these events, we also may be required to fund certain expenses and obligations (e.g., real estate taxes, insurance, debt costs and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new tenant, operator or manager. Furthermore, many of our facilities are leased to healthcare providers who provide long-term custodial care to the elderly; evicting such operators for failure to pay rent while the facility is occupied may involve specific procedural requirements and may not be successful.

Additionally, the financial weakness or other inability of our tenants, operators or borrowers to make payments or comply with certain other lease obligations may affect our compliance with certain covenants contained in our debt securities, credit facilities and the mortgages on the properties leased or managed by such tenants and operators, or otherwise adversely affect our results of operations. Under certain conditions, defaults under the underlying mortgages may result in cross default under our other indebtedness. Although we may be able to secure amendments under the applicable agreements in those circumstances, the bankruptcy of an applicable tenant or operator may potentially result in less favorable borrowing terms than currently available, delays in the availability of funding or other materially adverse consequences.

Increased competition has resulted and may further result in lower net revenues for some of our tenants, operators and borrowers and may affect their ability to meet their financial and other contractual obligations to us.

The healthcare industry is highly competitive. The occupancy levels at, and rental income from, our facilities are dependent on our ability and the ability of our tenants, operators and borrowers to compete with other tenants and operators on a number of different levels, including the quality of care provided, reputation, the physical appearance of a facility, price, the range of services offered, family preference, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location, and the size and demographics of the population in the surrounding area. In addition, our tenants, operators and borrowers face an increasingly competitive labor market for skilled management personnel and nurses. An inability to attract and retain skilled management personnel and nurses and other trained personnel could negatively impact the ability of our tenants, operators and borrowers to meet their obligations to us. A shortage of nurses or other trained personnel or general inflationary pressures on wages may force tenants, operators and borrowers to enhance pay and benefits packages to compete effectively for skilled personnel, or to use more expensive contract personnel, but they be unable to offset these added costs by increasing the rates charged to residents. Any increase in labor costs and other property operating expenses or any failure by our tenants, operators or borrowers to attract and retain qualified personnel could adversely affect our cash flow and have a materially adverse effect on our business, results of operations and financial condition.

Our tenants, operators and borrowers also compete with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. This competition, which is due, in part, to over development in some segments in which we invest, has caused the occupancy rate of newly constructed buildings to slow and the monthly rate that many newly built and previously existing facilities were able to obtain for their services to decrease. We cannot be certain that our tenants, operators and borrowers will be able to achieve occupancy and rate levels, and to manage their expenses, in a way that will enable them to meet all of their obligations to us. Further, many competing companies may have resources and attributes that are superior to those of our tenants, operators and borrowers. They may encounter increased competition that could limit their ability to maintain or attract residents or expand their businesses or to manage their expenses, either of which could materially adversely affect their ability to meet their financial and other contractual obligations to us, potentially decreasing our revenues, impairing our assets, and/or increasing our collection and dispute costs.

15

Table of Contents

Competition may make it difficult to identify and purchase, or develop, suitable healthcare facilities to grow our investment portfolio, to finance acquisitions on favorable terms, or to retain or attract tenants and operators.

We face significant competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, healthcare operators, lenders, developers and other institutional investors, some of whom may have greater resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our business goals and could improve the bargaining power of property owners seeking to sell, thereby impeding our investment, acquisition and development activities. Similarly, our properties face competition for tenants and operators from other properties in the same market, which may affect our ability to attract and retain tenants and operators, or may reduce the rents we are able to charge. If we cannot capitalize on our development pipeline, identify and purchase a sufficient quantity of healthcare facilities at favorable prices, finance acquisitions on commercially favorable terms, or attract and retain profitable tenants and operators, our business, results of operations and financial condition may be materially adversely affected.

Economic and other conditions that negatively affect geographic areas to which a greater percentage of our revenue is attributed could materially adversely affect our business, results of operations and financial condition.

For the year ended December 31, 2015, 35% of our revenue was derived from properties located in California (2 2%) and Texas (1 3%). As a result, we may be subject to increased exposure to adverse conditions affecting these regions, including downturns in the local economies or changes in local real estate conditions, increased competition or decreased demand, changes in state-specific legislation and local climate events and natural disasters (such as earthquakes, wildfires and hurricanes), which could adversely affect our business and results of operations.

We may be required to incur substantial renovation costs to make certain of our healthcare properties suitable for other tenants and operators.

Healthcare facilities are typically highly customized and may not be easily adapted to non-healthcare-related uses. The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and at times tenant-specific. A new or replacement tenant or operator may require different features in a property, depending on that tenant’s or operator’s particular business. If a current tenant or operator is unable to pay rent and/or vacates a property, we may incur substantial expenditures to modify a property before we are able to secure another tenant or operator or to accommodate multiple tenants or operators. These expenditures or renovations may materially adversely affect our business, results of operations and financial condition.

We face additional risks associated with property development that can render a project less profitable or not profitable at all and, under certain circumstances, prevent completion of development activities once undertaken.

Property development is a component of our growth strategy. At December 31, 2015, our actual investment and estimated commitments under our development platform, including land held for redevelopment, represented approximately $721 million, or 3% of our total assets. Large-scale, ground-up development of healthcare properties presents additional risks for us, including risks that:

| · |  | a development opportunity may be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred;

| · |  | the development and construction costs of a project may exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing or other costs, which could make the completion of the development project less profitable;

| · |  | construction and/or permanent financing may not be available on favorable terms or at all;

| · |  | the project may not be completed on schedule as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, regulatory hurdles, civil unrest and acts of war, which can result in increases in construction costs and debt service expenses or provide tenants or operators with the right to terminate pre-construction leases; and

| · |  | occupancy rates and rents at a newly completed property may not meet expected levels and could be insufficient to

16

Table of Contents

make the property profitable.

Any of the foregoing risks could materially adversely affect our business, results of operations and financial condition.

Our use of joint ventures may limit our flexibility with jointly owned investments.

We have and may continue in the future to develop and/or acquire properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to risks that may not be present with other methods of ownership, including:

| · |  | we could experience an impasse on certain decisions because we do not have sole decision-making authority, which could require us to expend additional resources on resolving such impasses or potential disputes, including litigation or arbitration;

| · |  | our joint venture partners could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments;

| · |  | our ability to transfer our interest in a joint venture to a third party may be restricted and the market for our interest may be limited;

| · |  | our joint venture partners may be structured differently than us for tax purposes, and this could create conflicts of interest and risk to our REIT status;

| · |  | our joint venture partners might become bankrupt, fail to fund their share of required capital contributions or fail to fulfill their obligations as a joint venture partner, which may require us to infuse our own capital into the venture on behalf of the partner despite other competing uses for such capital; and

| · |  | our joint venture partners may have competing interests in our markets that could create conflict of interest issues.

Any of the foregoing risks could materially adversely affect our business, results of operations and financial condition.

From time to time, we acquire other companies, and if we are unable to successfully integrate these operations, our business, results of operations and financial condition may be materially adversely affected.

Acquisitions require the integration of companies that have previously operated independently. Successful integration of the operations of these companies depends primarily on our ability to consolidate operations, systems, procedures, properties and personnel, and to eliminate redundancies and costs. We may encounter difficulties in these integrations. Potential difficulties associated with acquisitions include the loss of key employees, the disruption of our ongoing business or that of the acquired entity, possible inconsistencies in standards, controls, procedures and policies, and the assumption of unexpected liabilities, including:

| · |  | liabilities relating to the cleanup or remediation of undisclosed environmental conditions;

| · |  | unasserted claims of vendors or other persons dealing with the seller;

| · |  | liabilities, claims and litigation, whether or not incurred in the ordinary course of business, relating to periods prior to our acquisition;

| · |  | claims for indemnification by general partners, directors, officers and others indemnified by the seller; and

| · |  | liabilities for taxes relating to periods prior to our acquisition.

In addition, the acquired companies and their properties may fail to perform as expected, including in respect of estimated cost savings. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. Similarly, we may underestimate future operating expenses or the costs necessary to bring properties up to standards established for their intended use. If we have difficulties with any of these areas, or if we later discover additional liabilities or experience unforeseen costs relating to our acquired companies, we might not achieve the economic benefits we expect from our acquisitions, and this may materially adversely affect our business, results of operations and financial condition.

17

Table of Contents

From time to time we have made, and in the future we may seek to make, one or more material acquisitions, which may involve the expenditure of significant funds.

We regularly review potential transactions in order to maximize stockholder value. Future acquisitions may require the issuance of securities, the incurrence of debt, assumption of contingent liabilities or incurrence of significant expenditures, each of which could materially adversely impact our business, financial condition or results of operations. In addition, the financing required for such acquisitions may not be available on commercially favorable terms or at all.

Our tenants, operators and borrowers face litigation and may continue to experience rising liability and insurance costs.

In some states, advocacy groups have been created to monitor the quality of care at healthcare facilities, and these groups have brought litigation against the tenants and operators of such facilities. Also, in several instances, private litigation by patients has resulted in large damage awards for alleged abuses. The effect of this litigation and other potential litigation may materially increase the costs incurred by our tenants, operators and borrowers for monitoring and reporting quality of care compliance. In addition, their cost of liability and medical malpractice insurance can be significant and may increase or not be available at a reasonable cost so long as the present healthcare litigation environment continues. Cost increases could cause our tenants and operators to be unable to make their lease or mortgage payments or fail to purchase the appropriate liability and malpractice insurance, or cause our borrowers to be unable to meet their obligations to us, potentially decreasing our revenues and increasing our collection and litigation costs. In addition, as a result of our ownership of healthcare facilities, we may be named as a defendant in lawsuits arising from the alleged actions of our tenants or operators, for which claims such tenants and operators have agreed to indemnify us, but which may require unanticipated expenditures on our part.

The requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid, may adversely affect our tenants’, operators’ and borrowers’ ability to meet their financial and other contractual obligations to us.

Certain of our tenants, operators and borrowers are affected, directly or indirectly, by an extremely complex set of federal, state and local laws and regulations pertaining to governmental reimbursement programs. Such laws and regulations are subject to frequent and substantial changes that are sometimes applied retroactively. See “Item 1—Business—Government Regulation, Licensing and Enforcement” above. For example, to the extent that any of our tenants or operators receive a significant portion of their revenues from governmental payors, primarily Medicare and Medicaid, such revenues may be subject to:

| · |  | statutory and regulatory changes;

| · |  | retroactive rate adjustments;

| · |  | recovery of program overpayments or set-offs;

| · |  | court decisions;

| · |  | administrative rulings;

| · |  | policy interpretations;

| · |  | payment or other delays by fiscal intermediaries or carriers;

| · |  | government funding restrictions (at a program level or with respect to specific facilities); and

| · |  | interruption or delays in payments due to any ongoing governmental investigations and audits at such properties.

If our tenants, operators or borrowers directly or indirectly fail to comply with the extensive laws, regulations and other requirements applicable to their business and the operation of our properties, they could become ineligible to receive reimbursement from governmental reimbursement programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant changes to their operations. These laws and regulations are enforced by a variety of federal, state and local agencies and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. For

18

Table of Contents

example, one of our borrowers, Tandem Health Care, has an operator of its facilities, Consulate Health Care (“Consulate”), facing a qui tam or “whistleblower” action alleging that Consulate overbilled the federal government and the State of Florida. Our tenants, operators and borrow er s could be adversely affected by the resources required to respond to an investigation or other enforcement action. In such event, the results of operations and financial condition of our tenants and the results of operations of our properties operated by those entities could be materially adversely affected, which, in turn, could have a materially adverse effect on us. We are unable to predict future federal, state and local regulations and legislation, including the Medicare and Medicaid statutes and regulations, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory framework could have a materially adverse effect on our tenants, which, in turn, could have a materially adverse effect on us.

In recent years, governmental payors have frozen or reduced payments to healthcare provide rs due to budgetary pressures. Healthcare reimbursement will likely continue to be of significant importance to federal and state authorities. We cannot make any assessment as to the ultimate timing or the effect that any future legislative reforms may have on our tenants’, operators’ and borrowers’ costs of doing business and on the amount of reimbursement by government and other third-party payors. The failure of any of our tenants, operators or borrowers to comply with these laws and regulations, and significant limits on the scope of services reimbursed and on reimbursement rates and fees, could materially adversely affect their ability to meet their financial and contractual obligations to us.

Legislation to address federal government operations and administration decisions affecting the Centers for Medicare and Medicaid Services could have a materially adverse effect on our tenants’, operators’ and borrowers’ liquidity, financial condition or results of operations.

Congressional consideration of legislation pertaining to the federal debt ceiling, the Affordable Care Act (as defined below), tax reform and entitlement programs, including reimbursement rates for physicians, could have a materially adverse effect on our tenants’, operators’ and borrowers’ liquidity, financial condition or results of operations. In particular, changes in funding for entitlement programs such as Medicare and Medicaid may result in increased costs and fees for programs such as Medicare Advantage Plans and additional reductions in reimbursements to providers. Additionally, amendments to the Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), implementation of the Affordable Care Act and decisions by the Centers for Medicare and Medicaid Services could impact the delivery of services and benefits under Medicare, Medicaid or Medicare Advantage Plans and could affect our tenants and operators and the manner in which they are reimbursed by such programs. Such changes could have a materially adverse effect on our tenants’, operators’ and borrowers’ liquidity, financial condition or results of operations, which could adversely affect their ability to satisfy their obligations to us and could have a materially adverse effect on us.

Furthermore, the Supreme Court’s decision upholding the constitutionality of the individual healthcare mandate while striking down the provisions linking federal funding of state Medicaid programs with a federally mandated expansion of those programs has contributed to the uncertainty regarding the impact that the law will have on healthcare delivery systems over the next decade. We can expect that federal authorities will continue to implement the law, but because of the Supreme Court’s mixed ruling, the implementation will take longer than originally expected, with a commensurate increase in the period of uncertainty regarding the long-term financial impact on the delivery of and payment for healthcare.

Tenants and operators that fail to comply with federal, state, local and international laws and regulations, including licensure, certification and inspection requirements, may cease to operate or be unable to meet their financial and other contractual obligations to us.

Our tenants, operators and borrowers are subject to or impacted by extensive, frequently changing federal, state, local and international laws and regulations. These laws and regulations include, among others: laws protecting consumers against deceptive practices; laws relating to the operation of our properties and how our tenants and operators conduct their operations, such as fire, health and safety laws and privacy laws; federal and state laws affecting hospitals, clinics, and other healthcare communities that participate in both Medicare and Medicaid that mandate allowable costs, pricing, reimbursement procedures and limitations, quality of services and care, food service and physical plants, and similar foreign laws regulating the healthcare industry; resident rights laws (including abuse and neglect laws) and fraud laws; anti-kickback and physician referral laws; the ADA and similar state and local laws; and safety and health standards set by the Occupational Safety and Health Administration or similar foreign agencies. Certain of our properties may also require a license, registration and/or certificate of need to operate.

19

Table of Contents

Our tenants’, operators’ or borrowers’ failure to comply with any of these laws, regulations or requirements could result in loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from government healthcare programs, loss of license or closure of the facility and/or the incurrence of considerable costs arising from an investigation or regulatory action, which may have an adverse effect on facilities owned by or mortgaged to us, and therefore may materially adversely impact us. See “Item 1—Business—Government Regulation, Licensing and Enforcement—Healthcare Licensure and Certificate of Need” above.

Our tenants in the life science industry face high levels of regulation, expense and uncertainty.

Life science tenants, particularly those involved in developing and marketing pharmaceutical products, are subject to certain unique risks, including the following:

| · |  | some of our tenants require significant outlays of funds for the research, development and clinical testing of their products and technologies. If private investors, the government or other sources of funding are unavailable to support such activities, a tenant’s business may be adversely affected or fail;

| · |  | the research, development, clinical testing, manufacture and marketing of some of our tenants’ products require federal, state and foreign regulatory approvals which may be costly or difficult to obtain;

| · |  | even after a life science tenant gains regulatory approval and market acceptance, the product may still present significant regulatory and liability risks, including, among others, the possible later discovery of safety concerns, competition from new products and the expiration of patent protection for the product;

| · |  | our tenants with marketable products may be adversely affected by healthcare reform and the reimbursement policies of government or private healthcare payors; and

| · |  | our tenants may be unable to adequately protect their intellectual property under patent, copyright or trade secret laws.

If our tenants’ businesses are adversely affected, they may have difficulty making payments to us, which could materially adversely affect our business, results of operations and financial condition.

We may be unable to successfully foreclose on the collateral securing our real estate-related loans, and even if we are successful in our foreclosure efforts, we may be unable to successfully operate, occupy or reposition the underlying real estate, which may adversely affect our ability to recover our investments.

If a tenant or operator defaults under one of our mortgages or mezzanine loans, we may have to foreclose on the loan or protect our interest by acquiring title to the collateral and thereafter making substantial improvements or repairs in order to maximize the property’s investment potential. In some cases, the collateral consists of the equity interests in an entity that directly or indirectly owns the applicable real property or interests in operating facilities and, accordingly, we may not have full recourse to assets of that entity. Tenants, operators or borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against our exercise of enforcement or other remedies and/or bring claims for lender liability in response to actions to enforce mortgage obligations. Foreclosure-related costs, high loan-to-value ratios or declines in the value of the facility may prevent us from realizing an amount equal to our mortgage or mezzanine loan upon foreclosure, and we may be required to record a valuation allowance for such losses. Even if we are able to successfully foreclose on the collateral securing our real estate-related loans, we may inherit properties for which we may be unable to expeditiously secure tenants or operators, if at all, or we may acquire equity interests that we are unable to immediately resell due to limitations under the securities laws, either of which would adversely affect our ability to fully recover our investment.

Required regulatory approvals can delay or prohibit transfers of our healthcare facilities.

Transfers of healthcare facilities to successor tenants or operators may be subject to regulatory approvals or ratifications, including, but not limited to, change of ownership approvals under certificate of need laws and Medicare and Medicaid provider arrangements that are not required for transfers of other types of commercial operations and other types of real estate. The replacement of any tenant or operator could be delayed by the regulatory approval process of any federal, state or local government agency necessary for the transfer of the facility or the replacement of the operator licensed to manage the facility. If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a facility, which might expose us to successor liability, require us to indemnify subsequent operators to

20

Table of Contents

whom we might transfer the operating rights and licenses, or spend substantial time and funds to adapt the facility to other uses, all of which may materially adversely affect our business, results of operations and financial condition.

Risks Related to Our Capital Structure and Market Conditions

We rely on external sources of capital to fund future capital needs, and if access to such capital is unavailable on acceptable terms or at all, it could have a materially adverse effect on our ability to meet commitments as they become due or make future investments necessary to grow our business.

We may not be able to fund all future capital needs from cash retained from operations. If we are unable to obtain enough internal capital, we may need to rely on external sources of capital (including debt and equity financing) to fulfill our capital requirements. Our access to capital depends upon a number of factors, some of which we have little or no control over, including but not limited to:

| · |  | general availability of capital, including less favorable terms, rising interest rates and increased borrowing costs;

| · |  | the market price of the shares of our equity securities and the credit ratings of our debt and preferred securities;

| · |  | the market’s perception of our growth potential and our current and potential future earnings and cash distributions;

| · |  | our degree of financial leverage and operational flexibility;

| · |  | the financial integrity of our lenders, which might impair their ability to meet their commitments to us or their willingness to make additional loans to us, and our inability to replace the financing commitment of any such lender on favorable terms, or at all;

| · |  | the stability of the market value of our properties;

| · |  | the financial performance and general market perception of our tenants and operators;

| · |  | changes in the credit ratings on U.S. government debt securities or default or delay in payment by the United States of its obligations;

| · |  | issues facing the healthcare industry, including, but not limited to, healthcare reform and changes in government reimbursement policies; and

| · |  | the performance of the national and global economies generally.

If access to capital is unavailable on acceptable terms or at all, it could have a materially adverse impact on our ability to fund operations, repay or refinance our debt obligations, fund dividend payments, acquire properties and make the investments needed to grow our business.

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all, and negatively impact the market price of our securities, including our common stock.

Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. We may be unable to maintain our current credit ratings, and in the event that our current credit ratings deteriorate, we would likely incur higher borrowing costs, and it may be more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. Also, a downgrade in our credit ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities and debt instruments. The credit ratings of our senior unsecured debt are based on, among other things, our operating performance, liquidity and leverage ratios, overall financial position, level of indebtedness and pending or future changes in the regulatory framework applicable to our operators and our industry.

Our level of indebtedness may increase and materially adversely affect our future operations.

Our outstanding indebtedness as of December 31, 2015, was approximately $11.1 billion. We may incur additional indebtedness in the future, including in connection with the development or acquisition of assets, which may be substantial. Any significant additional indebtedness could negatively affect the credit ratings of our debt and require us to dedicate a substantial portion of our cash flow to interest and principal payments due on our indebtedness. Greater demands on our cash resources may reduce funds available to us to pay dividends, conduct development activities, make capital

21

Table of Contents

expenditures and acquisitions or carry out other aspects of our business strategy. Increased indebtedness can also make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relatively lower debt levels. Increased future debt service obligations may limit our operational flexibility, including our ability to finance or refinance our properties, contribute properties to joint ventures or sell properties as needed.

An increase in interest rates could increase interest cost on new debt and could materially adversely impact our ability to refinance existing debt, sell assets and conduct acquisition, investment and development activities.

If interest rates increase, so could our interest costs for any variable rate debt and for new debt. This increased cost could make the financing of any acquisition and development activity more costly. Rising interest rates could limit our ability to refinance existing debt when it matures, or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.

We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities and through the use of derivative instruments, primarily interest rate swap agreements. However, no amount of hedging activity can fully insulate us from the risks associated with changes in interest rates. Swap agreements involve risk, including that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, that the amount of income we earn from hedging transactions may be limited by federal tax provisions governing REITs and that these arrangements may cause us to pay higher interest rates on our debt obligations than would otherwise be the case. Failure to hedge effectively against interest rate risk, if we choose to engage in such activities, could adversely affect our results of operations and financial condition.

Covenants in our debt instruments limit our operational flexibility, and breaches of these covenants could materially adversely affect our business, results of operations and financial condition.

The terms of our current secured and unsecured debt instruments and other indebtedness that we may incur in the future, require or will require us to comply with a number of customary financial and other covenants, such as maintaining leverage ratios, minimum tangible net worth requirements, REIT status and certain levels of debt service coverage. Our continued ability to incur additional debt and to conduct business in general is subject to compliance with these financial and other covenants, which limit our operational flexibility. For example, mortgages on our properties contain customary covenants such as those that limit or restrict our ability, without the consent of the lender, to further encumber or sell the applicable properties, or to replace the applicable tenant or operator. Breaches of certain covenants may result in defaults under the mortgages on our properties and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee. Covenants that limit our operational flexibility as well as defaults resulting from the breach of any of these covenants could materially adversely affect our business, results of operations and financial condition.

Volatility, disruption or uncertainty in the financial markets may impair our ability to raise capital, obtain new financing or refinance existing obligations and fund real estate and development activities.

The global financial markets have experienced periods of significant volatility, disruption and uncertainty. While these conditions have stabilized since the first quarter of 2009 and the capital markets continue to show signs of improvement, the strength and sustainability of an economic recovery is uncertain. Increased or prolonged market disruption, volatility or uncertainty could materially adversely impact our ability to raise capital, obtain new financing or refinance our existing obligations as they mature and fund real estate and development activities.

Market volatility could also lead to significant uncertainty in the valuation of our investments and those of our joint ventures, which may result in a substantial decrease in the value of our properties and those of our joint ventures. As a result, we may be unable to recover the carrying amount of such investments and the associated goodwill, if any, which may require us to recognize impairment charges in earnings.

22

Table of Contents

We may be adversely affected by fluctuations in currency exchange rates.

We continue to pursue growth opportunities in international markets where the U.S. dollar is not the denominated currency. The ownership of investments located outside of the United States subjects us to risk from fluctuations in exchange rates between foreign currencies and the U.S. dollar. A significant change in the value of the British pound sterling (“GBP”) or other currencies in countries where we have a significant investment may have a materially adverse effect on our financial position, debt covenant ratios, results of operations and cash flow.

We may attempt to manage the impact of foreign currency exchange rate changes through the use of derivative contracts or other methods. For example, we currently utilize GBP denominated liabilities as a natural hedge against our GBP denominated assets. Additionally, we executed currency swap contracts to hedge the risk related to a portion of the forecasted interest receipts on these investments. However, no amount of hedging activity can fully insulate us from the risks associated with changes in foreign currency exchange rates, and the failure to hedge effectively against foreign currency exchange rate risk, if we choose to engage in such activities, could materially adversely affect our results of operations and financial condition. In addition, any international currency gain recognized with respect to changes in exchange rates may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT.

Risks Related to Other Events

We are subject to certain provisions of Maryland law and our charter relating to business combinations which may prevent a transaction that may otherwise be in the interest of our stockholders.

The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10% or more of the voting power of the outstanding voting stock of a Maryland corporation. Unless our Board of Directors takes action to exempt us, generally or with respect to certain transactions, from this statute in the future, the Maryland Business Combination Act will be applicable to business combinations between us and other persons.

In addition to the restrictions on business combinations contained in the Maryland Business Combination Act, our charter also contains restrictions on business combinations. Our charter requires that, except in certain circumstances, “business combinations,” including a merger or consolidation, and certain asset transfers and issuances of securities, with a “related person,” including a beneficial owner of 10% or more of our outstanding voting stock, be approved by the affirmative vote of the holders of at least 90% of our outstanding voting stock.

The restrictions on business combinations provided under Maryland law and contained in our charter may delay, defer or prevent a change of control or other transaction even if such transaction involves a premium price for our common stock or our stockholders believe that such transaction is otherwise in their best interests.

Unfavorable resolution of litigation matters and disputes could have a material adverse effect on our financial condition.

From time to time, we are involved in legal proceedings, lawsuits and other claims. We may also be named as defendants in lawsuits arising out of our alleged actions or the alleged actions of our tenants and operators for which such tenants and operators have agreed to indemnify, defend and hold us harmless. An unfavorable resolution of any such litigation may have a materially adverse effect on our business, results of operations and financial condition. Regardless of the outcome, litigation or other legal proceedings may result in substantial costs, disruption of our normal business operations and the diversion of management attention. We may be unable to prevail in, or achieve a favorable settlement of, any pending or future legal action against us.

23

Table of Contents

Loss of our key personnel could temporarily disrupt our operations and adversely affect us.

We are dependent on the efforts of our executive officers, and competition for these individuals is intense. Although our chief executive officer, chief financial officer and chief investment officer have employment agreements with us, we cannot assure you that they will remain employed with us. The loss or limited availability of the services of any of our executive officers, or our inability to recruit and retain qualified personnel in the future, could, at least temporarily, have a materially adverse effect on our business, results of operations and financial condition and the value of our common stock.

We may experience uninsured or underinsured losses, which could result in a significant loss of the capital invested in a property, lower than expected future revenues or unanticipated expense.

We maintain comprehensive insurance coverage on our properties with terms, conditions, limits and deductibles that we believe are adequate and appropriate given the relative risk and costs of such coverage, and we regularly review our insurance coverage. However, a large number of our properties are located in areas exposed to earthquake, windstorm, flood and other natural disasters and may be subject to other losses. In particular, our life science portfolio is concentrated in areas known to be subject to earthquake activity. While we purchase insurance coverage for earthquake, windstorm, flood and other natural disasters that we believe is adequate in light of current industry practice and analyses prepared by outside consultants, such insurance may not fully cover such losses. These losses can result in decreased anticipated revenues from a property and the loss of all or a portion of the capital we have invested in a property. Following these events, we may remain liable for any mortgage debt or other financial obligations related to the property. The insurance market for such exposures can be very volatile, and we may be unable to purchase the limits and terms we desire on a commercially reasonable basis in the future. In addition, there are certain exposures for which we do not purchase insurance because we do not believe it is economically feasible to do so or where there is no viable insurance market.

Environmental compliance costs and liabilities associated with our real estate-related investments may be substantial and may materially impair the value of those investments.

Federal, state and local laws, ordinances and regulations may require us, as a current or previous owner of real estate, to investigate and clean up certain hazardous or toxic substances or petroleum released at a property. We may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by the third parties in connection with the contamination. The costs of cleanup and remediation could be substantial. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination.

Although we currently carry environmental insurance on our properties in an amount that we believe is commercially reasonable and generally require our tenants and operators to indemnify us for environmental liabilities they cause, such liabilities could exceed the amount of our insurance, the financial ability of the tenant or operator to indemnify us or the value of the contaminated property. As the owner of a site, we may also be held liable to third parties for damages and injuries resulting from environmental contamination emanating from the site, including the release of asbestos-containing materials into the air. We may also experience environmental liabilities arising from conditions not known to us. The cost of defending against these claims, complying with environmental regulatory requirements, conducting remediation of any contaminated property, or paying personal injury or other claims or fines could be substantial and could have a materially adverse effect on our business, results of operations and financial condition.

In addition, the presence of contamination or the failure to remediate contamination may materially adversely affect our ability to use, sell or lease the property or to borrow using the property as collateral.

We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, and maintaining personal identifying information and tenant and lease data. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for the processing, transmission and storage of confidential tenant and customer data, including individually identifiable information relating to financial accounts. Although we have taken steps to protect the security of

24

Table of Contents

our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. The risk of security breaches has generally increased as the number, intensity and sophistication of attacks have increased. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a materially adverse effect on our business, financial condition and results of operations.

Risk Related to Tax, including REIT-Related Risks

Loss of our tax status as a REIT would substantially reduce our available funds and would have materially adverse consequences for us and the value of our common stock.

Qualification as a REIT involves the application of numerous highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), for which there are only limited judicial and administrative interpretations, as well as the determination of various factual matters and circumstances not entirely within our control. We intend to continue to operate in a manner that enables us to qualify as a REIT. However, our qualification and taxation as a REIT depend upon our ability to meet, through actual annual operating results, asset diversification, distribution levels and diversity of stock ownership, the various qualification tests imposed under the Code. For example, to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources, and we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. In addition, new legislation, regulations, administrative interpretations or court decisions could change the tax laws or interpretations of the tax laws regarding qualification as a REIT, or the federal income tax consequences of that qualification, in a manner that is materially adverse to our stockholders. Accordingly, there is no assurance that we have operated or will continue to operate in a manner so as to qualify or remain qualified as a REIT.

If we lose our REIT status, we will face serious tax consequences that will substantially reduce the funds available to make payments of principal and interest on the debt securities we issue and to make distributions to stockholders. If we fail to qualify as a REIT:

| · |  | we will not be allowed a deduction for distributions to stockholders in computing our taxable income;

| · |  | we will be subject to corporate-level income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates;

| · |  | we could be subject to increased state and local income taxes; and

| · |  | unless we are entitled to relief under relevant statutory provisions, we will be disqualified from taxation as a REIT for the four taxable years following the year during which we fail to qualify as a REIT.

As a result of all these factors, our failure to qualify as a REIT could also impair our ability to expand our business and raise capital and could materially adversely affect the value of our common stock.

The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the U.S. Internal Revenue Service (the “IRS”) and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investment in us.

We could have potential deferred and contingent tax liabilities from corporate acquisitions that could limit, delay or impede future sales of our properties.

If, during the five-year period beginning on the date we acquire certain companies, we recognize a gain on the disposition of any property acquired, then, to the extent of the excess of (i) the fair market value of such property as of the acquisition

25

Table of Contents

date over (ii) our adjusted income tax basis in such property as of that date, we will be required to pay a corporate-level federal income tax on this gain at the highest regular corporate rate. There can be no assurance that these triggering dispositions will not occur, and these requirements could limit, delay or impede future sales of our properties.

In addition, the IRS may assert liabilities against us for corporate income taxes for taxable years prior to the time that we acquire certain companies, in which case we will owe these taxes plus interest and penalties, if any.

There are uncertainties relating to the calculation of non-REIT tax earnings and profits (“E&P”) in certain acquisitions, which may require us to distribute E&P.

In order to remain qualified as a REIT, we are required to distribute to our stockholders all of the accumulated non-REIT E&P of certain companies that we acquire, prior to the close of the first taxable year in which the acquisition occurs. Failure to make such E&P distributions would result in our disqualification as a REIT. The determination of the amount to be distributed in such E&P distributions is a complex factual and legal determination. We may have less than complete information at the time we undertake our analysis, or we may interpret the applicable law differently from the IRS. We currently believe that we have satisfied the requirements relating to such E&P distributions. There are, however, substantial uncertainties relating to the determination of E&P, including the possibility that the IRS could successfully assert that the taxable income of the companies acquired should be increased, which would increase our non-REIT E&P. Moreover, an audit of the acquired company following our acquisition could result in an increase in accumulated non-REIT E&P, which could require us to pay an additional taxable distribution to our then-existing stockholders, if we qualify under rules for curing this type of default, or could result in our disqualification as a REIT.

Thus, we might fail to satisfy the requirement that we distribute all of our non-REIT E&P by the close of the first taxable year in which the acquisition occurs. Moreover, although there are procedures available to cure a failure to distribute all of our E&P, we cannot now determine whether we will be able to take advantage of these procedures or the economic impact on us of doing so.

The lease of “qualified healthcare properties” to a taxable REIT subsidiary, or TRS, is subject to special requirements.

We may lease certain “qualified healthcare properties” to a TRS, which in turn contracts with a manager or related party to operate the property. The rents from this TRS lessee structure are treated as qualifying rents from real property if (i) they are paid pursuant to an arms-length lease of a “qualified healthcare property” with the TRS and (ii) the manager qualifies as an “eligible independent contractor,” as defined in the Code. If either of these conditions is not satisfied, then the rents will not be qualifying rents.

Recent tax legislation impacts certain U.S. federal income tax rules applicable to REITs and could adversely affect our current tax positions.

The recently enacted Protecting Americans from Tax Hikes Act of 2015 (the “Act”) contains changes to certain aspects of the U.S. federal income tax rules applicable to us. The Act is the most recent example of changes to the REIT rules, and additional legislative changes may occur that could adversely affect our current tax positions. The Act modifies various rules that apply to our ownership of, and business relationship with, our TRSs and reduces the maximum allowable value of our assets attributable to TRSs from 25% to 20% which could impact our ability to enter into future investments. The Act makes permanent the reduction of the recognition period (from ten years to five years) during which an entity that converted from a corporation to a REIT or was acquired by a REIT is subject to a corporate-level tax on built-in gains recognized during such period, which could influence the types of investments we enter into in the future. The Act also makes multiple changes related to the Foreign Investment in Real Property Tax Act, or FIRPTA, expands prohibited transaction safe harbors and qualifying hedges, and repeals the preferential dividend rule for public REITs previously applicable to us. Lastly, the Act adjusts the way we may calculate certain earnings and profits calculations to avoid double taxation at the stockholder level, and expands the types of qualifying assets and income for purposes of the REIT requirements. The provisions enacted by the Act could result in changes in our tax positions or investments, and future legislative changes related to those rules described above could have a materially adverse impact on our results of operations and financial condition.

26

Table of Contents

Our international expansion may result in additional tax-related risks.

We have expanded our operations to include the United Kingdom, and may continue to expand internationally. International expansion presents tax-related risks that are different from those we face with respect to our domestic properties and operations. These risks include, but are not limited to:

| · |  | international currency gain recognized with respect to changes in exchange rates may not always qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT;

| · |  | challenges with respect to the repatriation of foreign earnings and cash; and

| · |  | challenges of complying with foreign tax rules (including the possible revisions in tax treaties or other laws and regulations, including those governing the taxation of our international income).

Our charter contains ownership limits with respect to our common stock and other classes of capital stock.

Our charter contains restrictions on the ownership and transfer of our common stock and preferred stock that are intended to assist us in preserving our qualification as a REIT. Under our charter, subject to certain exceptions, no person or entity may own, actually or constructively, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock or any class or series of our preferred stock.

Additionally, our charter has a 9.9% ownership limitation on the direct or indirect ownership of our voting shares, which may include common stock or other classes of capital stock. Our Board of Directors, in its sole discretion, may exempt a proposed transferee from either ownership limit. The ownership limits may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

We are organized to invest in income-producing healthcare-related facilities. In evaluating potential investments, we consider a multitude of factors, including:

| · |  | location, construction quality, age, condition and design of the property;

| · |  | geographic area, proximity to other healthcare facilities, type of property and demographic profile, including new competitive supply;

| · |  | whether the expected risk-adjusted return exceeds the incremental cost of capital;

| · |  | whether the rent or operating income provides a competitive market return to our investors;

| · |  | duration, rental rates, tenant and operator quality and other attributes of in-place leases, including master lease structures and coverage;

| · |  | current and anticipated cash flow and its adequacy to meet our operational needs;

| · |  | availability of security such as letters of credit, security deposits and guarantees;

| · |  | potential for capital appreciation;

| · |  | expertise and reputation of the tenant or operator;

| · |  | occupancy and demand for similar healthcare facilities in the same or nearby communities;

| · |  | the mix of revenues generated at healthcare facilities between privately paid and government reimbursed;

27

Table of Contents

| · |  | availability of qualified operators or property managers and whether we can manage the property;

| · |  | potential alternative uses of the facilities;

| · |  | the regulatory and reimbursement environment in which the properties operate;

| · |  | tax laws related to REITs;

| · |  | prospects for liquidity through financing or refinancing; and

| · |  | our access to and cost of capital.

Property and Direct Financing Lease Investments

The following table summarizes our property and direct financing lease (“DFL”) investments in our O wned P ortfolio as of and for the year ended December 31, 2015 (square feet and dollars in thousands):

|  | Number of |  |  |  | Gross Asset |  | Rental |  | Operating |
Facility Location |  | Facilities |  | Capacity |  | Value(1) |  | Revenues(2) |  | Expenses |
Senior housing—real estate: |  |  |  | (Units) |  |  |  |  |  |  |  |  |  |
California |  | 27 |  | 2,633 |  | $ | 546,272 |  | $ | 54,646 |  | $ | 2,663 |
Texas |  | 28 |  | 3,513 |  |  | 438,060 |  |  | 47,205 |  |  | 1 |
Florida |  | 23 |  | 2,582 |  |  | 374,000 |  |  | 28,590 |  |  | 8 |
Oregon |  | 25 |  | 2,042 |  |  | 306,098 |  |  | 26,427 |  |  | 329 |
Virginia |  | 9 |  | 1,154 |  |  | 252,318 |  |  | 19,555 |  |  | — |
Washington |  | 17 |  | 1,200 |  |  | 211,010 |  |  | 16,778 |  |  | — |
Colorado |  | 6 |  | 908 |  |  | 192,532 |  |  | 17,704 |  |  | — |
Other (33 States) |  | 134 |  | 11,680 |  |  | 1,907,453 |  |  | 173,232 |  |  | 1,112 |
|  | 269 |  | 25,712 |  |  | 4,227,743 |  |  | 384,137 |  |  | 4,113 |
Senior housing—real estate (U.K.): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (U.K.) |  | 40 |  | 1,855 |  |  | 213,324 |  |  | 17,557 |  |  | — |
Senior housing—RIDEA: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (25 States) |  | 108 |  | 15,403 |  |  | 2,467,708 |  |  | 525,453 |  |  | 370,204 |
Senior housing—DFLs(3): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (17 States) |  | 89 |  | 7,638 |  |  | 1,788,765 |  |  | 117,408 |  |  | 300 |
Total senior housing |  | 506 |  | 50,608 |  | $ | 8,697,540 |  | $ | 1,044,555 |  | $ | 374,617 |
Post-acute/skilled nursing—real estate: |  |  |  | (Beds) |  |  |  |  |  |  |  |  |  |
Indiana |  | 8 |  | 947 |  | $ | 59,171 |  | $ | 9,095 |  | $ | — |
Virginia |  | 9 |  | 932 |  |  | 58,377 |  |  | 7,425 |  |  | — |
Ohio |  | 6 |  | 577 |  |  | 30,826 |  |  | 4,949 |  |  | 16 |
Nevada |  | 2 |  | 298 |  |  | 17,474 |  |  | 3,329 |  |  | — |
Colorado |  | 2 |  | 216 |  |  | 13,800 |  |  | 1,792 |  |  | — |
Other (6 States) |  | 7 |  | 693 |  |  | 25,310 |  |  | 4,324 |  |  | 1,735 |
|  | 34 |  | 3,663 |  |  | 204,958 |  |  | 30,914 |  |  | 1,751 |
Post-acute/skilled nursing—real estate (U.K.): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (U.K.) |  | 21 |  | 1,341 |  |  | 145,490 |  |  | 11,122 |  |  | — |

28

Table of Contents

|  | Number of |  |  |  | Gross Asset |  | Rental |  | Operating |
Facility Location |  | Facilities |  | Capacity |  | Value(1) |  | Revenues(2) |  | Expenses |
Post-acute/skilled nursing—DFLs(3): |  |  |  | (Beds) |  |  |  |  |  |  |  |  |  |
Other (25 States) |  | 256 |  | 33,159 |  |  | 3,992,353 |  |  | 493,075 |  |  | 251 |
Total post-acute/skilled nursing |  | 311 |  | 38,163 |  | $ | 4,342,801 |  | $ | 535,111 |  | $ | 2,002 |
Life science: |  |  |  | (Sq. Ft.) |  |  |  |  |  |  |  |  |  |
California |  | 105 |  | 6,637 |  | $ | 3,305,305 |  | $ | 312,396 |  | $ | 64,501 |
Other (3 States) |  | 13 |  | 913 |  |  | 232,565 |  |  | 30,588 |  |  | 5,716 |
Total life science |  | 118 |  | 7,550 |  | $ | 3,537,870 |  | $ | 342,984 |  | $ | 70,217 |
Medical office: |  |  |  | (Sq. Ft.) |  |  |  |  |  |  |  |  |  |
Texas |  | 59 |  | 5,509 |  | $ | 886,418 |  | $ | 114,693 |  | $ | 49,986 |
Pennsylvania |  | 2 |  | 1,141 |  |  | 253,487 |  |  | 27,852 |  |  | 9,866 |
California |  | 16 |  | 830 |  |  | 237,747 |  |  | 25,054 |  |  | 7,223 |
Colorado |  | 16 |  | 1,083 |  |  | 202,891 |  |  | 30,892 |  |  | 12,303 |
Other (24 States and Mexico) |  | 134 |  | 8,492 |  |  | 1,454,549 |  |  | 220,734 |  |  | 84,172 |
Total medical office |  | 227 |  | 17,055 |  | $ | 3,035,092 |  | $ | 419,225 |  | $ | 163,550 |
Hospital—real estate: |  |  |  | (Beds) |  |  |  |  |  |  |  |  |  |
Texas |  | 4 |  | 912 |  | $ | 231,552 |  | $ | 31,882 |  | $ | 3,857 |
California |  | 2 |  | 111 |  |  | 143,500 |  |  | 19,370 |  |  | 28 |
Other (6 States) |  | 7 |  | 448 |  |  | 88,742 |  |  | 13,776 |  |  | 81 |
|  | 13 |  | 1,471 |  | $ | 463,794 |  | $ | 65,028 |  | $ | 3,966 |
Hospital—DFLs(3): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (3 States) |  | 3 |  | 756 |  |  | 123,891 |  |  | 23,352 |  |  | 23 |
Total hospital |  | 16 |  | 2,227 |  | $ | 587,685 |  | $ | 88,380 |  | $ | 3,989 |
Total properties |  | 1,178 |  |  |  | $ | 20,200,988 |  | $ | 2,430,255 |  | $ | 614,375 |

| (1) |  | Represents gross real estate and the carrying value of DFLs. Gross real estate represents the carrying amount of real estate after adding back accumulated depreciation and amortization.

| (2) |  | Represent the combined amount of rental and related revenues, tenant recoveries, resident fees and services and income from direct financing leases.

| (3) |  | Represents leased properties that are classified as DFLs.

29

Table of Contents

Occupancy and Annual Rent Trends

The following table summarizes occupancy and average annual rent trends for our owned portfolio for the years ended December 31, (square feet in thousands):

|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Senior housing(1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average annual rent per unit(2)(3) |  | $ | 13,796 |  | $ | 13,596 |  | $ | 13,174 |  | $ | 13,140 |  | $ | 14,431 |
Average capacity (available units) |  |  | 47,702 |  |  | 45,684 |  |  | 45,400 |  |  | 36,694 |  |  | 30,167 |
Average capacity (available units) - RIDEA |  |  | 12,704 |  |  | 6,408 |  |  | 4,620 |  |  | 4,626 |  |  | 1,545 |
Average resident occupancy percentage - RIDEA |  |  | 88 | % |  | 87 | % |  | 88 | % |  | 86 | % |  | 86 | %
Post-acute/skilled nursing(1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average annual rent per bed(2)(3) |  | $ | 11,767 |  | $ | 12,646 |  | $ | 12,218 |  | $ | 11,802 |  | $ | 12,669 |
Average capacity (available beds) |  |  | 38,779 |  |  | 38,441 |  |  | 38,464 |  |  | 38,459 |  |  | 26,167 |
Life science: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average occupancy percentage |  |  | 97 | % |  | 93 | % |  | 92 | % |  | 90 | % |  | 90 | %
Average annual rent per square foot(2) |  | $ | 46 |  | $ | 46 |  | $ | 44 |  | $ | 45 |  | $ | 44 |
Average occupied square feet |  |  | 7,179 |  |  | 6,637 |  |  | 6,480 |  |  | 6,250 |  |  | 6,076 |
Medical office: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average occupancy percentage |  |  | 91 | % |  | 91 | % |  | 91 | % |  | 91 | % |  | 91 | %
Average annual rent per square foot(2) |  | $ | 28 |  | $ | 28 |  | $ | 27 |  | $ | 27 |  | $ | 27 |
Average occupied square feet |  |  | 14,762 |  |  | 13,178 |  |  | 12,767 |  |  | 12,147 |  |  | 11,721 |
Hospital(1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average annual rent per bed(2) |  | $ | 40,212 |  | $ | 39,149 |  | $ | 38,437 |  | $ | 37,679 |  | $ | 36,974 |
Average capacity (available beds) |  |  | 2,224 |  |  | 2,221 |  |  | 2,175 |  |  | 2,087 |  |  | 2,084 |

| (1) |  | Senior housing includes average units that are in a RIDEA structure in which resident occupancy impacts our annual revenue, which structure was initially adopted in 2011 and expanded in August 2014 and June 2015. All other senior housing, post-acute/skilled nursing and hospital facilities are triple-net leased to operator occupied facilities, which makes these facilities 100% leased from our perspective.

| (2) |  | Average annual rent is presented as a ratio of revenues comprised of rental and related revenues, tenant recoveries and income from DFLs divided by the average capacity or average occupied square feet of the facilities and annualized for mergers and acquisitions for the year in which they occurred. Average annual rent for properties operated under a RIDEA structure is calculated based on NOI divided by the average capacity of the facilities. Average annual rent for leased properties (including DFLs) excludes termination fees and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles and DFL interest accretion).

| (3) |  | We changed our accounting treatment to recognize income on a cash basis beginning January 1, 2016 on our HCRMC DFL investments (see Note 6 to the Consolidated Financial Statements).

30

Table of Contents

Development Properties

The following table sets forth the properties owned by us in our life science, medical office and senior housing segments at December 31, 2015 that were under development or redevelopment (dollars and square feet in thousands):

|  |  |  | Estimated |  | Estimated |  |  |  |  | Estimated |
|  |  |  | Completion |  | Rentable |  | Investment |  | Total |
Name of Project |  | Location |  | Date(1) |  | Sq. Ft./Units |  | to Date |  | Investment |
Life science: |  |  |  |  |  |  |  |  |  |  |  |  |
The Cove at Oyster Point - Phase I |  | South San Francisco, CA |  | 3Q 2016 |  | 247 |  | $ | 92,926 |  | $ | 184,314 |
Medical office: |  |  |  |  |  |  |  |  |  |  |  |  |
Memorial Hermann - Pearland II |  | Pearland, TX |  | 1Q 2016 |  | 98 |  |  | 13,869 |  |  | 18,800 |
Sky Ridge |  | Lone Tree, CO |  | 1Q 2016 |  | 118 |  |  | 23,315 |  |  | 29,400 |
Memorial Hermann - Cypress |  | Cypress, TX |  | 2Q 2016 |  | 165 |  |  | 20,330 |  |  | 35,630 |
Folsom |  | Sacramento, CA |  | 2Q 2016 |  | 92 |  |  | 59,863 |  |  | 61,850 |
Bayfront(2) |  | St. Petersburg, FL |  | 2Q 2016 |  | 117 |  |  | 13,633 |  |  | 22,070 |
Senior housing: |  |  |  |  |  |  |  |  |  |  |  |  |
Deer Park |  | Deer Park, IL |  | 1Q 2016 |  | 180 |  |  | 41,219 |  |  | 47,690 |
|  |  |  |  |  |  |  | $ | 265,155 |  | $ | 399,754 |

| (1) |  | For development projects, management’s estimate of the date the core and shell structure improvements are expected to be completed. For redevelopment projects, management’s estimate of the time in which major construction activity in relation to the scope of the project is expected to be substantially completed. There are no assurances that any of these projects will be completed on schedule or within estimated amounts.

| (2) |  | Represents a portion of the facility.

At December 31, 2015, we also had $32 1 million of land held for future development primarily in our life science segment.

Tenant Lease Expirations

The following table shows tenant lease expirations, including those related to DFLs, for the next 10 years and thereafter at our leased properties, assuming that none of the tenants exercise any of their renewal or purchase options, unless otherwise noted below (dollars and square feet in thousands). See “Tenant Purchase Options” section of Note 12 to the Consolidated Financial Statements for additional information on leases subject to purchase options.

|  | Expiration Year |
Segment |  | Total |  | 2016(1) |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  | 2025 |  | Thereafter |
Senior housing(2): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Properties |  |  | 398 |  |  | 8 |  |  | 6 |  |  | 25 |  |  | 5 |  |  | 26 |  |  | 8 |  |  | 2 |  |  | 8 |  |  | 26 |  |  | 2 |  |  | 282 |
Base rent(3) |  | $ | 512,951 |  | $ | 13,338 |  | $ | 9,248 |  | $ | 50,829 |  | $ | 9,161 |  | $ | 41,216 |  | $ | 10,928 |  | $ | 2,157 |  | $ | 24,129 |  | $ | 31,540 |  | $ | 5,613 |  | $ | 314,792 |
% of segment base rent |  |  | 100 |  |  | 3 |  |  | 2 |  |  | 10 |  |  | 2 |  |  | 8 |  |  | 2 |  |  | — |  |  | 5 |  |  | 6 |  |  | 1 |  |  | 61 |
Post-acute/skilled nursing: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Properties |  |  | 311 |  |  | — |  |  | — |  |  | 1 |  |  | 21 |  |  | 6 |  |  | 1 |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | 278 |
Base rent(3) |  | $ | 435,760 |  | $ | — |  | $ | — |  | $ | 1,197 |  | $ | 19,056 |  | $ | 7,338 |  | $ | 351 |  | $ | 3,274 |  | $ | — |  | $ | — |  | $ | — |  | $ | 404,544 |
% of segment base rent |  |  | 100 |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 2 |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 93 |
Life science(4): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Square feet |  |  | 7,411 |  |  | 844 |  |  | 883 |  |  | 1,268 |  |  | 561 |  |  | 482 |  |  | 729 |  |  | 584 |  |  | 786 |  |  | 471 |  |  | 560 |  |  | 243 |
Base rent(3) |  | $ | 283,613 |  | $ | 34,935 |  | $ | 32,633 |  | $ | 60,350 |  | $ | 17,629 |  | $ | 14,915 |  | $ | 39,059 |  | $ | 17,948 |  | $ | 36,141 |  | $ | 7,759 |  | $ | 15,062 |  | $ | 7,182 |
% of segment base rent |  |  | 100 |  |  | 12 |  |  | 12 |  |  | 21 |  |  | 6 |  |  | 5 |  |  | 14 |  |  | 6 |  |  | 13 |  |  | 3 |  |  | 5 |  |  | 3 |
Medical office: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Square feet |  |  | 15,680 |  |  | 2,329 |  |  | 2,306 |  |  | 2,188 |  |  | 1,740 |  |  | 2,040 |  |  | 828 |  |  | 845 |  |  | 454 |  |  | 483 |  |  | 1,817 |  |  | 650 |
Base rent(3) |  | $ | 354,494 |  | $ | 54,977 |  | $ | 55,035 |  | $ | 50,255 |  | $ | 40,910 |  | $ | 48,047 |  | $ | 20,198 |  | $ | 19,881 |  | $ | 10,115 |  | $ | 12,731 |  | $ | 27,984 |  | $ | 14,361 |
% of segment base rent |  |  | 100 |  |  | 15 |  |  | 15 |  |  | 14 |  |  | 11 |  |  | 14 |  |  | 6 |  |  | 6 |  |  | 3 |  |  | 4 |  |  | 8 |  |  | 4 |
Hospital: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Properties |  |  | 16 |  |  | — |  |  | 3 |  |  | — |  |  | 5 |  |  | 1 |  |  | 1 |  |  | 2 |  |  | — |  |  | 1 |  |  | 2 |  |  | 1 |
Base rent(3) |  | $ | 75,714 |  | $ | — |  | $ | 12,800 |  | $ | — |  | $ | 7,346 |  | $ | 7,759 |  | $ | 1,482 |  | $ | 11,491 |  | $ | — |  | $ | 13,570 |  | $ | 17,138 |  | $ | 4,128 |
% of segment base rent |  |  | 100 |  |  | — |  |  | 17 |  |  | — |  |  | 10 |  |  | 10 |  |  | 2 |  |  | 15 |  |  | — |  |  | 18 |  |  | 23 |  |  | 5 |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Base rent(3) |  | $ | 1,662,532 |  | $ | 103,250 |  | $ | 109,716 |  | $ | 162,631 |  | $ | 94,102 |  | $ | 119,275 |  | $ | 72,018 |  | $ | 54,751 |  | $ | 70,385 |  | $ | 65,600 |  | $ | 65,797 |  | $ | 745,007 |
% of total base rent |  |  | 100 |  |  | 6 |  |  | 7 |  |  | 10 |  |  | 6 |  |  | 7 |  |  | 4 |  |  | 3 |  |  | 4 |  |  | 4 |  |  | 4 |  |  | 45 |

| (1) |  | Includes month-to-month leases.

| (2) |  | Excludes 108 RIDEA facilities, leased to consolidated subsidiaries, with annualized NOI of $193 million.

31

Table of Contents

| (3) |  | The most recent month’s (or subsequent month’s if acquired in the most recent month) base rent including additional rent floors and cash income from DFLs annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL interest accretion and deferred revenues).

| (4) |  | Includes 457,000 sq. ft. and 337,000 sq. ft. and annualized revenue s of $24 million and $19 million expiring in 2016 and 2018, respectively, related to the exercise of tenant purchase options in January 2016.

We specifically incorporate by reference into this section the information set forth in Schedule III: Real Estate and Accumulated Depreciation, included in this report.

ITEM 3. Legal Proceedings

We are involved from time-to-time in legal proceedings that arise in the ordinary course of our business, including, but not limited to, commercial disputes, environmental matters, and litigation in connection with transactions including acquisitions and divestitures. We believe that our existing legal proceedings will not have a material adverse impact on our financial position or our results of operations. We record a liability when a loss is considered probable and the amount can be reasonably estimated.

See “Legal Proceedings” section of Note 12 to the Consolidated Financial Statements for information regarding legal proceedings, which information is incorporated by reference in this Item 3.

ITEM 4. Mine Safety Disclosures

None.

32

Table of Contents

PART I I

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange. It has been our policy to declare quarterly dividends to common stockholders so as to comply with applicable provisions of the Code governing REITs. For t he fiscal quarters indicated below are the reported high and low sales prices per share of our common stock on the New York Stock Exchange and the cash dividends paid per common share:

|  | High |  | Low |  | Per Share Distribution |
2015 |  |  |  |  |  |  |  |  |  |
Fourth Quarter |  | $ | 39.83 |  | $ | 32.71 |  | $ | 0.565 |
Third Quarter |  |  | 40.90 |  |  | 35.37 |  |  | 0.565 |
Second Quarter |  |  | 44.79 |  |  | 36.20 |  |  | 0.565 |
First Quarter |  |  | 49.61 |  |  | 39.88 |  |  | 0.565 |
2014 |  |  |  |  |  |  |  |  |  |
Fourth Quarter |  |  | 46.07 |  |  | 39.66 |  |  | 0.545 |
Third Quarter |  |  | 43.86 |  |  | 39.34 |  |  | 0.545 |
Second Quarter |  |  | 42.82 |  |  | 38.49 |  |  | 0.545 |
First Quarter |  |  | 39.59 |  |  | 35.95 |  |  | 0.545 |

At January 29, 201 6, we had approximately 10,085 stockholders of record, and there were approximately 305,054 beneficial holders of our common stock.

Dividends (Distributions)

Distributions with respect to our common stock can be characterized for federal income tax purposes as taxable ordinary dividends, capital gain dividends, nondividend distributions or a combination thereof. Following is the characterization of our annual common stock distributions per share:

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Ordinary dividends |  | $ | 2.1184 |  | $ | 1.9992 |  | $ | 1.8127 |
Capital gain dividends |  |  | 0.0316 |  |  | 0.0890 |  |  | 0.1516 |
Nondividend distributions |  |  | 0.1100 |  |  | 0.0918 |  |  | 0.1357 |
|  | $ | 2.2600 |  | $ | 2.1800 |  | $ | 2.1000 |

On January 2 8, 201 6, we announced that our Board of Directors declared a quarterly common stock cash dividend of $0.57 5 per share. The common stock dividend will be paid on February 2 3, 201 6 to stockholders of record as of the close of business on February 8, 201 6.

Issuer Purchases of Equity Securities

The table below sets forth the information with respect to purchases of our common stock made by or on our behalf during

33

Table of Contents

the quarter ended December 31, 2015.

|  |  |  |  |  |  | Total Number of Shares |  | Maximum Number (or |
|  |  |  |  |  |  | Purchased as |  | Approximate Dollar Value) |
|  | Total Number |  |  |  |  | Part of Publicly |  | of Shares that May Yet |
|  | of Shares |  | Average Price |  | Announced Plans |  | be Purchased Under |
Period Covered |  | Purchased(1) |  | Paid per Share |  | or Programs |  | the Plans or Programs |
October 1-31, 2015 |  | 12,861 |  | $ | 37.38 |  | — |  | — |
November 1-30, 2015 |  | 108 |  |  | 37.20 |  | — |  | — |
December 1-31, 2015 |  | 6,759 |  |  | 36.46 |  | — |  | — |
Total |  | 19,728 |  |  | 37.06 |  | — |  | — |

| (1) |  | Represents restricted shares withheld under our equity incentive plans to offset tax withholding obligations that occur upon vesting of restricted shares. The value of the shares withheld is based on the closing price of our common stock on the last trading day prior to the date the relevant transaction occur red.

34

Table of Contents

Performance Graph

The graph below compares the cumulative total return of HCP, the S&P 500 Index and the Equity REIT Index of NAREIT, from January 1, 201 1 to December 31, 2015. Total cumulative return is based on a $100 investment in HCP common stock and in each of the indices on January 1, 201 1 and assumes quarterly reinvestment of dividends before consideration of income taxes. Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

AMONG S&P 500, EQUITY REITS AND HCP, INC.

RATE OF RETURN TREND COMPARISON

JANUARY 1, 201 1–DECEMBER 31, 2015

(JANUARY 1, 201 1 = $100)

Performance Graph Total Stockholder Return

|  | December 31, |
|  | 2011 |  | 2012 |  | 2013 |  | 2014 |  | 2015 |
FTSE NAREIT Equity REIT Index |  | $ | 108.28 |  | $ | 129.62 |  | $ | 133.32 |  | $ | 170.68 |  | $ | 175.51 |
S&P 500 |  |  | 102.08 |  |  | 118.39 |  |  | 156.70 |  |  | 178.10 |  |  | 180.56 |
HCP, Inc. |  |  | 118.42 |  |  | 135.24 |  |  | 114.07 |  |  | 145.60 |  |  | 134.09 |

35

Table of Contents

ITEM 6. Selected Financial Data

Set forth below is our selected financial data as of and for each of the years in the five-year period ended December 31, 2015 (dollars in thousands, except per share data):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Statement of operations data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total revenues |  | $ | 2,544,312 |  | $ | 2,266,279 |  | $ | 2,099,878 |  | $ | 1,879,970 |  | $ | 1,694,418 |
(Loss) income from continuing operations |  |  | (546,418) |  |  | 906,845 |  |  | 910,633 |  |  | 801,190 |  |  | 536,130 |
Net (loss) income applicable to common shares |  |  | (560,552) |  |  | 919,796 |  |  | 969,103 |  |  | 812,289 |  |  | 515,302 |
(Loss) income from continuing operations applicable to common shares: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings per common share |  |  | (1.21) |  |  | 1.94 |  |  | 1.97 |  |  | 1.80 |  |  | 1.25 |
Diluted earnings per common share |  |  | (1.21) |  |  | 1.94 |  |  | 1.97 |  |  | 1.80 |  |  | 1.25 |
Net (loss) income applicable to common shares: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings per common share |  |  | (1.21) |  |  | 2.01 |  |  | 2.13 |  |  | 1.90 |  |  | 1.29 |
Diluted earnings per common share |  |  | (1.21) |  |  | 2.00 |  |  | 2.13 |  |  | 1.90 |  |  | 1.29 |
Balance sheet data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets |  |  | 21,449,849 |  |  | 21,331,436 |  |  | 20,040,310 |  |  | 19,879,697 |  |  | 17,382,029 |
Debt obligations(1) |  |  | 11,069,003 |  |  | 9,721,269 |  |  | 8,626,067 |  |  | 8,659,691 |  |  | 7,704,691 |
Total equity |  |  | 9,746,317 |  |  | 10,997,099 |  |  | 10,931,134 |  |  | 10,753,777 |  |  | 9,220,622 |
Other data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid |  |  | 1,046,638 |  |  | 1,001,559 |  |  | 956,685 |  |  | 865,306 |  |  | 787,689 |
Dividends paid per common share |  |  | 2.26 |  |  | 2.18 |  |  | 2.10 |  |  | 2.00 |  |  | 1.92 |
Funds from operations (“FFO”)(2) |  |  | (10,841) |  |  | 1,381,634 |  |  | 1,349,264 |  |  | 1,166,508 |  |  | 877,907 |
Diluted FFO per common share(2) |  |  | (0.02) |  |  | 3.00 |  |  | 2.95 |  |  | 2.72 |  |  | 2.19 |
FFO as adjusted(2) |  |  | 1,470,167 |  |  | 1,398,691 |  |  | 1,382,699 |  |  | 1,195,799 |  |  | 1,052,692 |
Diluted FFO as adjusted per common share(2) |  |  | 3.16 |  |  | 3.04 |  |  | 3.02 |  |  | 2.79 |  |  | 2.71 |
Funds available for distribution (“FAD”)(2) |  |  | 1,261,849 |  |  | 1,178,822 |  |  | 1,158,082 |  |  | 954,645 |  |  | 838,440 |
Diluted FAD per common share(2) |  |  | 2.72 |  |  | 2.57 |  |  | 2.54 |  |  | 2.23 |  |  | 2.16 |

| (1) |  | Includes bank line of credit, bridge and term loans, senior unsecured notes, mortgage and other secured debt, and other debt. Reflects the early adoption of Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting) (“ASU 2015-15”). ASU 2015-03 and ASU 2015-15 simplify the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts).

| (2) |  | For a more detailed discussion and reconciliation of Funds From Operations (“FFO”), FFO as adjusted and Funds Available for Distribution (“FAD”), see “Non-GAAP Financ ial Measures Reconciliations” in Item 7.

36

Table of Contents

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations. We will discuss and provide our analysis in the following order:

| · |  | 201 5 Transaction Overview

| · |  | Dividends

| · |  | Results of Operations

| · |  | Liquidity and Capital Resources

| · |  | Contractual Obligations

| · |  | Off-Balance Sheet Arrangements

| · |  | Inflation

| · |  | Non-GAAP Financial Measures Reconciliations

| · |  | Critical Accounting Policies

| · |  | Recent Accounting Pronouncements

201 5 Transaction Overview

HCR ManorCare, Inc.

HCRMC Fourth Quarter 2015

The post-acute/skilled nursing (“SNF”) industry and HCRMC continued to experience a challenging operating environment in 2015, due to the ongoing change in reimbursement models which reduces rates and lowers census, the result of shorter lengths of stay. HCRMC’s normalized f ixed c harge c overage for the 12-month period end ed December 31, 2015 was 1.07x.

For the fourth quarter 2015, HCRMC reported normalized EBITDAR of $110 million, which decreased $36 million on a year-over-year basis compared to the fourth quarter 2014, and decreased $17 million sequentially compared to the third quarter 2015. The results were impacted by core operating performance weakness and unfavorable non-routine items discussed below. The level of performance was below expectations and uncharacteristic for the fourth quarter, which has historically been strong due in large part to increased census and the annual Medicare rate increases on October 1.

HCRMC ended 2015 with $125 million of cash and cash equivalents and continues to be current on its obligations under the amended master lease (the “Amended Master Lease”).

37

Table of Contents

Core Operating Performance. Before the impact from non-routine items described below, HCRMC’s fourth quarter EBITDAR was below its forecast, primarily due to the continued change in payor mix from traditional Medicare to Managed Care plans, which reduced reimbursement rates and lowered census. As a result, HCRMC reported a decline in its core SNF operating metrics (which excludes the 50 non-strategic disposition assets), with fourth quarter census decreasing 175 basis points from the prior year to 82.6%.

Non-Routine Items. As discussed below, HCRMC is in the process of exiting 50 non-strategic assets, of which 21 sales were completed in the fourth quarter and an additional 11 closed in the first quarter 2016. As such, disruption resulting from transitioning operations to new owners and closing costs led to additional underperformance from this pool of assets. EBITDAR losses from the sale of non-strategic assets totaled $11 million in the fourth quarter 2015, and $22 million for full year 2015. HCP continues to expect total proceeds of $350 million from the sales of the non-strategic assets, of which $280 million have closed to-date with the remaining $70 million expected to close in mid-2016.

In addition, HCRMC continues to defend against the DOJ civil complaint previously disclosed in April 2015. HCRMC incurred legal and regulatory defense costs of $3 million during the fourth quarter 2015 and $9 million for the full year 2015. The outcome of the DOJ civil complaint remains uncertain, and HCRMC expects to incur additional legal and regulatory defense costs in 2016.

As a result of HCRMC’s fourth quarter performance deterioration and the related decline in its FCC, we placed our real estate portfolio operated by HCRMC on “Watch List” status at year end 2015, and changed our accounting treatment to recognize rental income on a cash basis beginning January 2016. As such, we will no longer recognize non-cash accretion income under the HCRMC DFLs (see Note 2 to the Consolidated Financial Statements).

The reduced growth outlook for the broader post-acute/SNF industry indicates challenges to the improvement in HCRMC’s financial performance over the next few years. At year end 2015, the Company determined that it is probable that its HCRMC DFL investments are impaired and the amount of the loss can be reasonably estimated. In the fourth quarte r 2015, the Company recorded an allowance (impairment charge) for DFL losses of $817 million, reducing the carrying amount of its HCRMC DFL investments from $6.0 billion to $5.2 billion (see Notes 6 and 17 to the Consolidated Financial Statements). We also recorded a fourth quarter 2015 impairment charge of $19 million related to our equity investment in HCRMC OpCo (see Note 8 to the Consolidated Financial Statements).

HCP has engaged advisors and continues to work closely with HCRMC to jointly explore all opportunities that reduce our concentration, improve the credit quality and coverage of our Amended Master Lease, and ensure HCRMC can continue to deliver high quality care and services.

HCRMC Third Quarter 2015

In October 2015, we concluded that our equity investment in HCRMC was other-than-temporarily impaired as of September 30, 2015, and we recorded an impairment charge of $27 million during the third quarter of 2015. The impairment charge reduced the carrying amount of our equity investment in HCRMC to $21 million. Our impairment determination primarily resulted from our review of HCRMC operating results and market and industry data which, among other factors, showed a declining trend in admissions from hospitals and continuing trends in mix and length of stay driven by Medicare Advantage and other Manage Care plans.

HCRMC First Quarter 2015

During the quarter ended March 31, 2015, HCP and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic facilities that were under the Master Lease and Security Agreement (the “Master Lease”) for an estimated total gross sales price of approximately $350 million. HCRMC receives annual rent reduction under the Master Lease based on 7.75% of the net sales proceeds received by HCP. During the year ended December 3 1, 2015, we completed sales of 22 non-strategic HCRMC facilities for $21 9 mill ion. Through February 8, 2016, 3 3 of the facility sales have closed, and the remaining facility sales are expected to close mid-2016.

Additionally, HCP and HCRMC agreed to amend the Master Lease (the “HCRMC Lease Amendment”). Commencing April 1, 2015, HCP provided an annual net rent reduction of $68 million, which equates to initial lease year rent of $473 million, compared to $541 million that would have commenced April 1, 2015 prior to the HCRMC Lease

38

Table of Contents

Amendment. The contractual rent will increase by 3.0% annually during the initial term. In exchange, HCP receive d the following consideration:

| · |  | Fee ownership in nine post-acute facilities valued at $275 million with a median age of four years, owned and operated by HCRMC. HCP retain ed a lease receivable of equal value, earning income of $19 million annually (included in the amended initial lease year rent of $473 million above), which will be reduced as the facility purchases are completed. Following the purchase of a facility, HCRMC will lease such facility from HCP pursuant to the Amended Master Lease. The nine facilities will contribute an aggregate of $19 million of annual rent (subject to escalation) under the Amended Master Lease. During the year ended December 31, 2015 and through February 8, 2016, HCRMC and HCP completed seven of th e nine facility purchases for $18 4 million. The purchases of the remaining two facilities are expected to close mid-2016, subject to customary lic ensing and regulatory approvals;

| · |  | A second lease receivable with an initial amount of $250 million, payable by HCRMC upon the earlier of: (i) the end of the initial term of the first renewal pool under the Amended Master Lease; or (ii) certain capital or liquidity events of HCRMC, including an initial public offering or sale. The $250 million lease receivable amount will increase each year as follows: 3.0% in April 2016 through 2018, 4.0% in 2019, 5.0% in 2020 and 6.0% in 2021 until the end of the initial lease term; and

| · |  | Extension of the initial lease term by five years, to an average of 16 years.

In March 2015, we recorded a non-cash impairment charge of $478 million related to our HCRMC DFL investments. The non-cash charge reduced the carrying value of the HCRMC DFL investments from $6.6 billion to $6.1 billion, which represented the present value of the future lease payments under the Amended Master Lease. The impairment determination resulted from discussions with HCRMC in which they expressed an increasing desire to reduce rent in consideration of potential economic trades to HCP prior to the April 1, 2015 rental increase of 3.5% under the Master Lease (without regard to the HCRMC Lease Amendment).

See Note 6 to the Consolidated Financial Statements for additional discussion o f the HCRMC Lease Amendment and impairment of our HCRMC DFL investment s, Note 8 to the Consolidated Financial Statements for additional discussion regarding our equity interest in HCRMC and the DOJ complaint against HCRMC, and Note 17 to the Consolidated Financial Statements for additional discussion regarding the impairments, which information is incorporated by reference herein.

Investment Transactions

Acquisition of Private Pay Senior Housing Portfolio

On June 30, 2015, HCP acquired a portfolio of 35 private pay senior housing communities from Chartwell Retirement Residences, including two leasehold interests, representing 5,025 units for $847 million. The portfolio was acquired in a RIDEA structure (RIDEA III), with Brookdale owning a 10% noncontrolling interest. Brookdale has operated these communities since 2011, and continues to manage the communities under a long-term management agreement.

The Cove Development

In February 2015, we began construction on the first phase, $1 84 million (estimated total investment), of The Cove at Oyster Point (“The Cove”), a life science development in South San Francisco, California. The first phase includes two “class A” buildings totaling 2 47,000 square feet that are expected to be completed in the third quarter of 2016.

Edgewater Business Park

In December 2015, we acquired a six-building lab campus, totaling 1 70,000 square feet in South San Francisco, California for $83 million.

39

Table of Contents

U.K. Investments

In December 2015, we purchased £28 million ($42 million) of Four Seasons Health Care’s (“Four Seasons”) £40 million senior secured term loan.

In September 2015, we amended and increased the commitment under our HC-One Facility by £11 million, primarily to fund a development project in the U.K. and other capital improvements.

In May 2015, we provided a £27 million ($42 million) loan to fund Maria Mallaband Care Group’s (“Maria Mallaband”) acquisition of two care homes in the U.K. In July 2015, the loan was converted into fee ownership of the real estate at an equal value and the properties are triple-net leased to Maria Mallaband for an initial term of 15 years.

In April 2015, we converted £174 million of our total £502 million HC-One Facility to fee ownership in a portfolio of 36 care homes subject to long-term triple-net leases that provide aggregate rent in the first year of £13 million. The contractual rent will increase annually by the Retail Price Index (“RPI”), with rent resets to fair market value at the end of lease years 15 and 25. The triple-net leases have initial terms of 30 years with lessee termination options at the end of lease years 15 and 25.

In February 2015, we increased our U.K. HC-One debt investment (“HC-One Facility”) by £108 million ($164 million) to £502 million ($795 million) in conjunction with HC-One’s acquisition of Meridian Healthcare. At closing, the HC-One Facility was secured by 303 nursing and residential care homes representing over 13,900 beds in the U.K., primarily located in England and Scotland.

Acquisitions of On-Campus Medical Office Buildings

In June 2015, we expanded our relationship with Memorial Hermann Health System (“Memorial Hermann”) through the acquisition of a portfolio of 11 on-campus MOBs located in Houston, Texas in a sale-leaseback transaction for $225 million. Memorial Hermann, an ‘A rated’ health system, is the largest not-for-profit system in Southeast Texas and maintains the largest market share at 24% in the Houston metro area. The MOB portfolio, located on four campuses, has an aggregate 1.2 million rentable square feet and is subject to triple-net master leases with 10-year initial lease terms and four 5-year renewal terms. In October 2015, we issued a 49% noncontrolling interest in this portfolio (“HCP Ventures V”) for $110 million.

In April 2015, we acquired a MOB in Philadelphia, Pennsylvania for $161 million. The MOB is anchored by Thomas Jefferson University Hospital, which is ranked second among best hospitals in the Philadelphia metropolitan area by U.S. News and is owned by ‘A rated’ Thomas Jefferson University. The MOB contains 705,000 rentable square feet and was 85% occupied at closing.

MBK Joint Venture

In March 2015, we formed a new RIDEA joint venture (“MBK JV”) with MBK Senior Living (“MBK”), a subsidiary of Mitsui & Co. Ltd, that acquired three senior housing facilities for $126 million with HCP and MBK each owning a 50% equity interest. MBK manages these communities on behalf of this joint venture. At closing, we contributed $27 million of cash and MBK contributed the three senior housing facilities, which were encumbered by $78 million of mortgage debt. The MBK JV intends to acquire additional senior housing facilities by focusing on off-market transactions.

Other Investment Transactions

In November 2015, we exercised the purchase option under our $18 million par value development loan to acquire a newly built assisted living facility in Olney, Maryland for $39 million. The facility was 97% occupied at closing and was placed in a 100% owned RIDEA structure with Brookdale managing the facility.

In November 2015, we expanded our senior housing joint venture partnerships with Brookdale in the CCRC JV, an unconsolidated joint venture, through the acquisition of a CCRC in Spring, Texas for $40 million and in a RIDEA portfolio through the acquisition of a senior housing facility in Victoria, Texas for $10 million, of which our contribution was $19 million and $9 million, respectively.

40

Table of Contents

In May 2015, we increased and extended our mezzanine loan facility with Tandem Health Care (“Tandem”) to (i) fund an additional $55 million, which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt tranches; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period to January 2017. The mezzanine loan facility now totals $256 million and has an 11.5% blended coupon, or 11.9% blended yield-to-maturity.

In April 2015, we exercised the purchase option under our $33 million par value development loan to acquire a newly built assisted living and memory care facility in Germantown, Tennessee for $72 million. The facility was 93% occupied at closing and was placed in a RIDEA structure with Brookdale acquiring a 10% noncontrolling interest and managing the facility.

In March 2015, we exercised the purchase option under our $14 million par value development loan to acquire a newly built assisted living and memory care facility in Houston, Texas for $36 million. The facility was 99% occupied at closing and was placed in a RIDEA structure with Brookdale acquiring a 10% noncontrolling interest and managing the facility.

Financing and Capital Recycling Activities

In December 2015, we issued $600 million of 4.00% senior unsecured notes due 2022. The notes were priced at 99.577% of the principal amount with a yield-to-maturity of 4.070%. Net proceeds were used to prefund our $500 million 3.750% s enior n otes due February 2016. Prior to such repayment, we used a portion of such proceeds to temporarily reduce outstanding borrowings under our revolving line of credit, which borrowings were principally used for acquisitions and investments.

During the second half of 2015, we received £34 million ($52 million) and $23 million in loan paydowns from asset disposition proceeds relating to our HC-One Facility and loan to Delphis Operations, L.P., respectively.

In October 2015, we issued a 49% noncontrolling interest in HCP Ventures V to an institutional capital investor for $110 million. HCP Ventures V owns the MOB portfolio we acquired through a sale-leaseback transaction with Memorial Hermann in June 2015. We retained a 51% controlling interest in HCP Ventures V and will act as the managing member of the joint venture.

In July 2015, we sold a parcel of land at The Cove for $11 million; additionally, in October 2015, we sold a parcel of land in our life science segment for $40 million.

In June 2015, we established an at-the-market equity offering program (“ATM Program”), in connection with the renewal of our Shelf Registration Statement. Under this program, we may sell shares of our common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. During the year ended December 31, 2015, we issued 1.8 million shares of common stock at a weighted average price of $40.14 for proceeds of $73 million, net of fees and commissions of $1 million.

In May 2015, we issued $750 million of 4.00% senior unsecured notes due 2025. The notes were priced at 99.126% of the principal amount with a yield-to-maturity of 4.107%. Net proceeds were used to fund a portion of our investment transactions completed to date.

In January 2015, we issued $600 million of 3.40% senior unsecured notes due 2025. The notes were priced at 99.185% of the principal amount with a yield-to-maturity of 3.497%. Net proceeds were used to repay the entire $105 million U.S. dollar amount outstanding on our revolving credit facility at closing and $200 million of 6.00% senior unsecured notes that matured on March 1, 2015. We used the remaining proceeds to repay $200 million of 7.07% senior unsecured notes maturing in June 2015 and for general corporate purposes.

In January 2015, to economically hedge a portion of our foreign currency risk from the HC-One Facility, we completed a £220 million four-year unsecured term loan that accrues interest at GBP LIBOR plus 0.975%, subject to adjustments based on our credit ratings. Concurrently, we entered into a three-year interest rate swap agreement that fixes the rate of the term loan at 1.79%, and a foreign currency swap agreement that fixes the British pound sterling (“GBP”) into U.S. dollars (“USD”) exchange rate at 1.5149 on interest income from the HC-One Facility in excess of interest payments on the term

41

Table of Contents

loan. Proceeds from this term loan repaid £220 million of the GBP balance drawn on our revolving credit facility that was used to fund our HC-One Facility in November 2014.

Dividends

Quarterly dividends paid during 201 5 aggregated $2.26 per share, which represents a 3.7% increase from 201 4. On January 28, 201 6, our Board of Directors declared a quarterly cash dividend of $0.57 5 per common share. The annualized distribution rate per share for 201 6 increased 1.8% to $2.30, compared to $2.26 for 201 5. The dividend will be paid on February 23, 201 6 to stockholders of record as of the close of business on February 8, 201 6.

Results of Operations

We evaluate our business and allocate resources among our business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the senior housing, post-acute/skilled nursing, life science and hospital segments, we primarily invest, through acquisition and development, in single operator or tenant properties and debt issued by operators in these sectors. Under the medical office segment, we invest, through acquisition and development, in single or multi-tenant MOBs, which generally require a greater level of property management. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the Consolidated Financial Statements).

Non-GAAP Financial Measures

Net Operating Income (“NOI”)

NOI and adjusted NOI are non-GAAP supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 14 to the Consolidated Financial Statements. Management believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL accretion, amortization of market lease intangibles and lease termination fees. Adjusted NOI is oftentimes referred to as “cash NOI.” We use NOI and adjusted NOI to make decisions about resource allocations, assess and compare property level performance, and evaluate our same property portfolio (“SPP”), as described below. We believe that net income (loss) is the most directly comparable U.S. generally accepted accounting principles (“GAAP”) measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect various excluded items. Further, our definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating NOI. NOI and adjusted NOI are non-GAAP supplemental financial measures; for a reconciliation of net income (loss) to NOI and adjusted NOI and other relevant disclosure, refer to Note 14 to the Consolidated Financial Statements.

Operating expenses generally relate to leased medical office and life science properties and senior housing RIDEA properties. We generally recover all or a portion of our leased medical office and life science property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expenses.

Same Property Portfolio (“SPP”)

SPP NOI and adjusted NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our portfolio of properties. We identify our SPP as stabilized properties that remained in operations and were consistently reported as leased properties or RIDEA properties for the duration of the year-over-year comparison periods presented, excluding assets held for sale. Accordingly, it takes a stabilized property a minimum of 12 months in operations under a consistent reporting structure to be included in our SPP. Newly acquired operating assets are generally considered stabilized at the earlier of lease up (typically when the tenant(s) controls the physical use of at least 80% of the space) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease up or 24 months from the date the

42

Table of Contents

property is placed in service. SPP NOI excludes certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis. SPP adjusted NOI excludes the effects of foreign exchange rate movements by using the average current period exchange rate to translate from GBP into USD for the comparison periods. A property is removed from our SPP when it is sold, placed into redevelopment or changes its reporting structure.

Funds From Operations

We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.

FFO, as defined by the NAREIT, is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of property, impairments of, or related to, depreciable real estate, plus real estate and other depreciation and amortization, and after adjustments for joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss). We compute FFO in accordance with the current NAREIT definition; however, other REITs may report FFO differently or have a different interpretation of the current NAREIT definition from ours.

In addition, we present FFO before the impact of severance-related charges, litigation settlement charges, preferred stock redemption charges, impairments (recoveries) of non-depreciable assets, foreign currency remeasurement losses (gains) and transaction-related items (defined below) (“FFO as adjusted”). Transaction-related items include acquisition and pursuit costs (e.g., due diligence and closing) and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Management believes that FFO as adjusted provides a meaningful supplemental measurement of our FFO run-rate. This measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income (loss) (determined in accordance with GAAP) or NAREIT FFO. FFO and FFO as adjusted are non-GAAP supplemental financial measures; for a reconciliation of net income (loss) to FFO and FFO as adjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

Funds Available for Distribution

FAD is defined as FFO as adjusted after excluding the impact of the following: (i) amortization of acquired market lease intangibles, net; (ii) amortization of deferred compensation expense; (iii) amortization of deferred financing costs, net; (iv) straight-line rents; (v) accretion and depreciation related to DFLs and lease incentive amortization (reduction of straight-line rents); and (vi) deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash payments made by tenants to reduce their contractual rents. Also, FAD: (i) is computed after deducting recurring capital expenditures, including leasing costs and second generation tenant and capital improvements; and (ii) includes lease restructure payments and adjustments to compute our share of FAD from our unconsolidated joint ventures and those related to CCRC non-refundable entrance fees. Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, our FAD may not be comparable to those reported by other REITs. Although our FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. FAD does not represent cash generated from operating activities determined in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs, and should not be considered as an alternative to net income (loss) determined in accordance with GAAP. FAD is a non-GAAP supplemental financial measure; for a reconciliation of net income (loss) to FAD, as defined, and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

43

Table of Contents

Comparison of the Year Ended December 31, 2015 to the Year Ended December 31, 2014 and the Year Ended December 31, 2014 to the Year Ended December 31, 2013

Overview(1)

2015 and 2014

Results for the years ended December 31, 2015 and 201 4 (dollars in thousands except per share data):

|  | Year Ended |  | Year Ended |  | Per |
|  | December 31, 2015 |  | December 31, 2014 |  | Share |
|  | Amount |  | Per Share |  | Amount |  | Per Share |  | Change |
FFO |  | $ | (10,841) |  | $ | (0.02) |  | $ | 1,381,634 |  | $ | 3.00 |  | $ | (3.02) |
FFO as adjusted |  |  | 1,470,167 |  |  | 3.16 |  |  | 1,398,691 |  |  | 3.04 |  |  | 0.12 |
FAD |  |  | 1,261,849 |  |  | 2.72 |  |  | 1,178,822 |  |  | 2.57 |  |  | 0.15 |
Net (loss) income applicable to common shares |  |  | (560,552) |  |  | (1.21) |  |  | 919,796 |  |  | 2.00 |  |  | (3.21) |

| (1) |  | For the reconciliation, see “Non-GAAP Financial Measures Reconciliations” section below.

FFO as adjusted and FAD increased $0.12 and $0.15 per share, respectively, primarily as a result of increased NOI from our 2014 and 2015 acquisitions and incremental interest income from the repayments of three development loans resulting from our share in the appreciation of the underlying real estate assets. The increases were partially offset by the decline in income from DFLs as a result of the HCRMC Lease Amendment and by placing our m arketable debt securities issued by Elli Investments Limited as part of the financing for its acquisition of Four Seasons Health Care (“Four Seasons Notes”) on cost-recovery method in the third quarter of 2015.

FFO and earnings per share (“EPS”) decreased $3.02 and $3.21 per share, respectively, primarily as a result of: (i) $1.3 billion of impairments related to our HCRMC DFL investments, (ii) $112 million of impairments related to our investment in Four Seasons Notes, (iii) $46 million of impairments related to our equity investment in HCRMC, (iv) $38 million recognized in 2014 in net fees for terminating the leases on the 49 senior housing properties in the Brookdale Transaction, (v) transaction-related items of $33 million and (v i) a severance-related charge of $7 million. The decreases were partially offset by: (i) the aforementioned events impacting FFO as adjusted and FAD, (ii) $6 million impairment recovery from a repayment of a loan in our hospital segment and (iii) foreign currency remeasurement gains of $5 million.

Additionally, EPS decreased primarily as a result of: (i) decreased gain on sales of real estate and (ii) increased depreciation expense, partially offset by the increased equity income from unconsolidated joint venture as a result of gain on sales of real estate from HCP Ventures III, LLC and HCP Ventures IV, LLC.

2014 and 2013

Results for the years ended December 31, 2014 and 201 3 (dollars in thousands except per share data):

|  | Year Ended |  | Year Ended |  | Per |
|  | December 31, 2014 |  | December 31, 2013 |  | Share |
|  | Amount |  | Per Share |  | Amount |  | Per Share |  | Change |
FFO |  | $ | 1,381,634 |  | $ | 3.00 |  | $ | 1,349,264 |  | $ | 2.95 |  | $ | 0.05 |
FFO as adjusted |  |  | 1,398,691 |  |  | 3.04 |  |  | 1,382,699 |  |  | 3.02 |  |  | 0.02 |
FAD |  |  | 1,178,822 |  |  | 2.57 |  |  | 1,158,082 |  |  | 2.54 |  |  | 0.03 |
Net income applicable to common shares |  |  | 919,796 |  |  | 2.00 |  |  | 969,103 |  |  | 2.13 |  |  | (0.13) |

FFO increased $0.05 per share primarily as a result of: (i) net gains from the 2014 Brookdale t ransaction, (ii) increased NOI from our SPP and our 2013 and 2014 acquisitions, and (iii) a general and administrative charge in 2013 resulting from the termination of our former chief executive officer. The aforementioned were partially offset by: (i) an impairment charge in 2014 for our equity investment in HCRMC and (ii) favorable one-time items including interest income in 2013 from the par payoff of our Barchester debt investments and sale of marketable equity securities.

44

Table of Contents

FFO as adjusted and FAD increased $0.02 and $0.03 per share, respectively, primarily as a result of increased NOI from our SPP and 2013 and 2014 acquisitions, which were partially offset by favorable one-time items including interest income in 2013 from the par payoff of our Barchester debt investments and sale of marketable equity securities.

EPS decreased $0.13 primarily as a result of: (i) decreased gain on sales of real estate and (ii) increased depreciation expense, partially offset by the net result of the aforementioned events impacting FFO.

Segment NOI and Adjusted NOI

The tables below provide selected operating information for our SPP and total property portfolio for each of our five business segments. For the year ended December 31, 2015, o ur consolidated SPP consists of 993 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 201 4 and that remained in operations under a consistent reporting structure. For the year ended December 31, 2014, our consolidated SPP consisted of 1,011 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 201 3 and that remained in operations under a consistent reporting structure. Our consolidated total property portfolio represents 1,1 7 8, 1,108 and 1,079 properties at December 31, 2015, 201 4 and 2013, respectively, and excludes properties classified as discontinued operations.

Senior Housing

2015 and 2014

On June 30, 2015 (the “Closing Date”), we completed the RIDEA III acquisition of 35 senior housing properties (see Note 4 to the Consolidated Financial Statements). We report the resident level fees and services revenues and corresponding operating expenses in our consolidated financial statements from the Closing Date. For periods subsequent to the Closing Date, we expect increases in resident fees and services revenue and operating expenses.

Results as of and for the years ended December 31, 2015 and 201 4 (dollars in thousands except per unit data):

|  | SPP |  | Total Portfolio |
|  | 2015 |  | 2014(1) |  | Change |  | 2015 |  | 2014 |  | Change |
Rental revenues(2) |  | $ | 503,447 |  | $ | 499,675 |  | $ | 3,772 |  | $ | 519,102 |  | $ | 621,114 |  | $ | (102,012) |
Resident fees and services |  |  | 160,116 |  |  | 153,251 |  |  | 6,865 |  |  | 525,453 |  |  | 241,965 |  |  | 283,488 |
Total segment revenues |  | $ | 663,563 |  | $ | 652,926 |  | $ | 10,637 |  | $ | 1,044,555 |  | $ | 863,079 |  | $ | 181,476 |
Operating expenses |  |  | (101,484) |  |  | (98,190) |  |  | (3,294) |  |  | (374,617) |  |  | (167,407) |  |  | (207,210) |
NOI |  | $ | 562,079 |  | $ | 554,736 |  | $ | 7,343 |  | $ | 669,938 |  | $ | 695,672 |  | $ | (25,734) |
Non-cash adjustments to NOI |  |  | (23,177) |  |  | (34,920) |  |  | 11,743 |  |  | (16,127) |  |  | (78,197) |  |  | 62,070 |
Adjusted NOI |  | $ | 538,902 |  | $ | 519,816 |  | $ | 19,086 |  | $ | 653,811 |  | $ | 617,475 |  | $ | 36,336 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 3.7 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 376 |  |  | 376 |  |  |  |  |  | 506 |  |  | 465 |  |  |  |
Average capacity (units)(3) |  |  | 37,718 |  |  | 37,763 |  |  |  |  |  | 47,702 |  |  | 45,684 |  |  |  |
Average annual rent per unit(4) |  | $ | 14,328 |  | $ | 13,809 |  |  |  |  | $ | 13,796 |  | $ | 13,596 |  |  |  |

| (1) |  | From our 201 4 presentation of SPP, we removed 12 senior housing properties that were sold and three senior housing properties that were contributed to partnerships under a RIDEA structure, and no longer meet our criteria for SPP as of the date of contribution.

| (2) |  | Represents rental and related revenues and income from DFLs.

| (3) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented.

| (4) |  | Average annual rent per unit for RIDEA properties is based on NOI.

SPP Adjusted NOI. SPP adjusted NOI improved as a result of annual rent increases and improved performance from RIDEA properties.

Total Portfolio NOI and Adjusted NOI. Our total portfolio NOI decreased primarily as a result of: (i) $38 million of net revenues recognized from the 2014 Brookdale transaction (see Note 3 to the Consolidated Financial Statements) and (ii) an $8 million net termination fee related to our RIDEA III acquisition in 2015 (see Note 4 to the Consolidated Financial

45

Table of Contents

Statements), partially offset by the impact from our SPP and senior housing acquisitions in 2014 and 2015 primarily from our RIDEA III transaction in June 2015 (see Note 4 to the Consolidated Financial Statements).

In addition to the impact of our SPP, our total portfolio adjusted NOI increase d as a result of s enior housing acquisitions in 2014 and 2015 primarily from our RIDEA III transaction in June 2015 (see Note 4 to the Consolidated Financial Statements).

We placed our HCRMC DFL investment s on cash basis of accounting as of January 1, 2016 and will no longer recognize accretion income, unless the timing and amounts owed under the HCRMC DFL inv estments are reasonably assured (s ee Note 6 to the Consolidated Financial Statements).

2014 and 2013

Results as of and for the years ended December 31, 2014 and 2013 (dollars in thousands except per unit data):

|  | SPP |  | Total Portfolio |
|  | 2014 |  | 2013(1) |  | Change |  | 2014 |  | 2013 |  | Change |
Rental revenues(2) |  | $ | 506,592 |  | $ | 505,629 |  | $ | 963 |  | $ | 621,114 |  | $ | 602,506 |  | $ | 18,608 |
Resident fees and services |  |  | 153,251 |  |  | 146,245 |  |  | 7,006 |  |  | 241,965 |  |  | 146,288 |  |  | 95,677 |
Total segment revenues |  | $ | 659,843 |  | $ | 651,874 |  | $ | 7,969 |  | $ | 863,079 |  | $ | 748,794 |  | $ | 114,285 |
Operating expenses |  |  | (98,191) |  |  | (93,792) |  |  | (4,399) |  |  | (167,407) |  |  | (95,603) |  |  | (71,804) |
NOI |  | $ | 561,652 |  | $ | 558,082 |  | $ | 3,570 |  | $ | 695,672 |  | $ | 653,191 |  | $ | 42,481 |
Non-cash adjustments to NOI |  |  | (35,519) |  |  | (50,144) |  |  | 14,625 |  |  | (78,197) |  |  | (58,699) |  |  | (19,498) |
Adjusted NOI |  | $ | 526,133 |  | $ | 507,938 |  | $ | 18,195 |  | $ | 617,475 |  | $ | 594,492 |  | $ | 22,983 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 3.6 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 387 |  |  | 387 |  |  |  |  |  | 465 |  |  | 444 |  |  |  |
Average capacity (units)(3) |  |  | 38,545 |  |  | 38,541 |  |  |  |  |  | 45,684 |  |  | 45,400 |  |  |  |
Average annual rent per unit(4) |  | $ | 13,693 |  | $ | 13,285 |  |  |  |  | $ | 13,596 |  | $ | 13,174 |  |  |  |

| (1) |  | From our 2013 presentation of SPP, we removed a senior housing property that was sold and 51 senior housing properties that were contributed to partnerships under a RIDEA structure as part of the 2014 Brookdale t ransaction and no longer meet our criteria for SPP upon contribution.

| (2) |  | Represents rental and related revenues and income from DFLs.

| (3) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented.

| (4) |  | Average annual rent per unit for RIDEA properties is based on NOI.

SPP NOI and Adjusted NOI. SPP NOI increased primarily from improved performance from RIDEA properties; SPP adjusted NOI improved as a result of annual rent increases and improved performance from RIDEA properties.

Total Portfolio NOI and Adjusted NOI. In addition to the impact of our SPP, our total portfolio NOI increased as a result of recognizing net fees of $38 million from the 2014 Brookdale t ransaction (see Note 3 to the Consolidated Financial Statements). Our total portfolio NOI and adjusted NOI also increased as a result of our senior housing acquisitions in 2014 and 2013.

46

Table of Contents

Post-Acute/Skilled Nursing

2015 and 2014

Results as of and for the years ended December 31, 2015 and 201 4 (dollars in thousands, except per bed data):

|  | SPP |  | Total Portfolio |
|  | 2015 |  | 2014(1) |  | Change |  | 2015 |  | 2014 |  | Change |
Rental revenues(2) |  | $ | 508,638 |  | $ | 533,141 |  | $ | (24,503) |  | $ | 535,111 |  | $ | 555,322 |  | $ | (20,211) |
Operating expenses |  |  | (166) |  |  | (153) |  |  | (13) |  |  | (2,002) |  |  | (2,087) |  |  | 85 |
NOI |  | $ | 508,472 |  | $ | 532,988 |  | $ | (24,516) |  | $ | 533,109 |  | $ | 553,235 |  | $ | (20,126) |
Non-cash adjustments to NOI |  |  | (75,401) |  |  | (66,651) |  |  | (8,750) |  |  | (78,738) |  |  | (69,141) |  |  | (9,597) |
Adjusted NOI |  | $ | 433,071 |  | $ | 466,337 |  | $ | (33,266) |  | $ | 454,371 |  | $ | 484,094 |  | $ | (29,723) |
Adjusted NOI % change |  |  |  |  |  |  |  |  | (7.1) | % |  |  |  |  |  |  |  |  |
Property count |  |  | 290 |  |  | 290 |  |  |  |  |  | 311 |  |  | 301 |  |  |  |
Average capacity (beds)(3) |  |  | 35,934 |  |  | 35,936 |  |  |  |  |  | 38,779 |  |  | 38,441 |  |  |  |
Average annual rent per bed |  | $ | 12,056 |  | $ | 12,980 |  |  |  |  | $ | 11,767 |  | $ | 12,646 |  |  |  |

| (1) |  | From our 201 4 presentation of SPP, we removed 18 post-acute/skilled nursing facilit ies that were sold.

| (2) |  | Represents rental and related revenues and income from DFLs.

| (3) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented.

NOI and Adjusted NOI. SPP and total portfolio NOI and adjusted NOI decreased primarily as a result of the HCRMC Lease Amendment. See “2015 Transaction Overview” above for further discussion of developments with HCRMC.

We placed our HCRMC DFL investment s on cash basis of accounting as of January 1, 2016 and will no longer recognize accretion income, unless the timing and amounts owed under the HCRMC DFL investments are reasonably assured (s ee Note 6 to the Consolidated Financial Statements).

2014 and 2013

Results as of and for the years ended December 31, 2014 and 201 3 (dollars in thousands, except per bed data):

|  | SPP |  | Total Portfolio |
|  | 2014 |  | 2013(1) |  | Change |  | 2014 |  | 2013 |  | Change |
Rental revenues(2) |  | $ | 553,778 |  | $ | 540,403 |  | $ | 13,375 |  | $ | 555,322 |  | $ | 541,805 |  | $ | 13,517 |
Operating expenses |  |  | (168) |  |  | (443) |  |  | 275 |  |  | (2,087) |  |  | (2,485) |  |  | 398 |
NOI |  | $ | 553,610 |  | $ | 539,960 |  | $ | 13,650 |  | $ | 553,235 |  | $ | 539,320 |  | $ | 13,915 |
Non-cash adjustments to NOI |  |  | (69,004) |  |  | (71,632) |  |  | 2,628 |  |  | (69,141) |  |  | (71,812) |  |  | 2,671 |
Adjusted NOI |  | $ | 484,606 |  | $ | 468,328 |  | $ | 16,278 |  | $ | 484,094 |  | $ | 467,508 |  | $ | 16,586 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 3.5 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 301 |  |  | 301 |  |  |  |  |  | 301 |  |  | 302 |  |  |  |
Average capacity (beds)(3) |  |  | 38,333 |  |  | 38,253 |  |  |  |  |  | 38,441 |  |  | 38,464 |  |  |  |
Average annual rent per bed |  | $ | 12,645 |  | $ | 12,253 |  |  |  |  | $ | 12,646 |  | $ | 12,218 |  |  |  |

| (1) |  | From our 2013 presentation of SPP, we removed a post-acute/skilled nursing property that was sold.

| (2) |  | Represents rental and related revenues and income from DFLs.

| (3) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented.

47

Table of Contents

NOI and Adjusted NOI. SPP and total portfolio NOI and adjusted NOI increased primarily as a result of annual rent escalations from our HCRMC DFL investments.

Life Science

2015 and 2014

Results as of and for the years ended December 31, 2015 and 201 4 (dollars and sq. ft. in thousands, except per sq. ft. data):

|  | SPP |  | Total Portfolio |
|  | 2015 |  | 2014(1) |  | Change |  | 2015 |  | 2014 |  | Change |
Rental revenues |  | $ | 264,110 |  | $ | 251,857 |  | $ | 12,253 |  | $ | 283,557 |  | $ | 264,164 |  | $ | 19,393 |
Tenant recoveries |  |  | 53,827 |  |  | 46,863 |  |  | 6,964 |  |  | 59,427 |  |  | 49,950 |  |  | 9,477 |
Total segment revenues |  | $ | 317,937 |  | $ | 298,720 |  | $ | 19,217 |  | $ | 342,984 |  | $ | 314,114 |  | $ | 28,870 |
Operating expenses |  |  | (59,053) |  |  | (54,554) |  |  | (4,499) |  |  | (70,217) |  |  | (63,080) |  |  | (7,137) |
NOI |  | $ | 258,884 |  | $ | 244,166 |  | $ | 14,718 |  | $ | 272,767 |  | $ | 251,034 |  | $ | 21,733 |
Non-cash adjustments to NOI |  |  | (8,628) |  |  | (9,121) |  |  | 493 |  |  | (10,128) |  |  | (10,075) |  |  | (53) |
Adjusted NOI |  | $ | 250,256 |  | $ | 235,045 |  | $ | 15,211 |  | $ | 262,639 |  | $ | 240,959 |  | $ | 21,680 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 6.5 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 107 |  |  | 107 |  |  |  |  |  | 118 |  |  | 111 |  |  |  |
Average occupancy |  |  | 97.2 | % |  | 92.7 | % |  |  |  |  | 97.1 | % |  | 93.0 | % |  |  |
Average occupied sq. ft. |  |  | 6,735 |  |  | 6,414 |  |  |  |  |  | 7,179 |  |  | 6,637 |  |  |  |
Average annual total revenues per occupied sq. ft. |  | $ | 46 |  | $ | 45 |  |  |  |  | $ | 46 |  | $ | 46 |  |  |  |
Average annual rental revenues per occupied sq. ft. |  | $ | 38 |  | $ | 38 |  |  |  |  | $ | 38 |  | $ | 38 |  |  |  |

| (1) |  | From our 201 4 presentation of SPP, we removed a life science facility that was placed into land held for development, which no longer meets our criteria for SPP as of the date placed into development.

SPP NOI and Adjusted NOI. SPP NOI and adjusted NOI increased primarily as a result of increased occupancy. Additionally, SPP adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI. In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of the impact of our life science development projects placed into service during 2014 and life science acquisition s in 2014 and 2015.

During the year ended December 31, 2015, 6 94,000 square feet of new and renewal leases commenced at an average annual base rent of $33.52 per square foot compared to 412,000 square feet of expired and terminated leases with an average annual base rent of $33.47 per square foot. During the year ended December 31, 2015, we acquired six propert ies with 158,000 occupied square feet with an average annual base rent of $38.80 per square foot.

48

Table of Contents

2014 and 2013

Results as of and for the years ended December 31, 2014 and 2013 (dollars and sq. ft. in thousands, except per sq. ft. data):

|  | SPP |  | Total Portfolio |
|  | 2014 |  | 2013 |  | Change |  | 2014 |  | 2013 |  | Change |
Rental revenues |  | $ | 247,062 |  | $ | 243,558 |  | $ | 3,504 |  | $ | 264,164 |  | $ | 251,919 |  | $ | 12,245 |
Tenant recoveries |  |  | 46,004 |  |  | 43,628 |  |  | 2,376 |  |  | 49,950 |  |  | 44,960 |  |  | 4,990 |
Total segment revenues |  | $ | 293,066 |  | $ | 287,186 |  | $ | 5,880 |  | $ | 314,114 |  | $ | 296,879 |  | $ | 17,235 |
Operating expenses |  |  | (53,512) |  |  | (50,888) |  |  | (2,624) |  |  | (63,080) |  |  | (56,956) |  |  | (6,124) |
NOI |  | $ | 239,554 |  | $ | 236,298 |  | $ | 3,256 |  | $ | 251,034 |  | $ | 239,923 |  | $ | 11,111 |
Non-cash adjustments to NOI |  |  | (8,117) |  |  | (12,572) |  |  | 4,455 |  |  | (10,075) |  |  | (11,448) |  |  | 1,373 |
Adjusted NOI |  | $ | 231,437 |  | $ | 223,726 |  | $ | 7,711 |  | $ | 240,959 |  | $ | 228,475 |  | $ | 12,484 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 3.4 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 105 |  |  | 105 |  |  |  |  |  | 111 |  |  | 111 |  |  |  |
Average occupancy |  |  | 93.1 | % |  | 91.5 | % |  |  |  |  | 93.0 | % |  | 91.8 | % |  |  |
Average occupied sq. ft. |  |  | 6,325 |  |  | 6,212 |  |  |  |  |  | 6,637 |  |  | 6,480 |  |  |  |
Average annual total revenues per occupied sq. ft. |  | $ | 45 |  | $ | 44 |  |  |  |  | $ | 46 |  | $ | 44 |  |  |  |
Average annual rental revenues per occupied sq. ft. |  | $ | 38 |  | $ | 37 |  |  |  |  | $ | 38 |  | $ | 37 |  |  |  |

| (1) |  | From our 2013 presentation of SPP, we removed three life science facilities that were placed into land held for development and a life science facility that was placed into redevelopment in 2014, which no longer meet our criteria for SPP as of the date placed into development.

SPP NOI and Adjusted NOI. SPP NOI and adjusted NOI increased as a result of increased average occupancy. Additionally, SPP adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI. In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of the impact of our life science development projects placed in service during 2014 and 2013 and a life science acquisition in 2014.

During the year ended December 31, 2014, 1.5 million square feet of new and renewal leases commenced at an average annual base rent of $30.40 per square foot compared to 1.1 million square feet of expiring leases with an average annual base rent of $30.83 per square foot. During the year ended December 31, 2014, we acquired a property with 83,000 occupied square feet with an average annual base rent of $33.87 per square foot.

49

Table of Contents

Medical Office

2015 and 2014

Results as of and for the years ended December 31, 2015 and 201 4 (dollars and sq. ft. in thousands, except per sq. ft. data):

|  | SPP |  | Total Portfolio |
|  | 2015 |  | 2014(1) |  | Change |  | 2015 |  | 2014 |  | Change |
Rental revenues |  | $ | 302,792 |  | $ | 297,360 |  | $ | 5,432 |  | $ | 354,824 |  | $ | 312,734 |  | $ | 42,090 |
Tenant recoveries |  |  | 55,977 |  |  | 55,082 |  |  | 895 |  |  | 64,401 |  |  | 58,222 |  |  | 6,179 |
Total segment revenues |  | $ | 358,769 |  | $ | 352,442 |  | $ | 6,327 |  | $ | 419,225 |  | $ | 370,956 |  | $ | 48,269 |
Operating expenses |  |  | (137,411) |  |  | (135,375) |  |  | (2,036) |  |  | (163,550) |  |  | (148,199) |  |  | (15,351) |
NOI |  | $ | 221,358 |  | $ | 217,067 |  | $ | 4,291 |  | $ | 255,675 |  | $ | 222,757 |  | $ | 32,918 |
Non-cash adjustments to NOI |  |  | (661) |  |  | (844) |  |  | 183 |  |  | (5,025) |  |  | (1,406) |  |  | (3,619) |
Adjusted NOI |  | $ | 220,697 |  | $ | 216,223 |  | $ | 4,474 |  | $ | 250,650 |  | $ | 221,351 |  | $ | 29,299 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 2.1 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 204 |  |  | 204 |  |  |  |  |  | 227 |  |  | 215 |  |  |  |
Average occupancy |  |  | 90.5 | % |  | 91.1 | % |  |  |  |  | 90.7 | % |  | 90.7 | % |  |  |
Average occupied sq. ft. |  |  | 12,566 |  |  | 12,649 |  |  |  |  |  | 14,762 |  |  | 13,178 |  |  |  |
Average annual total revenues per occupied sq. ft. |  | $ | 28 |  | $ | 28 |  |  |  |  | $ | 28 |  | $ | 28 |  |  |  |
Average annual rental revenues per occupied sq. ft. |  | $ | 24 |  | $ | 23 |  |  |  |  | $ | 24 |  | $ | 24 |  |  |  |

| (1) |  | From our 201 4 presentation of SPP, we removed a MOB that was sold.

SPP NOI and Adjusted NOI. SPP NOI and adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI. Our total portfolio NOI and adjusted NOI increased primarily as a result of the impact of our MOB acquisitions in 2014 and 2015.

During the year ended December 31, 2015, 2.4 million square feet of new and renewal leases commenced at an average annual base rent of $23.82 per square foot compared to 2.4 million square feet of expiring and terminated leases with an average annual base rent of $24.1 5 per square foot. During the year ended December 31, 2015, we acquired properties with 1.9 million occupied square feet with an average annual base rent of $16.19 per square foot, including 1.2 million square feet with a triple net annual base rent of $10.74 per square foot, and disposed of 17,000 square feet with an average annual base rent of $17.50 per square foot.

50

Table of Contents

2014 and 2013

Results as of and for the years ended December 31, 2014 and 2013 (dollars and sq. ft. in thousands, except per sq. ft. data):

|  | SPP |  | Total Portfolio |
|  | 2014 |  | 2013(1) |  | Change |  | 2014 |  | 2013 |  | Change |
Rental revenues |  | $ | 296,216 |  | $ | 292,680 |  | $ | 3,536 |  | $ | 312,734 |  | $ | 299,102 |  | $ | 13,632 |
Tenant recoveries |  |  | 54,935 |  |  | 52,769 |  |  | 2,166 |  |  | 58,222 |  |  | 53,232 |  |  | 4,990 |
Total segment revenues |  | $ | 351,151 |  | $ | 345,449 |  | $ | 5,702 |  | $ | 370,956 |  | $ | 352,334 |  | $ | 18,622 |
Operating expenses |  |  | (134,275) |  |  | (131,148) |  |  | (3,127) |  |  | (148,199) |  |  | (139,376) |  |  | (8,823) |
NOI |  | $ | 216,876 |  | $ | 214,301 |  | $ | 2,575 |  | $ | 222,757 |  | $ | 212,958 |  | $ | 9,799 |
Non-cash adjustments to NOI |  |  | (467) |  |  | (2,161) |  |  | 1,694 |  |  | (1,406) |  |  | (2,147) |  |  | 741 |
Adjusted NOI |  | $ | 216,409 |  | $ | 212,140 |  | $ | 4,269 |  | $ | 221,351 |  | $ | 210,811 |  | $ | 10,540 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 2.0 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 203 |  |  | 203 |  |  |  |  |  | 215 |  |  | 206 |  |  |  |
Average occupancy |  |  | 91.4 | % |  | 91.3 | % |  |  |  |  | 90.7 | % |  | 90.7 | % |  |  |
Average occupied sq. ft. |  |  | 12,618 |  |  | 12,582 |  |  |  |  |  | 13,178 |  |  | 12,767 |  |  |  |
Average annual total revenues per occupied sq. ft. |  | $ | 28 |  | $ | 27 |  |  |  |  | $ | 28 |  | $ | 27 |  |  |  |
Average annual rental revenues per occupied sq. ft. |  | $ | 23 |  | $ | 23 |  |  |  |  | $ | 24 |  | $ | 23 |  |  |  |

| (1) |  | From our 2013 presentation of SPP, we removed a MOB that was sold.

SPP NOI and Adjusted NOI. SPP NOI and adjusted NOI increased primarily as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI. In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of our medical office acquisitions in 2014.

During the year ended December 31, 2014, 2.6 million square feet of new and renewal leases commenced at an average annual base rent of $23.15 per square foot compared to 2.6 million square feet of expiring and terminated leases with an average annual base rent of $25.06 per square foot. During the year ended December 31, 2014, we acquired properties with 953,000 occupied square feet that have average annual base rent of $25.00 per square foot.

Hospital

2015 and 2014

Results as of and for the years ended December 31, 2015 and 201 4 (dollars in thousands, except per bed data):

|  | SPP |  | Total Portfolio |
|  | 2015 |  | 2014 |  | Change |  | 2015 |  | 2014 |  | Change |
Rental revenues(1) |  | $ | 85,672 |  | $ | 83,941 |  | $ | 1,731 |  | $ | 85,723 |  | $ | 83,992 |  | $ | 1,731 |
Tenant recoveries |  |  | 2,657 |  |  | 2,515 |  |  | 142 |  |  | 2,657 |  |  | 2,516 |  |  | 141 |
Total segment revenues |  | $ | 88,329 |  | $ | 86,456 |  | $ | 1,873 |  | $ | 88,380 |  | $ | 86,508 |  | $ | 1,872 |
Operating expenses |  |  | (3,942) |  |  | (3,773) |  |  | (169) |  |  | (3,989) |  |  | (3,830) |  |  | (159) |
NOI |  | $ | 84,387 |  | $ | 82,683 |  | $ | 1,704 |  | $ | 84,391 |  | $ | 82,678 |  | $ | 1,713 |
Non-cash adjustments to NOI |  |  | 1,060 |  |  | 445 |  |  | 615 |  |  | 1,060 |  |  | 443 |  |  | 617 |
Adjusted NOI |  | $ | 85,447 |  | $ | 83,128 |  | $ | 2,319 |  | $ | 85,451 |  | $ | 83,121 |  | $ | 2,330 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 2.8 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 16 |  |  | 16 |  |  |  |  |  | 16 |  |  | 16 |  |  |  |
Average capacity (beds)(2) |  |  | 2,224 |  |  | 2,221 |  |  |  |  |  | 2,224 |  |  | 2,221 |  |  |  |
Average annual rent per bed |  | $ | 40,189 |  | $ | 39,127 |  |  |  |  | $ | 40,212 |  | $ | 39,149 |  |  |  |

51

Table of Contents

| (1) |  | Represents rental and related revenues and income from DFLs.

| (2) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented. Certain operators in our hospital portfolio are not required under their respective leases to provide operational data.

NOI and Adjusted NOI. SPP and total portfolio NOI and adjusted NOI increased primarily as a result of additional rents earned in 2015 due to exceeding pre-established thresholds and annual rent escalations, partially offset by increased operating expenses.

2014 and 2013

Results as of and for the years ended December 31, 2014 and 2013 (dollars in thousands, except per bed data):

|  | SPP |  | Total Portfolio |
|  | 2014 |  | 2013 |  | Change |  | 2014 |  | 2013 |  | Change |
Rental revenues(1) |  | $ | 82,667 |  | $ | 69,213 |  | $ | 13,454 |  | $ | 83,992 |  | $ | 69,603 |  | $ | 14,389 |
Tenant recoveries |  |  | 2,515 |  |  | 2,457 |  |  | 58 |  |  | 2,516 |  |  | 2,457 |  |  | 59 |
Total segment revenues |  | $ | 85,182 |  | $ | 71,670 |  | $ | 13,512 |  | $ | 86,508 |  | $ | 72,060 |  | $ | 14,448 |
Operating expenses |  |  | (3,773) |  |  | (3,813) |  |  | 40 |  |  | (3,830) |  |  | (3,862) |  |  | 32 |
NOI |  | $ | 81,409 |  | $ | 67,857 |  | $ | 13,552 |  | $ | 82,678 |  | $ | 68,198 |  | $ | 14,480 |
Non-cash adjustments to NOI |  |  | 466 |  |  | 11,561 |  |  | (11,095) |  |  | 443 |  |  | 11,554 |  |  | (11,111) |
Adjusted NOI |  | $ | 81,875 |  | $ | 79,418 |  | $ | 2,457 |  | $ | 83,121 |  | $ | 79,752 |  | $ | 3,369 |
Adjusted NOI % change |  |  |  |  |  |  |  |  | 3.1 | % |  |  |  |  |  |  |  |  |
Property count |  |  | 15 |  |  | 15 |  |  |  |  |  | 16 |  |  | 16 |  |  |  |
Average capacity (beds)(2) |  |  | 2,161 |  |  | 2,149 |  |  |  |  |  | 2,221 |  |  | 2,175 |  |  |  |
Average annual rent per bed |  | $ | 39,634 |  | $ | 38,730 |  |  |  |  | $ | 39,149 |  | $ | 38,437 |  |  |  |

| (1) |  | Represents rental and related revenues and income from DFLs.

| (2) |  | Represents average capacity as reported by the respective tenants or operators for a twelve-month period that is a quarter in arrears from the periods presented. Certain operators in our hospital portfolio are not required under their respective leases to provide operational data.

NOI and Adjusted NOI. SPP and total portfolio NOI increased primarily due to a net $12 million correction in 2013 that reduced previously recognized non-cash revenues including straight-line rents and accelerated amortization of below market lease intangibles related to our Medical City Dallas hospital. SPP and total portfolio adjusted NOI increased primarily as a result of annual rent escalations.

Other Income and Expense Items

Interest income. Interest income in creased $38 million to $112 million for the year ended December 31, 2015. The increase was primarily the result of: (i) fundings through our HC-One Facility in November 2014 and February 2015 (see Note 7 to the Consolidated Financial Statements), (ii) incremental interest income from the repayments of three development loans resulting from the appreciation of the underlying real estate assets and (iii) additional fundings under our mezzanine loan facility with Tandem in May 2015 (see Note 7 to the Consolidated Financial Statements). The increases in interest income were partially offset by a change in interest income recognition on our investment in the Four Seasons Notes (see Note 1 7 to the Consolidated Financial Statements).

Interest income decreased $12 million to $74 million for the year ended December 31, 2014. The decrease was primarily the result of the repayment of our Barchester loan in September 2013, partially offset by interest earned from the June 2013 funding under the Tandem Health Care mezzanine loan facility and the November 2014 HC-One Facility (see Note 7 to the Consolidated Financial Statements).

Interest expense. For the year ended December 31, 2015, interest expense increased $4 0 million to $4 8 0 million. The increase was primarily the result of: (i) our senior unsecured notes offerings during 2014 and 2015, (ii) increased borrowings from our term loan originated in 2015, (iii) increased borrowings under our line of credit facility and (iv) lower capitalized interest. The increases in interest expense were partially offset by repayments of senior unsecured notes and mortgage debt that matured during 2014 and 2015. The increased borrowings were used to fund our investment activities and to refinance our debt maturities.

52

Table of Contents

2015 and 2014

The table below sets forth information with respect to our debt, excluding premiums, discounts and debt issuance costs (dollars in thousands):

|  | As of December 31,(1) |
|  | 2015 |  | 2014 |
Balance: |  |  |  |  |  |  |
Fixed rate |  | $ | 10,659,378 |  | $ | 8,841,676 |
Variable rate |  |  | 397,432 |  |  | 847,016 |
Total |  | $ | 11,056,810 |  | $ | 9,688,692 |
Percentage of total debt: |  |  |  |  |  |  |
Fixed rate |  |  | 96.4 | % |  | 91.3 | %
Variable rate |  |  | 3.6 |  |  | 8.7 |
Total |  |  | 100 | % |  | 100 | %
Weighted average interest rate at end of period: |  |  |  |  |  |  |
Fixed rate |  |  | 4.68 | % |  | 5.01 | %
Variable rate |  |  | 1.72 | % |  | 1.59 | %
Total weighted average rate |  |  | 4.57 | % |  | 4.71 | %

| (1) |  | At December 31, 2015 and 2014, excludes $9 4 million and $97 million of other debt, respectively, that represents non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities and demand notes that have no scheduled maturities. At both December 31, 2015 and 201 4, $71 million of variable-rate mortgages are presented as fixed-rate debt as the interest payments were swapped from variable to fixed. At December 31, 2015 and 2014, £357 million ($526 million) and £137 million ($214 million) term loans, respectively, are presented as fixed-rate debt as the interest payments were swapped from variable to fixed.

For the year ended December 31, 2014, interest expense increased $4 million to $440 million. The increase was primarily the result of net increase in indebtedness as presented below.

2014 and 2013

The table below sets forth information with respect to our debt, excluding premiums, discounts and debt issuance costs (dollars in thousands):

|  | As of December 31,(1) |
|  | 2014 |  | 2013 |
Balance: |  |  |  |  |  |  |
Fixed rate |  | $ | 8,841,676 |  | $ | 8,581,889 |
Variable rate |  |  | 847,016 |  |  | 33,955 |
Total |  | $ | 9,688,692 |  | $ | 8,615,844 |
Percentage of total debt: |  |  |  |  |  |  |
Fixed rate |  |  | 91.3 | % |  | 99.6 | %
Variable rate |  |  | 8.7 |  |  | 0.4 |
Total |  |  | 100 | % |  | 100 | %
Weighted average interest rate at end of period: |  |  |  |  |  |  |
Fixed rate |  |  | 5.01 | % |  | 5.10 | %
Variable rate |  |  | 1.59 | % |  | 1.13 | %
Total weighted average rate |  |  | 4.71 | % |  | 5.08 | %

| (1) |  | At December 31, 2014, excludes $97 million of other debt that represents non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities and demand notes that have no scheduled maturities. At December 31, 2013, excludes $75 million of other debt that represents non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities. At December 31, 2014 and 2013, $71 million and $72 million of variable-rate mortgages, respectively, and a £137 million ($214 million and $227 million, respectively) term loan are presented as fixed-rate debt as the interest payments were swapped from variable to fixed.

Our exposure to interest expense fluctuations related to our variable rate indebtedness is mitigated by our interest rate swap contracts. For a more detailed discussion of our interest rate risk, see Item 7A.

53

Table of Contents

Depreciation and amortization expense. Deprec iation and amortization expense increased $51 million to $511 million for the year ended December 31, 2015. The increase was primarily the result of the impact of our acquisitions and redevelopment projects placed in service during 2014 and 2015. The increases in depreciation and amortization expense were partially offset by additional depreciation expense recognized in 2014 as a result of a change in estimate of the depreciable life and residual value of certain properties.

Deprec iation and amortization expense increased $37 million to $460 million for the year ended December 31, 2014. The increase was primarily the result of acquisitions, redevelopment projects placed in service and changes in estimates of the depreciable lives and residual values of certain properties.

General and administrative expenses. General and administrative expenses in creased $14 million to $96 million for the year ended December 31, 2015. The increase was primarily the result of a $7 million severance-related charge resulting from the resignation of our former Executive Vice President and Chief Investment Officer in June 2015. In addition, the increase was the result of higher compensation related expenses.

General and administrative expenses decreased $21 million to $82 million for the year ended December 31, 2014. The year ended December 31, 2013 included $27 million of severance-related charges resulting from the termination of our former chief executive officer (see Note 16 to the Consolidated Financial Statements).

Acquisition and pursuit costs. Acquisition and pursuit costs increased $1 0 million to $2 7 million for the year ended December 31, 2015. The in crease was primarily due to higher levels of transactional activity in 201 5, including transactional costs related to the U.K. and RIDEA III investments.

Acquisition and pursuit costs increased $11 million to $17 million for the year ended December 31, 2014. The increase was primarily due to higher levels of transactional activity in 2014, including transactional costs related to the 2014 Brookdale t ransaction and the U.K. real estate and debt investments.

Impairments (recovery). During the year ended December 31, 2015, we recognized the following impairment charges: (i) $1.3 b illion related to our HCRMC DFL investments, (ii) $112 million related to our investment in Four Seasons Notes and (iii) $3 million related to a MOB. The impairment charges were partially offset by a $6 million impairment recovery related to a repayment of a loan in our hospital segment. See Notes 6 and 1 7 to the Consolidated Financial Statements.

Other income, net. For the year ended December 31, 2015, other income, net in creased $7 million to $14 million. The increase was primarily the result of the impact from remeasuring assets and liabilities denominated in GBP to USD.

For the year ended December 31, 2014, other income, net decreased $11 million to $8 million. The decrease was primarily the result of gains from the sale of marketable equity securities during 2013; there were no comparable gains from the sale of marketable securities in 2014.

Income tax benefit (expense). For the year ended December 31, 2015, income taxes decreased by $9 million to a benefit of $9 million. The decrease was primarily the result of the tax benefit related to our share of operating losses from our RIDEA joint ventures formed as part of the 2014 Brookdale t ransaction and related to our U.K. real estate investments in 2015.

For the year ended December 31, 2014, income tax expense decreased by $6 million to $250,000. The decrease in income taxes was primarily due to the losses of our TRS entities during the year ended December 31, 2014.

Equity income from unconsolidated joint ventures. For the year ended December 31, 2015, equity income from unconsolidated joint ventures in creased $8 million to $57 million. The increase in equity income from unconsolidated joint ventures was primarily the result of our share of gains on sales of real estate from HCP Ventures III, LLC and HCP Ventures IV, LLC, partially offset by our share of operating losses recognized from the CCRC JV.

In December 2015, we concluded that our equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $19 million and, prospectively, income will be recognized only if cash distributions are received from HCRMC (see Notes 8 and 17 to the Consolidated Financial Statements).

54

Table of Contents

For the year ended December 31, 2014, equity income from unconsolidated joint ventures decreased $15 million to $50 million. The decrease in equity income from unconsolidated joint ventures was primarily the result of: (i) our share of operating losses from the CCRC JV investment formed in 2014; (ii) the decline in operating performance of our HCRMC equity interest; and (iii) a 2013 one-time distribution received from a senior housing joint venture that exceeded our investment balance.

Impairment of investments in unconsolidated joint ventures. During the year ended December 31, 2015 and 2014, we recognized impairment s of $46 million and $36 million, respectively, related to our equity ownership interest in HCRMC (see Notes 8 and 17 to the Consolidated Financial Statements).

Gain on sales of real estate (continu ing and discontinued operations). During the year ended December 31, 201 5, we sold 10 properties for total gain on sales of real estate of $6 million. During the year ended December 31, 201 4, we sold five properties for total gain on sales of real estate of $31 million (see Note 5 to the Consolidated Financial Statements).

During the year ended December 31, 2013, we sold 13 properties for total gain on sales of real estate of $70 million (see Note 5 to the Consolidated Financial Statements).

Liquidity and Capital Resources

We anticipate: (i) funding recurring operating expenses, (ii) meeting debt service requirements including principal payments and maturities, and (iii) satisfying our distributions to our stockholders and non-controlling interest members, for the next 12 months primarily by using cash flow from operations, available cash balances and cash from our various financing activities. Additionally, we expect to partially meet our scheduled financing maturities for 201 6 (excluding future acquisitions) with the proceeds from our December 2015 $600 million senior unsecured note offering.

Our principal investing liquidity needs for the next 12 months are to:

| · |  | fund capital expenditures, including tenant improvements and leasing costs; and

| · |  | fund future acquisition, transactional and development activities.

We anticipate satisfying these future investing needs using one or more of the following:

| · |  | issuance of common or preferred stock;

| · |  | issuance of additional debt, including unsecured notes and mortgage debt;

| · |  | draws on our credit facilities; and/or

| · |  | sale or exchange of ownership interests in properties.

Access to capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. For example, as noted below, our revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon our credit ratings. We also pay a facility fee on the entire revolving commitment that depends upon our credit ratings. As of January 29, 201 6, we had a credit rating of BBB+ from Fitch, Baa1 from Moody’s and BBB+ from S&P on our senior unsecured debt securities.

55

Table of Contents

Cash Flow Summary

The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents were $347 million and $184 million at December 31, 2015 and 201 4, respectively, reflecting a n in crease of $163 million. The following table sets forth changes in cash flows (dollars in thousands):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | Change |
Net cash provided by operating activities |  | $ | 1,222,145 |  | $ | 1,248,621 |  | $ | (26,476) |
Net cash used in investing activities |  |  | (1,672,005) |  |  | (1,511,879) |  |  | (160,126) |
Net cash provided by financing activities |  |  | 614,087 |  |  | 144,797 |  |  | 469,290 |

The in crease in operating cash flow is the result of a net paydown of working capital. Our cash flow from operations is dependent upon the occupancy levels of our buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses and other factors.

The following are significant investing and financing activities for the year ended December 31, 2015:

| · |  | made investments of $2.4 billion (development, leasing and acquisition of real estate, and investments in unconsolidated joint ventures and loans);

| · |  | paid dividends on common stock of $1 billion, which were generally funded by cash provided by our operating activities and cash on hand; and

| · |  | raised proceeds of $2.7 billion primarily from issuing senior unsecured notes, the term loan originated in January 2015, net borrowings under our bank line of credit, issuances of common stock and noncontrolling interest, and an additional $6 84 million from sales of real estate, and loan and DFL repayments; and repaid $969 m illion of senior unsecured notes, bank line of credit and mortgage debt.

Debt

Bank line of credit and Term Loans. Our $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a one-year extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon our credit ratings. We pay a facility fee on the entire revolving commitment that depends on our credit ratings. Based on our credit ratings at January 29, 201 6, the margin on the Facility was 0.925%, and the facility fee was 0.15%. The Facility also includes a feature that will allow us to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At December 3 1, 2015, we had $397 m illion (£270 million) outstanding under the Facility with a weighted average effective interest rate of 1.7 2%.

On July 30, 2012, we entered into a credit agreement with a syndicate of banks for a £137 million ($2 02 million at December 31, 2015) four-year unsecured term loan (the “2012 Term Loan”). Based on our credit ratings at January 29, 201 6, the 2012 Term Loan accrues interest at a rate of GBP LIBOR plus 1.20%. Concurrent with the closing of the 2012 Term Loan, we entered into a four-year interest rate swap contract that fixes the rate of the 2012 Term Loan at 1.81%, subject to adjustments based on our credit ratings. The 2012 Term Loan contains a one-year committed extension option.

On January 12, 2015, we entered into a credit agreement with a syndicate of banks for a £220 million ($32 3 million at December 3 1, 2015) four-year unsecured term loan (the “2015 Term Loan”) that accrues interest at a rate of GBP LIBOR plus 0.975%, subject to adjustments based on our credit ratings (the 2012 and 2015 Term Loans are collectively, the “Term Loans”). Proceeds from this term loan were used to repay a £220 million draw on the Facility that partially funded the November 2014 HC-One Facility (see Note 7 to the Consolidated Financial Statements). Concurrently, we entered into a three-year interest rate swap agreement that effectively fixes the interest rate of the 2015 Term Loan at 1.79% (see Note 2 4 to the Consolidated Financial Statements). The 2015 Term Loan contains a one-year committed extension option.

56

Table of Contents

The Facility and Term Loans contain certain financial restrictions and other customary requirements. Among other things, these covenants, using terms defined in the agreements, (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and Term Loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at December 31, 2015. At December 31, 2015, we were in compliance with each of these restrictions and requirements of the Facility and Term Loan s.

Senior unsecured notes. At December 31, 2015, we had senior unsecured notes outstanding with an aggregate principal balance of $9.2 billion. Interest rates on the notes ranged from 2.79% to 6.88% with a weighted average effective interest rate of 4.68% and a weighted average maturity of six years at December 31, 2015. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. At December 31, 2015, we believe we were in compliance with these covenants.

Mortgage debt. At December 31, 2015, we had $9 3 3 m illion in aggregate principal amount of mortgage debt outstanding that is secured by 62 healthcare facilities (including redevelopment properties) with a carrying value of $1.2 billion. Interest rates on the mortgage debt ranged from 3.14% to 8.35% with a weighted average effective interest rate of 6.2 1% and a weighted average maturity of two years at December 31, 2015.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets, and includes conditions to obtain lender consent to enter into and terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Equity

At December 31, 2015, we had 46 5 million shares of common stock outstanding, equity totaled $9.7 billion, and our equity securities had a market value of $18.0 billion.

At December 31, 2015, non-managing members held an aggregate of four million units in five limited liability companies (“DownREITs”) for which we are the managing member. The DownREIT units are exchangeable for an amount of cash approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications).

At-The-Market Program. In June 2015, we established an ATM Program, in connection with the renewal of our Shelf Registration Statement. Under this program, we may sell shares of our common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. During the year ended December 3 1, 2015, we issued 1.8 million shares of common stock at a weighted average price of $40.14 for proceeds of $73 million, net of fees and commissions of $1 million. Actual future sales will depend upon a variety of factors, including but not limited to market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under our program.

Shelf Registration

We filed a prospectus with the SEC as part of a registration statement on Form S-3ASR, using a shelf registration process, which expires in June 2018. Under the “shelf” process, we may sell any combination of the securities described in the prospectus through one or more offerings. The securities described in the prospectus include common stock, preferred stock, depositary shares, debt securities and warrants.

57

Table of Contents

Capital Market Outlook

The capital markets have facilitated our continued growth, including our international expansion. For the 2 4 months ended December 3 1, 2015, we have raised $3.1 billion in senior unsecured notes, originated a £220 million ($333 million) four-year unsecured term loan and increased our Facility from $1.5 billion to $2.0 billion. The capital raised, in combination with available cash and borrowing capacity under our Facility, supported $4.2 billion of investments completed during the 24 months ended December 31, 201 5. We believe our equity and debt investors, as well as our banking relationships, will provide additional capital as we pursue new investment opportunities.

Contractual Obligations

The following table summarizes our material contractual payment obligations and commitments at December 31, 2015 (in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  | More than |
|  | Total(1) |  | 2016 |  | 2017-2018 |  | 2019-2020 |  | Five Years |
Bank line of credit(2) |  | $ | 397,432 |  | $ | — |  | $ | 397,432 |  | $ | — |  | $ | — |
Term loans(3) |  |  | 526,468 |  |  | 202,034 |  |  | — |  |  | 324,434 |  |  | — |
Senior unsecured notes(4) |  |  | 9,200,000 |  |  | 900,000 |  |  | 1,350,000 |  |  | 1,250,000 |  |  | 5,700,000 |
Mortgage debt |  |  | 932,910 |  |  | 279,194 |  |  | 588,474 |  |  | 4,150 |  |  | 61,092 |
U.K. loan commitment s(5) |  |  | 56,915 |  |  | 34,099 |  |  | 22,816 |  |  | — |  |  | — |
Construction loan commitments(6) |  |  | 2,060 |  |  | 2,060 |  |  | — |  |  | — |  |  | — |
Development commitments(7) |  |  | 92,712 |  |  | 92,712 |  |  | — |  |  | — |  |  | — |
Ground and other operating leases |  |  | 383,906 |  |  | 7,870 |  |  | 14,068 |  |  | 13,719 |  |  | 348,249 |
Interest(8) |  |  | 2,776,445 |  |  | 471,543 |  |  | 712,356 |  |  | 543,451 |  |  | 1,049,095 |
Total |  | $ | 14,368,848 |  | $ | 1,989,512 |  | $ | 3,085,146 |  | $ | 2,135,754 |  | $ | 7,158,436 |

| (1) |  | Excludes $9 4 million of other debt that represents life care bonds and demand notes that have no scheduled maturities.

| (2) |  | Represents £270 million translated into USD.

| (3) |  | Represents £357 million translated into USD.

| (4) |  | In February 2016, we repaid $500 million senior unsecured notes with proceeds from our December 2015 senior unsecured notes issuance.

| (5) |  | Represents £3 9 million translated into USD as of December 31, 2015 for commitments to fund our U.K. loan facilit ies.

| (6) |  | Represents commitments to finance development projects and related working capital financings.

| (7) |  | Represents construction and other commitments for developments in progress.

| (8) |  | Interest on variable-rate debt is calculated using rates in effect at December 31, 2015.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated joint ventures as described under Note 8 to the Consolidated Financial Statements. Except in limited circumstances, our risk of loss is limited to our investment in the joint venture and any outstanding loans receivable. In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities, as described under Note 12 to the Consolidated Financial Statements. Our risk of loss for these certain properties is limited to the outstanding debt balance plus penalties, if any. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources except those described above under “Contractual Obligations”.

Inflation

Our leases often provide for either fixed increases in base rents or indexed escalators, based on the Consumer Price Index or other measures, and/or additional rent based on increases in the tenants’ operating revenues. Most of our MOB leases require the tenant to pay a share of property operating costs such as real estate taxes, insurance and utilities. Substantially all of our senior housing, life science, post-acute/skilled nursing and hospital leases require the tenant or operator to pay all of the property operating costs or reimburse us for all such costs. We believe that inflationary increases in expenses will be offset, in part, by the tenant or operator expense reimbursements and contractual rent increases described above.

58

Table of Contents

Non-GAAP Financial Measures Reconciliations

Funds From Operations and Funds Available for Distribution

The following is a reconciliation from net income applicable to common shares, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO, FFO as adjusted and FAD (in thousands, except per share data):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Net (loss) income applicable to common shares |  | $ | (560,552) |  | $ | 919,796 |  | $ | 969,103 |  | $ | 812,289 |  | $ | 515,302 |
Depreciation and amortization of real estate, in-place lease and other intangibles: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  |  | 510,785 |  |  | 459,995 |  |  | 423,312 |  |  | 353,704 |  |  | 346,055 |
Discontinued operations |  |  | — |  |  | — |  |  | 5,862 |  |  | 12,808 |  |  | 11,340 |
Other depreciation and amortization |  |  | 22,223 |  |  | 18,864 |  |  | 14,326 |  |  | 12,756 |  |  | 8,840 |
Gain on sales of real estate |  |  | (6,377) |  |  | (31,298) |  |  | (69,866) |  |  | (31,454) |  |  | (3,107) |
Impairments of real estate |  |  | 2,948 |  |  | — |  |  | 1,372 |  |  | — |  |  | — |
Gain upon consolidation of joint venture |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,769) |
Equity income from unconsolidated joint ventures |  |  | (57,313) |  |  | (49,570) |  |  | (64,433) |  |  | (54,455) |  |  | (46,750) |
FFO from unconsolidated joint ventures |  |  | 90,498 |  |  | 70,873 |  |  | 74,324 |  |  | 64,933 |  |  | 56,887 |
Noncontrolling interests’ and participating securities’ share in earnings |  |  | 14,134 |  |  | 16,795 |  |  | 15,903 |  |  | 17,547 |  |  | 18,062 |
Noncontrolling interests’ and participating securities’ share in FFO |  |  | (27,187) |  |  | (23,821) |  |  | (20,639) |  |  | (21,620) |  |  | (20,953) |
FFO applicable to common shares |  | $ | (10,841) |  | $ | 1,381,634 |  | $ | 1,349,264 |  | $ | 1,166,508 |  | $ | 877,907 |
Distributions on dilutive convertible units |  |  | — |  |  | 13,799 |  |  | 13,276 |  |  | 13,028 |  |  | 6,916 |
Diluted FFO applicable to common shares |  | $ | (10,841) |  | $ | 1,395,433 |  | $ | 1,362,540 |  | $ | 1,179,536 |  | $ | 884,823 |
Diluted FFO per common share |  | $ | (0.02) |  | $ | 3.00 |  | $ | 2.95 |  | $ | 2.72 |  | $ | 2.19 |
Weighted average shares used to calculate diluted FFO per common share |  |  | 462,795 |  |  | 464,845 |  |  | 461,710 |  |  | 434,328 |  |  | 403,864 |
Diluted earnings per common share |  |  | (1.21) |  | $ | 2.00 |  | $ | 2.13 |  | $ | 1.90 |  | $ | 1.29 |
Depreciation and amortization of real estate, in-place lease and other intangibles |  |  | 1.10 |  |  | 1.00 |  |  | 0.93 |  |  | 0.85 |  |  | 0.89 |
Impairments on real estate and DFL depreciation |  |  | 0.06 |  |  | 0.04 |  |  | 0.03 |  |  | 0.03 |  |  | 0.02 |
Gain on sales of real estate and upon consolidation of joint venture |  |  | (0.01) |  |  | (0.07) |  |  | (0.15) |  |  | (0.07) |  |  | (0.03) |
Joint venture and participating securities FFO adjustments |  |  | 0.04 |  |  | 0.03 |  |  | 0.01 |  |  | 0.01 |  |  | 0.02 |
Diluted FFO per common share |  | $ | (0.02) |  | $ | 3.00 |  | $ | 2.95 |  | $ | 2.72 |  | $ | 2.19 |
Impact of adjustments to FFO: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transaction-related items(1) |  | $ | 32,932 |  | $ | (18,856) |  | $ | 6,191 |  | $ | 5,339 |  | $ | 29,558 |
Other impairments, net(2) |  |  | 1,446,800 |  |  | 35,913 |  |  | — |  |  | 7,878 |  |  | 15,400 |
Severance-related charges(3) |  |  | 6,713 |  |  | — |  |  | 27,244 |  |  | 5,642 |  |  | 4,827 |
Foreign currency remeasurement gains |  |  | (5,437) |  |  | — |  |  | — |  |  | — |  |  | — |
Preferred stock redemption charge |  |  | — |  |  | — |  |  | — |  |  | 10,432 |  |  | — |
Litigation settlement and provision charge |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 125,000 |
|  | $ | 1,481,008 |  | $ | 17,057 |  | $ | 33,435 |  | $ | 29,291 |  | $ | 174,785 |
FFO as adjusted applicable to common shares |  | $ | 1,470,167 |  | $ | 1,398,691 |  | $ | 1,382,699 |  | $ | 1,195,799 |  | $ | 1,052,692 |
Distributions on dilutive convertible units and other |  |  | 13,597 |  |  | 13,766 |  |  | 13,220 |  |  | 12,957 |  |  | 11,646 |
Diluted FFO as adjusted applicable to common shares |  | $ | 1,483,764 |  | $ | 1,412,457 |  | $ | 1,395,919 |  | $ | 1,208,756 |  | $ | 1,064,338 |
Diluted FFO as adjusted per common share |  | $ | 3.16 |  | $ | 3.04 |  | $ | 3.02 |  | $ | 2.79 |  | $ | 2.71 |
Weighted average shares used to calculate diluted FFO as adjusted per common share(4) |  |  | 469,064 |  |  | 464,845 |  |  | 461,710 |  |  | 433,607 |  |  | 393,237 |

59

Table of Contents

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
FFO as adjusted applicable to common shares |  | $ | 1,470,167 |  | $ | 1,398,691 |  | $ | 1,382,699 |  | $ | 1,195,799 |  | $ | 1,052,692 |
Amortization of market lease intangibles, net |  |  | (1,295) |  |  | (949) |  |  | (6,646) |  |  | (2,232) |  |  | (4,510) |
Amortization of deferred compensation(5) |  |  | 23,233 |  |  | 21,885 |  |  | 23,327 |  |  | 23,277 |  |  | 20,034 |
Amortization of deferred financing costs, net(6) |  |  | 20,222 |  |  | 19,260 |  |  | 18,541 |  |  | 16,501 |  |  | 13,716 |
Straight-line rents |  |  | (28,859) |  |  | (41,032) |  |  | (39,587) |  |  | (47,311) |  |  | (59,173) |
DFL accretion(7) |  |  | (87,861) |  |  | (77,568) |  |  | (86,055) |  |  | (94,240) |  |  | (74,007) |
Other depreciation and amortization |  |  | (22,223) |  |  | (18,864) |  |  | (14,326) |  |  | (12,756) |  |  | (8,840) |
Deferred revenues – tenant improvement related |  |  | (2,594) |  |  | (2,306) |  |  | (2,906) |  |  | (1,570) |  |  | (2,371) |
Deferred revenues – additional rents |  |  | (219) |  |  | 422 |  |  | 63 |  |  | (85) |  |  | 52 |
Leasing costs and tenant and capital improvements |  |  | (82,072) |  |  | (74,464) |  |  | (64,557) |  |  | (61,440) |  |  | (52,903) |
Lease restructure payments |  |  | 22,657 |  |  | 9,425 |  |  | — |  |  | — |  |  | — |
Joint venture adjustments – CCRC entrance fees |  |  | 30,918 |  |  | 11,443 |  |  | — |  |  | — |  |  | — |
Joint venture and other FAD adjustments(7) |  |  | (80,225) |  |  | (67,121) |  |  | (52,471) |  |  | (61,298) |  |  | (46,250) |
FAD applicable to common shares |  | $ | 1,261,849 |  | $ | 1,178,822 |  | $ | 1,158,082 |  | $ | 954,645 |  | $ | 838,440 |
Distributions on dilutive convertible units |  |  | 14,230 |  |  | 13,799 |  |  | 13,276 |  |  | 7,714 |  |  | 6,916 |
Diluted FAD applicable to common shares |  | $ | 1,276,079 |  | $ | 1,192,621 |  | $ | 1,171,358 |  | $ | 962,359 |  | $ | 845,356 |
Diluted FAD per common share |  | $ | 2.72 |  | $ | 2.57 |  | $ | 2.54 |  | $ | 2.23 |  | $ | 2.16 |
Weighted average shares used to calculate diluted FAD per common share |  |  | 469,064 |  |  | 464,845 |  |  | 461,710 |  |  | 431,429 |  |  | 390,944 |

| (1) |  | For the year ended December 31, 2015, transaction-related items primarily relate to acquisition and pursuit costs. For the year ended December 31, 2014, transaction-related items include a net benefit from the 2014 Brookdale t ransaction, partially offset by acquisition and pursuit costs. For the years ended December 31, 2013 and 2012, transaction-related items are primarily attributable to acquisition and pursuit costs. For the year ended December 31, 2011, transaction-related items are primarily attributable to our HCRMC acquisition.

| (2) |  | For the year ended December 3 1, 2015, other impairments, net include impairment charges of: (i) $1.3 b illion related to our HCRMC DFL investments, (ii) $112 million related to our Four Seasons Notes and (iii) $4 6 million related to our equity investment in HCRMC, partially offset by impairment recovery of $6 million related to a loan payoff in our hospital segment. For the year ended December 31, 2014, the other impairment relate s to our equity ownership interest in HCRMC.

| (3) |  | For the year ended December 31, 201 5, the severance-related charge relates to the resignation of our former Executive Vice President and Chief Investment Officer. For the year ended December 31, 201 3, the severance-related charge relates to the termination of our former Chairman, Chief Executive Officer and President.

| (4) |  | Our weighted average shares for the year ended December 31, 2012 used to calculate diluted FFO as adjusted eliminate the impact of 22 million shares from our common stock offering completed on October 19, 2012; proceeds from this offering were used to fund the Blackstone JV acquisition. Our weighted average shares used to calculate diluted FFO as adjusted eliminate the impact of 30 million shares from our March 2011 common stock offering (excludes 4.5 million shares sold to the underwriters upon exercise of their option to purchase additional shares), which issuances increased our weighted average shares by 12.9 million for the year ended December 31, 2011; p roceeds from these offerings were used to fund a portion of the cash consideration for the HCRMC acquisition.

| (5) |  | Excludes $3 million related to the acceleration of deferred compensation for restricted stock units and stock options that vested upon the resignation of our former Executive Vice President and Chief Investment Officer, which is included in the severance-related charge for year ended December 3 1, 2015. Excludes $16.7 million related to the acceleration of deferred compensation for restricted stock units and options that vested upon termination of the our former chief executive officer, which is included in severance-related charges for the year ended December 31, 2013.

| (6) |  | Excludes $11.3 million related to the write-off of unamortized loan fees related to an expired bridge loan commitment and $0.8 million related to the amortization of deferred issuance costs of the senior notes, which costs are included in transaction-related items for the year ended December 31, 2011.

| (7) |  | Our ownership interest in HCRMC is accounted for using the equity method, which requires an ongoing elimination of DFL income that is proportional to our ownership in HCRMC. Further, our share of earnings from HCRMC (equity income) increases for the corresponding elimination of related lease expense recognized at the HCRMC entity level, which we present as a non-cash joint venture FAD adjustment. See Note 6 to the Consolidated Financial Statements for additional discussion.

60

Table of Contents

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, see Note 2 to the Consolidated Financial Statements. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Principles of Consolidation

The consolidated financial statements include the accounts of HCP, Inc., our wholly owned subsidiaries and joint ventures that we control, through voting rights or other means. We consolidate investments in variable interest entities (“VIEs”) when we are the primary beneficiary of the VIE. A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, or (iii) substantially all of the entity’s activities involve or are performed on behalf of an equity investor that holds disproportionately few voting rights. We make judgments with respect to our level of influence or control over an entity and whether we are (or are not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, our ability to direct the activities that most significantly impact the entity’s economic performance, our form of ownership interest, our representation on the entity’s governing body, the size and seniority of our investment, and our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity, if applicable. Our ability to correctly assess our influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. When we perform a re-analysis of the primary beneficiary at a date other than at inception of the VIE, our assumptions may be different and may result in the identification of a different primary beneficiary.

If we determine that we are the primary beneficiary of a VIE, our consolidated financial statements would include the operating results of the VIE rather than the results of the variable interest in the VIE. We would require the VIE to provide us timely financial information and would review the internal controls of the VIE to determine if we could rely on the financial information it provides. If the VIE has deficiencies in its internal controls over financial reporting, or does not provide us with timely financial information, this may adversely impact the quality and/or timing of our financial reporting and our internal controls over financial reporting.

Revenue Recognition

At the inception of a new lease arrangement, including new leases that arise from amendments, we assess the terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has a bargain purchase option during or at the end of the lease term, (iii) the lease term is equal to 75% or more of the underlying property’s economic life, or (iv) the present value of future minimum lease payments (excluding executory costs) is equal to 90% or more of the excess estimated fair value (over retained tax credits) of the leased asset. If one of the four criteria is met and the minimum lease payments are determined to be reasonably predictable and collectible, the lease arrangement is generally accounted for as a direct financing lease. If the assumptions utilized in the above

61

Table of Contents

classifications assessments were different, our lease classification for accounting purposes may have been different; thus the timing and amount of our revenue recognized would have been impacted, which may be material to our consolidated financial statements.

We recognize rental revenue for operating leases on a straight-line basis over the lease term when collectibility of all minimum lease payments is reasonably assured and the tenant has taken possession or controls the physical use of a leased asset. If the lease provides for tenant improvements, we determine whether the tenant improvements are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the leased asset until the tenant improvements are substantially complete. When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. The determination of ownership of a tenant improvement is subject to significant judgment. If our assessment of the owner of the tenant improvements was different, the timing and amount of our revenue recognized would be impacted.

Certain leases provide for additional rents that are contingent upon a percentage of the facility’s revenue in excess of specified base amounts or other thresholds. Such revenue is recognized when actual results reported by the tenant, or estimates of tenant results, exceed the base amount or other thresholds. The recognition of additional rents requires us to make estimates of amounts owed and, to a certain extent, is dependent on the accuracy of the facility results reported to us. Our estimates may differ from actual results, which could be material to our consolidated financial statements.

We maintain an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. We monitor the liquidity and creditworthiness of our tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent receivable amounts, our assessment is based on income recoverable over the term of the lease. We exercise judgment in establishing allowances and consider payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements.

We use the direct finance method of accounting to record income from DFLs. For leases accounted for as DFLs, the net investment in the DFL represents receivables for the sum of future minimum lease payments receivable and the estimated residual values of the leased properties, less the unamortized unearned income. Unearned income is deferred and amortized to income over the lease terms to provide a constant yield when collectibility of the lease payments is reasonably assured. The determination of estimated useful lives and residual values are subject to significant judgment. If these assessments were to change, the timing and amount of our revenue recognized would be impacted.

Loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. We recognize interest income on loans, including the amortization of discounts and premiums, using the interest method applied on a loan-by-loan basis when collectibility of the future payments is reasonably assured. Premiums, discounts and related costs are recognized as yield adjustments over the term of the related loans. If management determined that certain loans should no longer be classified as held-for-investment, the timing and amount of our interest income recognized would be impacted.

Loans receivable and DFLs (collectively, “Finance Receivables”), are reviewed and assigned an internal rating of Performing, Watch List or Workout. Finance Receivables that are deemed Performing meet all present contractual obligations, and collection and timing, of all amounts owed is reasonably assured. Watch List Finance Receivables are defined as Finance Receivables that do not meet the definition of Performing or Workout. Workout Finance Receivables are defined as Finance Receivables in which the Company has determined, based on current information and events, that it is probable (i) it will be unable to collect all amounts due according to the contractual terms of the agreement, (ii) the tenant, operator, or borrower is delinquent on making payments under the contractual terms of the agreement (iii) and the Company has commenced action or anticipates pursuing action in the near term to seek recovery of its investment.

62

Table of Contents

Finance Receivables are placed on nonaccrual status when management determines that the collectibility of contractual amounts is not reasonably assured (the asset will have an internal rating of either Watch List or Workout). Further, we perform a credit analysis to support the tenant’s, operator’s, borrower’s and/or guarantor’s repayment capacity and the underlying collateral values. We use the cash basis method of accounting for Finance Receivables placed on nonaccrual status unless one of the following conditions exist whereby we utilize the cost recovery method of accounting: (i) if we determine that it is probable that we will only recover the recorded investment in the Finance Receivable, net of associated allowances or charge-offs (if any), or (ii) we cannot reasonably estimate the amount of an impaired Finance Receivable. For cash basis method of accounting we apply payments received, excluding principal paydowns, to interest income so long as that amount does not exceed the amount that would have been earned under the original contractual terms. For cost recovery method of accounting any payment received is applied to reduce the recorded investment. Generally, we return a Finance Receivable to accrual status when all delinquent payments become current under the terms of the loan or lease agreements and collectibility of the remaining contractual loan or lease payments is reasonably assured.

Allowances are established for Finance Receivables on an individual basis utilizing an estimate of probable losses, if they are determined to be impaired. Finance Receivables are impaired when it is deemed probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan or lease. An allowance is based upon our assessment of the lessee’s or borrower’s overall financial condition, economic resources, payment record, the prospects for support from any financially responsible guarantors and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence, including the expected future cash flows discounted at the Finance Receivable’s effective interest rate, fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors, as appropriate. Should a Finance Receivable be deemed partially or wholly uncollectible, the uncollectible balance is charged off against the allowance in the period in which the uncollectible determination has been made.

Real Estate

We make estimates as part of our process for allocating a purchase price to the various identifiable assets of an acquisition based upon the relative fair value of each asset. The most significant components of our allocations are typically buildings as-if-vacant, land and in-place leases. In the case of allocating fair value to buildings and intangibles, our fair value estimates will affect the amount of depreciation and amortization we record over the estimated useful life of each asset acquired or the remaining lease term. In the case of allocating fair value to in-place leases, we make our best estimates based on our evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases.

A variety of costs are incurred in the development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. We consider a construction project to be considered substantially complete and available for occupancy and cease capitalization of costs upon the completion of the related tenant improvements.

Impairment of Long-Lived Assets and Goodwill

We assess the carrying value of our real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying amount of the real estate assets may not be recoverable, but at least annually. Recoverability of real estate assets is measured by comparing the carrying amount of the real estate assets to the respective estimated future undiscounted cash flows. The estimated future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. In order to review our real estate assets for recoverability, we consider market conditions, as well as our intent with respect to holding or disposing of the asset. If our analysis indicates that the carrying value of the real estate assets is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the carrying value exceeds the fair value of the real estate asset.

63

Table of Contents

Goodwill is tested for impairment at least annually based on certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Potential impairment indicators and qualitative factors include a significant decline in real estate valuations, restructuring plans, current macroeconomic conditions, state of the equity and capital markets or a significant decline in the value of our market capitalization. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we apply the required two-step quantitative approach. The quantitative procedures of the two-step approach (i) compare the fair value of a reporting unit with its carrying amount, including goodwill and, if necessary, (ii) compare the implied fair value of reporting unit goodwill with the carrying amount of that goodwill as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the fair value of assets and liabilities, excluding goodwill, is the implied value of goodwill and is used to determine the amount of impairment, if any. We estimate the fair value of the assets and liabilities in the reporting unit through various valuation techniques, including applying capitalization rates to segment net operating income, quoted market values and third-party appraisals, as necessary. The fair value of the reporting unit may also include an allocation of an enterprise value premium that we estimate a third party would be willing to pay for the company.

The determination of the fair value of real estate assets and goodwill involves significant judgment. This judgment is based on our analysis and estimates of fair value of real estate assets and reporting units, future operating results and resulting cash flows of each real estate asset whose carrying amount may not be recoverable. Our ability to accurately predict future operating results, resulting cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

Investments in Unconsolidated Joint Ventures

The initial carrying value of investments in unconsolidated joint ventures is based on the amount paid to purchase the joint venture interest or the carrying value of the assets prior to the sale or contribution of the interests to the joint venture. We evaluate our equity method investments for impairment indicators based upon a comparison of the fair value of the equity method investment to our carrying value. If we determine there is a decline in the fair value of our investment in an unconsolidated joint venture below its carrying value and it is other-than-temporary, an impairment is recorded. The determination of the fair value of investments in unconsolidated joint ventures and as to whether a deficiency in fair value is “other-than-temporary” involves significant judgment. Our estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at market rates, general economic conditions and trends, severity and duration of a fair value deficiency, and other relevant factors. Capitalization rates, discount rates and credit spreads utilized in our valuation models are based upon rates that we believe to be within a reasonable range of current market rates for the respective investments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

Income Taxes

As part of the process of preparing our consolidated financial statements, significant management judgment is required to evaluate our compliance with REIT requirements. Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on the income tax expense recognized. Adjustments to income tax expense may be required as a result of: (i) audits conducted by federal, state and local tax authorities, (ii) our ability to qualify as a REIT, (iii) the potential for built-in gain recognition, and (iv) changes in tax laws. Adjustments required in any given period are included within the income tax provision.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.

ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates, specifically the GBP. We use derivative financial instruments in the normal course of business to mitigate interest rate and foreign currency risk. We do not use derivative financial instruments for speculative or trading purposes. Derivatives are recorded on the consolidated balance sheets at fair value (see Note 24 to the Consolidated Financial Statements).

64

Table of Contents

To illustrate the effect of movements in the interest rate and foreign currency markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the change in fair value. Assuming a one percentage point change in the underlying interest rate curve and foreign currency exchange rates, the estimated change in fair value of each of the underlying derivative instruments would not exceed $6 million. See Note 24 to the Consolidated Financial Statements for additional analysis details.

Interest Rate Risk

At December 31, 2015, we are exposed to market risks related to fluctuations in interest rates primarily on variable rate debt, which has been predominately hedged through interest rate swap contracts.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could adversely be affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. However, interest rate changes will affect the fair value of our fixed rate instruments. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Assuming a one percentage point increase in the interest rate related to the variable-rate debt and variable-rate investments, and assuming no other changes in the outstanding balance as of December 31, 2015, our annual interest expense would increase by approximately $3 million, or less than $0.0 1 per common share on a diluted basis.

Foreign Currency Exchange Rate Risk

At December 31, 2015, our exposure to foreign currencies primarily relates to U.K. investments in leased real estate, senior notes and related GBP denominated cash flows. Our foreign currency exposure is partially mitigated through the use of GBP denominated borrowings and foreign currency swap contracts. Based solely on our operating results for the three months ended December 31, 2015, including the impact of existing hedging arrangements, if the value of the GBP relative to the U.S. dollar were to increase or decrease by 10% compared to the average exchange rate during the quarter ended December 31, 2015, our cash flows would have decreased or increased, as applicable, by less than $1 million.

Market Risk

We have investments in marketable debt securities classified as held-to-maturity because we have the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded at amortized cost and adjusted for the amortization of premiums and discounts through maturity. We consider a variety of factors in evaluating an other-than-temporary decline in value, such as: the length of time and the extent to which the market value has been less than our current adjusted carrying value; the issuer’s financial condition, capital strength and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and our investment horizon in relationship to an anticipated near-term recovery in the market value, if any. At December 31, 2015, both the fair value and carrying value of marketable debt securities were $103 million.

65

Table of Contents

The principal amount and the average interest rates for our loans receivable and debt categorized by maturity dates is presented in the table below. The fair value for our senior unsecured notes payable is based on prevailing market prices. The fair value estimates for loans receivable and mortgage debt payable are based on discounting future cash flows utilizing current rates for loans and debt of the same type and remaining maturity.

The table below summarizes the principal amounts and fair values of our financial instruments exposed to interest rate risk (dollars in thousands):

|  | Maturity |
|  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | Thereafter |  | Total |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable (USD) |  | $ | 15,244 |  | $ | 37,038 |  | $ | 276,789 |  | $ | — |  | $ | — |  | $ | — |  | $ | 329,071 |  | $ | 330,380 |
Weighted average interest rate |  |  | 8.50 | % |  | 8.50 | % |  | 11.23 | % |  | — | % |  | — | % |  | — | % |  | 10.79 | % |  |  |
Loans receivable (GBP)(1) |  | $ | — |  | $ | 42,253 |  | $ | — |  | $ | 397,419 |  | $ | — |  | $ | — |  | $ | 439,672 |  | $ | 439,672 |
Weighted average interest rate |  |  | — | % |  | 6.00 | % |  | — | % |  | 7.56 | % |  | — | % |  | — | % |  | 7.41 | % |  |  |
Debt securities held to maturity (USD) |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 17,776 |  | $ | 17,776 |  | $ | 17,776 |
Weighted average interest rate |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 4.43 | % |  | 4.43 | % |  |  |
Debt securities held to maturity (GBP)(2) |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 85,182 |  | $ | 85,182 |  | $ | 85,182 |
Weighted average interest rate |  |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 12.25 | % |  | 12.25 | % |  |  |
Liabilities(3): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Line of credit (GBP)(4) |  | $ | — |  | $ | — |  | $ | 397,432 |  | $ | — |  | $ | — |  | $ | — |  | $ | 397,432 |  | $ | 397,432 |
Weighted average interest rate |  |  | — | % |  | — | % |  | 1.72 | % |  | — | % |  | — | % |  | — | % |  | 1.72 | % |  |  |
Term loans (GBP)(5) |  | $ | 202,034 |  | $ | — |  | $ | — |  | $ | 324,434 |  | $ | — |  | $ | — |  | $ | 526,468 |  | $ | 526,468 |
Weighted average interest rate |  |  | 1.71 | % |  | — | % |  | — | % |  | 1.48 | % |  | — | % |  | — | % |  | 1.57 | % |  |  |
Mortgage debt payable (USD) |  | $ | 25,102 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 45,610 |  | $ | 70,712 |  | $ | 74,433 |
Weighted average interest rate |  |  | 1.69 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 0.03 | % |  | 0.62 | % |  |  |
Fixed rate debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes payable (USD)(6) |  | $ | 900,000 |  | $ | 750,000 |  | $ | 600,000 |  | $ | 450,000 |  | $ | 800,000 |  | $ | 5,700,000 |  | $ | 9,200,000 |  | $ | 9,390,668 |
Weighted average interest rate |  |  | 4.88 | % |  | 5.88 | % |  | 6.70 | % |  | 3.75 | % |  | 2.63 | % |  | 4.36 | % |  | 4.50 | % |  |  |
Mortgage debt payable (USD) |  | $ | 238,711 |  | $ | 593,569 |  | $ | 4,870 |  | $ | — |  | $ | 931 |  | $ | 24,117 |  | $ | 862,198 |  | $ | 890,735 |
Weighted average interest rate |  |  | 6.50 | % |  | 5.69 | % |  | 5.90 | % |  | — | % |  | 5.75 | % |  | 5.87 | % |  | 5.92 | % |  |  |
Interest rate derivatives assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable rate mortgage debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable to fixed (USD) |  | $ | (761) |  | $ | — |  | $ | — |  | $ | — |  | $ | (5,430) |  | $ | — |  | $ | (6,191) |  | $ | (6,191) |
Weighted average pay rate |  |  | 5.95 | % |  | — | % |  | — | % |  | — | % |  | 3.82 | % |  | — | % |  | 4.08 | % |  |  |
Weighted average receive rate |  |  | 2.03 | % |  | — | % |  | — | % |  | — | % |  | 1.65 | % |  | — | % |  | 1.70 | % |  |  |
Variable rate Term Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable to fixed (GBP) |  | $ | (60) |  | $ | 196 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 136 |  | $ | 136 |
Weighted average pay rate |  |  | 1.81 | % |  | 1.79 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 1.78 | % |  |  |
Weighted average receive rate |  |  | 1.71 | % |  | 1.74 | % |  | — | % |  | — | % |  | — | % |  | — | % |  | 1.76 | % |  |  |

| (1) |  | Represents approximately £301 million translated into USD.

| (2) |  | Represents approximately £5 8 million translated into USD.

| (3) |  | Excludes $9 4 million of other debt that represents life care bonds and demand notes that have no scheduled maturities.

| (4) |  | Represents approximately £270 million translated into USD.

| (5) |  | Represents approximately £357 million translated into USD.

| (6) |  | In February 201 6, we repaid $500 million of senior unsecured notes from the proceeds from our December 2015 senior unsecured note s issuance.

66

Table of Contents

ITEM 8.Financial Statements and Supplementary Dat a

HCP, Inc.

Index to Consolidated Financial Statement s

Report of Independent Registered Public Accounting Firm |  | 68 |
Financial Statements: |  |  |
Consolidated Balance Sheets—December 31, 2015 and 201 4 |  | 69 |
Consolidated Statements of Operations—for the years ended December 31, 2015, 201 4 and 201 3 |  | 70 |
Consolidated Statements of Comprehensive (Loss) Income—for the years ended December 31, 2015, 201 4 and 201 3 |  | 71 |
Consolidated Statements of Equity—for the years ended December 31, 2015, 201 4 and 201 3 |  | 72 |
Consolidated Statements of Cash Flows—for the years ended December 31, 2015, 201 4 and 201 3 |  | 73 |
Notes to Consolidated Financial Statements |  | 74 |

67

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIR M

The Board of Directors and Stockholders of HCP, Inc.

Irvine, California

We have audited the accompanying consolidated balance sheets of HCP, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 201 4, and the related consolidated statements of operations, comprehensive (loss) income, equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of HCP, Inc. and subsidiaries as of December 31, 2015 and 201 4, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 201 6 expressed an unqualified opinion on the Company’s internal control over financial reporting.

| /s/ Deloitte & Touche LLP

Los Angeles, California

February 9, 201 6

68

Table of Contents

HCP, Inc.

CONSOLIDATED BALANCE SHEET S

(In thousands, except share data)

|  | December 31, |
|  | 2015 |  | 2014 |
ASSETS |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |
Buildings and improvements |  | $ | 12,501,511 |  | $ | 10,972,973 |
Development costs and construction in progress |  |  | 390,584 |  |  | 275,233 |
Land |  |  | 1,995,657 |  |  | 1,889,438 |
Accumulated depreciation and amortization |  |  | (2,605,036) |  |  | (2,250,757) |
Net real estate |  |  | 12,282,716 |  |  | 10,886,887 |
Net investment in direct financing leases |  |  | 5,905,009 |  |  | 7,280,334 |
Loans receivable, net |  |  | 768,743 |  |  | 906,961 |
Investments in and advances to unconsolidated joint ventures |  |  | 605,244 |  |  | 605,448 |
Accounts receivable, net of allowance of $3,261 and $3,785, respectively |  |  | 48,929 |  |  | 36,339 |
Cash and cash equivalents |  |  | 346,500 |  |  | 183,810 |
Restricted cash |  |  | 60,616 |  |  | 48,976 |
Intangible assets, net |  |  | 614,227 |  |  | 481,013 |
Other assets, net |  |  | 817,865 |  |  | 901,668 |
Total assets(1) |  | $ | 21,449,849 |  | $ | 21,331,436 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |
Bank line of credit |  | $ | 397,432 |  | $ | 838,516 |
Term loans |  |  | 524,807 |  |  | 212,986 |
Senior unsecured notes |  |  | 9,120,107 |  |  | 7,589,960 |
Mortgage debt |  |  | 932,212 |  |  | 982,785 |
Other debt |  |  | 94,445 |  |  | 97,022 |
Intangible liabilities, net |  |  | 75,273 |  |  | 84,723 |
Accounts payable and accrued liabilities |  |  | 436,239 |  |  | 432,934 |
Deferred revenue |  |  | 123,017 |  |  | 95,411 |
Total liabilities(1) |  |  | 11,703,532 |  |  | 10,334,337 |
Commitments and contingencies |  |  |  |  |  |  |
Common stock, $1.00 par value: 750,000,000 shares authorized; 465,488,492 and 459,746,267 shares issued and outstanding, respectively |  |  | 465,488 |  |  | 459,746 |
Additional paid-in capital |  |  | 11,647,039 |  |  | 11,431,987 |
Cumulative dividends in excess of earnings |  |  | (2,738,414) |  |  | (1,132,541) |
Accumulated other comprehensive loss |  |  | (30,470) |  |  | (23,895) |
Total stockholders’ equity |  |  | 9,343,643 |  |  | 10,735,297 |
Joint venture partners |  |  | 217,066 |  |  | 73,214 |
Non-managing member unitholders |  |  | 185,608 |  |  | 188,588 |
Total noncontrolling interests |  |  | 402,674 |  |  | 261,802 |
Total equity |  |  | 9,746,317 |  |  | 10,997,099 |
Total liabilities and equity |  | $ | 21,449,849 |  | $ | 21,331,436 |

| (1) |  | The Company’s consolidated total assets and total liabilities at December 31, 2015 and 2014 include certain assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at December 31, 2015 include VIE assets as follows: buildings and improvements $7 91 million; land $1 25 million; accumulated depreciation and amortization $1 35 million; accounts receivable $16 million; cash $35 million; restricted cash $18 m illion; and other assets $2 0 million. Total assets at December 31, 2014 include VIE assets as follows: buildings and improvements $677 million; land $113 million; accumulated depreciation and amortization $111 million; accounts receivable $5 million; cash $42 million; and other assets of $23 million. Total liabilities at December 31, 2015 include accounts payable and accrued liabilities of $60 million and deferred revenue of $1 4 million from VIEs. Total liabilities at December 31, 2014 include accounts payable and accrued liabilities of $34 million and deferred revenue of $12 million of from VIEs. See Note 21 to the Consolidated Financial Statements for additional details.

See accompanying Notes to Consolidated Financial Statements.

69

Table of Contents

HCP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Revenues: |  |  |  |  |  |  |  |  |  |
Rental and related revenues |  | $ | 1,144,482 |  | $ | 1,174,256 |  | $ | 1,128,054 |
Tenant recoveries |  |  | 126,485 |  |  | 110,688 |  |  | 100,649 |
Resident fees and services |  |  | 525,453 |  |  | 241,965 |  |  | 146,288 |
Income from direct financing leases |  |  | 633,835 |  |  | 663,070 |  |  | 636,881 |
Interest income |  |  | 112,184 |  |  | 74,491 |  |  | 86,159 |
Investment management fee income |  |  | 1,873 |  |  | 1,809 |  |  | 1,847 |
Total revenues |  |  | 2,544,312 |  |  | 2,266,279 |  |  | 2,099,878 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 479,596 |  |  | 439,742 |  |  | 435,252 |
Depreciation and amortization |  |  | 510,785 |  |  | 459,995 |  |  | 423,312 |
Operating |  |  | 614,375 |  |  | 384,603 |  |  | 298,282 |
General and administrative |  |  | 96,022 |  |  | 82,175 |  |  | 103,042 |
Acquisition and pursuit costs |  |  | 27,309 |  |  | 17,142 |  |  | 6,191 |
Impairments, net |  |  | 1,403,853 |  |  | — |  |  | — |
Total costs and expenses |  |  | 3,131,940 |  |  | 1,383,657 |  |  | 1,266,079 |
Gain on sales of real estate |  |  | 6,377 |  |  | 3,288 |  |  | — |
Other income, net |  |  | 14,404 |  |  | 7,528 |  |  | 18,216 |
Total other income, net |  |  | 20,781 |  |  | 10,816 |  |  | 18,216 |
(Loss) income before income taxes and equity income from and impairment of unconsolidated joint ventures |  |  | (566,847) |  |  | 893,438 |  |  | 852,015 |
Income tax benefit (expense) |  |  | 9,011 |  |  | (250) |  |  | (5,815) |
Equity income from unconsolidated joint ventures |  |  | 57,313 |  |  | 49,570 |  |  | 64,433 |
Impairments of investments in unconsolidated joint ventures |  |  | (45,895) |  |  | (35,913) |  |  | — |
(Loss) income from continuing operations |  |  | (546,418) |  |  | 906,845 |  |  | 910,633 |
Discontinued operations: |  |  |  |  |  |  |  |  |  |
Income before impairment losses and gain on sales of real estate, net of income taxes |  |  | — |  |  | 1,736 |  |  | 5,879 |
Impairment losses on real estate |  |  | — |  |  | — |  |  | (1,372) |
Gain on sales of real estate, net of income taxes |  |  | — |  |  | 28,010 |  |  | 69,866 |
Total discontinued operations |  |  | — |  |  | 29,746 |  |  | 74,373 |
Net (loss) income |  |  | (546,418) |  |  | 936,591 |  |  | 985,006 |
Noncontrolling interests’ share in earnings |  |  | (12,817) |  |  | (14,358) |  |  | (14,169) |
Net (loss) income attributable to HCP, Inc. |  |  | (559,235) |  |  | 922,233 |  |  | 970,837 |
Participating securities’ share in earnings |  |  | (1,317) |  |  | (2,437) |  |  | (1,734) |
Net (loss) income applicable to common shares |  | $ | (560,552) |  | $ | 919,796 |  | $ | 969,103 |
Basic earnings per common share: |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | (1.21) |  | $ | 1.94 |  | $ | 1.97 |
Discontinued operations |  |  | — |  |  | 0.07 |  |  | 0.16 |
Net (loss) income applicable to common shares |  | $ | (1.21) |  | $ | 2.01 |  | $ | 2.13 |
Diluted earnings per common share: |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | (1.21) |  | $ | 1.94 |  | $ | 1.97 |
Discontinued operations |  |  | — |  |  | 0.06 |  |  | 0.16 |
Net (loss) income applicable to common shares |  | $ | (1.21) |  | $ | 2.00 |  | $ | 2.13 |
Weighted average shares used to calculate earnings per common share: |  |  |  |  |  |  |  |  |  |
Basic |  |  | 462,795 |  |  | 458,425 |  |  | 455,002 |
Diluted |  |  | 462,795 |  |  | 458,796 |  |  | 455,702 |

See accompanying Notes to Consolidated Financial Statements.

70

Table of Contents

HCP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Net (loss) income |  | $ | (546,418) |  | $ | 936,591 |  | $ | 985,006 |
Other comprehensive (loss) income: |  |  |  |  |  |  |  |  |  |
Change in net unrealized (losses) gains on securities: |  |  |  |  |  |  |  |  |  |
Unrealized (losses) gains |  |  | (5) |  |  | 13 |  |  | 1,355 |
Reclassification adjustment realized in net income |  |  | — |  |  | — |  |  | (9,131) |
Change in net unrealized gains on cash flow hedges: |  |  |  |  |  |  |  |  |  |
Unrealized gains |  |  | 1,894 |  |  | 2,258 |  |  | 6,435 |
Reclassification adjustment realized in net income |  |  | 148 |  |  | (1,085) |  |  | 1,220 |
Change in Supplemental Executive Retirement Plan obligation |  |  | 126 |  |  | (627) |  |  | 240 |
Foreign currency translation adjustment |  |  | (8,738) |  |  | (9,967) |  |  | 47 |
Total other comprehensive (loss) income |  |  | (6,575) |  |  | (9,408) |  |  | 166 |
Total comprehensive (loss) income |  |  | (552,993) |  |  | 927,183 |  |  | 985,172 |
Total comprehensive income attributable to noncontrolling interests |  |  | (12,817) |  |  | (14,358) |  |  | (14,169) |
Total comprehensive (loss) income attributable to HCP, Inc. |  | $ | (565,810) |  | $ | 912,825 |  | $ | 971,003 |

See accompanying Notes to Consolidated Financial Statements.

71

Table of Contents

HCP, Inc.

CONSOLIDATED STATEMENTS OF EQUIT Y

(In thousands, except per share data)

|  |  |  |  |  |  |  |  | Cumulative |  | Accumulated |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Additional |  | Dividends |  | Other |  | Total |  |  |  |  |  |  |
|  | Common Stock |  | Paid-In |  | In Excess |  | Comprehensive |  | Stockholders’ |  | Noncontrolling |  | Total |
|  | Shares |  | Amount |  | Capital |  | Of Earnings |  | Income (Loss) |  | Equity |  | Interests |  | Equity |
January 1, 2013 |  | 453,191 |  | $ | 453,191 |  | $ | 11,180,066 |  | $ | (1,067,367) |  | $ | (14,653) |  | $ | 10,551,237 |  | $ | 202,540 |  | $ | 10,753,777 |
Net income |  | — |  |  | — |  |  | — |  |  | 970,837 |  |  | — |  |  | 970,837 |  |  | 14,169 |  |  | 985,006 |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | 166 |  |  | 166 |  |  | — |  |  | 166 |
Issuance of common stock, net |  | 3,136 |  |  | 3,136 |  |  | 107,565 |  |  | — |  |  | — |  |  | 110,701 |  |  | (3,683) |  |  | 107,018 |
Repurchase of common stock |  | (242) |  |  | (242) |  |  | (10,196) |  |  | — |  |  | — |  |  | (10,438) |  |  | — |  |  | (10,438) |
Exercise of stock options |  | 876 |  |  | 876 |  |  | 16,626 |  |  | — |  |  | — |  |  | 17,502 |  |  | — |  |  | 17,502 |
Amortization of deferred compensation |  | — |  |  | — |  |  | 39,980 |  |  | — |  |  | — |  |  | 39,980 |  |  | — |  |  | 39,980 |
Common dividends ($2.10 per share) |  | — |  |  | — |  |  | — |  |  | (956,685) |  |  | — |  |  | (956,685) |  |  | — |  |  | (956,685) |
Distributions to noncontrolling interests |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (17,664) |  |  | (17,664) |
Issuance of noncontrolling interests |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,472 |  |  | 12,472 |
December 31, 2013 |  | 456,961 |  |  | 456,961 |  |  | 11,334,041 |  |  | (1,053,215) |  |  | (14,487) |  |  | 10,723,300 |  |  | 207,834 |  |  | 10,931,134 |
Net income |  | — |  |  | — |  |  | — |  |  | 922,233 |  |  | — |  |  | 922,233 |  |  | 14,358 |  |  | 936,591 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,408) |  |  | (9,408) |  |  | — |  |  | (9,408) |
Issuance of common stock, net |  | 2,939 |  |  | 2,939 |  |  | 89,749 |  |  | — |  |  | — |  |  | 92,688 |  |  | (557) |  |  | 92,131 |
Repurchase of common stock |  | (323) |  |  | (323) |  |  | (12,380) |  |  | — |  |  | — |  |  | (12,703) |  |  | — |  |  | (12,703) |
Exercise of stock options |  | 169 |  |  | 169 |  |  | 4,292 |  |  | — |  |  | — |  |  | 4,461 |  |  | — |  |  | 4,461 |
Amortization of deferred compensation |  | — |  |  | — |  |  | 21,885 |  |  | — |  |  | — |  |  | 21,885 |  |  | — |  |  | 21,885 |
Common dividends ($2.18 per share) |  | — |  |  | — |  |  | — |  |  | (1,001,559) |  |  | — |  |  | (1,001,559) |  |  | — |  |  | (1,001,559) |
Distributions to noncontrolling interests |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (15,611) |  |  | (15,611) |
Issuance of noncontrolling interests |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 57,746 |  |  | 57,746 |
Purchase of noncontrolling interests |  | — |  |  | — |  |  | (5,600) |  |  | — |  |  | — |  |  | (5,600) |  |  | (1,968) |  |  | (7,568) |
December 31, 2014 |  | 459,746 |  |  | 459,746 |  |  | 11,431,987 |  |  | (1,132,541) |  |  | (23,895) |  |  | 10,735,297 |  |  | 261,802 |  |  | 10,997,099 |
Net (loss) income |  | — |  |  | — |  |  | — |  |  | (559,235) |  |  | — |  |  | (559,235) |  |  | 12,817 |  |  | (546,418) |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,575) |  |  | (6,575) |  |  | — |  |  | (6,575) |
Issuance of common stock, net |  | 5,117 |  |  | 5,117 |  |  | 176,950 |  |  | — |  |  | — |  |  | 182,067 |  |  | (3,183) |  |  | 178,884 |
Repurchase of common stock |  | (198) |  |  | (198) |  |  | (8,540) |  |  | — |  |  | — |  |  | (8,738) |  |  | — |  |  | (8,738) |
Exercise of stock options |  | 823 |  |  | 823 |  |  | 26,764 |  |  | — |  |  | — |  |  | 27,587 |  |  | — |  |  | 27,587 |
Amortization of deferred compensation |  | — |  |  | — |  |  | 26,127 |  |  | — |  |  | — |  |  | 26,127 |  |  | — |  |  | 26,127 |
Common dividends ($2.26 per share) |  | — |  |  | — |  |  | — |  |  | (1,046,638) |  |  | — |  |  | (1,046,638) |  |  | — |  |  | (1,046,638) |
Distributions to noncontrolling interests |  | — |  |  | — |  |  | (263) |  |  | — |  |  | — |  |  | (263) |  |  | (18,884) |  |  | (19,147) |
Issuance of noncontrolling interests |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 151,185 |  |  | 151,185 |
Purchase of noncontrolling interests |  | — |  |  | — |  |  | (5,986) |  |  | — |  |  | — |  |  | (5,986) |  |  | (1,063) |  |  | (7,049) |
December 31, 2015 |  | 465,488 |  | $ | 465,488 |  | $ | 11,647,039 |  | $ | (2,738,414) |  | $ | (30,470) |  | $ | 9,343,643 |  | $ | 402,674 |  | $ | 9,746,317 |

See accompanying Notes to Consolidated Financial Statements.

72

Table of Contents

HCP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |
Net (loss) income |  | $ | (546,418) |  | $ | 936,591 |  | $ | 985,006 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |
Depreciation and amortization of real estate, in-place lease and other intangibles: |  |  |  |  |  |  |  |  |  |
Continuing operations |  |  | 510,785 |  |  | 459,995 |  |  | 423,312 |
Discontinued operations |  |  | — |  |  | — |  |  | 5,862 |
Amortization of market lease intangibles, net |  |  | (1,295) |  |  | (949) |  |  | (6,646) |
Amortization of deferred compensation |  |  | 26,127 |  |  | 21,885 |  |  | 39,980 |
Amortization of deferred financing costs, net |  |  | 20,222 |  |  | 19,260 |  |  | 18,541 |
Straight-line rents |  |  | (28,859) |  |  | (41,032) |  |  | (39,587) |
Loan and direct financing lease interest accretion |  |  | (95,713) |  |  | (78,286) |  |  | (86,314) |
Deferred rental revenues |  |  | (2,813) |  |  | (1,884) |  |  | (2,843) |
Equity income from unconsolidated joint ventures |  |  | (57,313) |  |  | (49,570) |  |  | (64,433) |
Distributions of earnings from unconsolidated joint ventures |  |  | 15,111 |  |  | 5,045 |  |  | 3,989 |
Lease termination income, net |  |  | (1,103) |  |  | (38,001) |  |  | — |
Gain on sales of real estate |  |  | (6,377) |  |  | (31,298) |  |  | (69,866) |
Foreign exchange and other gains, net |  |  | (7,178) |  |  | (2,270) |  |  | (10,817) |
Impairments, net |  |  | 1,449,748 |  |  | 35,913 |  |  | 1,372 |
Changes in: |  |  |  |  |  |  |  |  |  |
Accounts receivable, net |  |  | (9,569) |  |  | (8,845) |  |  | 6,656 |
Other assets |  |  | (19,453) |  |  | (6,287) |  |  | (58,290) |
Accounts payable and other accrued liabilities |  |  | (23,757) |  |  | 28,354 |  |  | 3,065 |
Net cash provided by operating activities |  |  | 1,222,145 |  |  | 1,248,621 |  |  | 1,148,987 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |
Acquisition of RIDEA III, net |  |  | (770,325) |  |  | — |  |  | — |
Acquisition of the CCRC unconsolidated joint venture interest, net |  |  | — |  |  | (370,186) |  |  | — |
Acquisitions of other real estate |  |  | (613,252) |  |  | (503,470) |  |  | (64,678) |
Development of real estate |  |  | (281,017) |  |  | (178,513) |  |  | (130,317) |
Leasing costs and tenant and capital improvements |  |  | (84,282) |  |  | (71,734) |  |  | (64,557) |
Proceeds from sales and pending sales of real estate, net |  |  | 58,623 |  |  | 104,557 |  |  | 95,816 |
Contributions to unconsolidated joint ventures |  |  | (69,936) |  |  | (2,935) |  |  | — |
Distributions in excess of earnings from unconsolidated joint ventures |  |  | 30,989 |  |  | 2,657 |  |  | 14,102 |
Purchases of marketable securities |  |  | — |  |  | — |  |  | (16,706) |
Proceeds from sales of marketable securities |  |  | 2,348 |  |  | — |  |  | 28,403 |
Principal repayments on loans receivable, direct financing leases and other |  |  | 625,701 |  |  | 119,511 |  |  | 263,445 |
Investments in loans receivable, direct financing leases and other |  |  | (575,652) |  |  | (600,019) |  |  | (322,775) |
Decrease (increase) in restricted cash |  |  | 4,798 |  |  | (11,747) |  |  | 619 |
Net cash used in investing activities |  |  | (1,672,005) |  |  | (1,511,879) |  |  | (196,648) |
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |
Net borrowings under bank line of credit |  |  | 98,743 |  |  | 845,190 |  |  | — |
Repayments under bank line of credit |  |  | (511,521) |  |  | — |  |  | — |
Borrowings under term loan |  |  | 333,014 |  |  | — |  |  | — |
Issuance of senior unsecured notes |  |  | 1,936,017 |  |  | 1,150,000 |  |  | 800,000 |
Repayments of senior unsecured notes |  |  | (400,000) |  |  | (487,000) |  |  | (550,000) |
Issuance of mortgage and other debt |  |  | — |  |  | 35,445 |  |  | 6,798 |
Repayments of mortgage and other debt |  |  | (57,845) |  |  | (447,784) |  |  | (302,119) |
Deferred financing costs |  |  | (19,995) |  |  | (16,550) |  |  | (7,300) |
Issuance of common stock and exercise of options |  |  | 206,471 |  |  | 96,592 |  |  | 114,082 |
Repurchase of common stock |  |  | (8,738) |  |  | (12,703) |  |  | — |
Dividends paid on common stock |  |  | (1,046,638) |  |  | (1,001,559) |  |  | (956,685) |
Issuance of noncontrolling interests |  |  | 110,775 |  |  | 4,674 |  |  | 12,472 |
Purchase of noncontrolling interests |  |  | (7,049) |  |  | (5,897) |  |  | — |
Distributions to noncontrolling interests |  |  | (19,147) |  |  | (15,611) |  |  | (17,664) |
Net cash provided by (used in) financing activities |  |  | 614,087 |  |  | 144,797 |  |  | (900,416) |
Effect of foreign exchange on cash and cash equivalents |  |  | (1,537) |  |  | 1,715 |  |  | 960 |
Net increase (decrease) in cash and cash equivalents |  |  | 162,690 |  |  | (116,746) |  |  | 52,883 |
Cash and cash equivalents, beginning of year |  |  | 183,810 |  |  | 300,556 |  |  | 247,673 |
Cash and cash equivalents, end of year |  | $ | 346,500 |  | $ | 183,810 |  | $ | 300,556 |

See accompanying Notes to Consolidated Financial Statements.

73

Table of Contents

HCP, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Business

HCP, Inc., an S&P 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company acquires, develops, leases, manages and disposes of healthcare real estate and provides financing to healthcare providers.

NOTE 2. Summary of Significant Accounting Policies

Use of Estimates

Management is required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures and variable interest entities that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation.

The Company is required to continually evaluate its VIE relationships and consolidate these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack, if any: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity.

A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and its ability to replace the VIE manager and/or liquidate the entity.

For its investments in joint ventures that are not considered to be VIEs, the Company evaluates the type of ownership rights held by the limited partner(s) that may preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control over a limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the limited partner rights, (ii) the sole general partner increases or decreases its ownership interest in the limited partnership, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. The Company similarly evaluates the rights of managing members of limited liability companies.

Revenue Recognition

At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses its terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has a bargain purchase option during or at the end of the lease term, (iii) the lease term is equal to 75% or

74

Table of Contents

more of the underlying property’s economic life, or (iv) the present value of future minimum lease payments (excluding executory costs) is equal to 90% or more of the excess fair value (over retained tax credits) of the leased property. If one of the four criteria is met and the minimum lease payments are determined to be reasonably predictable and collectible, the lease arrangement is generally accounted for as a direct financing lease (“DFL”).

The Company utilizes the direct finance method of accounting to record D FL income. For a lease accounted for as a DFL, the net investment in the DFL represents receivables for the sum of future minimum lease payments and the estimated residual value of the leased propert y, less the unamortized unearned income. Unearned income is deferred and amortized to income over the lease term to provide a constant yield when collectibility of the lease payments is reasonably assured.

The Company recognizes rental revenue for operating lease arrangements when the tenant has taken possession or controls the physical use of a leased asset; the tenant is not considered to have taken physical possession or have control of the leased asset until the Company-owned tenant improvements are substantially completed. If a lease arrangement provides for tenant improvements, the Company determines whether the tenant improvements are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized into income over the lease term. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded by the Company is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Ownership of tenant improvements is determined based on various factors including, but not limited to, the following criteria:

| · |  | lease stipulations of how and on what a tenant improvement allowance may be spent;

| · |  | which party to the arrangement retains legal title to the tenant improvements upon lease expiration;

| · |  | whether the tenant improvements are unique to the tenant or general purpose in nature; and

| · |  | if the tenant improvements are expected to have significant residual value at the end of the lease term.

Certain leases provide for additional rents that are contingent upon a percentage of the facility’s revenue in excess of specified base amounts or other thresholds. Such revenue is recognized when actual results reported by the tenant, or estimates of tenant results, exceed the base amount or other thresholds, and only after any contingency has been removed (when the related thresholds are achieved). This may result in the recognition of rental revenue in periods subsequent to when such payments are received.

Tenant recoveries subject to operating leases generally rel ate to the reimbursement of real estate taxes, insurance and repairs and maintenance expense. These expenses are recognized as revenue in the period the y are incurred. The reimbursements of these expenses are recognized and presented gross, as the Company is generally the primary obligor and, with respect to purchasing goods and services from third party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight line basis over the lease term when collectibility is reasonably assured. Recognizing rental income on a straight line basis results in a difference in the timing of revenue amounts from what is contractually due from tenants. If the Company determines that collectibility of straight line rents is not reasonably assured, future revenue recognition is limited to amounts contractually owed and paid, and, when appropriate, an allowance for estimated losses is established.

Resident fee revenue is recorded when services are rendered and includes resident room and care charges, community fees and other resident charges. Residency agreements are generally for a term of 30 days to one year, with resident fees billed monthly. Revenue for certain care related services is recognized as services are provided and is billed monthly in arrears.

Loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and are reduced by a valuation allowance for estimated credit losses as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, loan fees paid and received, using the interest method. The interest method is applied on a loan-by-loan basis when collectibility of the future payments is reasonably assured. Premiums and discounts are recognized as yield adjustments over the term of the related loans. Loans are transferred from held-for-investment to

75

Table of Contents

held-for-sale when management’s intent is to no longer hold the loans for the foreseeable future. Loans held-for-sale are recorded at the lower of cost or fair value.

The Company recognizes gain on sales of real estate upon the closing of a transaction with the purchaser. Gains on real estate sold are recognized using the full accrual method when collectibility of the sales price is reasonably assured, the Company is not obligated to perform additional activities that may be considered significant, the initial investment from the buyer is sufficient and other profit recognition criteria have been satisfied. Gain on sales of real estate may be deferred in whole or in part until the requirements for gain recognition have been met.

The Company receives investment management fees from certain joint venture entities for various services it provides as the managing member. Management fees are recorded as revenue when management services have been performed. Intercompany profit for management fees is eliminated.

Allowance for Doubtful Accounts

The Company evaluates the liquidity and creditworthiness of its tenants, operators and borrowers on a monthly and quarterly basis. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity and other factors. The Company’s tenants, borrowers and operators furnish property, portfolio and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis; the Company utilizes this financial information to calculate the lease or debt service coverages that it uses as a primary credit quality indicator. Lease and debt service coverage information is evaluated together with other property, portfolio and operator performance information, including revenue, expense, net operating income, occupancy, rental rate, reimbursement trends, capital expenditures and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures. The Company evaluates, on a monthly basis or immediately upon a significant change in circumstance, its tenants’, operators’ and borrowers’ ability to service their obligations with the Company.

The Company maintains an allowance for doubtful accounts for straight-line rent receivables resulting from tenant s’ inability to make contractual rent and tenant recovery payments or lease defaults. For straight-line rent receivable s, the Company’s assessment is based on amounts estimated to be recoverable over the lease term.

In connection with the Company’s quarterly review process or upon the occurrence of a significant event, loans receivable and DFLs (collectively, “Finance Receivables”), are reviewed and assigned an internal rating of Performing, Watch List or Workout. Finance Receivables that are deemed Performing meet all present contractual obligations, and collection and timing, of all amounts owed is reasonably assured. Watch List Finance Receivables are defined as Finance Receivables that do not meet the definition of Performing or Workout. Workout Finance Receivables are defined as Finance Receivables in which the Company has determined, based on current information and events, that it is probable (i) it will be unable to collect all amounts due according to the contractual terms of the agreement, (ii) the tenant, operator, or borrower is delinquent on making payments under the contractual terms of the agreement and (iii) the Company has commenced action or anticipates pursuing action in the near term to seek recovery of its investment.

Finance Receivables are placed on nonaccrual status when management determines that the collectibility of contractual amounts is not reasonably assured (the asset will have an internal rating of either Watch List or Workout). Further, the Company performs a credit analysis to support the tenant’s, operator’s, borrower’s and/or guarantor’s repayment capacity and the underlying collateral values. The Company uses the cash basis method of accounting for Finance Receivables placed on nonaccrual status unless one of the following conditions exist whereby it utilizes the cost recovery method of accounting: (i) if the Company determines that it is probable that it will only recover the recorded investment in the Finance Receivable, net of associated allowances or charge-offs (if any), or (ii) the Company cannot reasonably estimate the amount of an impaired Finance Receivable. For cash basis method of accounting the Company applies payments received, excluding principal paydowns, to interest income so long as that amount does not exceed the amount that would have been earned under the original contractual terms. For cost recovery method of accounting any payment received is applied to reduce the recorded investment. Generally, the Company returns a Finance Receivable to accrual status when all delinquent payments become current under the terms of the loan or lease agreements and collectibility of the remaining contractual loan or lease payments is reasonably assured.

76

Table of Contents

Allowances are established for Finance Receivables on an individual basis utilizing an estimate of probable losses, if they are determined to be impaired. Finance Receivables are impaired when it is deemed probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan or lease. An allowance is based upon the Company’s assessment of the lessee’s or borrower’s overall financial condition, economic resources, payment record, the prospects for support from any financially responsible guarantors and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence, including the expected future cash flows discounted at the Finance Receivable’s effective interest rate, fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors, as appropriate. Should a Finance Receivable be deemed partially or wholly uncollectible, the uncollectible balance is charged off against the allowance in the period in which the uncollectible determination has been made.

Real Estate

The Company’s real estate assets, consisting of land, buildings and improvements are recorded at fair value upon acquisition and/or consolidation. Any assumed liabilities, other acquired tangible assets or identifiable intangibles are also recorded at fair value upon acquisition and/or consolidation. The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transaction s and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate appropriate discount and/or capitalization rates or other available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant. Transaction costs related to acquisitions of businesses, including properties, are expensed as incurred.

The Company records acquired “above and below market” leases at fair value using discount rates which reflect the risks associated with the leases acquired. The amount recorded is based on the present value of the difference between (i) the contractual amounts paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the extended term for any leases with bargain renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on an evaluation of the specific characteristics of each property and the acquired tenant lease(s). Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rents at market rates during the hypothetical expected lease-up periods, which are dependent on local market conditions and expected trends. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related costs.

The Company capitalizes direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the development or construction of a real estate asset. The Company capitalizes construction and development costs while substantive activities are ongoing to prepare an asset for its intended use. The Company considers a construction project as substantially complete and held available for occupancy upon the completion of Company-owned tenant improvements, but no later than one year from cessation of significant construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. For redevelopment of existing operating properties, the Company capitalizes certain costs based on the net carrying value of the property under redevelopment plus the cost for the construction and improvement incurred in con nection with the redevelopment.

Costs previously capitalized related to abandoned developments/redevelopments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred. The Company considers costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investing activities in the Company’s consolidated statement of cash flows.

The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful li ves. Depreciation is discontinued when a property is identified as held for sale. Buildings and improvements are depreciated over useful lives ranging up to 60 years. Market lease intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods, if any. In-place lease intangibles are amortized to expense over the remaining noncancellable lease term and bargain renewal periods, if any.

77

Table of Contents

Impairment of Long-Lived Assets and Goodwill

The Company assesses the carrying value of real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company tests its real estate assets for impairment by comparing the sum of the expected future undiscounted cash flows to the carrying value of the real estate assets. The expected future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If the carrying value exceeds the expected future undiscounted cash flows, an impairment loss will be recognized to the extent that the carrying value of the real estate assets is greater than their fair value.

Goodwill is tested for impairment at least annually based on certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value. Potential impairment indicators include a significant decline in real estate values, restructuring plans, current macroeconomic conditions, state of the equity and capital markets or a significant decline in the Company’s market capitalization. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company applies the required two-step quantitative approach. The quantitative procedures of the two-step approach (i) compare the fair value of a reporting unit with its carrying value, including goodwill, and, if necessary, (ii) compare the implied fair value of reporting unit goodwill with the carrying value as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the fair value of assets and liabilities, excluding goodwill, is the implied value of goodwill and is used to determine the impairment amount, if any. The Company has selected the fourth quarter of each fiscal year to perform its annual impairment test.

Assets Held for Sale and Discontinued Operations

Prior to the Company’s adoption of Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), a discontinued operation was a component of an entity that had either been disposed of or was deemed to be held for sale and, (i) the operations and cash flows of the component had been or was to be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity was not to have any significant continuing involvement in the operations of the component after the disposal transaction. Accordingly, certain long-lived assets were classified as held for sale and reported at the lower of their carrying value or fair value less costs to sell and were no longer depreciated. Subsequent to the Company’s adoption of ASU 2014-08 on April 1, 2014, a discontinued operation must further represent that a disposal is a strategic shift that has (or will have) a major effect on the Company’s operations and financial results.

Investments in Unconsolidated Joint Ventures

Investments in entities which the Company does not consolidate, but has the ability to exercise significant influence over the operating and financial policies of, are reported under the equity method of accounting. Under the equity method of accounting, the Company’s share of the investee’s earnings or losses is included in the Company’s consolidated results of operations.

The initial carrying value of investments in unconsolidated joint ventures is based on the amount paid to purchase the joint venture interest or the fair value of the assets prior to the sale of interests in the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of equity in earnings of the joint venture. The Company evaluates its equity method investments for impairment based upon a comparison of the fair value of the equity method investment to its carrying value. When the Company determines a decline in the fair value of an investment in an unconsolidated joint venture below its carrying value is other-than-temporary, an impairment is recorded. The Company recognizes gains on the sale of interests in joint ventures to the extent the economic substance of the transaction is a sale.

The Company’s fair values of its equity method investments are based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums or discounts. Capitalization rates, discount rates and credit spreads utilized in these valuation models are based upon assumptions that the Company believes to be within a reasonable range of current market rates for the respective investments.

78

Table of Contents

Share-Based Compensation

Compensation expense for share-based awards granted to employees, including grants of employee stock options, are recognized in the consolidated statements of operations based on their grant date fair market value. Compensation expense for awards with graded vesting schedules is generally recognized ratably over the period from the grant date to the date when the award is no longer contingent on the employee providing additional services.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and short-term investments with maturities of three months or less when purchased.

Restricted Cash

Restricted cash primarily consists of amounts held by mortgage lenders to provide for (i) real estate tax expenditures, tenant improvements and capital expenditures, (ii) security deposits, and (iii) net proceeds from property sales that were executed as tax-deferred dispositions.

Derivatives and Hedging

During its normal course of business, the Company uses certain types of derivative instruments for the purpose of managing interest rate and foreign currency risk. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with the Company’s related assertions.

The Company recognizes all derivative instruments, including embedded derivatives that are required to be bifurcated, as assets or liabilities in the consolidated balance sheets at fair value. Changes in fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in earnings. For derivative instruments designated in qualifying cash flow hedging relationships, change s in fair value related to the effective portion of the derivative instruments are recognized in accumulated other comprehensive income (loss), whereas change s in fair value of the ineffective portion are recognized in earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivative instruments that are part of a hedging relationship to specific forecasted transactions as well as recognized obligations or assets in the consolidated balance sheets. The Company also assesses and documents, both at inception of the hedging relationship and on a quarterly basis thereafter, whether the derivative instruments are highly effective in offsetting the designated risks associated with the respective hedged items. If it is determined that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues hedge accounting prospectively and records the appropriate adjustment to earnings based on the current fair value of the derivative instrument.

Income Taxes

HCP, Inc. elected REIT status and believes it has always operated so as to continue to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, HCP, Inc. will not be subject to U.S. federal income tax, provided that it continues to qualify as a REIT and makes distributions to stockholders equal to or in excess of its taxable income. In addition, the Company has formed several consolidated subsidiaries, which have elected REIT status. HCP, Inc. and its consolidated REIT subsidiaries are each subject to the REIT qualification requirements under the Code. If any REIT fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and may be ineligible to qualify as a REIT for four subsequent tax years.

HCP, Inc. and its consolidated REIT subsidiaries are subject to state, local and foreign income taxes in some jurisdictions, and in certain circumstances each REIT may also be subject to federal excise taxes on undistributed income. In addition, certain activities that the Company undertakes may be conducted by entities which have elected to be treated as taxable REIT subsidiaries (“TRS”). TRSs are subject to both federal and state income taxes. The Company recognizes tax penalties relating to unrecognized tax benefits as additional income tax expense. Interest relating to unrecognized tax benefits is recognized as interest expense.

79

Table of Contents

Marketable Securities

The Company classifies its marketable equity securities as available‑for‑sale. These securities are carried at fair value with unrealized gains and losses recognized in stockholders’ equity as a component of accumulated other comprehensive income (loss). Gains or losses on securities sold are determined based on the specific identification method. The Company classifies its marketable debt securities as held‑to‑maturity, because the Company has the positive intent and ability to hold the securities to maturity. Held‑to‑maturity securities are recorded at amortized cost and adjusted for the amortization of premiums and discounts through maturity. When the Company determines declines in fair value of marketable securities are other‑than‑temporary, a loss is recognized in earnings.

Capital Raising Issuance Costs

Costs incurred in connection with the issuance of common shares are recorded as a reduction of additional paid-in capital. Debt issuance costs related to debt instruments excluding line of credit arrangements are deferred, recorded as a reduction of the related debt liability, and amortized to interest expense over the remaining term of the related debt liability utilizing the interest method. Debt issuance costs related to line of credit arrangements are deferred, included in other assets, and amortized to interest expense over the remaining term of the related line of credit arrangement utilizing the interest method.

Segment Reporting

The Company’s segments are based on its internal method of reporting which classifies business operations by healthcare sector as follow s: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital.

Noncontrolling Interests

A rrangements with noncontrolling interest holders are reported as a component of equity separate from the Company’s equity. N et income attributable to a noncontrolling interest is included in net income on the consolidated statements of operations and, upon a gain or loss of control, the interest purchased or sold, and any interest retained, is recorded at fair value with any gain or loss recognized in earnings. The Company accounts for purchases or sales of equity interests that do not result in a change in control as equity transactions.

The Company consolidates non-managing member limited liability companies (“DownREITs”) because it exercises control, and the noncontrolling interests in these entities are carried at cost. The non-managing member limited liability compan y (“LLC”) units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares of the Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications). Upon exchange of DownREIT units for the Company’s common stock, the carrying amount of the DownREIT units is reclassified to stockholders’ equity.

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income (loss), a component of stockholders’ equity on the consolidated balance sheets. Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses are included in other income, net in the consolidated statements of operations.

Life Care Bonds Payable

Certain of the Company’s continuing care retirement communities (“CCRCs”) issue non-interest bearing life care bonds payable to certain residents of the CCRCs. Generally, the bonds are refundable to the resident or to the resident’s estate upon termination or cancellation of the CCRC agreement or upon the successful resale of the unit. Proceeds from the issuance of new bonds are used to retire existing bonds, and since the maturity of the obligations for the facilities is not determinable, no interest is imputed. These amounts are included in other debt in the Company’s consolidated balance sheets.

80

Table of Contents

Fair Value Measurement

The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

| · |  | Level 1—quoted prices for identical instruments in active markets;

| · |  | Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

| · |  | Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company measures fair value using a set of standardized procedures that are outlined herein for all assets and liabilities which are required to be measured at fair value. When available, the Company utilizes quoted market prices from an independent third party source to determine fair value and classifies such items in Level 1. In instances where a market price is available, but the instrument is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and classifies the asset or liability in Level 2.

If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads and/or market capitalization rates. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or Level 3 even though there may be some significant inputs that are readily observable. Internal fair value models and techniques used by the Company include discounted cash flow and Black-Scholes valuation models. The Company also considers its counterparty’s and own credit risk for derivative instruments and other liabilities measured at fair value. The Company has elected the mid-market pricing expedient when determining fair value.

Earnings per Share

Basic earnings per common share is computed by dividing net income applicable to common shares by the weighted average number of shares of common stock outstanding during the period. The Company accounts for unvested share-based payment awards that contain non-forfeitable dividend rights or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. Diluted earnings per common share is calculated by including the effect of dilutive securities.

Recent Accounting Pronouncements

In January 201 6, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 201 6-0 1, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 201 6-0 1”). This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. ASU 201 6-0 1 is effective for fiscal years, and interim periods within, beginning after December 15, 201 7. Early adoption is permitted only for certain disclosure requirements. The Company is evaluating the impact of the adoption of ASU 201 6-0 1 on January 1, 2018 to its consolidated financial position or results of operations.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have

81

Table of Contents

been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2015-1 6 on January 1, 2016; the adoption of which did not have a material impact on its consolidated financial position or results of operations.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 simplifies the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts). In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting) (“ASU 2015-15”). ASU 2015-15 allows debt issuance costs related to line-of-credit agreements to be presented in the balance sheet as an asset. ASU 2015-03 and ASU 2015-15 are effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company early adopted ASU 2015-03 and ASU 2015-15 as of December 31, 2015 using the full retrospective method as required by these ASUs. As a result, $39 million of total debt issuance costs previously reported within “other assets, net” were reclassified to their respective debt liability financial statement line items on the Company’s consolidated balance sheet as of December 31, 2014.

In February 2015, the FASB issued ASU No. 2015-2, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 requires amendments to both the VIE and voting interest entity (“VOE”) consolidation accounting models. The amendments (i) rescind the indefinite deferral of certain aspects of accounting standards relating to consolidations and provide a permanent scope exception for registered money market funds and similar unregistered money market funds, (ii) modify (a) the identification of variable interests (fees paid to a decision maker or service provider), (b) the VIE characteristics for a limited partnership or similar entity and (c) the primary beneficiary determination under the VIE model, and (iii) eliminate the presumption within the current VOE model that a general partner controls a limited partnership or similar entity. ASU 2015-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using either a modified retrospective or retrospective method by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted ASU 2015-02 on January 1, 2016; the adoption of which did not have a material impact to its consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update changes the requirements for recognizing revenue. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for annual periods, and interim periods within, beginning after December 15, 2016. The Company is evaluating the impact of the adoption of ASU 2014-09 on January 1, 2018 to its consolidated financial position or results of operations.

NOTE 3. Brookdale Lease Amendments and Terminations and the Formation of Two RIDEA Joint Ventures (“Brookdale Transaction”)

On July 31, 2014, Brookdale Senior Living (“Brookdale”) completed its acquisition of Emeritus Corporation (“Emeritus”). On August 29, 2014, the Company and Brookdale completed a multiple-element transaction with three major components:

| · |  | amended existing lease agreements on 153 HCP-owned senior housing communities previously leased and operated by Emeritus, that included the termination of embedded purchase options in the se leases relating to 30 properties and future rent reductions;

| · |  | terminated existing lease agreements on 49 HCP-owned senior housing properties previously leased and operated by Emeritus, that included the termination of embedded purchase options in these leases relating to 19 properties. At closing, the Company contributed 48 of these properties to newly formed consolidated partnership s that are operated under a structure permitted by the Housing and Economic Recovery Act of 2008 (commonly referred to as “RIDEA”)

82

Table of Contents

(“RIDEA II”); the 49 th property was contributed on January 1, 2015. Brookdale owns a 20% noncontrolling equity interest in the RIDEA II and manages the facilities on behalf of the partnership; and

| · |  | entered into new unconsolidated joint ventures that own 14 campuses of continuing care retirement communities (“CCRC”) in a RIDEA structure (collectively, the “CCRC JV”) with the Company owning a 49% equity interest and Brookdale owning a 51% equity interest. Brookdale manages these communities on behalf of this partnership.

Leases Amended on 153 Properties (“NNN Lease Restructuring”)

The Company and Brookdale entered into amended and restated triple-net master leases for 153 properties formerly leased to Emeritus. As part of the lease amendments, Brookdale forfeited purchase option rights related to 30 of these properties. The master leases have weighted average initial terms of 15 years, with two extension options that average 10 years each. While the total base rent for 2014 remained unchanged, these leases provide for reduced escalators beginning in 2015 compared to those which were in-place; the leases contain reduced rent payments of $6.5 million in 2016 and $7.5 million each subsequent year thereafter. All obligations under the amended and restated leases are guaranteed by Brookdale. In addition, the new leases include a purchase option in favor of Brookdale that was exercised with nine communities sold during 2015 for $60 million in proceeds.

Effectively, the Company paid consideration of $129 million to terminate the existing purchase options and received consideration of: (i) $76 million for lower rent payments and escalators discussed above and (ii) $53 million to settle the amount that the Company owed to Brookdale for the RIDEA II transaction discussed below. See the Fair Value Measurement Techniques and Quantitative Information section below for additional information.

The Company amortize s the $53 million of net consideration paid to Brookdale for the NNN Lease Restructuring as a reduction in rental income on a straight-line basis over the term of the new leases. Additionally, the lease-related intangibles, initial direct costs and straight-line rent receivables associated with the previous leases will be amortized prospectively over the new (or amended) lease terms.

Lease Terminations of 49 Properties that were contributed to a RIDEA Structure (RIDEA II)

The Company and Brookdale terminated leases for a 49 property portfolio, which resulted in Brookdale forfeiting its purchase option rights to 19 of these properties; the net value of the terminated leases and forfeited purchase options was $108 million ($131 million for the value of the terminated leases, less $23 million for the value of the forfeited purchase options). At closing, the Company contributed the properties into partnerships, with Brookdale owning a 20% noncontrolling equity interest in each of the RIDEA II (“SH PropCo” and “SH OpCo”). Brookdale’s 20% interest in the RIDEA II was valued at $47 million. Brookdale also manages the properties on behalf of the RIDEA II under long-term management contracts. See the Fair Value Measurement Techniques and Quantitative Information section below for additional information.

As consideration for the net value of $108 million for the terminated leases and the $47 million sale to Brookdale of the 20% noncontrolling interest in the RIDEA II, the Company received the following: (i) a $34 million short-term receivable recorded in other assets; (ii) a $68 million note from Brookdale (the “Brookdale Receivable”) recorded in loans receivable (see Note 7) that was repaid in November 2014; and (iii) an effective offset for the $53 million associated with the additional consideration owed by the Company to Brookdale for the NNN Lease Restructuring transaction discussed above. The fair values of the short-term receivable and Brookdale Receivable were estimated based on similar instruments available in the marketplace and are considered to be Level 2 measurements within the fair value hierarchy.

As a result of terminating these leases, the Company recognized a net gain of $38 million consisting of: (i) $108 million gain based on the fair value of the net consideration received; less (ii) $70 million to write-off the direct leasing costs and straight-line rent receivables related to the former in-place leases.

The Company has identified the SH PropCo and SH OpCo entities as VIEs (see Note 21 for additional information).

Continuing Care Retirement Communities Joint Venture

HCP and Brookdale formed new unconsolidated joint ventures, that own ed 14 CCRC campuses at formation, in a RIDEA structure (“CCRC PropCo” and “CCRC OpCo”). HCP and Brookdale own 49% and 51%, respectively, of CCRC PropCo and CCRC OpCo, based on each company’s respective contributions. At closing, CCRC PropCo own ed eight campuses

83

Table of Contents

that are leased to CCRC OpCo; CCRC OpCo own ed six campuses and the operations of the campuses leased from CCRC PropCo. Brookdale manages the campuses of the CCRC JV under long-term management contracts.

At closing, Brookdale contributed eight of its owned campuses; the Company contributed two campuses previously leased to Brookdale valued at $162 million (carrying value of $92 million) and $370 million of cash (includes amounts used to fund the purchase of properties and working capital), which was primarily used to acquire four additional campuses from third parties. At closing, the CCRC JV campuses were encumbered by $569 million of mortgage and entrance fee obligations.

The Company has identified the CCRC OpCo entity as a VIE (see Note 21 for additional information).

Fair Value Measurement Techniques and Quantitative Information

The fair values of the forfeited rental payments and purchase option rights related to the NNN Lease Restructuring and the RIDEA II were based on the income approach and are considered Level 3 measurements within the fair value hierarchy. The Company utilized discounted cash flow models with observable and unobservable valuation inputs. These fair value measurements, or valuation techniques, were based on current market participant expectations and information available as of the close of the transaction on August 29, 2014.

A summary of the quantitative information about fair value measurements for the NNN Lease Restructuring and RIDEA II transactions follows (dollars in thousands):

|  | Fair Value |  | Valuation Technique |  | Valuation Inputs |  | Input Average or Range |
NNN Lease Restructuring |  |  |  |  |  |  |  |  |  |
Rental payment concessions by HCP |  | $ | 76,000 |  | Discounted Cash Flow |  | NNN Rent Coverage Ratio |  | 1.20x |
(benefiting Brookdale) |  |  |  |  |  |  | NNN Rent Growth Rate |  | 3.0% |
|  |  |  |  |  |  | Discount Rate |  | 8.00%-8.50% |
Forfeited purchase options by |  | $ | (129,000) |  | Discounted Cash Flow |  | Capitalization Rates |  | 7.50%-9.25% |
Brookdale (benefiting HCP) |  |  |  |  |  |  | Discount Rate |  | 10.50%-11.00% |
|  |  |  |  |  |  | Exercise Probability |  | 100.00% |
RIDEA II |  |  |  |  |  |  |  |  |  |
Forfeited rental payments by HCP |  | $ | 131,000 |  | Discounted Cash Flow |  | NNN Rent Coverage Ratio |  | 1.20x |
(benefiting Brookdale) |  |  |  |  |  |  | NNN Rent Growth Rate |  | 3.0% |
|  |  |  |  |  |  | EBITDAR Growth Rate |  | 5.5% |
|  |  |  |  |  |  | Discount Rate |  | 8.00%-11.00% |
Forfeited purchase options by |  | $ | (23,000) |  | Discounted Cash Flow |  | Capitalization Rates |  | 7.50%-9.25% |
Brookdale (benefiting HCP) |  |  |  |  |  |  | Discount Rate |  | 10.50%-11.00% |
|  |  |  |  |  |  | Exercise Probability |  | 100.00% |

In determining which valuation technique would be utilized to calculate fair value for the multiple elements of this transaction, the Company considered the market approach, obtaining published investor survey and sales transaction data, where available. The information obtained was consistent with the valuation inputs and assumptions utilized by the selected income approach that was applied to this transaction. Investor survey and sales transaction data reviewed for similar transactions in similar marketplaces, included, but were not limited to, sales price per unit, rent coverage ratios, rental rate growth as well as capitalization and discount rates.

Rental Payment Concessions. The fair value of the rental payment concessions related to the NNN Lease Restructuring Transaction was determined as the present value of the difference between (i) the remaining contractual rental payments of the in-place leases, limited to the first purchase option date (where available) and market rents to complete the initial lease term of the amended Brookdale leases thereafter and (ii) the contractual rental payments under the amended Brookdale leases.

Forfeited Rental Payments. The fair value of the forfeited rental payments related to the RIDEA II transaction was calculated as the present value of the difference between (i) the remaining contractual rental payments of the terminated in-place leases, limited to first purchase option date, where available and (ii) the forecasted cash flows of the facility-level operating results of the RIDEA II.

84

Table of Contents

Forfeited Purchase Option Rights. The fair value of the forfeited purchase option rights was determined as the present value of the difference between (i) the fair value of the underlying property as of the initial exercise date and (ii) the exercise price for purchase option rights as defined in the lease agreement. To determine the fair value of the underlying property as of the initial exercise date, the Company utilized a cash flow model that incorporated growth rates to forecast the underlying property’s operating results and applied capitalization rates to establish its expected fair value. The Company utilized an appropriate risk-adjusted discount rate to estimate the present value as of the closing date of the transaction.

NOTE 4. Other Real Estate Property Investments

Acquisition of Private Pay Senior Housing Portfolio (“RIDEA III”)

On June 30, 2015, the Company and Brookdale acquired a portfolio of 35 private pay senior housing communities from Chartwell Retirement Residences, including two leasehold interests, representing 5,025 units. The portfolio was acquired in a RIDEA structure (“RIDEA III”), with Brookdale owning a 10% noncontrolling interest. Brookdale has operated these communities since 2011 and continues to manage the communities under a long-term management agreement, which is cancellable under certain conditions (subject to a fee if terminated within seven years from the acquisition date). The Company paid $770 million in cash consideration, net of cash assumed, and assumed $32 million of net liabilities and $29 million of noncontrolling interests to acquire: (i) real estate with a fair value of $771 million, (ii) lease-up intangible assets with a fair value of $53 million and (iii) working capital of $7 million. As a result of the acquisition, the Company recognized a net termination fee of $8 million in rental and related revenues, which represents the termination value of the two leasehold interests. The lease-up intangible assets recognized were attributable to the value of the acquired underlying operating resident leases of the senior housing communities that were stabilized or nearly stabilized (i.e., resident occupancy above 80%). From the acquisition date to December 3 1, 2015, the Company recognized revenues and earnings of $94 million and $1 million, respectively, from RIDEA III. As of December 3 1, 2015, the purchase price allocation is preliminary and may be subject to change.

Pro Forma Results of Operations (Unaudited)

The following unaudited pro forma consolidated results of operations assume that the RIDEA III acquisition was completed as of January 1, 2013 (in thousands, except per share amounts):

|  | December 31, 2015 |  | December 31, 2014 |  | December 31, 2013 |
Revenues |  | $ | 2,638,192 |  | $ | 2,454,039 |  | $ | 2,287,638 |
Net (loss) income |  |  | (531,464) |  |  | 954,540 |  |  | 996,976 |
Net (loss) income applicable to HCP, Inc. |  |  | (545,776) |  |  | 938,387 |  |  | 981,610 |
Basic earnings per common share |  | $ | (1.18) |  | $ | 2.04 |  | $ | 2.15 |
Diluted earnings per common share |  |  | (1.18) |  |  | 2.04 |  |  | 2.15 |

2015 Other Real Estate Acquisitions

In addition to the RIDEA III acquisition discussed above, a summary of other real estate acquisitions for the year ended December 31, 2015 follows (in thousands):

|  | Consideration |  | Assets Acquired(1) |
|  | Cash Paid/ |  | Liabilities |  | Noncontrolling |  |  |  |  | Net |
Segment |  | Debt Settled |  | Assumed |  | Interest |  | Real Estate |  | Intangibles |
Senior housing(2) |  | $ | 268,782 |  | $ | 8,298 |  | $ | 4,255 |  | $ | 253,802 |  |  | 27,533 |
Post-acute/skilled nursing(2) |  |  | 178,707 |  |  | — |  |  | — |  |  | 142,528 |  |  | 36,179 |
Life science |  |  | 80,946 |  |  | 2,054 |  |  | — |  |  | 68,988 |  |  | 14,012 |
Medical office(3) |  |  | 384,114 |  |  | 12,866 |  |  | — |  |  | 305,091 |  |  | 91,889 |
|  | $ | 912,549 |  | $ | 23,218 |  | $ | 4,255 |  | $ | 770,409 |  | $ | 169,613 |

| (1) |  | Amounts include preliminary purchase price allocations which may be subject to change.

| (2) |  | Includes £174 million ($254 million) of the Company’s HC-One Facility (see Note 7) converted to fee ownership in a portfolio of 36 care homes located throughout the United Kingdom (“U.K.”) and includes £27 million ($42 million) of a loan originated in May 2015 converted to fee ownership in two U.K. care homes.

85

Table of Contents

| (3) |  | Includes $225 million for a medical office building (“MOB”) portfolio acquisition completed in June 2015 and placed in HCP Ventures V, LL C (“HCP Ventures V”), of which in October 2015 the Company issued a 49% noncontrolling interest in HCP Ventures V for $110 million (see Note 13).

2014 Real Estate Acquisitions

A summary of other real estate acquisitions for the year ended December 31, 2014 follows (in thousands):

|  | Consideration |  | Assets Acquired |
|  |  |  |  | Debt and Other |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Liabilities |  | Noncontrolling |  |  |  |  | Net |
Segment |  | Cash Paid |  | Assumed |  | Interest |  | Real Estate |  | Intangibles |
Senior housing(1) |  | $ | 233,797 |  | $ | 3,351 |  | $ | 6,321 | (2) | $ | 215,255 |  |  | 28,214 |
Life science |  |  | 43,500 |  |  | 250 |  |  | — |  |  | 41,281 |  |  | 2,469 |
Medical office |  |  | 226,173 |  |  | 33,677 |  |  | — |  |  | 226,510 |  |  | 33,340 |
|  | $ | 503,470 |  | $ | 37,278 |  | $ | 6,321 |  | $ | 483,046 |  | $ | 64,023 |

| (1) |  | Includes the acquisition of a $147 million (£88 million) portfolio of 23 care homes in the UK.

| (2) |  | Includes $5 million of non-managing member limited liability company units

Completed Developments

During the year ended December 31, 2014, the Company placed in service the following: (i) two life science facilities, (ii) a MOB and (iii) a post-acute/skilled nursing facility. These completed developments represented $41 million of gross real estate on the Company’s consolidated balance sheets as of the date they were placed in service. There were no completed developments placed in service during the year ended December 31, 2015.

Construction, Tenant and Other Capital Improvements

A summary of the Company’s funding for construction, tenant and other capital improvements follows (in thousands):

|  | Year Ended December 31, |
Segment |  | 2015 |  | 2014 |
Senior housing |  | $ | 131,405 |  | $ | 45,586 |
Post-acute/skilled nursing |  |  | 3,369 |  |  | 2,533 |
Life science |  |  | 122,319 |  |  | 133,164 |
Medical office |  |  | 131,021 |  |  | 90,027 |
Hospital |  |  | 37 |  |  | 1,688 |
|  | $ | 388,151 |  | $ | 272,998 |

NOTE 5. Dispositions of Real Estate and Discontinued Operations

During the year ended December 31, 2015, the Company sold the following: (i) nine senior housing facilities for $60 million resulting from Brookdale’s exercise of its purchase option received as part of the Brookdale Transaction, (ii) two parcels of land in its life science segment for $51 million and (iii) a MOB for $400,000.

During the year ended December 31, 2014, the Company sold the following: (i) two post-acute/skilled nursing facilities for $22 million, (ii) a hospital for $17 million, (i ii) a senior housing facility for $16 m illion and (i v) a MOB for $145,000.

On August 29, 2014, in conjunction with the Brookdale Transaction, the Company contributed three senior housing facilities with a carrying value of $92 million into the CCRC JV (an unconsolidated joint venture with Brookdale discussed in Note 3). The Company recorded its investment in the CCRC JV for the contribution of these properties at their carrying value (carryover basis) and therefore did not recognize either a gain or loss upon the contribution.

86

Table of Contents

The Company separately presented as discontinued operations the results of operations for all consolidated assets disposed of and all properties held for sale, if any, prior to the adoption of ASU 2014-08 on April 1, 2014. The amounts included in discontinued operations, for the year ended December 31, 201 4 represent the activity for properties sold prior to the adoption date. No properties sold subsequent to the adoption date met the new criteria for reporting discontinued operations (see Note 2).

The following table summarizes income from discontinued operations, impairments and gain on sales of real estate included in discontinued operations (dollars in thousands):

|  | Year Ended December 31, |
|  | 2014 |  | 2013 |
Rental and related revenues |  | $ | 1,810 |  | $ | 16,649 |
Depreciation and amortization expenses |  |  | — |  |  | 5,862 |
Operating expenses |  |  | 54 |  |  | 3,929 |
Other expense, net |  |  | 20 |  |  | 979 |
Income before impairment losses and gain on sales of real estate, net of income taxes |  | $ | 1,736 |  | $ | 5,879 |
Impairment losses on real estate |  | $ | — |  | $ | (1,372) |
Gain on sales of real estate, net of income taxes |  | $ | 28,010 |  | $ | 69,866 |
Number of properties included in discontinued operations |  |  | 3 |  |  | 16 |

NOTE 6. Net Investment in Direct Financing Leases

The components of net investment in DFLs consisted of the following (dollars in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |
Minimum lease payments receivable |  | $ | 26,283,392 |  | $ | 24,182,525 |
Estimated residual values |  |  | 3,900,679 |  |  | 4,126,426 |
Less unearned income |  |  | (23,462,022) |  |  | (21,028,617) |
Net investment in direct financing leases before allowance |  |  | 6,722,049 |  |  | 7,280,334 |
Allowance for DFL losses |  |  | (817,040) |  |  | — |
Net investment in direct financing leases |  | $ | 5,905,009 |  | $ | 7,280,334 |
Properties subject to direct financing leases |  |  | 348 |  |  | 363 |

HCR ManorCare, Inc.

The Company acquired 334 post-acute, skilled nursing and assisted living facilities in its 2011 transaction with HCR ManorCare Inc. (“HCRMC”) and entered into a triple-net Master Lease and Security Agreement (the “Master Lease”) with a subsidiary (“Lessee”) of HCRMC.

As part of the Company’s fourth quarter 2015 review process, including its internal rating evaluation, it assessed the collect i bility of all contractual rent payments under the HCRMC amended master lease (the “Amended Master Lease”). The Company’s evaluation included, but was not limited to, consideration of: (i) the continued decline in HCRMC’s operating performance and fixed charge coverage ratio during the second half of 2015, with the most significant deterioration occurring during the fourth quarter, (ii) the reduced growth outlook for the post-acute/skilled nursing business and (iii) HCRMC’s 2015 audited financial statements. The Company determined that the timing and amounts owed under the HCRMC DFL investments are no longer reasonably assured and assigned an internal rating of “Watch List” as of December 31, 2015. Further, the Company placed the HCRMC DFL investments on nonaccrual and will utilize the cash method of accounting in accordance with its policy (see Note 2).

As a result of assigning an internal rating of “Watch List” for its HCRMC DFL investments during the quarterly review process, the Company further evaluated the carrying amount of its HCRMC DFL investments. As a result of the significant decline in HCRMC’s fixed charge coverage ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post-acute/skilled nursing business, the Company determined that it is probable that its HCRMC DFL investments are

87

Table of Contents

impaired and the amount of the loss can be reasonably estimated. In the fourth quarter of 2015, the Company recorded an allowance for DFL losses (impairment charge) of $817 million, reducing the carrying amount of its HCRMC DFL investments from $6.0 billion to $5.2 billion. See Note 17 for additional discussion of the impairment charge and related valuation assumptions.

In December 2015, the Company reduced the carrying amount of its equity investment in HCRMC to zero, and income will be recognized only if cash distributions are received from HCRMC; as a result, the Company will no longer recharacterize (eliminate) its proportional ownership share of income from DFLs to equity income from unconsolidated joint ventures (see Note 8).

The Company recognized HCRMC DFL income and HCRMC equity income as follows (in thousands):

|  | Year Ended
|  | December 31,
|  | 2015 |  | 2014 |  | 2013
Cash income |  | $ | 482,770 |  | $ | 519,280 |  | $ | 502,354
DFL accretion, net |  |  | 90,065 |  |  | 79,349 |  |  | 82,688
Total DFL income from HCRMC |  | $ | 572,835 |  | $ | 598,629 |  | $ | 585,042
DFL accretion income recharacterized to equity income |  | $ | 58,047 |  | $ | 62,445 |  | $ | 62,061
Equity loss from HCRMC |  |  | (7,324) |  |  | (9,270) |  |  | (6,460)
Total equity income from HCRMC |  | $ | 50,723 |  | $ | 53,175 |  | $ | 55,601

During the years ended December 31, 2015, 2014 and 2013, the C ompany recognized a total of $148 million, $142 million and $145 million of accretion, net, respectively, related to its HCRMC DFL investments.

During the quarter ended March 31, 2015, the Company and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic facilities that were under the Master Lease. HCRMC receive s an annual rent reduction under the Master Lease based on 7.75% of the net sales proceeds received by HCP. During the year ended December 31, 2015, the Company completed sales of 22 non-strategic HCRMC facilities for $21 9 million. Subsequent to December 31, 2015, the Company sold an additional 1 1 facilities, bringing the total facilities sold t hrough February 8, 2016 to 3 3, with the remaining facility sales expected to close by mid-2016.

On March 29, 2015, certain subsidiaries of the Company entered into an amendment to the Master Lease (the “HCRMC Lease Amendment”) effective April 1, 2015. The HCRMC Lease Amendment reduced initial annual rent by a net $68 million from $541 million to $473 million. Commencing on April 1, 2016, the minimum rent escalation shall be reset to 3.0% for each lease year through the expiration of the initial term of each applicable pool of facilities. Prior to the HCRMC Lease Amendment, rent payments would have increased 3.5% on April 1, 2015 and 2016 and 3.0% thereafter. The initial term was extended five years to an average of 16 years, and the extension options’ aggregate terms remained the same.

As consideration for the rent reduction, the Company received a Deferred Rent Obligation (“DRO”) from the Lessee equal to an aggregate amount of $525 million, which was allocated into two tranches: (i) a Tranche A DRO of $275 million and (ii) a Tranche B DRO of $250 million. Until the entire Tranche A DRO is paid in full, the Lessee will make rental payments equal to 6.9% of the outstanding amount (representing $19 million) for the initial lease year (the “Tranche A Current Payment”), increased each year thereafter by 3.0%. Commencing on April 1, 2016, until the Tranche B DRO is paid in full, the outstanding principal balance of the Tranche B DRO will be increased annually by (i) 3.0% initially, (ii) 4.0% commencing on April 1, 2019, (iii) 5.0% commencing on April 1, 2020, and (iv) 6.0% commencing on April 1, 2021 and for the remainder of its term. The DRO is due and payable on the earlier of (i) certain capital or liquidity events of HCRMC, including an initial public offering or sale, or (ii) March 31, 2029, which is not subject to any extensions. The HCRMC Lease Amendment also imposes certain restrictions on the Lessee and HCRMC until the DRO is paid in full, including with respect to the payment of dividends and the transfer of interest in HCRMC.

Additionally, HCRMC agreed to sell, and HCP agreed to purchase, nine post-acute facilities for an aggregate purchase price of $275 million. The proceeds from the nine facilities are to be used to reduce the Tranche A DRO as the purchases are consummated. The closing of the purchases of these facilities are subject to certain customary conditions and approvals.

88

Table of Contents

Through December 31, 2015, HCRMC and HCP completed seven of the nine facility purchases for $18 4 million. The purchases of the remaining two facilities are expected to occur by mid-2016. Following the purchase of a facility, the Lessee lease s such facility from the Company pursuant to the Amended Master Lease. The nine facilities will contribute an aggregate of $19 million of annual rent (subject to escalation) under the Amended Master Lease.

In March 2015, the Company recorded a n impairment charge of $478 million related to its HCRMC DFL investments. The impairment charge reduced the carrying value of the HCRMC DFL investments from $6.6 billion to $6.1 billion, based on the present value of the future lease payments effective April 1, 2015 under the Amended Master Lease discounted at the original DFL investments’ effective lease rate (see Note 17).

See Note 8 for additional discussion of the Company’s equity interest in HCRMC and the U.S. Department of Justice (“DOJ”) action related to HCRMC.

During the year ended December 31, 2014, the Company received a $13 million payoff from the sale of a HCRMC post-acute/skilled nursing facility that collateralized this DFL.

Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for net investment in DFLs at December 31, 2015 (dollars in thousands):

|  | Carrying |  | Percentage of |  | Internal Ratings |
Investment Type |  | Amount |  | DFL Portfolio |  | Performing DFLs |  | Watch List DFLs |  | Workout DFLs |
Senior housing |  | $ | 1,788,764 |  | 30 |  | $ | 261,261 |  | $ | 1,527,503 |  | $ | — |
Post-acute/skilled nursing |  |  | 3,992,354 |  | 68 |  |  | — |  |  | 3,992,354 |  |  | — |
Hospital |  |  | 123,891 |  | 2 |  |  | 123,891 |  |  | — |  |  | — |
|  | $ | 5,905,009 |  | 100 |  | $ | 385,152 |  | $ | 5,519,857 |  | $ | — |

Beginning September 30, 2013, the Company placed a 14 property s enior housing DFL (the “DFL Portfolio”) on nonaccrual status and classified the DFL Portfolio on “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Portfolio has been recognized on a cash basis. The Company re-assessed the DFL Portfolio for impairment on December 31, 201 5 and determined that the DFL Portfolio was not impaired based on its belief that: (i) it was not probable that it will not collect all of the rental payments under the terms of the lease; and (ii) the fair value of the underlying collateral exceeded the DFL Portfolio’s carrying amount. The fair value of the DFL Portfolio was estimated based on a discounted cash flow model, the inputs to which are considered to be a Level 3 measurement within the fair value hierarchy. Inputs to this valuation model include real estate capitalization rates, industry growth rates and operating margins, some of which influence the Company’s expectation of future cash flows from the DFL Portfolio and, accordingly, the fair value of its investment. During the years ended December 31, 2015, 201 4 and 201 3, the Company recognized DFL income of $15 million, $19 million and $24 million, respectively, and received cash payments of $20 million, $24 million and $24 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $366 million and $370 million at December 31, 2015 and 201 4, respectively.

Certain leases contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

89

Table of Contents

Future minimum lease payments contractually due under DFLs at December 31, 2015, were as follow (in thousands):

Year |  | Amount |
2016 |  | $ | 552,985 |
2017 |  |  | 545,307 |
2018 |  |  | 559,979 |
2019 |  |  | 576,206 |
2020 |  |  | 586,229 |
Thereafter |  |  | 23,462,686 |
|  | $ | 26,283,392 |

NOTE 7. Loans Receivable

The following table summarizes the Company’s loans receivable (in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |
|  | Real Estate |  | Other |  |  |  |  | Real Estate |  | Other |  |  |  |
|  | Secured |  | Secured |  | Total |  | Secured |  | Secured |  | Total |
Mezzanine |  | $ | — |  | $ | 660,138 |  | $ | 660,138 |  | $ | — |  | $ | 799,064 |  | $ | 799,064 |
Other |  |  | 114,322 |  |  | — |  |  | 114,322 |  |  | 135,363 |  |  | — |  |  | 135,363 |
Unamortized premiums (discounts), fees and costs, net |  |  | 961 |  |  | (6,678) |  |  | (5,717) |  |  | — |  |  | (14,056) |  |  | (14,056) |
Allowance for loan losses |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (13,410) |  |  | (13,410) |
|  | $ | 115,283 |  | $ | 653,460 |  | $ | 768,743 |  | $ | 135,363 |  | $ | 771,598 |  | $ | 906,961 |

The following table summarizes the Company’s internal ratings for loans receivable at December 31, 2015 (dollars in thousands):

|  |  |  |  | Percentage |  | Internal Ratings |
|  | Carrying |  | of Loan |  | Performing |  | Watch List |  | Workout |
Investment Type |  | Amount |  | Portfolio |  | Loans |  | Loans |  | Loans |
Real estate secured |  | $ | 115,283 |  | 15 |  | $ | 115,283 |  | $ | — |  | $ | — |
Other secured |  |  | 653,460 |  | 85 |  |  | 653,460 |  |  | — |  |  | — |
|  | $ | 768,743 |  | 100 |  | $ | 768,743 |  | $ | — |  | $ | — |

Real Estate Secured Loans

Following is a summary of loans receivable secured by real estate at December 31, 2015 (dollars in thousands):

Final |  | Number |  |  |  |  |  |  |  |  |
Maturity |  | of |  |  |  | Principal |  | Carrying |
Date |  | Loans |  | Payment Terms |  | Amount |  | Amount |
2016 |  | 1 |  | aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by a senior housing facility in Pennsylvania(1) |  | $ | 15,135 |  | $ | 15,244 |
2017 |  | 3 |  | aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by two senior housing facilities in New Jersey and Pennsylvania;(1) and aggregate monthly interest-only payments, accrues interest at LIBOR plus 6.0%, and secured by, among other things, the issuer's real estate assets |  |  | 78,329 |  |  | 79,291 |
2018 |  | 1 |  | monthly interest-only payments, accrues interest at 8.0% and secured by a senior housing facility in Pennsylvania(1) |  |  | 20,078 |  |  | 20,748 |
|  | 5 |  |  |  | $ | 113,542 |  | $ | 115,283 |

| (1) |  | Represents commitments to fund an aggregate of $2 million for four development projects that are at or near completion as of December 31, 2015.

90

Table of Contents

At December 31, 2015, future contractual principal payments to be received on loans receivable secured by real estate are $15 million in 2016, $79 million in 2017 and $20 million in 2018. During the year ended December 31, 2015, the Company recognized $27 million in interest income related to loans secured by real estate. At December 31, 2015, the Company accrued $1 million of interest receivables related to real estate secured loans.

In December 2015, the Company purchased £28 million ($42 million) of Four Seasons Health Care’s (“Four Seasons”) £40 million senior secured term loan. The loan is secured by, among other things, the real estate assets of Four Seasons, and represents the most senior debt tranche. The loan bears interest at a rate of LIBOR plus 6.0% per annum and matures in December 2017.

Other Secured Loans

HC-One Facility

In November 2014, the Company was the lead investor in the financing for Formation Capital and Safanad’s acquisition of NHP, a company that, at closing, owned 273 nursing and residential care homes representing over 12,500 beds in the U.K. principally operated by HC-One. The Company provided a loan facility (the “HC-One Facility”), secured by substantially all of NHP’s assets, totaling £395 million, with £363 million ($574 million) drawn at closing. The HC-One Facility has a five-year term and was funded by a £355 million draw on the Company’s revolving line of credit facility that is discussed in Note 11. In February 2015, the Company increased the HC-One Facility by £108 million ($164 million) to £502 million ($795 million), in conjunction with HC-One’s acquisition of Meridian Healthcare. In April 2015, the Company converted £174 million of the HC-One Facility into a sale-leaseback transaction for 36 nursing and residential care homes located throughout the U.K. (see Note 4). In September 2015, the Company amended and increased its commitment under the HC-One Facility by £11 million primarily for the funding of capital expenditures and a development project. As part of the amendments, the Company shortened the non-call period by 17 months and provided consent for (i) the pay down of £34 million from disposition proceeds without a prepayment premium and (ii) the spinoff of 36 properties into a separate joint venture. In return, the Company retained security over the spinoff properties for a period of two years. Through December 3 1, 2015, the Company received paydowns of £34 million ($52 million).

Brookdale Receivable

In conjunction with the Brookdale Transaction, on August 29, 2014, the Company provided a $68 million interest-only loan, which was repaid in full in November 2014. See additional information regarding the Brookdale Transaction in Note 3.

Barchester Loan

On May 2, 2013, the Company acquired £121 million of subordinated debt at a discount for £109 million ($1 70 million). The loans were secured by an interest in facilities leased and operated by Barchester Healthcare (“Barchester”). On September 6, 2013, the Company received £129 million ($2 02 million) for the par payoff of these debt investments, recognizing interest income of $24 million for the related unamortized loan discounts.

Tandem Health Care Loan

On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period to January 2017. The loans bear interest at fixed rates of 12%, 14%, 6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. At December 31, 2015, the facility had an outstanding balance of $256 million at an 11.5% blended interest rate and was subordinate to $381 million of senior mortgage debt.

Delphis Operations, L.P. Loan

Through October 2015, the Company held a secured term loan made to Delphis Operations, L.P. (“Delphis” or the “Borrower”) that was collateralized by all of the assets of the Borrower. I n October 2015, the Company received $23 million in cash proceeds from the sale of Delp his’ collateral and recognized an impairment recovery of $6 million for

91

Table of Contents

the amount received in excess of the loan’s carrying value. The carrying value of the loan, net of an allowance for loan losses, was $17 million at December 31, 2014. At December 31, 2014, the allowance related to the Company’s senior secured term loan to Delphis was $13 million with no additional allowances recognized during the year ended December 31, 2015. During the years ended December 31, 2015 and 2014, the Company received cash payments from the Borrower of $23 million and $1 million, respectively.

NOTE 8. Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities that are accounted for under the equity method at December 31, 2015 (dollars in thousands):

Entity(1) |  | Segment |  | Carrying Amount |  | Ownership % |
CCRC JV(2) |  | senior housing |  | $ | 465,179 |  | 49 |
HCRMC(3) |  | senior housing and post-acute/skilled nursing |  |  | — |  | 9 |
MBK JV(4) |  | senior housing |  |  | 34,131 |  | 50 |
HCP Ventures III, LLC |  | medical office |  |  | 9,241 |  | 30 |
HCP Ventures IV, LLC |  | medical office and hospital |  |  | 11,884 |  | 20 |
HCP Life Science(5) |  | life science |  |  | 68,582 |  | 50-63 |
Vintage Park |  | senior housing |  |  | 8,729 |  | 85 |
MBK Development JV(4) |  | senior housing |  |  | 2,224 |  | 50 |
Suburban Properties, LLC |  | medical office |  |  | 4,621 |  | 67 |
Advances to unconsolidated joint ventures, net |  |  |  |  | 653 |  |  |
|  |  |  | $ | 605,244 |  |  |

| (1) |  | These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.

| (2) |  | Includes two unconsolidated joint ventures in a RIDEA structure (CCRC PropCo and CCRC OpCo). See additional information regarding the CCRC JV and the Brookdale Transaction in Note 3.

| (3) |  | In December 2015, September 2015 and December 2014, the Company recognized impairment charge s of $1 9 million, $27 million and $36 million, respectively. See Note 17 for additional information regarding th e impairment charge s; also, see Note 6 regarding the Company’s related HCRMC DFL investment s.

| (4) |  | Includes two unconsolidated joint ventures in a RIDEA structure (PropCo and OpCo).

| (5) |  | Includes three unconsolidated joint ventures between the Company and an institutional capital partner for which the Company is the managing member. HCP Life Science includes the following partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

Summarized combined financial information for the Company’s unconsolidated joint ventures follows (in thousands):

|  | December 31, |
|  | 2015(1) |  | 2014 |
Real estate, net |  | $ | 4,470,249 |  | $ | 4,537,553 |
Goodwill and other assets, net |  |  | 4,935,343 |  |  | 4,920,604 |
Assets held for sale |  |  | 94,866 |  |  | 662,740 |
Total assets |  | $ | 9,500,458 |  | $ | 10,120,897 |
Capital lease obligations and mortgage debt |  | $ | 6,575,531 |  | $ | 6,733,943 |
Accounts payable and other |  |  | 1,111,350 |  |  | 974,206 |
Liabilities and mortgage debt held for sale |  |  | 6,318 |  |  | 505,703 |
Other partners’ capital |  |  | 1,163,501 |  |  | 1,281,413 |
HCP’s capital(2) |  |  | 643,758 |  |  | 625,632 |
Total liabilities and partners’ capital |  | $ | 9,500,458 |  | $ | 10,120,897 |

| (1) |  | Includes the financial information of Vintage Park, MBK JV and MBK Development JV, which were formed i n January 2015, March 2015 and September 2015, respectively.

| (2) |  | The combined basis difference of the Company’s investments in these joint ventures of $39 million, as of December 31, 2015, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.

92

Table of Contents

|  | Year Ended December 31, |
|  | 2015(1) |  | 2014(2) |  | 2013 |
Total revenues |  | $ | 4,464,317 |  | $ | 4,284,747 |  | $ | 4,189,793 |
Income (loss) from discontinued operations |  |  | 38,071 |  |  | (24,422) |  |  | (22,030) |
Net loss(3) |  |  | (83,277) |  |  | (411,385) |  |  | (354,079) |
HCP’s share in earnings(3) |  |  | 57,313 |  |  | 49,570 |  |  | 64,433 |
Fees earned by HCP |  |  | 1,873 |  |  | 1,809 |  |  | 1,847 |
Distributions received by HCP |  |  | 46,100 |  |  | 7,702 |  |  | 18,091 |

| (1) |  | Includes the financial information of Vintage Park, MBK JV and MBK Development JV, which were formed in January 2015, March 2015 and September 2015, respectively.

| (2) |  | Includes the financial information of the CCR C JV, which the Company formed i n August 2014.

| (3) |  | The net loss in 201 5 includes $79 million related to HCRMC’s goodwill that was allocat ed to disposal groups that were sold. The net loss in 2014 includes impairments, net of the related tax benefit, of $396 million related to HCRMC’s deferred tax assets and trademark intangible assets. The impairments at HCRMC were the result of a continued shift in patient payor sources from Medicare to Medicare Advantage, which negatively impact reimbursement rates and length of stay for HCRMC’s skilled nursing segment and a shift in HCRMC’s marketing and branding strategy. The net loss in 2013 includes a charge of $400 million related to recording of a valuation allowance that reduced the carrying value of HCRMC’s deferred tax assets to an amount that is more likely than not to be realized as determined by HCRMC’s management. HCRMC’s goodwill, intangible assets and deferred tax assets were not previously considered in the Company’s initial investments in the operations of HCRMC. T herefore, the related impairments and valuation allowance against the carrying value of the deferred tax assets do not impact the Company’s recorded investment or impact on the Company’s share of earnings from or its equity investment in HCRMC. H owever, the circumstances that led to HCRMC’s management to reach the determination that it was necessary to reduce the carrying value of their deferred tax and trademark intangible assets in 2014 are consistent with the Company’s determination that its equity investment in HCRMC was impaired in December 2014 (see Note 17). The Company’s joint venture interest in HCRMC is accounted for using the equity method and results in an ongoing reduction of DFL income, proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance results in $58 million, $62 million and $62 million of DFL income that is recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated joint ventures) for the years ended December 31, 2015, 2014 and 2013, respectively. See Note 6 for additional discussion.

CCRC JV

On August 29, 2014, as part of the Brookdale Transaction discussed in Note 3, HCP and Brookdale formed unconsolidated joint ventures in a RIDEA structure. At closing, Brookdale contributed eight of its owned campuses; the Company contributed two campuses previously leased to Brookdale valued at $162 million (carrying value of $92 million) and $370 million of cash. At closing, the CCRC JV campuses were encumbered by $569 million of mortgage and entrance fee obligations (s ee Notes 3 and 5).

HCRMC

On April 20, 2015, the DOJ unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The DOJ’s complaint in intervention is captioned United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)). The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not entitled to Medicare reimbursement. While this litigation is at an early stage and HCRMC has indicated that it believes the claims are unjust and it will vigorously defend against them, a significant adverse judgment against HCRMC or significant settlement obligation could impact the carrying value of the Company’s investments in HCRMC’s operations and/or DFLs investment further (see Note s 6 and 17).

The Company concluded that its equity investment in HCRMC was other-than-temporarily impaired as of September 30, 2015 and recorded an impairment charge of $27 million (see Note 17). In December 2015, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $1 9 million, and, prospectively, income will be recognized only if cash distributions are received from HCRMC (see Notes 6 and 17).

MBK JVs

On March 30, 2015, the Company and MBK Senior Living (“MBK”), a subsidiary of Mitsui & Co. Ltd, formed a new RIDEA joint venture (“MBK JV”) that owns three senior housing facilities with the Company and MBK each owning a 50% equity interest. MBK manages these communities on behalf of the joint venture. The Company contributed $27

93

Table of Contents

million of cash and MBK contributed the three senior housing facilities with a fair value of $126 million, which were encumbered by $78 million of mortgage debt at closing.

On September 25, 2015, the Company and MBK formed a new RIDEA joint venture (“MBK Development JV”) which acquired a $3 million parcel of land for the purpose of developing a 74-unit class A senior housing facility in Santa Rosa, California. The parcel of land is located adjacent to the Oakmont Gardens independent living facility currently owned and operated by the MBK JV.

HCP Ventures III, LLC and HCP Ventures IV, LLC

On December 30, 2015, HCP Ventures III, LLC and HCP Ventures IV, LLC (“HCP Ventures IV”) sold 6 1 MOBs, three hospitals and a re-development property for total proceeds of $63 4 million, recognizing gains on sales of real estate of $59 million, of which the Company’s share was $15 million. As part of these sales, the Company received aggregate distributions of $45 million, including repayment of its loan receivable.

94

Table of Contents

NOTE 9. Intangibles

The Company’s intangible lease assets were (in thousands):

|  | December 31, |
Intangible lease assets |  | 2015 |  | 2014 |
Lease-up intangibles |  | $ | 801,513 |  | $ | 608,323 |
Above market tenant lease intangibles |  |  | 155,048 |  |  | 163,146 |
Below market ground lease intangibles |  |  | 57,899 |  |  | 58,939 |
Gross intangible lease assets |  |  | 1,014,460 |  |  | 830,408 |
Accumulated depreciation and amortization |  |  | (400,233) |  |  | (349,395) |
Net intangible lease assets |  | $ | 614,227 |  | $ | 481,013 |

The remaining weighted average amortization period of intangible assets w as 14 years at both December 31, 2015 and 201 4.

The Company’s intangible lease liabilities were (in thousands):

|  | December 31, |
Intangible lease liabilities |  | 2015 |  | 2014 |
Below market lease intangibles |  | $ | 204,662 |  | $ | 203,374 |
Above market ground lease intangibles |  |  | 6,121 |  |  | 6,121 |
Gross intangible lease liabilities |  |  | 210,783 |  |  | 209,495 |
Accumulated depreciation and amortization |  |  | (135,510) |  |  | (124,772) |
Net intangible lease liabilities |  | $ | 75,273 |  | $ | 84,723 |

The remaining weighted average amortization period of intangible lease liabilities was nine years at both December 31, 2015 and 201 4.

For the years ended December 31, 2015, 201 4 and 201 3, rental income includes additional revenues of $4 million, $3 million and $9 million, respectively, from the amortization of net below market lease intangibles. For the years ended December 31, 2015, 201 4 and 201 3, operating expenses include additional expense of $1 million each year from the amortization of net above market ground lease intangibles. For the years ended December 31, 2015, 201 4 and 201 3, depreciation and amortization expense includes additional expense of $7 6 million, $60 million and $59 million, respectively, from the amortization of lease-up and non-compete agreement intangibles.

Estimated aggregate amortization of intangible assets and liabilities for each of the five succeeding fiscal years and thereafter follows (in thousands):

|  | Intangible |  | Intangible |
|  | Assets |  | Liabilities |
2016 |  | $ | 97,043 |  | $ | 17,545 |
2017 |  |  | 84,552 |  |  | 15,118 |
2018 |  |  | 68,999 |  |  | 12,413 |
2019 |  |  | 55,730 |  |  | 9,758 |
2020 |  |  | 46,308 |  |  | 6,047 |
Thereafter |  |  | 261,595 |  |  | 14,392 |
|  | $ | 614,227 |  | $ | 75,273 |

95

Table of Contents

NOTE 10. Other Assets

The Company’s other assets consisted of the following (in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |
Straight-line rent receivables, net of allowance of $33,648 and $34,182, respectively |  | $ | 385,888 |  | $ | 355,864 |
Marketable debt securities, net |  |  | 102,958 |  |  | 231,442 |
Leasing costs and inducements, net |  |  | 158,708 |  |  | 146,500 |
Goodwill |  |  | 50,346 |  |  | 50,346 |
Other |  |  | 119,965 |  |  | 117,516 |
Total other assets |  | $ | 817,865 |  | $ | 901,668 |

At December 31, 2015 and 2014, within other assets is a non-interest bearing receivable of $9 million and $26 million, respectively, from Brookdale payable in eight quarterly installments (see Note 3). At December 31, 2014, other assets also include a loan receivable of $15 million from HCP Ventures IV, which was repaid as part of real estate asset sales in December 2015 (see Note 8).

During the year ended December 31, 2013, the Company realized gains from the sale of marketable equity securities of $11 million, which were included in other income, net.

Four Seasons Health Care Senior Unsecured Notes

Marketable debt securities, net are classified as held-to-maturity debt securities and primarily represent senior notes issued by Elli Investments Limited (“Elli”), a company beneficially owned by funds or limited partnerships managed by Terra Firma, as part of the financing for Elli’s acquisition of Four Seasons Health Care (the “Four Seasons Notes”). The Four Seasons Notes mature in June 2020, are non-callable through June 2016 and bear interest on their par value at a fixed rate of 12.25% per annum. The Company purchased an aggregate par value of £138.5 million of the Four Seasons Notes at a discount for £136.8 million ($215 million) in June 2012, representing 79% of the total £175 million issued and outstanding Four Seasons Notes. In June 2015 and September 2015, the Company determined that the Four Seasons Notes were other-than-temporarily impaired (see Note 1 7). In December 2015, the Company received its contractual interest payment of £8 million ($13 million), which was applied against the principal balance reducing the carrying amount to £58 million ($85 million).

NOTE 11. Debt

Bank Line of Credit and Term Loans

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a one-year extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at December 31, 2015, the margin on the Facility was 0.925%, and the facility fee was 0.15%. The Facility also includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At December 31, 2015, the Company had £270 million ($397 million), outstanding under the Facility with a weighted average effective interest rate of 1.72%.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 millio n ($2 02 million at December 31, 2015) four-year unsecured term loan (the “2012 Term Loan”). Based on the Company’s credit ratings at December 31, 2015, the 2012 Term Loan accrues interest at a rate of GBP LIBOR plus 1.20%. Concurrent with the closing of the 2012 Term Loan, the Company entered into a four-year interest rate swap contract that fixes the interest rate of the 2012 Term Loan at 1.81%, subject to adjustments based on the Company’s credit ratings. The 2012 Term Loan contains a one-year committed extension option.

On January 12, 2015, the Company entered into a credit agreement with a syndicate of banks for a £220 million ($3 2 3 million at December 31, 2015) four-year unsecured term loan (the “2015 Term Loan”) that accrues interest at a rate

96

Table of Contents

of GBP LIBOR plus 0.975%, subject to adjustments based on the Company’s credit ratings (the 2012 and 2015 Term Loans are collectively, the “Term Loans”). Concurrently, the Company entered into a three-year interest rate swap contract that fixes the rate of the 2015 Term Loan at 1.79% (see Note 2 4). Proceeds from the 2015 Term Loan were used to repay £220 million that partially funded the November 2014 HC-One Facility (see Note 7). The 2015 Term Loan contains a one-year committed extension option.

The Facility and Term Loans contain certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements, (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and Term Loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at December 31, 2015. At December 31, 2015, the Company was in compliance with each of these restrictions and requirements.

Senior Unsecured Notes

At December 31, 2015, the Company had senior unsecured notes outstanding with an aggregate principal balance of $9.2 billion. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at December 31, 2015.

The following table summarizes the Company’s senior unsecured note issuances for the periods presented (dollars in thousands):

|  | Issuance |  |  |  |  |  |  |  |
Period |  | Amount |  | Coupon Rate |  | Maturity Date |  | Net Proceeds |
Year ended December 31, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |
January 21, 2015 |  | $ | 600,000 |  |  | 3.400 | % |  | 2025 |  | $ | 591,000 |
May 20, 2015 |  | $ | 750,000 |  |  | 4.000 | % |  | 2025 |  | $ | 739,000 |
December 1, 2015 |  | $ | 600,000 |  |  | 4.000 | % |  | 2022 |  | $ | 594,000 |
Year ended December 31, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |
February 21, 2014 |  | $ | 350,000 |  |  | 4.200 | % |  | 2024 |  | $ | 346,000 |
August 14, 2014 |  | $ | 800,000 |  |  | 3.875 | % |  | 2024 |  | $ | 792,000 |

The following table summarizes the Company’s senior unsecured notes payoffs for the periods presented (dollars in thousands):

Period |  | Amount |  | Coupon Rate |
Year ended December 31, 2015: |  |  |  |  |  |  |
March 1, 2015 |  | $ | 200,000 |  |  | 6.000 | %
June 8, 2015 |  | $ | 200,000 |  |  | 7.072 | %
Year ended December 31, 2014: |  |  |  |  |  |  |
February 1, 2014 |  | $ | 400,000 |  |  | 2.700 | %
June 14, 2014 |  | $ | 62,000 |  |  | 6.000 | %
June 14, 2014 |  | $ | 25,000 |  |  | 3 Month LIBOR+0.9 | %

Mortgage Debt

At December 31, 2015, the Company had $9 33 m illion in aggregate principal amount of mortgage debt outstanding, which is secured by 62 healthcare facilities (including redevelopment properties) with a carrying value of $1.2 billion.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

97

Table of Contents

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at December 31, 2015 (dollars in thousands):

|  |  |  |  |  |  |  | Senior Unsecured Notes(3) |  |  | Mortgage Debt(4) |  |  |  |
|  | Line of |  |  |  |  |  |  | Interest |  |  |  |  | Interest |  |  |  |
Year |  | Credit(1) |  | Term Loans(2) |  | Amount |  | Rate |  |  | Amount |  | Rate |  | Total(5) |
2016 |  | $ | — |  | $ | 202,034 |  | $ | 900,000 |  | 5.09 | % |  | $ | 279,194 |  | 6.84 | % | $ | 1,381,228 |
2017 |  |  | — |  |  | — |  |  | 750,000 |  | 6.02 | % |  |  | 581,891 |  | 6.08 | % |  | 1,331,891 |
2018 |  |  | 397,432 |  |  | — |  |  | 600,000 |  | 6.81 | % |  |  | 6,583 |  | 5.90 | % |  | 1,004,015 |
2019 |  |  | — |  |  | 324,434 |  |  | 450,000 |  | 3.97 | % |  |  | 2,072 |  | N/A |  |  | 776,506 |
2020 |  |  | — |  |  | — |  |  | 800,000 |  | 2.79 | % |  |  | 2,078 |  | 5.14 | % |  | 802,078 |
Thereafter |  |  | — |  |  | — |  |  | 5,700,000 |  | 4.54 | % |  |  | 61,092 |  | 4.98 | % |  | 5,761,092 |
|  |  | 397,432 |  |  | 526,468 |  |  | 9,200,000 |  | 4.68 | % |  |  | 932,910 |  | 6.21 | % |  | 11,056,810 |
Discounts and debt costs, net |  |  | — |  |  | (1,661) |  |  | (79,893) |  |  |  |  |  | (698) |  |  |  |  | (82,252) |
|  | $ | 397,432 |  | $ | 524,807 |  | $ | 9,120,107 |  |  |  |  | $ | 932,212 |  |  |  | $ | 10,974,558 |

| (1) |  | Represents £270 million translated into U.S. dollars (“USD”).

| (2) |  | Represents £357 million translated into USD.

| (3) |  | Interest rates on the notes ranged from 2.79% to 6.88% with a weighted average effective rate of 4.68% and a weighted average maturity of six years.

| (4) |  | Interest rates on the mortgage debt ranged from 3.1 4% to 8.35% with a weighted average effective interest rate of 6.2 1% and a weighted average maturity of t wo years.

| (5) |  | Excludes $9 4 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

Other Debt

At December 31, 2015, the Company had $66 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which were payable to certain residents of the facilities (collectively, “Life Care Bonds”). The Life Care Bonds are generally refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

At December 31, 2015, the Company had $28 million of on-demand notes (“Demand Notes”) from the CCRC JV. The Demand Notes bear interest at a rate of 4.5%.

NOTE 12. 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 accrue legal expenses as they are incurred.

DownREIT LLCs

In connection with the formation of certain DownREIT LLCs, members may contribute appreciated real estate to a DownREIT LLC in exchange for DownREIT units. These contributions are generally tax-deferred, so that the pre-contribution gain related to the property is not taxed to the member. However, if a contributed property is later sold by the DownREIT LLC, the unamortized pre-contribution gain that exists at the date of sale is specifically allocated and taxed to the contributing members. In many of the DownREITs, the Company has entered into indemnification agreements with those members who contributed appreciated property into the DownREIT LLC. Under these indemnification agreements, if any of the appreciated real estate contributed by the members is sold by the DownREIT LLC in a taxable transaction within a specified number of years, the Company will reimburse the affected members for the federal and state income taxes associated with the pre-contribution gain that is specially allocated to the affected member under the Code (“make-whole payments”). These make-whole payments include a tax gross-up provision. These indemnification agreements have expiration terms that range through 2033.

98

Table of Contents

Commitments

The following table summarizes our material commitments, excluding debt servicing obligations (see Note 11), at December 31, 2015 (in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  | More than |
|  | Total |  | 2016 |  | 2017-2018 |  | 2019-2020 |  | Five Years |
U.K. loan commitments(1) |  | $ | 56,915 |  | $ | 34,099 |  | $ | 22,816 |  | $ | — |  | $ | — |
Construction loan commitments(2) |  |  | 2,060 |  |  | 2,060 |  |  | — |  |  | — |  |  | — |
Development commitments(3) |  |  | 92,712 |  |  | 92,712 |  |  | — |  |  | — |  |  | — |
Ground and other operating leases |  |  | 383,906 |  |  | 7,870 |  |  | 14,068 |  |  | 13,719 |  |  | 348,249 |
Total |  | $ | 535,593 |  | $ | 136,741 |  | $ | 36,884 |  | $ | 13,719 |  | $ | 348,249 |

| (1) |  | Represents £3 9 million translated into U SD as of December 31, 2015 for commitments to fund the Company’s U.K. loan facilities.

| (2) |  | Represents commitments to finance development projects and related working capital financings.

| (3) |  | Represents construction and other commitments for developments in progress.

Credit Enhancement Guarantee

Certain of the Company’s senior housing facilities serve as collateral for $98 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 $3 66 million as of December 31, 2015.

Environmental Costs

The Company monitors its properties for the presence of hazardous or toxic substances. The Company is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company’s business, financial condition or results of operations. The Company carries environmental insurance and believes that the policy terms, conditions, limitations and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and current industry practice.

General Uninsured Losses

The Company obtains various types of insurance to mitigate the impact of property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. In addition, the Company has a large number of properties that are exposed to earthquake, flood and windstorm occurrences for which the related insurances carry high deductibles.

99

Table of Contents

Tenant Purchase Options

Certain leases, including DFLs, contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable are as follows (dollars in thousands):

|  | Annualized |  | Number of |
Year |  | Base Rent(1) |  | Properties |
2016 |  | $ | 32,062 |  | 12 |
2017 |  |  | 15,078 |  | 10 |
2018 |  |  | 19,352 |  | 4 |
2019 |  |  | 25,863 |  | 14 |
2020 |  |  | 13,647 |  | 4 |
Thereafter |  |  | 54,009 |  | 32 |
|  | $ | 160,011 |  | 76 |

| (1) |  | Represents the most recent month’s base rent including additional rent floors and cash income from DFLs annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight- line rents, amortization of market lease intangibles, DFL interest accretion and deferred revenues).

Rental Expense

The Company’s rental expense attributable to continuing operations for the years ended December 31, 2015, 201 4 and 201 3 was approximately $10 million, $8 million and $8 million, respectively. These rental expense amounts include ground rent and other leases. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. These leases have terms that are up to 99 years, excluding extension options. Future minimum lease obligations under non-cancelable ground and other operating leases as of December 31, 2015 were as follows (in thousands):

Year |  | Amount |
2016 |  | $ | 7,870 |
2017 |  |  | 7,160 |
2018 |  |  | 6,908 |
2019 |  |  | 7,063 |
2020 |  |  | 6,656 |
Thereafter |  |  | 348,249 |
|  | $ | 383,906 |

NOTE 13. Equity

Common Stock

On January 28, 2016, the Company announced that its Board declared a quarterly cash dividend of $0.57 5 per share. The common stock cash dividend will be paid on February 23, 2016 to stockholders of record as of the close of business on February 8, 2016.

100

Table of Contents

During the years ended December 31, 2015, 2014 and 2013, the Company declared and paid common stock cash dividends of $2.26, $2.18 and $2.10 per share.

In June 2015, the Company established an at-the-market equity offering program (“ATM Program”). Under this program, the Company may sell shares of its common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. During the year ended December 31, 2015, the Company issued 1.8 million shares of common stock at a weighted average price of $40.14 for proceeds of $73 million, net of fees and commissions of $1 million.

The following is a summary of the Company’s other common stock activities (shares in thousands):

|  | Year Ended |
|  | December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Dividend Reinvestment and Stock Purchase Plan |  | 2,762 |  | 2,299 |  | 2,441 |
Conversion of DownREIT units |  | 104 |  | 27 |  | 100 |
Exercise of stock options |  | 823 |  | 169 |  | 876 |
Vesting of restricted stock units |  | 409 |  | 614 |  | 471 |
Repurchase of common stock |  | 198 |  | 323 |  | 242 |

Accumulated Other Comprehensive Loss

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |
Cumulative foreign currency translation adjustment |  | $ | (19,485) |  | $ | (10,747) |
Unrealized losses on cash flow hedges, net |  |  | (7,582) |  |  | (9,624) |
Supplemental Executive Retirement Plan minimum liability |  |  | (3,411) |  |  | (3,537) |
Unrealized gains on available for sale securities |  |  | 8 |  |  | 13 |
Total accumulated other comprehensive loss |  | $ | (30,470) |  | $ | (23,895) |

Noncontrolling Interests

On October 7, 2015, the Company issued a 49% noncontrolling interest in HCP Ventures V to an institutional capital investor for $110 million. HCP Ventures V owns a portfolio of 11 on-campus MOBs located in Texas acquired through a sale-leaseback transaction with Memorial Hermann in June 2015 (see Note 4).

At December 31, 2015, there were four million non-managing member units (six million shares of HCP common stock are issuable upon conversion) outstanding in five DownREIT LLCs, in all of which the Company is the managing member. At December 31, 2015, the carrying and market values of the four million DownREIT units were $18 6 million and $2 29 million, respectively.

See Note 20 for the supplemental schedule of non-cash financing activities.

101

Table of Contents

NOTE 14. Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the medical office segment, the Company invests through the acquisition and development of MOBs, which generally require a greater level of property management. Otherwise, the Company primarily invests, through the acquisition and development of real estate, in single tenant and operator properties and debt issued by tenants and operators in these s ectors. The accounting policies of the segments are the same as those described under Summary of Significant Accounting Policies (see Note 2). There were no intersegment sales or transfers during the years ended December 31, 2015, 2014 and 2013. The Company evaluates performance based upon (i) property net operating income from continuing operations (“NOI”), (ii) adjusted NOI (cash NOI), and (iii) adjusted NOI plus interest income (“Portfolio Income”) of the combined investments in each segment.

Non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities, deferred financing costs and, if any, real estate held for sale. Interest expense, depreciation and amortization, and non-property specific revenues and expenses are not allocated to individual segments in evaluating the Company’s segment-level performance. See Note 23 for other information regarding concentrations of credit risk.

Summary information for the reportable segments follows (in thousands):

For the year ended December 31, 2015:

|  | Senior |  | Post-acute/ |  | Life |  | Medical |  |  |  |  |  |
Segments |  | Housing |  | Skilled Nursing |  | Science |  | Office |  | Hospital |  | Total |
Rental revenues(1) |  | $ | 519,102 | (2) | $ | 535,111 | (2) | $ | 342,984 |  | $ | 419,225 |  | $ | 88,380 |  | $ | 1,904,802 |
Resident fees and services |  |  | 525,453 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 525,453 |
Operating expenses |  |  | (374,617) |  |  | (2,002) |  |  | (70,217) |  |  | (163,550) |  |  | (3,989) |  |  | (614,375) |
NOI |  |  | 669,938 |  |  | 533,109 |  |  | 272,767 |  |  | 255,675 |  |  | 84,391 |  |  | 1,815,880 |
Non-cash adjustments to NOI(3) |  |  | (16,127) | (2) |  | (78,738) | (2) |  | (10,128) |  |  | (5,025) |  |  | 1,060 |  |  | (108,958) |
Adjusted (cash) NOI |  |  | 653,811 |  |  | 454,371 |  |  | 262,639 |  |  | 250,650 |  |  | 85,451 |  |  | 1,706,922 |
Interest income |  |  | 28,718 |  |  | 83,466 |  |  | — |  |  | — |  |  | — |  |  | 112,184 |
Portfolio Income |  | $ | 682,529 |  | $ | 537,837 |  | $ | 262,639 |  | $ | 250,650 |  | $ | 85,451 |  |  | 1,819,106 |
Addback non-cash adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 108,958 |
Investment management fee income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,873 |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (479,596) |
Depreciation and amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (510,785) |
General and administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (96,022) |
Acquisition and pursuit costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (27,309) |
Impairments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (1,403,853) |
Gain on sales of real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 6,377 |
Other income, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 14,404 |
Income tax benefit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 9,011 |
Equity income in unconsolidated joint ventures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 57,313 |
Impairment of investments in unconsolidated joint ventures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (45,895) |
Net loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (546,418) |

102

Table of Contents

For the year ended December 31, 2014:

|  | Senior |  | Post-acute/ |  | Life |  | Medical |  |  |  |  |  |
Segments |  | Housing |  | Skilled Nursing |  | Science |  | Office |  | Hospital |  | Total |
Rental revenues(1) |  | $ | 621,114 |  | $ | 555,322 |  | $ | 314,114 |  | $ | 370,956 |  | $ | 86,508 |  | $ | 1,948,014 |
Resident fees and services |  |  | 241,965 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 241,965 |
Operating expenses |  |  | (167,407) |  |  | (2,087) |  |  | (63,080) |  |  | (148,199) |  |  | (3,830) |  |  | (384,603) |
NOI |  |  | 695,672 |  |  | 553,235 |  |  | 251,034 |  |  | 222,757 |  |  | 82,678 |  |  | 1,805,376 |
Non-cash adjustments to NOI(3) |  |  | (78,197) |  |  | (69,141) |  |  | (10,075) |  |  | (1,406) |  |  | 443 |  |  | (158,376) |
Adjusted (cash) NOI |  |  | 617,475 |  |  | 484,094 |  |  | 240,959 |  |  | 221,351 |  |  | 83,121 |  |  | 1,647,000 |
Interest income |  |  | 14,249 |  |  | 60,242 |  |  | — |  |  | — |  |  | — |  |  | 74,491 |
Portfolio Income |  | $ | 631,724 |  | $ | 544,336 |  | $ | 240,959 |  | $ | 221,351 |  | $ | 83,121 |  |  | 1,721,491 |
Addback non-cash adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 158,376 |
Investment management fee income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,809 |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (439,742) |
Depreciation and amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (459,995) |
General and administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (82,175) |
Acquisition and pursuit costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (17,142) |
Gain on sales of real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 3,288 |
Other income, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 7,528 |
Income tax expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (250) |
Equity income in unconsolidated joint ventures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 49,570 |
Impairment of investments in unconsolidated joint ventures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (35,913) |
Total discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 29,746 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 936,591 |

For the year ended December 31, 2013:

|  | Senior |  | Post-acute/ |  | Life |  | Medical |  |  |  |  |  |
Segments |  | Housing |  | Skilled Nursing |  | Science |  | Office |  | Hospital |  | Total |
Rental revenues(1) |  | $ | 602,506 |  | $ | 541,805 |  | $ | 296,879 |  | $ | 352,334 |  | $ | 72,060 |  | $ | 1,865,584 |
Resident fees and services |  |  | 146,288 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 146,288 |
Operating expenses |  |  | (95,603) |  |  | (2,485) |  |  | (56,956) |  |  | (139,376) |  |  | (3,862) |  |  | (298,282) |
NOI |  |  | 653,191 |  |  | 539,320 |  |  | 239,923 |  |  | 212,958 |  |  | 68,198 |  |  | 1,713,590 |
Non-cash adjustments to NOI(3) |  |  | (58,699) |  |  | (71,812) |  |  | (11,448) |  |  | (2,147) |  |  | 11,554 |  |  | (132,552) |
Adjusted (cash) NOI |  |  | 594,492 |  |  | 467,508 |  |  | 228,475 |  |  | 210,811 |  |  | 79,752 |  |  | 1,581,038 |
Interest income |  |  | 11,621 |  |  | 73,595 |  |  | — |  |  | — |  |  | 943 |  |  | 86,159 |
Portfolio Income |  | $ | 606,113 |  | $ | 541,103 |  | $ | 228,475 |  | $ | 210,811 |  | $ | 80,695 |  |  | 1,667,197 |
Addback non-cash adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 132,552 |
Investment management fee income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,847 |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (435,252) |
Depreciation and amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (423,312) |
General and administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (103,042) |
Acquisition and pursuit costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (6,191) |
Other income, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 18,216 |
Income tax expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (5,815) |
Equity income in unconsolidated joint ventures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 64,433 |
Total discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 74,373 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 985,006 |

103

Table of Contents

| (1) |  | Represents rental and related revenues, tenant recoveries, and income from DFLs.

| (2) |  | See Note 6 for discussion of the Company’s HCRMC DFL investments

| (3) |  | Represents straight-line rents, DFL accretion, amortization of market lease intangibles and lease termination fees.

The Company’s total assets by segment were (in thousands):

|  | December 31, |
Segments |  | 2015 |  | 2014 |
Senior housing |  | $ | 9,812,142 |  | $ | 8,383,345 |
Post-acute/skilled nursing |  |  | 5,162,947 |  |  | 6,875,122 |
Life science |  |  | 4,267,373 |  |  | 4,154,789 |
Medical office |  |  | 3,469,048 |  |  | 2,988,888 |
Hospital |  |  | 622,820 |  |  | 640,253 |
Gross segment assets |  |  | 23,334,330 |  |  | 23,042,397 |
Accumulated depreciation and amortization |  |  | (3,005,270) |  |  | (2,600,072) |
Net segment assets |  |  | 20,329,060 |  |  | 20,442,325 |
Other nonsegment assets |  |  | 1,120,789 |  |  | 889,111 |
Total assets |  | $ | 21,449,849 |  | $ | 21,331,436 |

At both December 31, 2015 and 2014, goodwill of $50 million was allocated to segment assets as follows: (i) senior housing—$31 million, (ii) post-acute/skilled nursing—$3 million, (iii) medical office—$11 million, and (iv) hospital—$5 million. The Company completed the required annual impairment test du ring the fourth quarter of 2015 and no impairment was recognized based on the results of the Company’s procedures.

NOTE 15. Future Minimum Rents

Future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under non-cancelable operating leases as of December 31, 2015, are as follow (in thousands):

Year |  | Amount |
2016 |  | $ | 1,140,375 |
2017 |  |  | 1,062,781 |
2018 |  |  | 989,886 |
2019 |  |  | 842,278 |
2020 |  |  | 695,268 |
Thereafter |  |  | 3,601,248 |
|  | $ | 8,331,836 |

NOTE 16. Compensation Plans

Stock Based Compensation

On May 11, 2006, the Company’s stockholders approved the 2006 Performance Incentive Plan, which was amended and restated in 2009 (“the 2006 Plan”). On May 1, 2014, the Company’s stockholders approved the 2014 Performance Incentive Plan (“the 2014 Plan”) (collectively, “the Plans”). Following the adoption of the 2014 Plan, no new awards will be issued under the 2006 Plan. The Plan s provide for the granting of stock-based compensation, including stock options, restricted stock and restricted stock units to officers, employees and directors in connection with their employment with or services provided to the Company. The maximum number of shares reserved for awards under the 2014 Plan is 33 million shares; as of December 31, 2015, approximately 32.4 million of the reserved shares under the 2014 Plan are available for future awards, and approximately 2 1.6 million shares may be issued as restricted stock and restricted stock units.

Stock Options

Stock options are granted with an exercise price per share equal to the closing market price of the Company’s common stock on the grant date. Stock options generally vest ratably over a three- to f ive-year period and have a 10-year contractual

104

Table of Contents

term. Vesting of certain stock options may acc elerate, as provided in the P lans or in the applicable award agreement, upon retirement, a change in control or other specified events. Upon the exercise, a participant is required to pay the exercise price of the stock options being exercised and the related tax withholding obligation.

A summary of the stock option activity during 2015 is presented in the following table (dollars and shares in thousands, except per share amounts):

|  |  |  |  |  |  | Weighted |  |  |  |
|  |  |  | Weighted |  | Average |  |  |  |
|  |  |  | Average |  | Remaining |  | Aggregate |
|  | Shares |  | Exercise |  | Contractual |  | Intrinsic |
|  | Under Options |  | Price |  | Term (Years) |  | Value |
Outstanding as of January 1, 2015 |  | 2,587 |  | $ | 37.00 |  | 5.0 |  | $ | 19,581 |
Exercised |  | (823) |  |  | 33.52 |  |  |  |  |  |
Cancelled |  | (2) |  |  | 42.69 |  |  |  |  |  |
Forfeited |  | (24) |  |  | 41.25 |  |  |  |  |  |
Outstanding as of December 31, 2015 |  | 1,738 |  |  | 38.58 |  | 4.4 |  |  | 4,521 |
Exercisable as of December 31, 2015 |  | 1,368 |  |  | 37.88 |  | 3.5 |  |  | 4,521 |

The following table summarizes additional information concerning outstanding and exercisable stock options at December 31, 2015 (shares in thousands):

|  |  |  |  |  |  |  |  | Currently Exercisable |
|  |  |  |  |  |  | Weighted |  |  |  |  |  |
|  |  |  | Weighted |  | Average |  |  |  | Weighted |
|  |  |  | Average |  | Remaining |  |  |  | Average |
Range of |  | Shares Under |  | Exercise |  | Contractual |  | Shares Under |  | Exercise |
Exercise Price |  | Options |  | Price |  | Term (Years) |  | Options |  | Price |
$23.34 - $25.52 |  | 166 |  | $ | 23.34 |  | 2.1 |  | 166 |  | $ | 23.34 |
27.11 - 28.35 |  | 156 |  |  | 28.35 |  | 2.8 |  | 156 |  |  | 28.35 |
31.95 - 46.92 |  | 1,416 |  |  | 41.72 |  | 4.8 |  | 1,046 |  |  | 41.60 |
|  | 1,738 |  |  | 38.58 |  |  |  | 1,368 |  |  | 37.88 |

The following table summarizes additional information concerning unvested stock options at December 31, 2015 (shares in thousands):

|  |  |  | Weighted |
|  | Shares |  | Average |
|  | Under |  | Grant Date Fair |
|  | Options |  | Value |
Unvested at January 1, 2015 |  | 906 |  | $ | 4.85 |
Vested |  | (512) |  |  | 5.06 |
Forfeited |  | (24) |  |  | 4.58 |
Unvested at December 31, 2015 |  | 370 |  |  | 4.59 |

There were no grants of stock options for the fiscal year 2015. The weighted average fair value per share at the date of grant for stock options awarded during the years ended December 31, 2014 and 2013 was $3.80 and $5.89, respectively. The total vesting date intrinsic value (at vesting) of shares under stock options vested during the years ended December 31, 2015, 2014 and 2013 was $1 million, $7 million and $12 million, respectively. The total intrinsic value of vested shares under stock options at December 31, 2015 was $5 million.

105

Table of Contents

Proceeds received from stock options exercised under the Plan s for the years ended December 31, 2015, 2014 and 2013 were $28 million, $5 million and $18 million, respectively. The total intrinsic value (at exercise) of stock options exercised during the years ended December 31, 2015, 2014 and 2013 was $10 million, $3 million and $25 million, respectively.

The fair value of the stock options granted during the years ended December 31, 2014 and 2013 was determined on the grant date utilizing a Black-Scholes valuation model, incorporating the market assumptions described below. The risk-free rate is based on the U.S. Treasury yield curve effect ive at the grant date. The expected life (estimated period of time outstanding) of the stock options granted was determined using the historical exercise behavior of employees and turnover rates. For stock options granted in 2014 and 2013, the expected volatility was based on the average of the Company’s: (i) historical volatility of the adjusted closing prices of its common stock for a period equal to the stock option’s expected life, ending on the grant date, calculated on a weekly basis and (ii) the implied volatility of traded options on its common stock for a period equal to 30 days ending on the grant date. The following table summarizes the Company’s stock option valuation assumptions used with respect to stock options awarded in 2014 and 2013:

|  | 2014 |  | 2013 |
Risk-free rate |  | 1.34 | % | 0.78 | %
Expected life (in years) |  | 4.5 |  | 4.5 |
Expected volatility |  | 22.9 | % | 28.9 | %
Expected dividend yield |  | 5.4 | % | 5.8 | %

Restricted Stock and Performance Restricted Stock Units

Under the Plans, restricted stock and performance restricted stock units generally have a contractual life or vest over one- to five-year periods. The vesting of certain restricted stock and performance restricted stock units may accelerate, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control or other specified events. When vested, each restricted stock and performance restricted stock unit is convertible into one share of common stock. The restricted stock units are valued on the grant date based on the closing market price of the Company’s common stock on that date. The performance restricted stock units are valued utilizing a lattice-binomial option-pricing model based on Monte Carlo simulation s as described below. Generally, the Company recognizes the fair value of the awards over the applicable vesting period as compensation expense. Upon exercise or payment of restricted stock and performance restricted stock units, the participant is required to pay the related tax withholding obligation. Participants can generally elect to have the Company reduce the number of common stock shares delivered to pay the employee tax withholding obligation. The value of the shares withheld is dependent on the closing market price of the Company’s common stock on the trading date prior to the relevant transaction occurring. During 2015, 2014 and 2013, the Company withheld 2 00,000, 323,000 and 242,000 shares, respectively, to offset tax withholding obligations with respect to the restricted stock and performance restricted stock unit awards.

The following table summarizes additional information concerning restricted stock and performance restricted stock units at December 31, 2015 (units and shares in thousands):

|  |  |  | Weighted |  |  |  | Weighted |
|  | Restricted |  | Average |  |  |  | Average |
|  | Stock |  | Grant Date |  | Restricted |  | Grant Date |
|  | Units |  | Fair Value |  | Shares |  | Fair Value |
Unvested at January 1, 2015 |  | 900 |  | $ | 40.54 |  | 112 |  | $ | 38.69 |
Granted |  | 402 |  |  | 48.56 |  | — |  |  | — |
Vested |  | (409) |  |  | 44.79 |  | (76) |  |  | 37.26 |
Forfeited |  | (26) |  |  | 43.74 |  | — |  |  | — |
Unvested at December 31, 2015 |  | 867 |  |  | 43.34 |  | 36 |  |  | 41.77 |

At December 31, 2015, the weighted average remaining vesting period of restricted stock and performance restricted stock units was one year. The total fair values (at vesting) of restricted stock and performance restricted stock units which vested for the years ended December 31, 2015, 2014 and 2013 were $2 1 million, $24 million and $22 million, respectively.

106

Table of Contents

Long-Term Incentive Plan Units (“LTIP”)

2015

Pursuant to the 2014 Plan and effective February 2, 201 5, certain officers were granted 1 28,762 performance based units with three-year and one-year performance periods (“2015 3-Year LTIP Awards” and “2015 1-Year LTIP Awards,” respectively, and collectively, “the Awards”). The Awards had a grant date fair value of $6.9 million (fair value of the awards per target share for the 2015 3-Year LTIP Awards and the 2015 1-Year LTIP Awards were $54.97 and $50.82, respectively). The fair value on the grant date w as determined utilizing a lattice-binomial option-pricing model based on Monte Carlo simulation s. The Awards vest based upon the total shareholder return (“TSR”) of the Company’s common stock re lative to the TSRs of each of the other companies in the FTSE NAREIT Equity Health Care Index (the “NAREIT Index”). TSR for the Awards is measured over the performance periods: January 1, 2015 through December 31, 2015 for the 2015 1-Year LTIP Awards and January 1, 2015 through December 31, 2017 for the 2015 3-Year LTIP Awards.

2014

Pursuant to the 2006 Plan and effective February 3, 2014, certain officers were granted 176,088 performance based units (“2014 3-Year LTIP Awards”). The 2014 3-Year LTIP Awards had a grant date fair value of $7.2 million (fair value of the awards per target share of $40.68) as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. Seventy percent of the 2014 3-Year LTIP Awards vest based upon the t hree-year TSR of the Company’s common stock relative to the TSRs of the MSCI US REIT Index (25% weight) and the NAREIT Index (75% weight). TSR for the 2014 3-Year LTIP Awards is measured over the performance period: January 1, 2014 through December 31, 2016. Thirty percent of the 2014 3-Year LTIP Awards vest based upon the Company’s Net Debt to Adjusted Pro Forma EBITDA over the performance period.

The following table summarizes the Company’s performance based restricted stock valuation assumptions used with respect to awards issued in 2015 and 2014:

|  | 2015 |  | 2014 |
Expected volatility |  | 17.94 | % | 21.74 | %
Risk-free rate |  | 0.33 | % | 0.22 | %
Expected dividend yield |  | 4.79 | % | 5.61 | %

Compensation expense is charged to earnings on a straight-line basis over the performance period. Following the end of the respective performance period, each participant will be issued shares of the Company’s common stock equal to the number of units granted to the participant multiplied by a percentage, ranging from zero to 200%, based on the outcome of the performance metrics for the applicable performance period, as described above. The participants will also be entitled to dividend equivalents for shares issued, which dividend equivalents represent any dividends that would have been paid with respect to such issued shares after the grant date of the a wards and prior to the date of settlement.

As the Company pays dividends on its outstanding common stock, holders of restricted stock awards are generally entitled to dividends on the underlying restricted shares, and holders of performance restricted stock units generally have the right to a cash payment equal to the dividends that would be paid on a number of shares of Company common stock equal to the number of outstanding units subject to the award.

In 2012, the Company implemented a clawback policy that is retroactive to prior years pursuant to which its Board of Directors or Compensation Committee shall, in such circumstances as they determine to be appropriate, require reimbursement or cancellation of all or a portion of any short- or long-term cash or equity incentive awards or payments to an officer (or former officer, as the case may be) of the Company where: (i) the amount of, or number of shares included in, any such payment or award was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to noncompliance with any financial reporting requirement under the securities laws; (ii) a lesser payment or award of cash or shares would have been made to the individual based upon the restated financial results; and (iii) the payment or award of cash or shares was received by the individual prior to or during the 12-month period following the first public issuance or filing of the financial results that were subsequently restated.

Total share-based compensation expense recognized during the years ended December 31, 2015, 2014 and 2013 was $2 6 million, $22 million and $40 million, respectively; included in 2013 is a $27 million charge recognized in general and

107

Table of Contents

administrative expenses resulting from the termination of the Company’s former chief executive officer (“CEO”) that was comprised of: (i) the acceleration of $17 million of deferred compensation for restricted stock units and stock options that vested upon termination; and (ii) severance payments and other costs of approximately $10 million; these vestings and severance payments were in accordance with the terms of the former CEO’s employment agreement. As of December 31, 2015, there was $19 million of deferred compensation cost associated with future employee services, related to unvested share-based compensation arrangements granted under the Company’s incentive plans, which is expected to be recognized over a weighted average period of three years.

Employee Benefit Plan

The Company maintains a 401(k) and profit sharing plan that allows for eligible participants to defer compensation, subject to certain limitations imposed by the Code. The Company provides a matching contribution of up to 4% of each participant’s eligible compensation. During the years ended December 31, 2015, 2014 and 2013, the Company’s matching contributions were approximately $1 million for each of the years then ended.

NOTE 17. Impairments

HCRMC

During the three months ended December 31, 2015, the Company recorded an allowance for credit losses and impairment charge of $817 million related to its HCRMC DFL investments. The allowance for credit losses reduced the net carrying value of the HCRMC DFL investments from $6.0 billion to $5.2 billion, and was determined as the present value of expected future (i) in-place lease payments under the HCRMC Amended Master Lease and (ii) estimated market rate lease payments, each discounted at the original HCRMC DFL investments’ effective lease rate. Impairments related to an allowance for credit losses are included in impairments, net.

The market rate lease payments were based on an income approach utilizing a discounted cash flow valuation model. The significant inputs to this valuation model include d forecasted EBITDAR (defined as earnings before interest, taxes, depreciation and amortization, and rent), rent coverage ratios and real estate capitalization rates and are summarized as follows (dollars in thousands):

|  |  |  |  | Post-acute/ |
|  | Senior Housing |  |  | Skilled nursing |
Description of Input(s) to the Valuation |  | DFL Valuation Inputs |  |  | DFL Valuation Inputs |
Range of EBITDAR |  | $75,000-$85,000 |  |  | $385,000-$435,000 |
Range of rent coverage ratio |  | 1.05x-1.15x |  |  | 1.25x-1.35x |
Range of real estate capitalization rate |  | 6.25%-7.25% |  |  | 7.50%-8.50% |

In determining which technique would be utilized to estimate fair value for the multiple elements of this valuation, the Company also considered the market approach, obtaining published investor survey and sales transaction data, where available. Investor survey and sales transaction data reviewed for similar transactions in similar marketplaces, included, but were not limited to, sales price per unit/bed, rent coverage ratios, revenue and operating expense growth rates, rent per unit/bed per month and real estate capitalization rates. The information obtained was consistent with the inputs and assumptions utilized by the selected income approach that was applied to this valuation.

As of December 31, 2015, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $1 9 million, reducing its carrying value to zero (see Notes 6 and 8).

A s of September 30, 2015, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $27 million. The impairment charge reduced the carrying amount of the Company’s equity investment in HCRMC from $48 million to its fair value of $21 million. The impairment determination primarily resulted from the Company’s review of HCRMC operating results and market and industry data which, among other factors, show ed a declining trend in admissions from hospitals and continuing trends in mix and length of stay driven by Medicare Advantage and other M anaged C are plans.

The fair value of the Company’s equity investment in HCRMC was based on a discounted cash flow valuation model and inputs were considered to be Level 3 measurements within the fair value hierarchy. Inputs to this valuation model include d

108

Table of Contents

earnings multiples, discount rate, industry growth rates of revenue, operating expenses and facility occupancy, some of which influence the Company’s expectation of future cash flows from its equity investment in HCRMC and, accordingly, the fair value of its investment.

The following is a summary of the quantitative information about fair value measurements for the impairment related to the Company’s equity ownership interest in HCRMC using a discounted cash flow valuation model:

Description of Input(s) to the Valuation |  | Valuation Inputs |
Range of revenue growth rates(1) |  | (1.8%)-3.0% |
Range of occupancy growth rates(1) |  | (0.8%)-0.2% |
Range of operating expense growth rates(1) |  | (1.1%)-3.1% |
Discount rate |  | 15.20% |
Range of earnings multiples |  | 6.0x-7.0x |

| (1) |  | For growth rates, the value ranges provided represent the highest and lowest input utilized in the valuation model for any forecasted period.

In March 2015, the Company recorded a n impairment charge of $478 million related to its HCRMC DFL investments (see Note 6).

During the year ended December 31, 2014, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $36 million. The impairment charge reduced the carrying amount of the Company’s equity investment in HCRMC from $75 million to its fair value of $39 million. The impairment determination primarily resulted from the Company’s review of HCRMC’s preliminary base financial forecast for 2015, received in December 2014, together with HCRMC’s year-to-date operating results through November 2014. The preliminary base financial forecast and operating results primarily reflected a continued shift in patient payor sources from Medicare to Medicare Advantage, which negatively impacts reimbursement rates and length of stay for HCRMC’s skilled nursing segment. The fair value of the Company’s equity investment was based on a n income approach utilizing a discounted cash flow valuation model, and inputs were considered to be Level 3 measurements within the fair value hierarchy. Inputs to this valuation model include d earnings multiples, discount rate, industry growth rates of revenue, operating expenses and facility occupancy, some of which influence the Company’s expectation of future cash flows from its equity investment in HCRMC and, accordingly, the fair value of its investment.

The following is a summary of the quantitative information about fair value measurements for the impairment related to the Company’s equity ownership interest in HCRMC using a discounted cash flow valuation model:

Description of Input(s) to the Valuation |  | Valuation Inputs |
Range of revenue growth rates(1) |  | (0.2%)-3.5% |
Range of occupancy growth rates(1) |  | (0.3%)-0.2% |
Range of operating expense growth rates(1) |  | 0.6%-2.8% |
Discount rate |  | 13.7% |
Range of earnings multiples |  | 6.0x-7.0x |

| (1) |  | For growth rates, the value ranges provided represent the highest and lowest input utilized in the valuation model for any forecasted period.

In determining the fair value of our interest in HCRMC, the Company applied the above valuation inputs, which resulted in a range of fair values of its equity investment in HCRMC of $35 million to $44 million based on the range of earnings multiples. The Company elected to use the mid-point of the valuation results and recorded an impairment to reduce the carrying value of its equity investment in HCRMC to $39.5 million.

Other

In June 2015 and September 2015, the Company determined that its Four Seasons Notes (see Note 10) were other-than-temporarily impaired resulting from a continued decrease in the fair value of its investment. Although the Company does not intend to sell and does not believe it will be required to sell the Four Seasons Notes before their maturity, the Company determined that a credit loss existed resulting from several factors including: (i) deterioration in Four Seasons’ operating performance since the fourth quarter of 2014 and (ii) credit downgrades received during the first half of 2015. Accordingly, the Company recorded impairment charges during the three months ended June 30, 2015 and September 30, 2015 of $42

109

Table of Contents

million and $70 million, respectively, reducing the carrying value of the Four Seasons Notes at September 30, 2015 to $100 million (£66 million). Elli remains obligated to repay the aggregate par value at maturity and interest payments due June 15 and December 15 each year. When the remaining semi-annual interest payments are received, the Company expects to reduce the carrying value of the Four Seasons Notes during the related fiscal period.

The fair value of the Four Seasons Notes used to calculate the impairment charge was based on quoted market prices. However, because the Four Seasons Notes are not actively traded, these prices are considered to be Level 2 measurements within the fair value hierarchy. When calculating the fair value and determining whether a credit loss existed, the Company also evaluated Four Season’s ability to repay the Four Seasons Notes according to their contractual terms based on its estimate of future cash flows. The estimated future cash flow inputs included forecasted revenues, capital expenditures, operating expenses, care home occupancy and continued implementation of Four Seasons’ business plan which includes executing on its business line segmentation and continuing to invest in its core real estate portfolio. This information was consistent with the results of the valuation technique used by the Company to determine if a credit loss existed and to calculate the fair value of the Four Seasons Notes during its impairment review.

In June 2015, the Company determined a MOB was impaired and recognized an impairment charge of $3 million, which reduced the carrying value of the Company’s investment to $400,000. The fair value of the MOB was based on its projected sales prices, which was considered to be a Level 2 measurement within the fair value hierarchy. In July 2015, the Company sold the MOB for $400,000 (see Note 5).

During the year ended December 31, 2013, the Company placed two medical office buildings into assets held for sale. As a result, the Company recognized impairment charges of $1 million, which reduced the carrying value of the Company’s aggregate investments from $7 million to the $6 million sales price. The fair value of the Company’s medical office buildings were based on the projected sales prices from the pending dispositions. The sales prices of the MOBs were considered to be a Level 2 measurement within the fair value hierarchy.

NOTE 18. Income Taxes

The Company has elected to be taxed as a REIT under the applicable provisions of the Code for every year beginning with the year ended December 31, 1985. The Company has also elected for certain of its subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”) which are subject to federal and state income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this Note 18. Certain REIT entities are also subject to state, local and foreign income taxes.

The TRS entities subject to tax reported losses before income taxes of $2 2 million and $2 million for the years ended December 31, 2015 and 2014, respectively, and income before income taxes of $10 million for the year ended December 31, 2013. The REIT’s losses before income taxes from the U.K. were $15 million and $4 million for the years ended December 31, 2015, and 2014, respectively.

The total income tax (benefit) expense from continuing operations consists of the following components (in thousands):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Current |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4,948 |  | $ | 1,833 |  | $ | 130 |
State |  |  | 2,784 |  |  | 2,773 |  |  | 2,195 |
Foreign |  |  | 828 |  |  | 223 |  |  | — |
Total current |  | $ | 8,560 |  | $ | 4,829 |  | $ | 2,325 |
Deferred |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (11,317) |  | $ | (3,278) |  | $ | 3,045 |
State |  |  | (1,382) |  |  | (347) |  |  | 445 |
Foreign |  |  | (4,872) |  |  | (954) |  |  | — |
Total deferred |  | $ | (17,571) |  | $ | (4,579) |  | $ | 3,490 |
Total income tax (benefit) expense |  | $ | (9,011) |  | $ | 250 |  | $ | 5,815 |

110

Table of Contents

The Company’s income tax expense from discontinued operations was insignificant for the years ended December 31, 2014 and 2013.

The following table reconciles the income tax expense at statutory rates to the actual income tax expense recorded (in thousands):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Tax (benefit) expense at U.S. federal statutory income tax rate on income or loss subject to tax |  | $ | (12,630) |  | $ | (2,131) |  | $ | 3,582 |
State income tax expense, net of federal tax |  |  | 93 |  |  | 764 |  |  | 928 |
Gross receipts and margin taxes |  |  | 1,480 |  |  | 1,699 |  |  | 1,553 |
Foreign rate differential |  |  | 2,269 |  |  | 554 |  |  | — |
Effect of permanent differences |  |  | (298) |  |  | (196) |  |  | (221) |
Return to provision adjustments |  |  | (368) |  |  | (528) |  |  | (27) |
Increase in valuation allowance |  |  | 443 |  |  | 88 |  |  | — |
Total income tax (benefit) expense |  | $ | (9,011) |  | $ | 250 |  | $ | 5,815 |

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of the asset s and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Investments and property, primarily differences in investment basis, depreciation and amortization, the basis of land assets, and the treatment of interest and certain costs |  | $ | 19,862 |  | $ | 3,418 |  | $ | 707 |
Net operating loss carryforward |  |  | 3,703 |  |  | 484 |  |  | 749 |
Expense accruals and other |  |  | (753) |  |  | 462 |  |  | (4) |
Valuation allowance |  |  | (531) |  |  | (88) |  |  | — |
Net deferred tax assets |  | $ | 22,281 |  | $ | 4,276 |  | $ | 1,452 |

D eferred tax assets and liabilities are included in other assets, net and accounts payable and accrued liabilities.

At December 31, 2015 the Company had a net operating loss (“NOL”) carryforward of $10 million related to the TRS entities. These amounts can be used to offset future taxable income, if any. The NOL carryforwards begin to expire in 2033 with respect to the TRS entities.

The Company records a valuation allowance against deferred tax assets in certain jurisdictions when it cannot sustain a conclusion that it is more likely than not that it can realize the deferred tax assets during the periods in which these temporary differences become deductible. The deferred tax asset valuation allowance is adequate to reduce the total deferred tax asset s to an amount that the Company estimates will “more-likely-than-not” be realized.

The C ompany files numerous U.S. federal, state and local income and franchise tax returns. With a few exceptions, the Company is no longer subject to U.S. federal, state, or local tax examinations by taxing authorities for years prior to 2012.

For each of the years ended December 31, 2015 and 201 4, the tax basis of the Company’s net assets is less than the reported amounts by $6.5 billion. The difference between the reported amounts and the tax basis is primarily related to the Slough Estates USA, Inc. (“SEUSA”) and HCRMC acquisitions, which occurred in 2007 and 2011, respectively. Both SEUSA and HCRMC were corporations subject to federal and state income taxes. As a result of these acquisitions, the Company succeeded to the tax attributes of SEUSA and HCRMC, including the tax basis in the acquired companies’ assets and liabilities. The Company generally will be subject to a federal corporate-level tax on any taxable disposition of HCRMC pre-acquisition assets that occur within five years after its April 7, 2011 acquisition.

111

Table of Contents

The corporate-level tax associated with the disposition of assets acquired in connection with the HCRMC acquisition would be assessed only to the extent of the built-in gain that existed on the date of the acquisition, based on the fair market value of the assets on April 7, 2011. The Company has not and does not expect to dispose of any assets that would result in the imposition of a material tax liability. As a result, the Company has not recorded a deferred tax liability associated with this corporate-level tax. Gains from asset dispositions occurring more than five years after the acquisition will not be subject to a federal corporate-level tax. However, gains from asset dispositions occurring within ten years after the SEUSA and HCRMC acquisitions may be subject to corporate-level tax in some states. F rom time to time, the Company may dispose of SEUSA or HCRMC assets before the applicable built-in gain holding period if it is able to effect a tax deferred exchange.

In connection with the HCRMC acquisition, the Company assumed unrecognized tax benefits of $2 million. For each of the years ended December 31, 201 4 and 2013, the Company had a decrease in unrecognized tax benefits of $1 million. There were no unrecognized tax benefits balances at December 31, 2015 and 2014.

A reconciliation of the Company’s beginning and ending unrecognized tax benefits follows (in thousands):

|  | Amount |
Balance at January 1, 2013 |  | $ | 1,977 |
Reductions based on prior years’ tax positions |  |  | (890) |
Additions based on 2013 tax positions |  |  | — |
Balance at December 31, 2013 |  |  | 1,087 |
Reductions based on prior years’ tax positions |  |  | (1,087) |
Additions based on 2014 tax positions |  |  | — |
Balance at December 31, 2014 |  | $ | — |

During the year ended December 31, 2014, the Company reversed the entire balance of the interest expense associated with the unrecognized tax benefits assumed in connection with the acquisition of HCRMC. The amount reversed was insignificant and it was due to the lapse in the statute of limitations. For the year ended December 31, 2013, the Company recorded insignificant net increases to interest expense associated with the unrecognized tax benefits.

112

Table of Contents

NOTE 19. Earnings Per Common Share

The following table illustrates the computation of basic and diluted earnings per share (dollars in thousands, except per share data):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Numerator |  |  |  |  |  |  |  |  |  |
(Loss) income from continuing operations |  | $ | (546,418) |  | $ | 906,845 |  | $ | 910,633 |
Noncontrolling interests’ share in continuing operations |  |  | (12,817) |  |  | (13,181) |  |  | (14,110) |
(Loss) income from continuing operations applicable to HCP, Inc. |  |  | (559,235) |  |  | 893,664 |  |  | 896,523 |
Participating securities’ share in continuing operations |  |  | (1,317) |  |  | (2,437) |  |  | (1,734) |
(Loss) income from continuing operations applicable to common shares |  |  | (560,552) |  |  | 891,227 |  |  | 894,789 |
Discontinued operations |  |  | — |  |  | 29,746 |  |  | 74,373 |
Noncontrolling interests’ share in discontinued operations |  |  | — |  |  | (1,177) |  |  | (59) |
Net (loss) income applicable to common shares |  | $ | (560,552) |  | $ | 919,796 |  | $ | 969,103 |
Denominator |  |  |  |  |  |  |  |  |  |
Basic weighted average common shares |  |  | 462,795 |  |  | 458,425 |  |  | 455,002 |
Dilutive potential common shares |  |  | — |  |  | 371 |  |  | 700 |
Diluted weighted average common shares |  |  | 462,795 |  |  | 458,796 |  |  | 455,702 |
Basic earnings per common share |  |  |  |  |  |  |  |  |  |
(Loss) income from continuing operations |  | $ | (1.21) |  | $ | 1.94 |  | $ | 1.97 |
Discontinued operations |  |  | — |  |  | 0.07 |  |  | 0.16 |
Net (loss) income applicable to common stockholders |  | $ | (1.21) |  | $ | 2.01 |  | $ | 2.13 |
Diluted earnings per common share |  |  |  |  |  |  |  |  |  |
(Loss) income from continuing operations |  | $ | (1.21) |  | $ | 1.94 |  | $ | 1.97 |
Discontinued operations |  |  | — |  |  | 0.06 |  |  | 0.16 |
Net (loss) income applicable to common shares |  | $ | (1.21) |  | $ | 2.00 |  | $ | 2.13 |

Restricted stock and certain performance restricted stock units are considered participating securities, because dividend payments are not forfeited even if the underlying share-based award does not vest, and require the use of the two-class method when computing basic and diluted earnings per share.

For the year ended December 31, 2015, the Company generated a net loss. T he weighted-average basic shares outstanding was used in calculating diluted loss per share from continuing operations, as using diluted shares would be anti-dilutive to loss per share. Options to purchase approximately 1.4 million and 800,000 shares of common stock that had exercise prices in excess of the average market price of the common stock during the years ended December 31, 2014 and 2013, respectively, were not included because they are anti-dilutive. Additionally, six million shares issuable upon conversion of four million DownREIT units during the years ended December 31, 2014 and 2013 were not included because they are anti-dilutive.

113

Table of Contents

NOTE 20. Supplemental Cash Flow Information

Supplemental cash flow information follows (in thousands):

|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Supplemental cash flow information: |  |  |  |  |  |  |  |  |  |
Interest paid, net of capitalized interest |  | $ | 451,615 |  | $ | 410,286 |  | $ | 412,011 |
Income taxes paid |  |  | 6,959 |  |  | 5,071 |  |  | 114 |
Capitalized interest |  |  | 8,798 |  |  | 10,314 |  |  | 13,494 |
Supplemental disclosure of non-cash investing activities: |  |  |  |  |  |  |  |  |  |
Accrued construction costs |  |  | 52,511 |  |  | 37,178 |  |  | 15,187 |
Settlement of loans receivable as consideration for real estate acquisition |  |  | 299,297 |  |  | — |  |  | — |
Loan originated in connection with Brookdale Transaction |  |  | — |  |  | 67,640 |  |  | — |
Real estate contributed to CCRC JV |  |  | — |  |  | 91,603 |  |  | — |
Fair value of real estate acquired in exchange for sale of real estate |  |  | — |  |  | 32,000 |  |  | 15,204 |
Tenant funded tenant improvements owned by HCP |  |  | 28,850 |  |  | 21,863 |  |  | — |
Reclassification of the in-place leases from real estate to DFLs |  |  | — |  |  | — |  |  | 123,891 |
Supplemental disclosure of non-cash financing activities: |  |  |  |  |  |  |  |  |  |
Vesting of restricted stock units |  |  | 409 |  |  | 614 |  |  | 471 |
Cancellation of restricted stock |  |  | — |  |  | 1 |  |  | 20 |
Conversion of non-managing member units into common stock |  |  | 2,979 |  |  | 473 |  |  | 3,583 |
Noncontrolling interest and other liabilities, net assumed in connection with the RIDEA III acquisition |  |  | 61,219 |  |  | — |  |  | — |
Noncontrolling interest issued in connection with Brookdale Transaction |  |  | — |  |  | 46,751 |  |  | — |
Noncontrolling interests issued in connection with real estate and other acquisitions |  |  | 10,971 |  |  | 6,321 |  |  | — |
Noncontrolling interest assumed in connection with real estate disposition |  |  | — |  |  | 1,671 |  |  | — |
Mortgages and other liabilities assumed with real estate acquisitions |  |  | 23,218 |  |  | 37,149 |  |  | 12,767 |
Foreign currency translation adjustment |  |  | (8,738) |  |  | (9,967) |  |  | 47 |
Unrealized gains on available-for-sale securities and derivatives designated as cash flow hedges, net |  |  | 1,889 |  |  | 2,271 |  |  | 7,790 |

See discussions related to the Brookdale Transaction discussed in Note 3.

NOTE 21. Variable Interest Entities

Unconsolidated Variable Interest Entities

At December 31, 2015, the Company had investments in: (i) t hree unconsolidated VIE joint ventures; (ii) 366 properties leased to VIE tenants; and (iii) marketable debt securities of two VIE borrowers. The Company has determined that it is not the primary beneficiary of these VIEs. The Company does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated joint ventures (CCRC OpCo, HCRMC OpCo and Vintage Park discussed below), the Company has no formal involvement in these VIEs beyond its investments.

The Company leased 318 properties to, and has an equity ownership investment in, HCRMC that has been identified as a VIE upon a reconsideration event in the fourth quarter of 2015. HCRMC has experienced continued operational declines and is a “thinly capitalized” entity that relies on the operating cash flows generated from its senior housing and post-acute facilities to fund operating expenses, including the rent obligations under the Amended Ma s ter Lease (see Note s 6, 8 and 17).

The Company lease s 48 properties to a total of seven tenants that have been identified as VIEs (“VIE tenants”).T hese VIE tenants are “thinly capitalized” entities that rely on the operating cash flows generated from the senior housing facilities to pay operating expenses, including the rent obligations under their leases.

114

Table of Contents

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure, that has been identified as a VIE (see Notes 3 and 8). The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily the rental costs and operating expenses incurred to manage such facilities).

The Company holds an 85% ownership interest in Vintage Park (see Note 8) that has been identified as a VIE. Although power is shared among equity members, one equity member does not have a substantive investment in the entity. The assets of Vintage Park primarily consist of an in-progress independent living facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of the development obligations. Any assets generated by Vintage Park may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company holds Four Seasons Notes (see Note 10) and a portion of Four Season’s senior secured term loan (see Note 7). In the second quarter of 2015, upon the occurrence of a reconsideration event, it was determined that the issu er of the Four Seasons Notes was a VIE because th e entity was “thinly capitalized” (see Note 17).

The Company holds commercial mortgage-backed securities (“CMBS”) issued by Federal Home Loan Mortgage Corporation (“Freddie MAC”) through a special purpose entity that has been identified as a VIE bec ause it is “thinly capitalized.” The CMBS issued by the VIE are backed by mortgage debt obligations on real estate assets.

The classification of the related assets and liabilities and their maximum loss exposure as a result of the Company’s involvement with these VIEs at December 31, 2015 are presented below (in thousands):

|  | Maximum Loss |  |  |  | Carrying |
VIE Type |  | Exposure(1) |  | Asset/Liability Type |  | Amount |
HCRMC |  | $ | 5,154,315 |  | Net investment in DFLs and investments in unconsolidated joint ventures |  | $ | 5,154,315 |
VIE tenants—DFLs |  |  | 599,652 |  | Net investment in DFLs |  |  | 599,652 |
VIE tenants—operating leases |  |  | 10,727 |  | Lease intangibles, net and straight-line rent receivables |  |  | 10,727 |
CCRC OpCo |  |  | 232,404 |  | Investments in unconsolidated joint ventures |  |  | 232,404 |
Vintage Park |  |  | 8,729 |  | Investments in unconsolidated joint ventures |  |  | 8,729 |
Four Seasons |  |  | 127,435 |  | Loans and marketable debt securities |  |  | 127,435 |
CMBS |  |  | 17,930 |  | Marketable debt securities |  |  | 17,930 |

| (1) |  | The Company’s maximum loss exposure related to VIE tenants, CCRC OpCo, Vintage Park, and loans and marketable debt securities to VIE borrowers represents the aggregate carrying amount of such investments (including accrued interest). The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

A s of December 31, 2015, the Company has not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls). See Notes 3, 6, 7, 8, 10 and 12 for additional descriptions of the nature, purpose and operating activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

RIDEA I. The Company holds a 90% ownership interest in a joint venture entity formed in September 2011 that operates senior housing properties in a RIDEA structure (“RIDEA I OpCo”). The Company consolidates RIDEA I OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of RIDEA I OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to a non-VIE consolidated subsidiary of the Company and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents)

115

Table of Contents

of RIDEA I OpCo may only be used to settle its contractual obligations (primarily from the rental costs and operating expenses incurred to manage such facilities).

RIDEA II. The Company holds an 80% ownership interest in joint venture entities formed in August 2014 that own and operate senior housing properties in a RIDEA structure (“RIDEA II”). The Company consolidates RIDEA II (“SH PropCo” and “SH OpCo”) as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of SH PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of SH OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to SH PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA II structure may only be used to settle its contractual obligations (primarily from the rental costs and operating expenses incurred to manage such facilities).

RIDEA III. The Company holds a 90% ownership interest in a joint venture entity formed in June 2015 that operates senior housing properties in a RIDEA structure (“RIDEA III OpCo”). The Company consolidates RIDEA III OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of RIDEA III OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to a non-VIE consolidated subsidiary of the Company and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of RIDEA III OpCo may only be used to settle its contractual obligations (primarily from the rental costs and operating expenses incurred to manage such facilities).

Other consolidated VIEs. The Company made a loan to an entity that entered into a tax credit structure (“Tax Credit Subsidiary”) and a loan to an entity that made an investment in a development joint venture (“Development JV”) both of which are considered VIEs. The Company consolidates the Tax Credit Subsidiary and Development JV because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the VIEs’ economic performance. The assets and liabilities of the Tax Credit Subsidiary and Development JV substantially consist of development in progress, notes receivable, prepaid expenses, notes payable, and accounts payable and accrued liabilities generated from their operating activities. Any assets generated by the operating activities of the Tax Credit Subsidiary and Development JV may only be used to settle their contractual obligations.

NOTE 22. Fair Value Measurements

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2015 in the consolidated balance sheets (in thousands):

Financial assets and liabilities |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |
Marketable equity securities |  | $ | 39 |  | $ | 39 |  | $ | — |  | $ | — |
Interest-rate swap asset(1) |  |  | 196 |  |  | — |  |  | 196 |  |  | — |
Interest-rate swap liabilities(1) |  |  | 6,251 |  |  | — |  |  | 6,251 |  |  | — |
Currency swap assets(1) |  |  | 1,551 |  |  | — |  |  | 1,551 |  |  | — |
Warrants(1) |  |  | 55 |  |  | — |  |  | — |  |  | 55 |

| (1) |  | Interest rate and currency swaps, as well as common stock warrant fair values, are determined based on observable and unobservable market assumptions utilizing standardized derivative pricing models.

Recognized gains and losses are recorded in other income, net on the Company’s consolidated statements of operations. In September 2015, the Company exercised $2 million of warrants classified as Level 3 within the fair value hierarchy in exchange for marketable equity securities classified as Level 1. During the year ended December 31, 2015, there were no other transfers of financial assets or liabilities within the fair value hierarchy.

116

Table of Contents

Disclosures About Fair Value of Financial Instruments

Cash and cash equivalents, restricted cash, accounts receivable, net, and accounts payable and accrued liabilities. The carrying values are reasonable estimates of fair value because of the short-term maturities of these instruments.

Loans receivable, net and mortgage debt. The fair values are based on discounting future cash flows utilizing current market rates for loans and debt of the same type and remaining maturity.

Marketable debt securities. The fair value is based on quoted prices from inactive markets.

Marketable equity securities and senior unsecured notes. The fair values are based on quoted prices in active markets.

Warrants. The fair value is based on significant unobservable market inputs utilizing standardized derivative pricing models.

Bank line of credit, term loans and other debt. The carrying values are a reasonable estimate of fair value because the borrowings are primarily based on market interest rates and the Company’s current credit ratings.

Interest-rate swaps. The fair value is based on observable inputs utilizing standardized pricing models that consider forward yield curves and discount rates which are observable in active and inactive markets.

Currency swaps. The fair value is based on observable inputs utilizing standardized pricing models that consider the future value of the currency exchange rates, comprised of current spot and traded forward points, and calculating a present value of the net amount using discount rates based on observable traded interest rates.

The table below summarizes the carrying amounts and fair values of the Company’s financial instruments (in thousands):

|  | December 31, |
|  | 2015 |  | 2014 |
|  | Carrying |  |  |  |  | Carrying |  |  |  |
|  | Amount |  | Fair Value |  | Amount |  | Fair Value |
Loans receivable, net(2) |  | $ | 768,743 |  | $ | 770,052 |  | $ | 906,961 |  | $ | 898,522 |
Marketable debt securities(2) |  |  | 102,958 |  |  | 102,958 |  |  | 231,442 |  |  | 252,125 |
Marketable equity securities(1) |  |  | 39 |  |  | 39 |  |  | 43 |  |  | 43 |
Warrants(3) |  |  | 55 |  |  | 55 |  |  | 2,220 |  |  | 2,220 |
Bank line of credit(2) |  |  | 397,432 |  |  | 397,432 |  |  | 838,516 |  |  | 838,516 |
Term loans(2) |  |  | 524,807 |  |  | 524,807 |  |  | 212,986 |  |  | 212,986 |
Senior unsecured notes(1) |  |  | 9,120,107 |  |  | 9,390,668 |  |  | 7,589,960 |  |  | 8,187,458 |
Mortgage debt(2) |  |  | 932,212 |  |  | 963,786 |  |  | 982,785 |  |  | 1,025,091 |
Other debt(2) |  |  | 94,445 |  |  | 94,445 |  |  | 97,022 |  |  | 97,022 |
Interest-rate swap asset(2) |  |  | 196 |  |  | 196 |  |  | 178 |  |  | 178 |
Interest-rate swap liabilit ies(2) |  |  | 6,251 |  |  | 6,251 |  |  | 7,663 |  |  | 7,663 |
Currency swap assets(2) |  |  | 1,551 |  |  | 1,551 |  |  | 929 |  |  | 929 |

| (1) |  | Level 1: Fair value calculated based on quoted prices in active markets.

| (2) |  | Level 2: Fair value based on quoted prices for similar or identical instruments in active or inactive markets, respectively, or calculated utilizing standardized pricing models in which significant inputs or value drivers are observable in active markets.

| (3) |  | Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

117

Table of Contents

NOTE 23. Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants, operators 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 tenants and operators; the information provided is presented for the gross assets and revenues that are associated with certain tenants and operators as percentages of their respective segment’s and total Company’s gross assets and revenues:

|  | Percentage of |  | Percentage of |
|  | Senior Housing Gross Assets |  | Senior Housing Revenues |
|  | December 31, |  | Year Ended December 31, |
Operators |  | 2015 |  | 2014 |  | 2015 |  | 2014 |  | 2013 |
Brookdale(1) |  | 28 |  | 36 |  | 23 |  | 37 |  | 46 |
HCRMC |  | 12 |  | 11 |  | 7 |  | 8 |  | 10 |

|  | Percentage of Post-Acute/ |  | Percentage of Post-Acute/ |
|  | Skilled Nursing Gross Assets |  | Skilled Nursing Revenues |
|  | December 31, |  | Year Ended December 31, |
Operators |  | 2015 |  | 2014 |  | 2015 |  | 2014 |  | 2013 |
HCRMC |  | 64 |  | 82 |  | 80 |  | 85 |  | 83 |

|  | Percentage of Total |  | Percentage of |
|  | Company Gross Assets |  | Total Company Revenues |
|  | December 31, |  | Year Ended December 31, |
Operators |  | 2015 |  | 2014 |  | 2015 |  | 2014 |  | 2013 |
HCRMC |  | 23 |  | 31 |  | 23 |  | 26 |  | 28 |
Brookdale (1) |  | 12 |  | 13 |  | 10 |  | 14 |  | 17 |

| (1) |  | On July 31, 2014, Brookdale completed its acquisition of Emeritus. These percentages of segment gross assets, total gross assets, segment revenues and total revenues, 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. On August 29, 2014, the Company and Brookdale amended or terminated all former leases with Emeritus and entered into two RIDEA joint ventures (see Note 3). Percentages do not include senior housing facilities that Brookdale manages (is not a tenant) under a RIDEA structure.

For discussions of significant HCRMC updates and performance during 2015, see Notes 6, 8 and 17.

As of December 31, 2015, Brookdale provided comprehensive facility management and accounting services with respect to 10 8 of the Company’s senior housing facilities and 1 5 CCRCs owned by the CCRC JV, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

Brookdale is subject to the registration and reporting requirements of the U.S. Securities and Exchange Commission (“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 report has been derived from SEC filings made by Brookdale 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.

118

Table of Contents

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.

At December 31, 2015 and 2014, the Company’s gross real estate assets in the state of California represented approximately 24% and 23% of the Company’s total gross assets, respectively. At December 31, 2015 and 201 4, the Company’s gross real estate assets in the state of Texas represented approximately 1 1% and 1 3% of the Company’s total gross assets, respectively. For the years ended December 31, 2015, 2014 and 2013, the Company’s revenues derived from properties located in the states of California represented approximately 2 2%, 2 3% and 21% of the Company’s total revenues, respectively. For the years ended December 31, 2015, 2014 and 2013, the Company’s revenues derived from properties located in the state of Texas represented approximately 1 3%, 12% and 11% of the Company’s total revenues, respectively.

NOTE 24. Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of December 31, 2015 (dollars and GBP in thousands):

|  |  |  |  |  | Fixed |  |  |  |  |  |  |  |  |
|  |  |  | Hedge |  | Rate/Buy |  |  |  | Notional/Sell |  |  |  |
Date Entered |  | Maturity Date |  | Designation |  | Amount |  | Floating/Exchange Rate Index |  | Amount |  | Fair Value (1) |
Interest rate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
July 2005(2) |  | July 2020 |  | Cash Flow |  |  | 3.82 | % | BMA Swap Index |  | $ | 45,600 |  | $ | (5,430) |
November 2008(3) |  | October 2016 |  | Cash Flow |  |  | 5.95 | % | 1 Month LIBOR+1.50% |  | $ | 25,100 |  |  | (761) |
July 2012(4) |  | June 2016 |  | Cash Flow |  |  | 1.81 | % | 1 Month GBP LIBOR+1.20% |  | £ | 137,000 |  |  | (60) |
January 2015(4) |  | October 2017 |  | Cash Flow |  |  | 1.79 | % | 1 Month GBP LIBOR+0.975% |  | £ | 220,000 |  |  | 196 |
Foreign currency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
July 2012(5) |  | June 2016 |  | N/A |  | $ | 11,400 |  | Buy USD/Sell GBP |  | £ | 7,200 |  |  | 685 |
January 2015(6) |  | October 2017 |  | Cash Flow |  | $ | 35,100 |  | Buy USD/Sell GBP |  | £ | 23,200 |  |  | 866 |

| (1) |  | Derivative assets are recorded in other assets, net and derivative liabilities are recorded in accounts payable and accrued liabilities on the consolidated balance sheets.

| (2) |  | Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

| (3) |  | Represents an interest-rate swap contract, that hedge s the fluctuation in interest payments on variable-rate secured debt due to overall changes in hedged cash flows

| (4) |  | Hedges fluctuations in interest payments on variable-rate unsecured debt due to fluctuations in the underlying benchmark interest rate.

| (5) |  | Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to a portion of the Company’s forecasted interest receipts on GBP denominated senior unsecured notes. Represents a currency swap to sell £7.2 million at a rate of 1.5695 in June 2016.

| (6) |  | Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to the Company’s forecasted GBP denominated interest receipts on its HC-One Facility. Represents a currency swap to sell approximately £1.0 million monthly at a rate of 1.5149 through October 2017.

The Company uses derivative instruments to mitigate the effects of interest rate and foreign currency fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. Utilizing derivative instruments allows the Company to manage the risk of fluctuations in interest and foreign currency rates related to the potential impact these changes could have on future earnings and forecasted cash flows. The Company does not use derivative instruments for speculative or trading purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of a derivative instrument due to adverse changes in market prices. Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. The Company does not obtain collateral associated with its derivative contracts, but monitors the credit standing of its counterparties on a regular basis. Should a counterparty fail to perform, the Company would incur a financial loss to the extent that the associated derivative contract was in an asset position. At December 31, 2015, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

119

Table of Contents

As of December 31, 2015, the Company designated £26 8 million of its GBP-denominated borrowings under the Facility and 2012 term loan as a hedge of a portion of the Company’s net investments in GBP-functional subsidiaries to mitigate its exposure to fluctuations in the GBP to USD exchange rate. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to USD exchange rate of the instrument is recorded as part of the cumulative translation adjustment component of a ccumulated other c omprehensive i ncome (l oss). Accordingly, the remeasurement value of the designated £26 8 million GBP-denominated borrowings due to fluctuations in the GBP to USD exchange rate are reported in a ccumulated other c omprehensive i ncome (l oss) as the hedging relationship is considered to be effective. The cumulative balance of the remeasurement value will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

In December 2010, the Company assumed a cash flow hedge as part of a real estate acquisition. During the year s ended December 31, 2015 and 2014, the Company determined a portion of the hedge was ineffective and reclassified $500,000 and $2 million, respectively, of unrealized gains related to this interest-rate swap contract into other income, net.

On July 27, 2012, the Company entered into a foreign currency swap contract to hedge the foreign currency exchange risk related to a portion of the forecasted interest receipts from its GBP denominated Four Seasons N otes (see Note 10). The cash flow hedge has a fixed USD/GBP exchange rate of 1.5695 (buy $11 million and sell £7 million semi-annually) for a portion of its forecasted semi-annual interest receipts denominated in GBP. The foreign currency swap contract matures in June 2016 (the end of the non-call period of the Four Seasons N otes). In September 2015, the Company ceased hedge accounting on this foreign currency swap contract and reclassified $0.5 million from a ccumulated other c omprehensive i ncome (l oss) to other i ncome, net, and all future changes in fair value of the foreign currency swap contract will be recognized in earnings. The fair value of the contract at December 31, 2015 was $0.7 million and is included in other assets, net.

On July 27, 2012, the Company entered into an interest-rate swap contract that is designated as hedging the interest payments on its GBP denominated 2012 Term Loan due to fluctuations in the underlying benchmark interest rate (see Note 11). The cash flow hedge has a notional amount of £137 million and expires in June 2016.

On January 12, 2015, the Company entered into an interest-rate swap contract that is designated as hedging the interest payments on its GBP denominated 2015 Term Loan due to fluctuations in the underlying benchmark interest rate (see Note 11). The cash flow hedge has a notional amount of £220 million and matures in October 2017.

On January 12, 2015, the Company entered into a foreign currency swap contract to hedge the foreign currency exchange risk related to a portion of the forecasted GBP interest receipts from its HC-One Facility (see Note 7). The cash flow hedge has a fixed GBP/USD exchange rate of 1.5149 (buy approximately $1.5 million and sell £1.0 million monthly) and matures in October 2017.

For the year ended December 31, 2015, the Company earned reduced interest income of $0.1 million and recognized additional interest expense of $4 million, resulting from its cash flow hedging relationships. At December 31, 2015, the Company expects that the hedged forecasted transactions for each of the outstanding qualifying cash flow hedging relationships remain probable of occurring, and as a result, no gains or losses recorded to accumulated other comprehensive income (loss) are expected to be reclassified to earnings. During year ended December 31, 2015, there were no ineffective portions related to outstanding hedges, other than those discussed above.

120

Table of Contents

To illustrate the effect of movements in the interest rate and foreign currency markets, the Company performed a market sensitivity analysis on its outstanding derivative financial instruments. The Company applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

|  |  |  | Effects of Change in Interest and |
|  |  |  | Foreign Currency Rates |
|  |  |  | +50 Basis |  | −50 Basis |  | +100 Basis |  | −100 Basis |
Date Entered |  | Maturity Date |  | Points |  | Points |  | Points |  | Points |
Interest rates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
July 2005 |  | July 2020 |  | $ | 1,034 |  | $ | (933) |  | $ | 2,017 |  | $ | (1,916) |
November 2008 |  | October 2016 |  |  | 102 |  |  | (96) |  |  | 201 |  |  | (195) |
July 2012 |  | June 2016 |  |  | 469 |  |  | (452) |  |  | 937 |  |  | (906) |
January 2015 |  | October 2017 |  |  | 2,982 |  |  | (2,916) |  |  | 5,931 |  |  | (5,866) |
Foreign currency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
July 2012 |  | June 2016 |  |  | (44) |  |  | 63 |  |  | (97) |  |  | 116 |
January 2015 |  | October 2017 |  |  | (95) |  |  | 246 |  |  | (265) |  |  | 417 |

NOTE 2 5. Selected Quarterly Financial Data (Unaudited)

Selected quarterly information for the years ended December 31, 2015 and 201 4 is as follows (in thous ands, except per share amounts):

|  | Three Months Ended During 2015 |
|  | March 31 |  | June 30 |  | September 30 |  | December 31 |
Total revenues |  | $ | 610,791 |  | $ | 607,532 |  | $ | 657,953 |  | $ | 668,036 |
(Loss) income before income taxes and equity income from and impairments of investments in unconsolidated joint ventures |  |  | (251,181) |  |  | 151,184 |  |  | 134,894 |  |  | (601,744) |
Net (loss) income |  |  | (237,503) |  |  | 167,748 |  |  | 117,954 |  |  | (594,617) |
Net (loss) income applicable to HCP, Inc. |  |  | (240,614) |  |  | 164,885 |  |  | 115,362 |  |  | (598,868) |
Dividends paid per common share |  |  | 0.565 |  |  | 0.565 |  |  | 0.565 |  |  | 0.565 |
Basic earnings per common share |  |  | (0.52) |  |  | 0.36 |  |  | 0.25 |  |  | (1.29) |
Diluted earnings per common share |  |  | (0.52) |  |  | 0.36 |  |  | 0.25 |  |  | (1.29) |

|  | Three Months Ended During 2014 |
|  | March 31 |  | June 30 |  | September 30 |  | December 31 |
Total revenues |  | $ | 529,992 |  | $ | 536,121 |  | $ | 596,638 |  | $ | 603,528 |
Income before income taxes and equity income from and impairments of investments in unconsolidated joint ventures |  |  | 220,795 |  |  | 208,926 |  |  | 240,946 |  |  | 222,771 |
Total discontinued operations |  |  | 29,746 |  |  | — |  |  | — |  |  | — |
Net income |  |  | 263,623 |  |  | 222,279 |  |  | 251,059 |  |  | 199,630 |
Net income applicable to HCP, Inc. |  |  | 259,111 |  |  | 218,885 |  |  | 247,654 |  |  | 196,583 |
Dividends paid per common share |  |  | 0.545 |  |  | 0.545 |  |  | 0.545 |  |  | 0.545 |
Basic earnings per common share |  |  | 0.56 |  |  | 0.48 |  |  | 0.54 |  |  | 0.43 |
Diluted earnings per common share |  |  | 0.56 |  |  | 0.48 |  |  | 0.54 |  |  | 0.43 |

121

Table of Contents

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9 A. Controls and Procedure s

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective, as of December 31, 2015, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 201 5 to which this report relates that have materially affected, or are reasonabl y likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2015.

The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

122

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of HCP, Inc.

Irvine, California

We have audited the internal control over financial reporting of HCP, Inc. and subsidiaries (the ‘‘Company’’) as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2015, of the Company and our report dated February 9, 201 6 expressed an unqualified opinion on those financial statements and financial statement schedules.

| /s/ Deloitte & Touche LLP

Los Angeles, California

February 9, 201 6

123

Table of Contents

ITEM 9 B. Other Informatio n

None.

PART II I

ITEM 1 0. Directors, Executive Officers and Corporate Governance

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees, including our Chief Executive Officer and all senior financial officers, including our principal financial officer, principal accounting officer and controller. We have also adopted a Vendor Code of Business Conduct and Ethics applicable to our v endors and business partners. C urrent cop ies of our Code of Business Conduct and Ethics and Vendor Code of Business Conduct and Ethics are posted on the Investor Relations section of our website at www.hcpi.com. In addition, waivers from, and amendments to, our Code of Business Conduct and Ethics that apply to our directors and executive officers, including our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, will be timely posted in the Investor Relations section of our website at www.hcpi.com.

We hereby incorporate by reference the information appearing under the captions “Proposal No. 1 E lection of Directors,” “Our Executive Officers,” “Board of Directors and Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Registrant’s definitive proxy statement relating to its 201 6 Annual Meeting of Stockholders to be held on April 28, 201 6.

ITEM 1 1. Executive Compensatio n

We hereby incorporate by reference the information under the caption “Executive Compensation” in the Registrant’s definitive proxy statement relating to its 2016 Annual Meeting of Stockholders to be held on April 28, 2016.

ITEM 1 2. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We hereby incorporate by reference the information under the captions “Security Ownership of Principal Stockholders, Directors and Management” and “Equity Compensation Plan Information” in the Registrant’s definitive proxy statement relating to its 2016 Annual Meeting of Stockholders to be held on April 28, 2016.

ITEM 1 3. Certain Relationships and Related Transaction s, and Director Independence

We hereby incorporate by reference the information under the caption “Board of Directors and Corporate Governance” in the Registrant’s definitive proxy statement relating to its 2016 Annual Meeting of Stockholders to be held on April 28, 2016.

ITEM 1 4. Principal Account ing Fees and Services

We hereby incorporate by reference under the caption “Audit and Non-Audit Fees” in the Registrant’s definitive proxy statement relating to its 2016 Annual Meeting of Stockholders to be held on April 28, 2016.

124

Table of Contents

PART I V

ITEM 1 5. Exhibits, Fin ancial Statement Schedules

(a) 1. Financial Statement Schedules

Schedule II: Valuation and Qualifying Accounts

Allowance Accounts(1) |  |  |  |  | Additions |  | Deductions |  |  |  |
|  |  |  |  | Amounts |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Balance at |  | Charged |  |  |  |  | Uncollectible |  |  |  |  |  |  |
Year Ended |  | Beginning of |  | Against |  | Acquired |  | Accounts |  | Disposed |  | Balance at |
December 31, |  | Year |  | Operations, net |  | Properties |  | Written-off |  | Properties |  | End of Year |
2015 |  | $ | 51,377 |  | $ | 820,097 |  | $ | — |  | $ | (17,209) |  | $ | (316) |  | $ | 853,949 |
2014 |  |  | 49,169 |  |  | 5,413 |  |  | — |  |  | (2,512) |  |  | (693) |  |  | 51,377 |
2013 |  |  | 48,599 |  |  | 2,633 |  |  | — |  |  | (2,063) |  |  | — |  |  | 49,169 |

| (1) |  | Includes allowance for doubtful accounts, straight-line rent reserves, and allowances for loan and direct financing lease losses.

125

Table of Contents

Schedule III: Real Estate and Accumulated Depreciation

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
Senior housing |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1107 |  | Huntsville |  | AL |  | $ | — |  | $ | 307 |  | $ | 5,813 |  | $ | — |  | $ | 307 |  | $ | 5,453 |  | $ | 5,760 |  | $ | (1,261) |  | 2006 |  | 40 |
2366 |  | Little Rock |  | AR |  |  | — |  |  | 1,922 |  |  | 14,140 |  |  | 1,762 |  |  | 2,046 |  |  | 15,284 |  |  | 17,330 |  |  | (3,521) |  | 2006 |  | 45 |
0786 |  | Douglas |  | AZ |  |  | — |  |  | 110 |  |  | 703 |  |  | — |  |  | 110 |  |  | 703 |  |  | 813 |  |  | (325) |  | 2005 |  | 35 |
2384 |  | Prescott |  | AZ |  |  | — |  |  | 1,276 |  |  | 8,660 |  |  | 1,423 |  |  | 1,276 |  |  | 10,083 |  |  | 11,359 |  |  | (1,102) |  | 2012 |  | 45 |
1974 |  | Sun City |  | AZ |  |  | 26,445 |  |  | 2,640 |  |  | 33,223 |  |  | 2,021 |  |  | 2,640 |  |  | 34,716 |  |  | 37,356 |  |  | (6,035) |  | 2011 |  | 30 |
0518 |  | Tucson |  | AZ |  |  | — |  |  | 2,350 |  |  | 24,037 |  |  | — |  |  | 2,350 |  |  | 24,037 |  |  | 26,387 |  |  | (9,815) |  | 2002 |  | 30 |
1238 |  | Beverly Hills |  | CA |  |  | — |  |  | 9,872 |  |  | 32,590 |  |  | 4,194 |  |  | 9,872 |  |  | 36,059 |  |  | 45,931 |  |  | (8,777) |  | 2006 |  | 40 |
2362 |  | Camarillo |  | CA |  |  | — |  |  | 5,798 |  |  | 19,427 |  |  | 730 |  |  | 5,822 |  |  | 19,357 |  |  | 25,179 |  |  | (4,654) |  | 2006 |  | 45 |
2352 |  | Carlsbad |  | CA |  |  | — |  |  | 7,897 |  |  | 14,255 |  |  | 1,442 |  |  | 7,897 |  |  | 14,906 |  |  | 22,803 |  |  | (3,370) |  | 2006 |  | 45 |
0883 |  | Carmichael |  | CA |  |  | — |  |  | 4,270 |  |  | 13,846 |  |  | — |  |  | 4,270 |  |  | 13,236 |  |  | 17,506 |  |  | (3,006) |  | 2006 |  | 40 |
2204 |  | Chino Hills |  | CA |  |  | — |  |  | 3,720 |  |  | 41,183 |  |  | — |  |  | 3,720 |  |  | 41,183 |  |  | 44,903 |  |  | (2,179) |  | 2014 |  | 35 |
0851 |  | Citrus Heights |  | CA |  |  | — |  |  | 1,180 |  |  | 8,367 |  |  | — |  |  | 1,180 |  |  | 8,037 |  |  | 9,217 |  |  | (2,566) |  | 2006 |  | 29 |
2092 |  | Clearlake |  | CA |  |  | — |  |  | 354 |  |  | 4,799 |  |  | 237 |  |  | 354 |  |  | 5,036 |  |  | 5,390 |  |  | (486) |  | 2012 |  | 45 |
0790 |  | Concord |  | CA |  |  | 25,000 |  |  | 6,010 |  |  | 39,601 |  |  | — |  |  | 6,010 |  |  | 38,301 |  |  | 44,311 |  |  | (9,960) |  | 2005 |  | 40 |
2399 |  | Corona |  | CA |  |  | — |  |  | 2,637 |  |  | 10,134 |  |  | 184 |  |  | 2,637 |  |  | 10,318 |  |  | 12,955 |  |  | (1,029) |  | 2012 |  | 45 |
0787 |  | Dana Point |  | CA |  |  | — |  |  | 1,960 |  |  | 15,946 |  |  | — |  |  | 1,960 |  |  | 15,466 |  |  | 17,426 |  |  | (4,027) |  | 2005 |  | 39 |
2364 |  | Elk Grove |  | CA |  |  | — |  |  | 2,235 |  |  | 6,339 |  |  | 763 |  |  | 2,235 |  |  | 6,949 |  |  | 9,184 |  |  | (1,580) |  | 2006 |  | 45 |
0798 |  | Escondido |  | CA |  |  | 14,340 |  |  | 5,090 |  |  | 24,253 |  |  | — |  |  | 5,090 |  |  | 23,353 |  |  | 28,443 |  |  | (6,082) |  | 2005 |  | 40 |
2054 |  | Fortuna |  | CA |  |  | — |  |  | 818 |  |  | 3,295 |  |  | 11 |  |  | 818 |  |  | 3,306 |  |  | 4,124 |  |  | (1,096) |  | 2012 |  | 50 |
2079 |  | Fortuna |  | CA |  |  | — |  |  | 1,346 |  |  | 11,856 |  |  | 44 |  |  | 1,346 |  |  | 11,900 |  |  | 13,246 |  |  | (2,854) |  | 2012 |  | 45 |
0791 |  | Fremont |  | CA |  |  | 8,402 |  |  | 2,360 |  |  | 11,672 |  |  | — |  |  | 2,360 |  |  | 11,192 |  |  | 13,552 |  |  | (2,915) |  | 2005 |  | 40 |
1965 |  | Fresno |  | CA |  |  | 18,345 |  |  | 1,730 |  |  | 31,918 |  |  | 1,713 |  |  | 1,730 |  |  | 33,202 |  |  | 34,932 |  |  | (5,645) |  | 2011 |  | 30 |
0788 |  | Granada Hills |  | CA |  |  | — |  |  | 2,200 |  |  | 18,257 |  |  | — |  |  | 2,200 |  |  | 17,637 |  |  | 19,837 |  |  | (4,593) |  | 2005 |  | 39 |
0856 |  | Irvine |  | CA |  |  | — |  |  | 8,220 |  |  | 14,104 |  |  | — |  |  | 8,220 |  |  | 13,564 |  |  | 21,784 |  |  | (2,838) |  | 2006 |  | 45 |
0227 |  | Lodi |  | CA |  |  | 8,532 |  |  | 732 |  |  | 5,453 |  |  | — |  |  | 732 |  |  | 5,453 |  |  | 6,185 |  |  | (2,696) |  | 1997 |  | 35 |
0226 |  | Murietta |  | CA |  |  | 5,732 |  |  | 435 |  |  | 5,729 |  |  | — |  |  | 435 |  |  | 5,729 |  |  | 6,164 |  |  | (2,765) |  | 1997 |  | 35 |
1165 |  | Northridge |  | CA |  |  | — |  |  | 6,718 |  |  | 26,309 |  |  | 2,117 |  |  | 6,752 |  |  | 27,583 |  |  | 34,335 |  |  | (6,259) |  | 2006 |  | 40 |
1561 |  | Orangevale |  | CA |  |  | — |  |  | 2,160 |  |  | 8,522 |  |  | 1,144 |  |  | 2,160 |  |  | 9,146 |  |  | 11,306 |  |  | (2,358) |  | 2008 |  | 40 |
1168 |  | Palm Springs |  | CA |  |  | — |  |  | 1,005 |  |  | 5,183 |  |  | 496 |  |  | 1,005 |  |  | 5,315 |  |  | 6,320 |  |  | (1,308) |  | 2006 |  | 40 |
0789 |  | Pleasant Hill |  | CA |  |  | 6,270 |  |  | 2,480 |  |  | 21,333 |  |  | — |  |  | 2,480 |  |  | 20,633 |  |  | 23,113 |  |  | (5,373) |  | 2005 |  | 40 |
2369 |  | Rancho Mirage |  | CA |  |  | — |  |  | 1,798 |  |  | 24,053 |  |  | 667 |  |  | 1,811 |  |  | 23,792 |  |  | 25,603 |  |  | (5,586) |  | 2006 |  | 45 |
2128 |  | Red Bluff |  | CA |  |  | — |  |  | — |  |  | — |  |  | 279 |  |  | — |  |  | 279 |  |  | 279 |  |  | (7) |  | 2012 |  | 45 |
2205 |  | Roseville |  | CA |  |  | — |  |  | 3,844 |  |  | 33,527 |  |  | — |  |  | 3,844 |  |  | 33,527 |  |  | 37,371 |  |  | (1,740) |  | 2014 |  | 35 |
2380 |  | Roseville |  | CA |  |  | — |  |  | 692 |  |  | 21,662 |  |  | 102 |  |  | 692 |  |  | 21,764 |  |  | 22,456 |  |  | (1,791) |  | 2012 |  | 45 |
2353 |  | San Diego |  | CA |  |  | — |  |  | 6,384 |  |  | 32,072 |  |  | 1,348 |  |  | 6,384 |  |  | 32,317 |  |  | 38,701 |  |  | (7,402) |  | 2006 |  | 45 |
1007 |  | San Dimas |  | CA |  |  | — |  |  | 5,628 |  |  | 31,374 |  |  | 1,398 |  |  | 5,630 |  |  | 31,977 |  |  | 37,607 |  |  | (7,268) |  | 2006 |  | 40 |
2354 |  | San Juan Capistrano |  | CA |  |  | — |  |  | 5,983 |  |  | 9,614 |  |  | 1,380 |  |  | 5,983 |  |  | 10,708 |  |  | 16,691 |  |  | (2,377) |  | 2006 |  | 45 |
1167 |  | Santa Rosa |  | CA |  |  | — |  |  | 3,582 |  |  | 21,113 |  |  | 1,209 |  |  | 3,627 |  |  | 21,508 |  |  | 25,135 |  |  | (5,107) |  | 2006 |  | 40 |
0793 |  | South San Francisco |  | CA |  |  | 9,692 |  |  | 3,000 |  |  | 16,586 |  |  | — |  |  | 3,000 |  |  | 16,056 |  |  | 19,056 |  |  | (4,175) |  | 2005 |  | 40 |
1966 |  | Sun City |  | CA |  |  | 13,888 |  |  | 2,650 |  |  | 22,709 |  |  | 3,350 |  |  | 2,650 |  |  | 25,605 |  |  | 28,255 |  |  | (4,648) |  | 2011 |  | 30 |
0792 |  | Ventura |  | CA |  |  | 9,157 |  |  | 2,030 |  |  | 17,379 |  |  | — |  |  | 2,030 |  |  | 16,749 |  |  | 18,779 |  |  | (4,362) |  | 2005 |  | 40 |
1155 |  | Yorba Linda |  | CA |  |  | — |  |  | 4,968 |  |  | 19,290 |  |  | 1,603 |  |  | 5,030 |  |  | 20,035 |  |  | 25,065 |  |  | (4,495) |  | 2006 |  | 40 |
2055 |  | Yreka |  | CA |  |  | — |  |  | 565 |  |  | 9,184 |  |  | 137 |  |  | 565 |  |  | 9,321 |  |  | 9,886 |  |  | (947) |  | 2012 |  | 45 |
2505 |  | Arvada |  | CO |  |  | — |  |  | 2,012 |  |  | 29,264 |  |  | 140 |  |  | 2,012 |  |  | 29,404 |  |  | 31,416 |  |  | (527) |  | 2015 |  | 35 |
2506 |  | Boulder |  | CO |  |  | — |  |  | 2,447 |  |  | 35,471 |  |  | 36 |  |  | 2,447 |  |  | 35,507 |  |  | 37,954 |  |  | (606) |  | 2015 |  | 35 |
2373 |  | Colorado Springs |  | CO |  |  | — |  |  | 1,910 |  |  | 24,479 |  |  | 1,290 |  |  | 1,910 |  |  | 24,806 |  |  | 26,716 |  |  | (5,707) |  | 2006 |  | 45 |
2146 |  | Denver |  | CO |  |  | — |  |  | 875 |  |  | 5,693 |  |  | 168 |  |  | 875 |  |  | 5,861 |  |  | 6,736 |  |  | (647) |  | 2012 |  | 45 |
2515 |  | Denver |  | CO |  |  | — |  |  | 2,310 |  |  | 18,416 |  |  | 580 |  |  | 2,310 |  |  | 18,996 |  |  | 21,306 |  |  | (386) |  | 2015 |  | 35 |
0512 |  | Denver |  | CO |  |  | — |  |  | 2,810 |  |  | 36,021 |  |  | 1,885 |  |  | 2,810 |  |  | 37,906 |  |  | 40,716 |  |  | (15,146) |  | 2002 |  | 30 |
1233 |  | Denver |  | CO |  |  | — |  |  | 2,511 |  |  | 30,641 |  |  | 1,730 |  |  | 2,528 |  |  | 31,552 |  |  | 34,080 |  |  | (7,174) |  | 2006 |  | 40 |
2507 |  | Englewood |  | CO |  |  | — |  |  | 7,068 |  |  | 102,330 |  |  | 992 |  |  | 7,068 |  |  | 103,322 |  |  | 110,390 |  |  | (1,748) |  | 2015 |  | 35 |
1000 |  | Greenwood Village |  | CO |  |  | — |  |  | 3,367 |  |  | 43,610 |  |  | 2,894 |  |  | 3,367 |  |  | 45,708 |  |  | 49,075 |  |  | (9,528) |  | 2006 |  | 40 |
2508 |  | Lakewood |  | CO |  |  | — |  |  | 4,163 |  |  | 60,601 |  |  | 649 |  |  | 4,163 |  |  | 61,249 |  |  | 65,412 |  |  | (1,050) |  | 2015 |  | 35 |
2509 |  | Lakewood |  | CO |  |  | — |  |  | 2,562 |  |  | 37,215 |  |  | 70 |  |  | 2,562 |  |  | 37,285 |  |  | 39,847 |  |  | (666) |  | 2015 |  | 35 |
1234 |  | Lakewood |  | CO |  |  | — |  |  | 3,012 |  |  | 31,913 |  |  | 1,550 |  |  | 3,012 |  |  | 32,665 |  |  | 35,677 |  |  | (7,437) |  | 2006 |  | 40 |
2091 |  | Montrose |  | CO |  |  | — |  |  | 1,078 |  |  | 24,224 |  |  | 946 |  |  | 1,078 |  |  | 25,170 |  |  | 26,248 |  |  | (2,088) |  | 2012 |  | 50 |
2085 |  | Glastonbury |  | CT |  |  | — |  |  | 3,743 |  |  | 9,766 |  |  | 86 |  |  | 3,743 |  |  | 9,852 |  |  | 13,595 |  |  | (1,042) |  | 2012 |  | 45 |
2144 |  | Glastonbury |  | CT |  |  | — |  |  | 1,658 |  |  | 16,046 |  |  | 103 |  |  | 1,658 |  |  | 16,149 |  |  | 17,807 |  |  | (1,537) |  | 2012 |  | 45 |
0730 |  | Torrington |  | CT |  |  | — |  |  | 166 |  |  | 11,001 |  |  | 888 |  |  | 166 |  |  | 11,479 |  |  | 11,645 |  |  | (2,863) |  | 2005 |  | 40 |
2355 |  | Woodbridge |  | CT |  |  | — |  |  | 2,352 |  |  | 9,929 |  |  | 1,343 |  |  | 2,363 |  |  | 10,799 |  |  | 13,162 |  |  | (2,439) |  | 2006 |  | 45 |
2519 |  | Altamonte Springs |  | FL |  |  | — |  |  | 2,480 |  |  | 18,883 |  |  | 158 |  |  | 2,480 |  |  | 18,221 |  |  | 20,701 |  |  | (2,545) |  | 2015 |  | 35 |
2521 |  | Altamonte Springs |  | FL |  |  | — |  |  | — |  |  | — |  |  | 110 |  |  | — |  |  | 110 |  |  | 110 |  |  | (3) |  | 2015 |  | 35 |
0861 |  | Apopka |  | FL |  |  | — |  |  | 920 |  |  | 4,816 |  |  | 418 |  |  | 920 |  |  | 5,134 |  |  | 6,054 |  |  | (1,262) |  | 2006 |  | 35 |
0852 |  | Boca Raton |  | FL |  |  | — |  |  | 4,730 |  |  | 17,532 |  |  | 5,471 |  |  | 4,730 |  |  | 22,592 |  |  | 27,322 |  |  | (6,149) |  | 2006 |  | 30 |
1001 |  | Boca Raton |  | FL |  |  | 11,066 |  |  | 2,415 |  |  | 17,923 |  |  | — |  |  | 2,415 |  |  | 17,561 |  |  | 19,976 |  |  | (3,817) |  | 2006 |  | 40 |
1963 |  | Boynton Beach |  | FL |  |  | 27,256 |  |  | 2,550 |  |  | 31,521 |  |  | 3,279 |  |  | 2,550 |  |  | 34,240 |  |  | 36,790 |  |  | (5,967) |  | 2011 |  | 30 |
1964 |  | Boynton Beach |  | FL |  |  | 3,816 |  |  | 570 |  |  | 5,649 |  |  | 1,763 |  |  | 570 |  |  | 7,219 |  |  | 7,789 |  |  | (1,550) |  | 2011 |  | 30 |
0544 |  | Boynton Beach |  | FL |  |  | 7,633 |  |  | 1,270 |  |  | 4,773 |  |  | — |  |  | 1,270 |  |  | 4,773 |  |  | 6,043 |  |  | (1,531) |  | 2003 |  | 40 |
2520 |  | Clearwater |  | FL |  |  | — |  |  | 2,250 |  |  | 2,627 |  |  | 49 |  |  | 2,250 |  |  | 2,676 |  |  | 4,926 |  |  | (855) |  | 2015 |  | 35 |
0746 |  | Clearwater |  | FL |  |  | — |  |  | 3,856 |  |  | 12,176 |  |  | 805 |  |  | 3,856 |  |  | 10,850 |  |  | 14,706 |  |  | (3,011) |  | 2005 |  | 40 |
0862 |  | Clermont |  | FL |  |  | — |  |  | 440 |  |  | 6,518 |  |  | 133 |  |  | 440 |  |  | 6,551 |  |  | 6,991 |  |  | (1,705) |  | 2006 |  | 35 |
1002 |  | Coconut Creek |  | FL |  |  | 13,233 |  |  | 2,461 |  |  | 16,006 |  |  | — |  |  | 2,461 |  |  | 15,620 |  |  | 18,081 |  |  | (3,395) |  | 2006 |  | 40 |
0492 |  | Delray Beach |  | FL |  |  | 10,866 |  |  | 850 |  |  | 6,637 |  |  | — |  |  | 850 |  |  | 6,637 |  |  | 7,487 |  |  | (1,913) |  | 2002 |  | 43 |
2517 |  | Ft Lauderdale |  | FL |  |  | — |  |  | 2,800 |  |  | 43,482 |  |  | 114 |  |  | 2,800 |  |  | 43,597 |  |  | 46,397 |  |  | (835) |  | 2015 |  | 35 |
2351 |  | Gainesville |  | FL |  |  | — |  |  | 1,020 |  |  | 13,490 |  |  | 184 |  |  | 1,020 |  |  | 13,274 |  |  | 14,294 |  |  | (3,143) |  | 2015 |  | 50 |
1095 |  | Gainesville |  | FL |  |  | — |  |  | 1,221 |  |  | 12,226 |  |  | — |  |  | 1,221 |  |  | 12,001 |  |  | 13,222 |  |  | (2,775) |  | 2006 |  | 40 |
2437 |  | Jacksonville |  | FL |  |  | — |  |  | 2,450 |  |  | 13,683 |  |  | 201 |  |  | 2,450 |  |  | 13,883 |  |  | 16,333 |  |  | (265) |  | 2015 |  | 35 |
0490 |  | Jacksonville |  | FL |  |  | 42,014 |  |  | 3,250 |  |  | 25,936 |  |  | 6,170 |  |  | 3,250 |  |  | 32,106 |  |  | 35,356 |  |  | (10,755) |  | 2002 |  | 35 |
1096 |  | Jacksonville |  | FL |  |  | — |  |  | 1,587 |  |  | 15,616 |  |  | — |  |  | 1,587 |  |  | 15,298 |  |  | 16,885 |  |  | (3,538) |  | 2006 |  | 40 |
2518 |  | Lake Worth |  | FL |  |  | — |  |  | 1,680 |  |  | 13,224 |  |  | 452 |  |  | 1,680 |  |  | 13,675 |  |  | 15,355 |  |  | (308) |  | 2015 |  | 35 |
0855 |  | Lantana |  | FL |  |  | — |  |  | 3,520 |  |  | 26,452 |  |  | — |  |  | 3,520 |  |  | 25,652 |  |  | 29,172 |  |  | (8,052) |  | 2006 |  | 30 |
1968 |  | Largo |  | FL |  |  | 47,807 |  |  | 2,920 |  |  | 64,988 |  |  | 7,580 |  |  | 2,920 |  |  | 71,440 |  |  | 74,360 |  |  | (13,123) |  | 2011 |  | 30 |
2522 |  | Lutz |  | FL |  |  | — |  |  | 860 |  |  | 14,511 |  |  | 390 |  |  | 860 |  |  | 14,900 |  |  | 15,760 |  |  | (284) |  | 2015 |  | 35 |
0731 |  | Ocoee |  | FL |  |  | — |  |  | 2,096 |  |  | 9,322 |  |  | 571 |  |  | 2,096 |  |  | 9,372 |  |  | 11,468 |  |  | (2,371) |  | 2005 |  | 40 |
2523 |  | Orange City |  | FL |  |  | — |  |  | 830 |  |  | 9,359 |  |  | 222 |  |  | 830 |  |  | 9,581 |  |  | 10,411 |  |  | (198) |  | 2015 |  | 35 |
0859 |  | Oviedo |  | FL |  |  | — |  |  | 670 |  |  | 8,071 |  |  | 260 |  |  | 670 |  |  | 8,231 |  |  | 8,901 |  |  | (2,113) |  | 2006 |  | 35 |
1970 |  | Palm Beach Gardens |  | FL |  |  | 26,325 |  |  | 4,820 |  |  | 24,937 |  |  | 17,010 |  |  | 4,820 |  |  | 41,152 |  |  | 45,972 |  |  | (6,432) |  | 2011 |  | 30 |
1017 |  | Palm Harbor |  | FL |  |  | — |  |  | 1,462 |  |  | 16,774 |  |  | 500 |  |  | 1,462 |  |  | 16,888 |  |  | 18,350 |  |  | (3,973) |  | 2006 |  | 40 |
0732 |  | Port Orange |  | FL |  |  | — |  |  | 2,340 |  |  | 9,898 |  |  | 333 |  |  | 2,340 |  |  | 9,710 |  |  | 12,050 |  |  | (2,521) |  | 2005 |  | 40 |
2524 |  | Port St Lucie |  | FL |  |  | — |  |  | 860 |  |  | 10,087 |  |  | 304 |  |  | 860 |  |  | 10,392 |  |  | 11,252 |  |  | (215) |  | 2015 |  | 35 |
1971 |  | Sarasota |  | FL |  |  | 22,041 |  |  | 3,050 |  |  | 29,516 |  |  | 4,249 |  |  | 3,050 |  |  | 33,345 |  |  | 36,395 |  |  | (5,901) |  | 2011 |  | 30 |
2525 |  | Sarasota |  | FL |  |  | — |  |  | 1,470 |  |  | 15,639 |  |  | 96 |  |  | 1,470 |  |  | 15,735 |  |  | 17,205 |  |  | (329) |  | 2015 |  | 35 |
2194 |  | Springtree |  | FL |  |  | — |  |  | 1,066 |  |  | 15,874 |  |  | 215 |  |  | 1,066 |  |  | 16,089 |  |  | 17,155 |  |  | (1,570) |  | 2013 |  | 45 |
0802 |  | St. Augustine |  | FL |  |  | — |  |  | 830 |  |  | 11,627 |  |  | 290 |  |  | 830 |  |  | 11,517 |  |  | 12,347 |  |  | (3,326) |  | 2005 |  | 35 |
1097 |  | Tallahassee |  | FL |  |  | — |  |  | 1,331 |  |  | 19,039 |  |  | — |  |  | 1,331 |  |  | 18,695 |  |  | 20,026 |  |  | (4,323) |  | 2006 |  | 40 |
2526 |  | Tamarac |  | FL |  |  | — |  |  | 950 |  |  | 15,651 |  |  | 42 |  |  | 950 |  |  | 15,693 |  |  | 16,643 |  |  | (297) |  | 2015 |  | 35 |
0224 |  | Tampa |  | FL |  |  | — |  |  | 600 |  |  | 5,566 |  |  | 1,147 |  |  | 696 |  |  | 6,595 |  |  | 7,291 |  |  | (2,592) |  | 1997 |  | 45 |
0849 |  | Tampa |  | FL |  |  | — |  |  | 800 |  |  | 11,340 |  |  | 773 |  |  | 800 |  |  | 11,713 |  |  | 12,513 |  |  | (2,661) |  | 2006 |  | 40 |
2513 |  | Venice |  | FL |  |  | — |  |  | 1,120 |  |  | 20,366 |  |  | 378 |  |  | 1,120 |  |  | 20,744 |  |  | 21,864 |  |  | (383) |  | 2015 |  | 35 |
1605 |  | Vero Beach |  | FL |  |  | — |  |  | 700 |  |  | 16,234 |  |  | — |  |  | 700 |  |  | 16,234 |  |  | 16,934 |  |  | (2,962) |  | 2010 |  | 35 |
2527 |  | Vero Beach |  | FL |  |  | — |  |  | 1,040 |  |  | 17,186 |  |  | 359 |  |  | 1,040 |  |  | 17,545 |  |  | 18,585 |  |  | (337) |  | 2015 |  | 35 |
1257 |  | Vero Beach |  | FL |  |  | — |  |  | 2,035 |  |  | 34,993 |  |  | 201 |  |  | 2,035 |  |  | 33,634 |  |  | 35,669 |  |  | (7,775) |  | 2006 |  | 40 |
1976 |  | West Palm Beach |  | FL |  |  | — |  |  | 390 |  |  | 2,241 |  |  | 294 |  |  | 390 |  |  | 2,451 |  |  | 2,841 |  |  | (470) |  | 2011 |  | 30 |
1098 |  | Alpharetta |  | GA |  |  | — |  |  | 793 |  |  | 8,761 |  |  | 1,181 |  |  | 793 |  |  | 9,656 |  |  | 10,449 |  |  | (2,212) |  | 2006 |  | 40 |
2370 |  | Atlanta |  | GA |  |  | — |  |  | 2,665 |  |  | 5,911 |  |  | 854 |  |  | 2,669 |  |  | 6,491 |  |  | 9,160 |  |  | (1,570) |  | 2006 |  | 45 |

126

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
1099 |  | Atlanta |  | GA |  |  | — |  |  | 687 |  |  | 5,507 |  |  | 1,281 |  |  | 687 |  |  | 6,387 |  |  | 7,074 |  |  | (1,476) |  | 2006 |  | 40 |
2108 |  | Buford |  | GA |  |  | — |  |  | 562 |  |  | 3,604 |  |  | 190 |  |  | 562 |  |  | 3,794 |  |  | 4,356 |  |  | (405) |  | 2012 |  | 45 |
2109 |  | Buford |  | GA |  |  | — |  |  | 536 |  |  | 3,142 |  |  | 141 |  |  | 536 |  |  | 3,283 |  |  | 3,819 |  |  | (345) |  | 2012 |  | 45 |
2388 |  | Buford |  | GA |  |  | — |  |  | 1,987 |  |  | 6,561 |  |  | 231 |  |  | 1,987 |  |  | 6,792 |  |  | 8,779 |  |  | (741) |  | 2012 |  | 45 |
2053 |  | Canton |  | GA |  |  | — |  |  | 401 |  |  | 17,888 |  |  | 69 |  |  | 401 |  |  | 17,957 |  |  | 18,358 |  |  | (1,383) |  | 2012 |  | 50 |
2165 |  | Hartwell |  | GA |  |  | — |  |  | 368 |  |  | 6,337 |  |  | 227 |  |  | 368 |  |  | 6,564 |  |  | 6,932 |  |  | (569) |  | 2012 |  | 45 |
2066 |  | Lawrenceville |  | GA |  |  | — |  |  | 581 |  |  | 2,669 |  |  | 78 |  |  | 581 |  |  | 2,747 |  |  | 3,328 |  |  | (356) |  | 2012 |  | 45 |
1241 |  | Lilburn |  | GA |  |  | — |  |  | 907 |  |  | 17,340 |  |  | 132 |  |  | 907 |  |  | 16,916 |  |  | 17,823 |  |  | (3,925) |  | 2006 |  | 40 |
2167 |  | Lithia Springs |  | GA |  |  | — |  |  | 1,031 |  |  | 6,954 |  |  | 79 |  |  | 1,031 |  |  | 7,033 |  |  | 8,064 |  |  | (767) |  | 2012 |  | 40 |
2105 |  | Macon |  | GA |  |  | — |  |  | 814 |  |  | 10,890 |  |  | 49 |  |  | 814 |  |  | 10,939 |  |  | 11,753 |  |  | (881) |  | 2012 |  | 45 |
2395 |  | Marietta |  | GA |  |  | — |  |  | 987 |  |  | 4,818 |  |  | 119 |  |  | 987 |  |  | 4,937 |  |  | 5,924 |  |  | (542) |  | 2012 |  | 45 |
1112 |  | Marietta |  | GA |  |  | — |  |  | 894 |  |  | 6,944 |  |  | 725 |  |  | 904 |  |  | 7,392 |  |  | 8,296 |  |  | (1,798) |  | 2006 |  | 40 |
2086 |  | Newnan |  | GA |  |  | — |  |  | 1,227 |  |  | 4,202 |  |  | 56 |  |  | 1,227 |  |  | 4,258 |  |  | 5,485 |  |  | (514) |  | 2012 |  | 45 |
2118 |  | Woodstock |  | GA |  |  | — |  |  | 764 |  |  | 7,334 |  |  | 73 |  |  | 764 |  |  | 7,407 |  |  | 8,171 |  |  | (683) |  | 2012 |  | 45 |
2157 |  | Woodstock |  | GA |  |  | — |  |  | 1,926 |  |  | 12,757 |  |  | 81 |  |  | 1,926 |  |  | 12,838 |  |  | 14,764 |  |  | (1,185) |  | 2012 |  | 45 |
1088 |  | Davenport |  | IA |  |  | — |  |  | 511 |  |  | 8,039 |  |  | — |  |  | 511 |  |  | 7,868 |  |  | 8,379 |  |  | (1,819) |  | 2006 |  | 40 |
1093 |  | Marion |  | IA |  |  | — |  |  | 502 |  |  | 6,865 |  |  | — |  |  | 502 |  |  | 6,713 |  |  | 7,215 |  |  | (1,552) |  | 2006 |  | 40 |
2397 |  | Sioux City |  | IA |  |  | — |  |  | 197 |  |  | 8,078 |  |  | 484 |  |  | 197 |  |  | 8,562 |  |  | 8,759 |  |  | (827) |  | 2012 |  | 45 |
1091 |  | Bloomington |  | IL |  |  | — |  |  | 798 |  |  | 13,091 |  |  | 127 |  |  | 798 |  |  | 12,959 |  |  | 13,757 |  |  | (2,967) |  | 2006 |  | 40 |
2375 |  | Burr Ridge |  | IL |  |  | — |  |  | 2,640 |  |  | 23,901 |  |  | 1,691 |  |  | 2,704 |  |  | 24,538 |  |  | 27,242 |  |  | (5,451) |  | 2010 |  | 45 |
1089 |  | Champaign |  | IL |  |  | — |  |  | 101 |  |  | 4,207 |  |  | 1,592 |  |  | 279 |  |  | 5,463 |  |  | 5,742 |  |  | (1,179) |  | 2006 |  | 40 |
2200 |  | Deer Park |  | IL |  |  | — |  |  | 4,172 |  |  | 2,417 |  |  | 34,630 |  |  | 4,172 |  |  | 37,047 |  |  | 41,219 |  |  | — |  | 2014 |  | * |
1090 |  | Macomb |  | IL |  |  | — |  |  | 81 |  |  | 6,062 |  |  | — |  |  | 81 |  |  | 5,905 |  |  | 5,986 |  |  | (1,366) |  | 2006 |  | 40 |
1143 |  | Mt. Vernon |  | IL |  |  | — |  |  | 296 |  |  | 15,935 |  |  | 3,562 |  |  | 512 |  |  | 18,949 |  |  | 19,461 |  |  | (4,102) |  | 2006 |  | 40 |
1969 |  | Niles |  | IL |  |  | 25,231 |  |  | 3,790 |  |  | 32,912 |  |  | 4,889 |  |  | 3,790 |  |  | 37,076 |  |  | 40,866 |  |  | (6,903) |  | 2011 |  | 30 |
1005 |  | Oak Park |  | IL |  |  | 24,975 |  |  | 3,476 |  |  | 35,259 |  |  | 1,862 |  |  | 3,476 |  |  | 36,575 |  |  | 40,051 |  |  | (7,653) |  | 2006 |  | 40 |
1961 |  | Olympia Fields |  | IL |  |  | 28,513 |  |  | 4,120 |  |  | 29,400 |  |  | 2,886 |  |  | 4,120 |  |  | 31,763 |  |  | 35,883 |  |  | (5,478) |  | 2011 |  | 30 |
1162 |  | Orland Park |  | IL |  |  | — |  |  | 2,623 |  |  | 23,154 |  |  | 534 |  |  | 2,623 |  |  | 23,058 |  |  | 25,681 |  |  | (5,351) |  | 2006 |  | 40 |
1092 |  | Peoria |  | IL |  |  | — |  |  | 404 |  |  | 10,050 |  |  | — |  |  | 404 |  |  | 9,840 |  |  | 10,244 |  |  | (2,276) |  | 2006 |  | 40 |
2376 |  | Prospect Heights |  | IL |  |  | — |  |  | 2,680 |  |  | 20,299 |  |  | 1,870 |  |  | 2,725 |  |  | 21,119 |  |  | 23,844 |  |  | (4,642) |  | 2010 |  | 45 |
2367 |  | Schaumburg |  | IL |  |  | — |  |  | 1,701 |  |  | 12,037 |  |  | 1,322 |  |  | 1,704 |  |  | 12,772 |  |  | 14,476 |  |  | (2,809) |  | 2006 |  | 45 |
1952 |  | Vernon Hills |  | IL |  |  | 41,844 |  |  | 4,900 |  |  | 45,854 |  |  | 4,977 |  |  | 4,900 |  |  | 50,144 |  |  | 55,044 |  |  | (8,378) |  | 2011 |  | 30 |
1237 |  | Wilmette |  | IL |  |  | — |  |  | 1,100 |  |  | 9,373 |  |  | — |  |  | 1,100 |  |  | 9,149 |  |  | 10,249 |  |  | (2,116) |  | 2006 |  | 40 |
0379 |  | Evansville |  | IN |  |  | — |  |  | 500 |  |  | 9,302 |  |  | — |  |  | 500 |  |  | 7,762 |  |  | 8,262 |  |  | (2,821) |  | 1999 |  | 45 |
1144 |  | Indianapolis |  | IN |  |  | — |  |  | 1,197 |  |  | 7,718 |  |  | — |  |  | 1,197 |  |  | 7,486 |  |  | 8,683 |  |  | (1,731) |  | 2006 |  | 40 |
0457 |  | Jasper |  | IN |  |  | — |  |  | 165 |  |  | 5,952 |  |  | 359 |  |  | 165 |  |  | 6,311 |  |  | 6,476 |  |  | (2,627) |  | 2001 |  | 35 |
2047 |  | Kokomo |  | IN |  |  | — |  |  | 296 |  |  | 3,245 |  |  | — |  |  | 296 |  |  | 3,057 |  |  | 3,353 |  |  | (428) |  | 2012 |  | 30 |
1146 |  | West Lafayette |  | IN |  |  | — |  |  | 813 |  |  | 10,876 |  |  | — |  |  | 813 |  |  | 10,626 |  |  | 11,439 |  |  | (2,457) |  | 2006 |  | 40 |
2371 |  | Edgewood |  | KY |  |  | — |  |  | 1,868 |  |  | 4,934 |  |  | 1,895 |  |  | 1,915 |  |  | 6,352 |  |  | 8,267 |  |  | (1,270) |  | 2006 |  | 45 |
0697 |  | Lexington |  | KY |  |  | — |  |  | 2,093 |  |  | 16,917 |  |  | — |  |  | 2,093 |  |  | 16,299 |  |  | 18,392 |  |  | (6,245) |  | 2004 |  | 30 |
1105 |  | Louisville |  | KY |  |  | — |  |  | 1,499 |  |  | 26,252 |  |  | 240 |  |  | 1,513 |  |  | 25,868 |  |  | 27,381 |  |  | (6,095) |  | 2006 |  | 40 |
2115 |  | Murray |  | KY |  |  | — |  |  | 288 |  |  | 7,400 |  |  | 98 |  |  | 288 |  |  | 7,498 |  |  | 7,786 |  |  | (763) |  | 2012 |  | 45 |
2135 |  | Paducah |  | KY |  |  | — |  |  | 621 |  |  | 16,768 |  |  | 71 |  |  | 621 |  |  | 16,839 |  |  | 17,460 |  |  | (1,297) |  | 2012 |  | 50 |
2358 |  | Danvers |  | MA |  |  | — |  |  | 4,616 |  |  | 30,692 |  |  | 1,120 |  |  | 4,621 |  |  | 31,221 |  |  | 35,842 |  |  | (7,209) |  | 2006 |  | 45 |
2363 |  | Dartmouth |  | MA |  |  | — |  |  | 3,145 |  |  | 6,880 |  |  | 691 |  |  | 3,176 |  |  | 7,292 |  |  | 10,468 |  |  | (1,789) |  | 2006 |  | 45 |
2357 |  | Dedham |  | MA |  |  | — |  |  | 3,930 |  |  | 21,340 |  |  | 1,212 |  |  | 3,930 |  |  | 21,977 |  |  | 25,907 |  |  | (5,034) |  | 2006 |  | 45 |
1158 |  | Plymouth |  | MA |  |  | — |  |  | 2,434 |  |  | 9,027 |  |  | 489 |  |  | 2,438 |  |  | 9,035 |  |  | 11,473 |  |  | (2,219) |  | 2006 |  | 40 |
2365 |  | Baltimore |  | MD |  |  | — |  |  | 1,684 |  |  | 18,889 |  |  | 532 |  |  | 1,696 |  |  | 18,986 |  |  | 20,682 |  |  | (4,475) |  | 2006 |  | 45 |
1249 |  | Frederick |  | MD |  |  | — |  |  | 609 |  |  | 9,158 |  |  | 401 |  |  | 609 |  |  | 9,314 |  |  | 9,923 |  |  | (2,269) |  | 2006 |  | 40 |
2541 |  | Olney |  | MD |  |  | — |  |  | 1,580 |  |  | 34,363 |  |  | — |  |  | 1,580 |  |  | 34,363 |  |  | 35,943 |  |  | (161) |  | 2015 |  | 40 |
2356 |  | Pikesville |  | MD |  |  | — |  |  | 1,416 |  |  | 8,854 |  |  | 612 |  |  | 1,416 |  |  | 9,005 |  |  | 10,421 |  |  | (2,192) |  | 2006 |  | 45 |
0281 |  | Westminster |  | MD |  |  | — |  |  | 768 |  |  | 5,251 |  |  | 229 |  |  | 768 |  |  | 5,535 |  |  | 6,303 |  |  | (1,937) |  | 1998 |  | 45 |
0546 |  | Cape Elizabeth |  | ME |  |  | — |  |  | 630 |  |  | 3,524 |  |  | 93 |  |  | 630 |  |  | 3,617 |  |  | 4,247 |  |  | (1,156) |  | 2003 |  | 40 |
0545 |  | Saco |  | ME |  |  | — |  |  | 80 |  |  | 2,363 |  |  | 155 |  |  | 80 |  |  | 2,518 |  |  | 2,598 |  |  | (801) |  | 2003 |  | 40 |
1258 |  | Auburn Hills |  | MI |  |  | — |  |  | 2,281 |  |  | 10,692 |  |  | — |  |  | 2,281 |  |  | 10,692 |  |  | 12,973 |  |  | (2,473) |  | 2006 |  | 40 |
1248 |  | Farmington Hills |  | MI |  |  | — |  |  | 1,013 |  |  | 12,119 |  |  | 457 |  |  | 1,013 |  |  | 12,233 |  |  | 13,246 |  |  | (3,019) |  | 2006 |  | 40 |
1094 |  | Portage |  | MI |  |  | — |  |  | 276 |  |  | 5,733 |  |  | 5,012 |  |  | 276 |  |  | 10,378 |  |  | 10,654 |  |  | (2,168) |  | 2006 |  | 40 |
2435 |  | Southfield |  | MI |  |  | — |  |  | 2,235 |  |  | 9,961 |  |  | 61 |  |  | 2,235 |  |  | 10,022 |  |  | 12,257 |  |  | (221) |  | 2015 |  | 35 |
0472 |  | Sterling Heights |  | MI |  |  | — |  |  | 920 |  |  | 7,326 |  |  | — |  |  | 920 |  |  | 7,326 |  |  | 8,246 |  |  | (3,000) |  | 2001 |  | 35 |
1259 |  | Sterling Heights |  | MI |  |  | — |  |  | 1,593 |  |  | 11,500 |  |  | — |  |  | 1,593 |  |  | 11,181 |  |  | 12,774 |  |  | (2,586) |  | 2006 |  | 40 |
2143 |  | Champlin |  | MN |  |  | — |  |  | 1,576 |  |  | 26,725 |  |  | 291 |  |  | 1,576 |  |  | 27,016 |  |  | 28,592 |  |  | (6,061) |  | 2012 |  | 50 |
1235 |  | Des Peres |  | MO |  |  | — |  |  | 4,361 |  |  | 20,664 |  |  | — |  |  | 4,361 |  |  | 20,046 |  |  | 24,407 |  |  | (4,636) |  | 2006 |  | 40 |
1236 |  | Richmond Heights |  | MO |  |  | — |  |  | 1,744 |  |  | 24,232 |  |  | — |  |  | 1,744 |  |  | 23,548 |  |  | 25,292 |  |  | (5,445) |  | 2006 |  | 40 |
0853 |  | St. Louis |  | MO |  |  | — |  |  | 2,500 |  |  | 20,343 |  |  | — |  |  | 2,500 |  |  | 19,853 |  |  | 22,353 |  |  | (6,342) |  | 2006 |  | 30 |
2081 |  | St. Peters |  | MO |  |  | — |  |  | 1,377 |  |  | 31,508 |  |  | 1,877 |  |  | 1,377 |  |  | 33,385 |  |  | 34,762 |  |  | (3,055) |  | 2012 |  | 45 |
2074 |  | Oxford |  | MS |  |  | — |  |  | 2,003 |  |  | 14,140 |  |  | 99 |  |  | 2,003 |  |  | 14,239 |  |  | 16,242 |  |  | (1,247) |  | 2012 |  | 45 |
0842 |  | Great Falls |  | MT |  |  | — |  |  | 500 |  |  | 5,683 |  |  | — |  |  | 500 |  |  | 5,423 |  |  | 5,923 |  |  | (1,333) |  | 2006 |  | 40 |
2163 |  | Great Falls |  | MT |  |  | — |  |  | 252 |  |  | 9,908 |  |  | 199 |  |  | 252 |  |  | 10,107 |  |  | 10,359 |  |  | (853) |  | 2012 |  | 45 |
0878 |  | Charlotte |  | NC |  |  | — |  |  | 710 |  |  | 9,559 |  |  | — |  |  | 710 |  |  | 9,159 |  |  | 9,869 |  |  | (2,080) |  | 2006 |  | 40 |
2374 |  | Charlotte |  | NC |  |  | — |  |  | 2,051 |  |  | 6,529 |  |  | 1,168 |  |  | 2,051 |  |  | 7,514 |  |  | 9,565 |  |  | (1,125) |  | 2010 |  | 45 |
1119 |  | Concord |  | NC |  |  | — |  |  | 601 |  |  | 7,615 |  |  | 166 |  |  | 612 |  |  | 7,546 |  |  | 8,158 |  |  | (1,830) |  | 2006 |  | 40 |
2126 |  | Mooresville |  | NC |  |  | — |  |  | 2,538 |  |  | 37,617 |  |  | 366 |  |  | 2,538 |  |  | 37,983 |  |  | 40,521 |  |  | (3,101) |  | 2012 |  | 50 |
1254 |  | Raleigh |  | NC |  |  | — |  |  | 1,191 |  |  | 11,532 |  |  | 369 |  |  | 1,191 |  |  | 11,616 |  |  | 12,807 |  |  | (2,767) |  | 2006 |  | 40 |
2127 |  | Minot |  | ND |  |  | — |  |  | 685 |  |  | 16,047 |  |  | 362 |  |  | 685 |  |  | 16,409 |  |  | 17,094 |  |  | (1,420) |  | 2012 |  | 45 |
2080 |  | Kearney |  | NE |  |  | — |  |  | 856 |  |  | 22,584 |  |  | 290 |  |  | 856 |  |  | 22,874 |  |  | 23,730 |  |  | (1,952) |  | 2012 |  | 45 |
2169 |  | Lexington |  | NE |  |  | — |  |  | 474 |  |  | 8,405 |  |  | 55 |  |  | 474 |  |  | 8,460 |  |  | 8,934 |  |  | (996) |  | 2012 |  | 40 |
2168 |  | Mc Cook |  | NE |  |  | — |  |  | 1,024 |  |  | 13,789 |  |  | 211 |  |  | 1,024 |  |  | 14,000 |  |  | 15,024 |  |  | (1,639) |  | 2012 |  | 40 |
2129 |  | Seward |  | NE |  |  | — |  |  | 792 |  |  | 18,276 |  |  | 260 |  |  | 792 |  |  | 18,536 |  |  | 19,328 |  |  | (1,859) |  | 2012 |  | 40 |
2119 |  | Wayne |  | NE |  |  | — |  |  | 1,005 |  |  | 13,953 |  |  | 279 |  |  | 1,005 |  |  | 14,232 |  |  | 15,237 |  |  | (1,304) |  | 2012 |  | 45 |
1599 |  | Cherry Hill |  | NJ |  |  | — |  |  | 2,420 |  |  | 11,042 |  |  | 1,454 |  |  | 2,420 |  |  | 11,946 |  |  | 14,366 |  |  | (2,400) |  | 2010 |  | 25 |
1239 |  | Cresskill |  | NJ |  |  | — |  |  | 4,684 |  |  | 53,927 |  |  | 229 |  |  | 4,684 |  |  | 53,170 |  |  | 57,854 |  |  | (12,312) |  | 2006 |  | 40 |
0734 |  | Hillsborough |  | NJ |  |  | — |  |  | 1,042 |  |  | 10,042 |  |  | 131 |  |  | 1,042 |  |  | 9,707 |  |  | 10,749 |  |  | (2,564) |  | 2005 |  | 40 |
1242 |  | Madison |  | NJ |  |  | — |  |  | 3,157 |  |  | 19,909 |  |  | 75 |  |  | 3,157 |  |  | 19,398 |  |  | 22,555 |  |  | (4,508) |  | 2006 |  | 40 |
0733 |  | Manahawkin |  | NJ |  |  | — |  |  | 921 |  |  | 9,927 |  |  | 318 |  |  | 921 |  |  | 9,779 |  |  | 10,700 |  |  | (2,538) |  | 2005 |  | 40 |
2359 |  | Paramus |  | NJ |  |  | — |  |  | 4,280 |  |  | 31,684 |  |  | 1,152 |  |  | 4,280 |  |  | 32,135 |  |  | 36,415 |  |  | (7,396) |  | 2006 |  | 45 |
1231 |  | Saddle River |  | NJ |  |  | — |  |  | 1,784 |  |  | 15,625 |  |  | 351 |  |  | 1,784 |  |  | 15,532 |  |  | 17,316 |  |  | (3,695) |  | 2006 |  | 40 |
0245 |  | Voorhees Township |  | NJ |  |  | — |  |  | 900 |  |  | 7,629 |  |  | 279 |  |  | 900 |  |  | 7,908 |  |  | 8,808 |  |  | (2,819) |  | 1998 |  | 45 |
0213 |  | Albuquerque |  | NM |  |  | — |  |  | 767 |  |  | 9,324 |  |  | — |  |  | 767 |  |  | 8,825 |  |  | 9,592 |  |  | (3,643) |  | 1996 |  | 45 |
2387 |  | Albuquerque |  | NM |  |  | — |  |  | 2,223 |  |  | 8,049 |  |  | 79 |  |  | 2,223 |  |  | 8,128 |  |  | 10,351 |  |  | (813) |  | 2012 |  | 45 |
2161 |  | Rio Rancho |  | NM |  |  | — |  |  | 1,154 |  |  | 13,726 |  |  | 121 |  |  | 1,154 |  |  | 13,847 |  |  | 15,001 |  |  | (1,311) |  | 2012 |  | 40 |
2121 |  | Roswell |  | NM |  |  | — |  |  | 618 |  |  | 7,038 |  |  | 539 |  |  | 618 |  |  | 7,577 |  |  | 8,195 |  |  | (822) |  | 2012 |  | 45 |

127

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
2150 |  | Roswell |  | NM |  |  | — |  |  | 837 |  |  | 8,614 |  |  | 835 |  |  | 837 |  |  | 9,449 |  |  | 10,286 |  |  | (1,036) |  | 2012 |  | 45 |
0796 |  | Las Vegas |  | NV |  |  | — |  |  | 1,960 |  |  | 5,816 |  |  | — |  |  | 1,960 |  |  | 5,426 |  |  | 7,386 |  |  | (1,413) |  | 2005 |  | 40 |
2110 |  | Las Vegas |  | NV |  |  | — |  |  | 667 |  |  | 14,469 |  |  | 213 |  |  | 667 |  |  | 14,682 |  |  | 15,349 |  |  | (1,525) |  | 2012 |  | 45 |
1252 |  | Brooklyn |  | NY |  |  | — |  |  | 8,117 |  |  | 23,627 |  |  | 783 |  |  | 8,117 |  |  | 23,834 |  |  | 31,951 |  |  | (5,907) |  | 2006 |  | 40 |
1256 |  | Brooklyn |  | NY |  |  | — |  |  | 5,215 |  |  | 39,052 |  |  | 723 |  |  | 5,215 |  |  | 38,924 |  |  | 44,139 |  |  | (9,037) |  | 2006 |  | 40 |
2177 |  | Clifton Park |  | NY |  |  | — |  |  | 2,257 |  |  | 11,470 |  |  | — |  |  | 2,257 |  |  | 11,470 |  |  | 13,727 |  |  | (1,122) |  | 2012 |  | 50 |
2176 |  | Greece |  | NY |  |  | — |  |  | 666 |  |  | 9,569 |  |  | — |  |  | 666 |  |  | 9,569 |  |  | 10,235 |  |  | (927) |  | 2012 |  | 45 |
2178 |  | Greece |  | NY |  |  | — |  |  | 601 |  |  | 7,362 |  |  | — |  |  | 601 |  |  | 7,362 |  |  | 7,963 |  |  | (727) |  | 2012 |  | 45 |
2174 |  | Orchard Park |  | NY |  |  | — |  |  | 726 |  |  | 17,735 |  |  | — |  |  | 726 |  |  | 17,735 |  |  | 18,461 |  |  | (1,813) |  | 2012 |  | 45 |
2175 |  | Orchard Park |  | NY |  |  | — |  |  | 478 |  |  | 11,961 |  |  | — |  |  | 478 |  |  | 11,961 |  |  | 12,439 |  |  | (1,207) |  | 2012 |  | 45 |
2436 |  | Bedford |  | OH |  |  | — |  |  | 2,110 |  |  | 5,932 |  |  | 75 |  |  | 2,110 |  |  | 6,008 |  |  | 8,118 |  |  | (143) |  | 2015 |  | 35 |
2516 |  | Centerville |  | OH |  |  | — |  |  | 1,080 |  |  | 10,911 |  |  | 621 |  |  | 1,080 |  |  | 11,532 |  |  | 12,612 |  |  | (247) |  | 2015 |  | 35 |
2512 |  | Cincinnati |  | OH |  |  | — |  |  | 1,220 |  |  | 6,391 |  |  | 288 |  |  | 1,220 |  |  | 6,679 |  |  | 7,899 |  |  | (173) |  | 2015 |  | 35 |
0473 |  | Cincinnati |  | OH |  |  | — |  |  | 600 |  |  | 4,428 |  |  | — |  |  | 600 |  |  | 4,428 |  |  | 5,028 |  |  | (1,814) |  | 2001 |  | 35 |
0841 |  | Columbus |  | OH |  |  | — |  |  | 970 |  |  | 7,806 |  |  | 1,330 |  |  | 970 |  |  | 8,746 |  |  | 9,716 |  |  | (2,042) |  | 2006 |  | 40 |
0857 |  | Fairborn |  | OH |  |  | — |  |  | 810 |  |  | 8,311 |  |  | 42 |  |  | 810 |  |  | 8,053 |  |  | 8,863 |  |  | (2,158) |  | 2006 |  | 36 |
1147 |  | Fairborn |  | OH |  |  | — |  |  | 298 |  |  | 10,704 |  |  | 3,068 |  |  | 298 |  |  | 13,541 |  |  | 13,839 |  |  | (3,007) |  | 2006 |  | 40 |
1386 |  | Marietta |  | OH |  |  | — |  |  | 1,069 |  |  | 11,435 |  |  | 119 |  |  | 1,069 |  |  | 11,349 |  |  | 12,418 |  |  | (3,732) |  | 2007 |  | 40 |
1159 |  | Willoughby |  | OH |  |  | — |  |  | 1,177 |  |  | 9,982 |  |  | 1,029 |  |  | 1,194 |  |  | 10,589 |  |  | 11,783 |  |  | (2,415) |  | 2006 |  | 40 |
1253 |  | Youngstown |  | OH |  |  | — |  |  | 695 |  |  | 10,444 |  |  | 268 |  |  | 695 |  |  | 10,375 |  |  | 11,070 |  |  | (2,410) |  | 2006 |  | 40 |
2158 |  | Broken Arrow |  | OK |  |  | — |  |  | 1,115 |  |  | 18,852 |  |  | 194 |  |  | 1,115 |  |  | 19,046 |  |  | 20,161 |  |  | (1,575) |  | 2012 |  | 45 |
2122 |  | Muskogee |  | OK |  |  | — |  |  | 412 |  |  | 2,815 |  |  | 125 |  |  | 412 |  |  | 2,940 |  |  | 3,352 |  |  | (375) |  | 2012 |  | 45 |
2083 |  | Oklahoma City |  | OK |  |  | — |  |  | 2,116 |  |  | 28,007 |  |  | 1,550 |  |  | 2,116 |  |  | 29,557 |  |  | 31,673 |  |  | (2,485) |  | 2012 |  | 45 |
2372 |  | Oklahoma City |  | OK |  |  | — |  |  | 801 |  |  | 4,904 |  |  | 420 |  |  | 811 |  |  | 4,931 |  |  | 5,742 |  |  | (1,225) |  | 2006 |  | 45 |
2383 |  | Oklahoma City |  | OK |  |  | — |  |  | 1,345 |  |  | 3,943 |  |  | 147 |  |  | 1,345 |  |  | 4,090 |  |  | 5,435 |  |  | (473) |  | 2012 |  | 45 |
2070 |  | Tahlequah |  | OK |  |  | — |  |  | 256 |  |  | 5,648 |  |  | 286 |  |  | 256 |  |  | 5,934 |  |  | 6,190 |  |  | (582) |  | 2012 |  | 45 |
1160 |  | Tulsa |  | OK |  |  | — |  |  | 1,115 |  |  | 11,028 |  |  | 494 |  |  | 1,129 |  |  | 10,819 |  |  | 11,948 |  |  | (2,572) |  | 2006 |  | 40 |
2130 |  | Ashland |  | OR |  |  | — |  |  | — |  |  | 19,303 |  |  | 74 |  |  | — |  |  | 19,377 |  |  | 19,377 |  |  | (1,721) |  | 2012 |  | 45 |
2103 |  | Eagle Point |  | OR |  |  | — |  |  | 609 |  |  | 12,117 |  |  | 60 |  |  | 609 |  |  | 12,177 |  |  | 12,786 |  |  | (1,044) |  | 2012 |  | 45 |
2098 |  | Eugene |  | OR |  |  | — |  |  | 1,082 |  |  | 18,858 |  |  | 52 |  |  | 1,082 |  |  | 18,910 |  |  | 19,992 |  |  | (1,582) |  | 2012 |  | 50 |
2104 |  | Eugene |  | OR |  |  | — |  |  | 653 |  |  | 13,568 |  |  | 47 |  |  | 653 |  |  | 13,615 |  |  | 14,268 |  |  | (1,159) |  | 2012 |  | 45 |
2390 |  | Grants Pass |  | OR |  |  | — |  |  | 430 |  |  | 3,267 |  |  | 20 |  |  | 430 |  |  | 3,287 |  |  | 3,717 |  |  | (365) |  | 2012 |  | 45 |
2391 |  | Grants Pass |  | OR |  |  | — |  |  | 1,064 |  |  | 16,124 |  |  | 59 |  |  | 1,064 |  |  | 16,183 |  |  | 17,247 |  |  | (1,266) |  | 2012 |  | 45 |
2392 |  | Grants Pass |  | OR |  |  | — |  |  | 618 |  |  | 2,932 |  |  | 109 |  |  | 618 |  |  | 3,041 |  |  | 3,659 |  |  | (499) |  | 2012 |  | 45 |
2393 |  | Grants Pass |  | OR |  |  | — |  |  | 774 |  |  | 13,230 |  |  | 49 |  |  | 774 |  |  | 13,279 |  |  | 14,053 |  |  | (1,113) |  | 2012 |  | 45 |
2139 |  | Gresham |  | OR |  |  | — |  |  | 465 |  |  | 6,403 |  |  | 28 |  |  | 465 |  |  | 6,431 |  |  | 6,896 |  |  | (560) |  | 2012 |  | 50 |
2182 |  | Hermiston Terrace |  | OR |  |  | 2,657 |  |  | 582 |  |  | 8,087 |  |  | — |  |  | 582 |  |  | 8,087 |  |  | 8,669 |  |  | (628) |  | 2013 |  | 45 |
2131 |  | Keizer |  | OR |  |  | 2,747 |  |  | 551 |  |  | 6,454 |  |  | — |  |  | 551 |  |  | 6,454 |  |  | 7,005 |  |  | (543) |  | 2013 |  | 45 |
2140 |  | Lebanon |  | OR |  |  | — |  |  | 505 |  |  | 12,571 |  |  | 129 |  |  | 505 |  |  | 12,700 |  |  | 13,205 |  |  | (1,113) |  | 2012 |  | 50 |
2152 |  | Mcminnville |  | OR |  |  | — |  |  | 3,203 |  |  | 24,909 |  |  | 1,337 |  |  | 3,203 |  |  | 26,246 |  |  | 29,449 |  |  | (3,362) |  | 2012 |  | 45 |
2090 |  | Monmouth |  | OR |  |  | — |  |  | 490 |  |  | 1,278 |  |  | 9 |  |  | 490 |  |  | 1,287 |  |  | 1,777 |  |  | (195) |  | 2012 |  | 50 |
2106 |  | Monmouth |  | OR |  |  | — |  |  | 603 |  |  | 8,538 |  |  | 62 |  |  | 603 |  |  | 8,600 |  |  | 9,203 |  |  | (819) |  | 2012 |  | 45 |
2089 |  | Newberg |  | OR |  |  | — |  |  | 1,889 |  |  | 16,855 |  |  | 83 |  |  | 1,889 |  |  | 16,938 |  |  | 18,827 |  |  | (1,418) |  | 2012 |  | 50 |
2133 |  | Portland |  | OR |  |  | — |  |  | 1,615 |  |  | 12,030 |  |  | 35 |  |  | 1,615 |  |  | 12,065 |  |  | 13,680 |  |  | (960) |  | 2012 |  | 50 |
2151 |  | Portland |  | OR |  |  | — |  |  | 1,677 |  |  | 9,469 |  |  | 147 |  |  | 1,677 |  |  | 9,616 |  |  | 11,293 |  |  | (984) |  | 2012 |  | 45 |
2171 |  | Portland |  | OR |  |  | — |  |  | — |  |  | 16,087 |  |  | 78 |  |  | — |  |  | 16,165 |  |  | 16,165 |  |  | (1,226) |  | 2012 |  | 50 |
2050 |  | Redmond |  | OR |  |  | — |  |  | 1,229 |  |  | 21,921 |  |  | 544 |  |  | 1,229 |  |  | 22,465 |  |  | 23,694 |  |  | (1,668) |  | 2012 |  | 50 |
2084 |  | Roseburg |  | OR |  |  | — |  |  | 1,042 |  |  | 12,090 |  |  | 72 |  |  | 1,042 |  |  | 12,162 |  |  | 13,204 |  |  | (1,155) |  | 2012 |  | 45 |
2134 |  | Scappoose |  | OR |  |  | — |  |  | 353 |  |  | 1,258 |  |  | 11 |  |  | 353 |  |  | 1,269 |  |  | 1,622 |  |  | (160) |  | 2012 |  | 50 |
2153 |  | Scappoose |  | OR |  |  | — |  |  | 971 |  |  | 7,116 |  |  | 78 |  |  | 971 |  |  | 7,194 |  |  | 8,165 |  |  | (782) |  | 2012 |  | 45 |
2051 |  | Springfield |  | OR |  |  | — |  |  | 1,124 |  |  | 22,515 |  |  | 166 |  |  | 1,124 |  |  | 22,681 |  |  | 23,805 |  |  | (1,809) |  | 2012 |  | 50 |
2057 |  | Springfield |  | OR |  |  | — |  |  | 527 |  |  | 6,035 |  |  | 52 |  |  | 527 |  |  | 6,087 |  |  | 6,614 |  |  | (603) |  | 2012 |  | 45 |
2056 |  | Stayton |  | OR |  |  | — |  |  | 48 |  |  | 569 |  |  | 7 |  |  | 48 |  |  | 576 |  |  | 624 |  |  | (95) |  | 2012 |  | 45 |
2058 |  | Stayton |  | OR |  |  | — |  |  | 253 |  |  | 8,621 |  |  | 24 |  |  | 253 |  |  | 8,645 |  |  | 8,898 |  |  | (821) |  | 2012 |  | 45 |
2088 |  | Tualatin |  | OR |  |  | — |  |  | — |  |  | 6,326 |  |  | 157 |  |  | — |  |  | 6,483 |  |  | 6,483 |  |  | (788) |  | 2012 |  | 45 |
2180 |  | Windfield Village |  | OR |  |  | 3,216 |  |  | 580 |  |  | 9,817 |  |  | — |  |  | 580 |  |  | 9,817 |  |  | 10,397 |  |  | (824) |  | 2013 |  | 45 |
1163 |  | Haverford |  | PA |  |  | — |  |  | 16,461 |  |  | 108,816 |  |  | 7,894 |  |  | 16,461 |  |  | 115,098 |  |  | 131,559 |  |  | (27,525) |  | 2006 |  | 40 |
2063 |  | Selinsgrove |  | PA |  |  | — |  |  | 529 |  |  | 9,111 |  |  | 64 |  |  | 529 |  |  | 9,175 |  |  | 9,704 |  |  | (967) |  | 2012 |  | 45 |
1967 |  | Cumberland |  | RI |  |  | — |  |  | 2,630 |  |  | 19,050 |  |  | 770 |  |  | 2,630 |  |  | 19,473 |  |  | 22,103 |  |  | (3,424) |  | 2011 |  | 30 |
1959 |  | East Providence |  | RI |  |  | 14,462 |  |  | 1,890 |  |  | 13,989 |  |  | 1,278 |  |  | 1,890 |  |  | 15,014 |  |  | 16,904 |  |  | (2,771) |  | 2011 |  | 30 |
1960 |  | Greenwich |  | RI |  |  | 7,920 |  |  | 450 |  |  | 11,845 |  |  | 1,518 |  |  | 450 |  |  | 13,098 |  |  | 13,548 |  |  | (2,498) |  | 2011 |  | 30 |
2511 |  | Johnston |  | RI |  |  | — |  |  | 2,113 |  |  | 12,947 |  |  | 1,402 |  |  | 2,113 |  |  | 14,350 |  |  | 16,463 |  |  | (313) |  | 2015 |  | 35 |
1972 |  | Smithfield |  | RI |  |  | — |  |  | 1,250 |  |  | 17,816 |  |  | 653 |  |  | 1,250 |  |  | 18,134 |  |  | 19,384 |  |  | (3,297) |  | 2011 |  | 30 |
1973 |  | South Kingstown |  | RI |  |  | — |  |  | 1,390 |  |  | 12,551 |  |  | 630 |  |  | 1,390 |  |  | 12,918 |  |  | 14,308 |  |  | (2,240) |  | 2011 |  | 30 |
1975 |  | Tiverton |  | RI |  |  | — |  |  | 3,240 |  |  | 25,735 |  |  | 651 |  |  | 3,240 |  |  | 25,955 |  |  | 29,195 |  |  | (4,433) |  | 2011 |  | 30 |
1962 |  | Warwick |  | RI |  |  | 14,151 |  |  | 1,050 |  |  | 17,389 |  |  | 2,103 |  |  | 1,050 |  |  | 19,136 |  |  | 20,186 |  |  | (3,660) |  | 2011 |  | 30 |
1104 |  | Aiken |  | SC |  |  | — |  |  | 357 |  |  | 14,832 |  |  | 151 |  |  | 363 |  |  | 14,471 |  |  | 14,834 |  |  | (3,425) |  | 2006 |  | 40 |
1100 |  | Charleston |  | SC |  |  | — |  |  | 885 |  |  | 14,124 |  |  | 292 |  |  | 896 |  |  | 14,075 |  |  | 14,971 |  |  | (3,373) |  | 2006 |  | 40 |
1109 |  | Columbia |  | SC |  |  | — |  |  | 408 |  |  | 7,527 |  |  | 131 |  |  | 412 |  |  | 7,458 |  |  | 7,870 |  |  | (1,782) |  | 2006 |  | 40 |
2154 |  | Florence |  | SC |  |  | — |  |  | 255 |  |  | 4,052 |  |  | 557 |  |  | 255 |  |  | 4,609 |  |  | 4,864 |  |  | (504) |  | 2012 |  | 45 |
0306 |  | Georgetown |  | SC |  |  | — |  |  | 239 |  |  | 3,008 |  |  | — |  |  | 239 |  |  | 3,008 |  |  | 3,247 |  |  | (1,103) |  | 1998 |  | 45 |
0879 |  | Greenville |  | SC |  |  | — |  |  | 1,090 |  |  | 12,558 |  |  | — |  |  | 1,090 |  |  | 12,058 |  |  | 13,148 |  |  | (2,738) |  | 2006 |  | 40 |
1172 |  | Greenville |  | SC |  |  | — |  |  | 993 |  |  | 16,314 |  |  | 674 |  |  | 1,006 |  |  | 16,075 |  |  | 17,081 |  |  | (3,751) |  | 2006 |  | 40 |
2059 |  | Greenville |  | SC |  |  | — |  |  | 149 |  |  | 3,827 |  |  | 185 |  |  | 149 |  |  | 4,012 |  |  | 4,161 |  |  | (457) |  | 2012 |  | 45 |
2099 |  | Hilton Head Island |  | SC |  |  | — |  |  | 828 |  |  | 6,285 |  |  | 199 |  |  | 828 |  |  | 6,484 |  |  | 7,312 |  |  | (721) |  | 2012 |  | 45 |
2111 |  | Hilton Head Island |  | SC |  |  | — |  |  | 1,107 |  |  | 1,873 |  |  | 67 |  |  | 1,107 |  |  | 1,940 |  |  | 3,047 |  |  | (273) |  | 2012 |  | 45 |
2112 |  | Hilton Head Island |  | SC |  |  | — |  |  | 621 |  |  | 2,234 |  |  | 96 |  |  | 621 |  |  | 2,330 |  |  | 2,951 |  |  | (306) |  | 2012 |  | 45 |
0305 |  | Lancaster |  | SC |  |  | — |  |  | 84 |  |  | 2,982 |  |  | — |  |  | 84 |  |  | 2,982 |  |  | 3,066 |  |  | (1,009) |  | 1998 |  | 45 |
0880 |  | Myrtle Beach |  | SC |  |  | — |  |  | 900 |  |  | 10,913 |  |  | — |  |  | 900 |  |  | 10,513 |  |  | 11,413 |  |  | (2,387) |  | 2006 |  | 40 |
0312 |  | Rock Hill |  | SC |  |  | — |  |  | 203 |  |  | 2,671 |  |  | — |  |  | 203 |  |  | 2,671 |  |  | 2,874 |  |  | (959) |  | 1998 |  | 45 |
1113 |  | Rock Hill |  | SC |  |  | — |  |  | 695 |  |  | 4,119 |  |  | 322 |  |  | 795 |  |  | 4,126 |  |  | 4,921 |  |  | (1,110) |  | 2006 |  | 40 |
2076 |  | Rock Hill |  | SC |  |  | — |  |  | 919 |  |  | 14,741 |  |  | 148 |  |  | 919 |  |  | 14,889 |  |  | 15,808 |  |  | (1,381) |  | 2012 |  | 45 |
2093 |  | Rock Hill |  | SC |  |  | — |  |  | 503 |  |  | 4,281 |  |  | 629 |  |  | 503 |  |  | 4,910 |  |  | 5,413 |  |  | (475) |  | 2012 |  | 45 |
0313 |  | Sumter |  | SC |  |  | — |  |  | 196 |  |  | 2,623 |  |  | — |  |  | 196 |  |  | 2,623 |  |  | 2,819 |  |  | (962) |  | 1998 |  | 45 |
2067 |  | West Columbia |  | SC |  |  | — |  |  | 220 |  |  | 2,662 |  |  | 247 |  |  | 220 |  |  | 2,909 |  |  | 3,129 |  |  | (370) |  | 2012 |  | 45 |
2132 |  | Cordova |  | TN |  |  | — |  |  | 2,167 |  |  | 5,829 |  |  | 270 |  |  | 2,167 |  |  | 6,099 |  |  | 8,266 |  |  | (649) |  | 2012 |  | 45 |
2060 |  | Franklin |  | TN |  |  | — |  |  | 2,475 |  |  | 27,337 |  |  | 410 |  |  | 2,475 |  |  | 27,747 |  |  | 30,222 |  |  | (2,355) |  | 2012 |  | 45 |
2401 |  | Germantown |  | TN |  |  | — |  |  | 3,640 |  |  | 64,588 |  |  | 39 |  |  | 3,640 |  |  | 64,626 |  |  | 68,266 |  |  | (1,204) |  | 2015 |  | 40 |
2385 |  | Hendersonville |  | TN |  |  | — |  |  | 1,298 |  |  | 2,464 |  |  | 214 |  |  | 1,298 |  |  | 2,678 |  |  | 3,976 |  |  | (381) |  | 2012 |  | 45 |
2073 |  | Kingsport |  | TN |  |  | — |  |  | 1,113 |  |  | 8,625 |  |  | 88 |  |  | 1,113 |  |  | 8,713 |  |  | 9,826 |  |  | (824) |  | 2012 |  | 45 |
2381 |  | Memphis |  | TN |  |  | — |  |  | 1,315 |  |  | 9,787 |  |  | 107 |  |  | 1,315 |  |  | 9,894 |  |  | 11,209 |  |  | (813) |  | 2012 |  | 45 |
2439 |  | Memphis |  | TN |  |  | — |  |  | 1,320 |  |  | 1,679 |  |  | 122 |  |  | 1,320 |  |  | 1,801 |  |  | 3,121 |  |  | (60) |  | 2015 |  | 35 |
1003 |  | Nashville |  | TN |  |  | 10,696 |  |  | 812 |  |  | 16,983 |  |  | 2,524 |  |  | 812 |  |  | 18,759 |  |  | 19,571 |  |  | (3,712) |  | 2006 |  | 40 |
2094 |  | Nashville |  | TN |  |  | — |  |  | 1,444 |  |  | 14,436 |  |  | 305 |  |  | 1,444 |  |  | 14,741 |  |  | 16,185 |  |  | (1,238) |  | 2012 |  | 45 |
0860 |  | Oak Ridge |  | TN |  |  | — |  |  | 500 |  |  | 4,741 |  |  | 173 |  |  | 500 |  |  | 4,814 |  |  | 5,314 |  |  | (1,238) |  | 2006 |  | 35 |
0843 |  | Abilene |  | TX |  |  | — |  |  | 300 |  |  | 2,830 |  |  | — |  |  | 300 |  |  | 2,710 |  |  | 3,010 |  |  | (650) |  | 2006 |  | 39 |

128

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  | State/ |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | Country |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
2107 |  | Amarillo |  | TX |  |  | — |  |  | 1,315 |  |  | 26,838 |  |  | 184 |  |  | 1,315 |  |  | 27,022 |  |  | 28,337 |  |  | (2,248) |  | 2012 |  | 45 |
1004 |  | Arlington |  | TX |  |  | 13,685 |  |  | 2,002 |  |  | 19,110 |  |  | — |  |  | 2,002 |  |  | 18,729 |  |  | 20,731 |  |  | (4,071) |  | 2006 |  | 40 |
1116 |  | Arlington |  | TX |  |  | — |  |  | 2,494 |  |  | 12,192 |  |  | 249 |  |  | 2,540 |  |  | 11,873 |  |  | 14,413 |  |  | (2,854) |  | 2006 |  | 40 |
0511 |  | Austin |  | TX |  |  | — |  |  | 2,960 |  |  | 41,645 |  |  | — |  |  | 2,960 |  |  | 41,645 |  |  | 44,605 |  |  | (17,005) |  | 2002 |  | 30 |
2377 |  | Austin |  | TX |  |  | — |  |  | 2,860 |  |  | 17,359 |  |  | 1,543 |  |  | 2,973 |  |  | 17,716 |  |  | 20,689 |  |  | (3,922) |  | 2010 |  | 45 |
2531 |  | Austin |  | TX |  |  | — |  |  | 680 |  |  | 15,342 |  |  | 65 |  |  | 680 |  |  | 15,408 |  |  | 16,088 |  |  | (278) |  | 2015 |  | 35 |
0202 |  | Beaumont |  | TX |  |  | — |  |  | 145 |  |  | 10,404 |  |  | — |  |  | 145 |  |  | 10,020 |  |  | 10,165 |  |  | (4,210) |  | 1995 |  | 45 |
2075 |  | Bedford |  | TX |  |  | — |  |  | 1,204 |  |  | 26,845 |  |  | 1,029 |  |  | 1,204 |  |  | 27,874 |  |  | 29,078 |  |  | (2,279) |  | 2012 |  | 45 |
0844 |  | Burleson |  | TX |  |  | — |  |  | 1,050 |  |  | 5,242 |  |  | — |  |  | 1,050 |  |  | 4,902 |  |  | 5,952 |  |  | (1,174) |  | 2006 |  | 40 |
0848 |  | Cedar Hill |  | TX |  |  | — |  |  | 1,070 |  |  | 11,554 |  |  | — |  |  | 1,070 |  |  | 11,104 |  |  | 12,174 |  |  | (2,660) |  | 2006 |  | 40 |
1325 |  | Cedar Hill |  | TX |  |  | — |  |  | 440 |  |  | 7,494 |  |  | — |  |  | 440 |  |  | 6,974 |  |  | 7,414 |  |  | (1,525) |  | 2007 |  | 40 |
2396 |  | Dallas |  | TX |  |  | — |  |  | 2,120 |  |  | 8,986 |  |  | 128 |  |  | 2,120 |  |  | 9,114 |  |  | 11,234 |  |  | (890) |  | 2012 |  | 45 |
2438 |  | Dallas |  | TX |  |  | — |  |  | 2,550 |  |  | 11,551 |  |  | 207 |  |  | 2,550 |  |  | 11,757 |  |  | 14,307 |  |  | (234) |  | 2015 |  | 35 |
0513 |  | Fort Worth |  | TX |  |  | — |  |  | 2,830 |  |  | 50,832 |  |  | — |  |  | 2,830 |  |  | 50,832 |  |  | 53,662 |  |  | (20,756) |  | 2002 |  | 30 |
0506 |  | Friendswood |  | TX |  |  | — |  |  | 400 |  |  | 7,354 |  |  | 70 |  |  | 400 |  |  | 7,424 |  |  | 7,824 |  |  | (2,212) |  | 2002 |  | 45 |
2528 |  | Graham |  | TX |  |  | — |  |  | 680 |  |  | 8,513 |  |  | 518 |  |  | 680 |  |  | 9,031 |  |  | 9,711 |  |  | (187) |  | 2015 |  | 35 |
2529 |  | Grand Prairie |  | TX |  |  | — |  |  | 840 |  |  | 10,367 |  |  | 460 |  |  | 840 |  |  | 10,827 |  |  | 11,667 |  |  | (221) |  | 2015 |  | 35 |
0217 |  | Houston |  | TX |  |  | — |  |  | 835 |  |  | 7,195 |  |  | 54 |  |  | 835 |  |  | 7,249 |  |  | 8,084 |  |  | (2,896) |  | 1997 |  | 45 |
0491 |  | Houston |  | TX |  |  | — |  |  | 2,470 |  |  | 21,710 |  |  | 750 |  |  | 2,470 |  |  | 22,460 |  |  | 24,930 |  |  | (9,022) |  | 2002 |  | 35 |
1106 |  | Houston |  | TX |  |  | — |  |  | 1,008 |  |  | 15,333 |  |  | 183 |  |  | 1,020 |  |  | 15,098 |  |  | 16,118 |  |  | (3,574) |  | 2006 |  | 40 |
1955 |  | Houston |  | TX |  |  | 47,527 |  |  | 9,820 |  |  | 50,079 |  |  | 8,022 |  |  | 9,820 |  |  | 56,815 |  |  | 66,635 |  |  | (10,247) |  | 2011 |  | 30 |
1957 |  | Houston |  | TX |  |  | 31,212 |  |  | 8,170 |  |  | 37,285 |  |  | 3,905 |  |  | 8,170 |  |  | 40,368 |  |  | 48,538 |  |  | (7,313) |  | 2011 |  | 30 |
1958 |  | Houston |  | TX |  |  | 28,740 |  |  | 2,910 |  |  | 37,443 |  |  | 4,631 |  |  | 2,910 |  |  | 41,183 |  |  | 44,093 |  |  | (7,546) |  | 2011 |  | 30 |
2068 |  | Houston |  | TX |  |  | — |  |  | 985 |  |  | 18,824 |  |  | 502 |  |  | 985 |  |  | 19,326 |  |  | 20,311 |  |  | (1,616) |  | 2012 |  | 45 |
2402 |  | Houston |  | TX |  |  | — |  |  | 1,740 |  |  | 32,057 |  |  | 17 |  |  | 1,740 |  |  | 32,074 |  |  | 33,814 |  |  | (753) |  | 2015 |  | 40 |
0820 |  | Irving |  | TX |  |  | — |  |  | 710 |  |  | 9,949 |  |  | 1,455 |  |  | 710 |  |  | 10,814 |  |  | 11,524 |  |  | (2,765) |  | 2005 |  | 35 |
2394 |  | Kerrville |  | TX |  |  | — |  |  | 1,459 |  |  | 33,407 |  |  | 1,838 |  |  | 1,459 |  |  | 35,245 |  |  | 36,704 |  |  | (3,076) |  | 2012 |  | 45 |
1111 |  | Kingswood |  | TX |  |  | — |  |  | 1,877 |  |  | 25,372 |  |  | 247 |  |  | 1,961 |  |  | 24,491 |  |  | 26,452 |  |  | (5,780) |  | 2006 |  | 40 |
2389 |  | Lubbock |  | TX |  |  | — |  |  | 1,143 |  |  | 4,656 |  |  | 208 |  |  | 1,143 |  |  | 4,864 |  |  | 6,007 |  |  | (542) |  | 2012 |  | 45 |
0845 |  | North Richland Hills |  | TX |  |  | — |  |  | 520 |  |  | 5,117 |  |  | — |  |  | 520 |  |  | 4,807 |  |  | 5,327 |  |  | (1,152) |  | 2006 |  | 40 |
0846 |  | North Richland Hills |  | TX |  |  | — |  |  | 870 |  |  | 9,259 |  |  | — |  |  | 870 |  |  | 8,819 |  |  | 9,689 |  |  | (2,415) |  | 2006 |  | 35 |
2113 |  | North Richland Hills |  | TX |  |  | — |  |  | 909 |  |  | 11,337 |  |  | 103 |  |  | 909 |  |  | 11,440 |  |  | 12,349 |  |  | (963) |  | 2012 |  | 45 |
2530 |  | North Richland Hills |  | TX |  |  | — |  |  | 1,060 |  |  | 17,645 |  |  | 426 |  |  | 1,060 |  |  | 18,071 |  |  | 19,131 |  |  | (344) |  | 2015 |  | 35 |
1102 |  | Plano |  | TX |  |  | — |  |  | 494 |  |  | 12,518 |  |  | 145 |  |  | 505 |  |  | 12,247 |  |  | 12,752 |  |  | (2,898) |  | 2006 |  | 40 |
2379 |  | Plano |  | TX |  |  | — |  |  | 590 |  |  | 6,930 |  |  | 122 |  |  | 590 |  |  | 7,052 |  |  | 7,642 |  |  | (695) |  | 2012 |  | 45 |
2162 |  | Portland |  | TX |  |  | — |  |  | 1,233 |  |  | 14,001 |  |  | 281 |  |  | 1,233 |  |  | 14,282 |  |  | 15,515 |  |  | (1,387) |  | 2012 |  | 45 |
0494 |  | San Antonio |  | TX |  |  | 7,507 |  |  | 730 |  |  | 3,961 |  |  | — |  |  | 730 |  |  | 3,961 |  |  | 4,691 |  |  | (1,210) |  | 2002 |  | 45 |
2378 |  | San Antonio |  | TX |  |  | — |  |  | 2,860 |  |  | 17,030 |  |  | 1,295 |  |  | 2,880 |  |  | 17,232 |  |  | 20,112 |  |  | (3,756) |  | 2010 |  | 45 |
2532 |  | San Antonio |  | TX |  |  | — |  |  | 1,120 |  |  | 5,378 |  |  | 265 |  |  | 1,120 |  |  | 5,642 |  |  | 6,762 |  |  | (153) |  | 2015 |  | 35 |
2533 |  | San Marcos |  | TX |  |  | — |  |  | 680 |  |  | 17,570 |  |  | 306 |  |  | 680 |  |  | 17,876 |  |  | 18,556 |  |  | (321) |  | 2015 |  | 35 |
2116 |  | Sherman |  | TX |  |  | — |  |  | 209 |  |  | 3,492 |  |  | 75 |  |  | 209 |  |  | 3,567 |  |  | 3,776 |  |  | (372) |  | 2012 |  | 45 |
1954 |  | Sugar Land |  | TX |  |  | 30,738 |  |  | 3,420 |  |  | 36,846 |  |  | 3,920 |  |  | 3,420 |  |  | 40,096 |  |  | 43,516 |  |  | (7,325) |  | 2011 |  | 30 |
2510 |  | Temple |  | TX |  |  | — |  |  | 2,310 |  |  | 53,749 |  |  | 452 |  |  | 2,310 |  |  | 54,201 |  |  | 56,511 |  |  | (975) |  | 2015 |  | 35 |
1103 |  | The Woodlands |  | TX |  |  | — |  |  | 802 |  |  | 17,358 |  |  | 228 |  |  | 869 |  |  | 17,071 |  |  | 17,940 |  |  | (4,051) |  | 2006 |  | 40 |
2400 |  | Victoria |  | TX |  |  | — |  |  | 1,032 |  |  | 7,743 |  |  | 4 |  |  | 1,032 |  |  | 7,747 |  |  | 8,779 |  |  | (37) |  | 2015 |  | 30 |
0195 |  | Victoria |  | TX |  |  | 12,149 |  |  | 175 |  |  | 4,290 |  |  | 3,101 |  |  | 175 |  |  | 7,018 |  |  | 7,193 |  |  | (2,352) |  | 1995 |  | 43 |
0847 |  | Waxahachie |  | TX |  |  | — |  |  | 390 |  |  | 3,879 |  |  | — |  |  | 390 |  |  | 3,659 |  |  | 4,049 |  |  | (877) |  | 2006 |  | 40 |
1953 |  | Webster |  | TX |  |  | 29,369 |  |  | 4,780 |  |  | 30,854 |  |  | 3,466 |  |  | 4,780 |  |  | 33,661 |  |  | 38,441 |  |  | (6,292) |  | 2011 |  | 30 |
2534 |  | Wichita Falls |  | TX |  |  | — |  |  | 690 |  |  | 2,439 |  |  | 522 |  |  | 690 |  |  | 2,961 |  |  | 3,651 |  |  | (86) |  | 2015 |  | 35 |
2069 |  | Cedar City |  | UT |  |  | — |  |  | 437 |  |  | 8,706 |  |  | 744 |  |  | 437 |  |  | 9,450 |  |  | 9,887 |  |  | (802) |  | 2012 |  | 45 |
2368 |  | Salt Lake City |  | UT |  |  | — |  |  | 2,621 |  |  | 22,072 |  |  | 1,266 |  |  | 2,654 |  |  | 22,350 |  |  | 25,004 |  |  | (5,068) |  | 2006 |  | 45 |
2386 |  | St. George |  | UT |  |  | — |  |  | 683 |  |  | 9,436 |  |  | 776 |  |  | 683 |  |  | 10,212 |  |  | 10,895 |  |  | (890) |  | 2012 |  | 45 |
1244 |  | Arlington |  | VA |  |  | — |  |  | 3,833 |  |  | 7,076 |  |  | 330 |  |  | 3,833 |  |  | 7,170 |  |  | 11,003 |  |  | (1,719) |  | 2006 |  | 40 |
1245 |  | Arlington |  | VA |  |  | — |  |  | 7,278 |  |  | 37,407 |  |  | 513 |  |  | 7,278 |  |  | 37,035 |  |  | 44,313 |  |  | (8,739) |  | 2006 |  | 40 |
2360 |  | Arlington |  | VA |  |  | — |  |  | 4,320 |  |  | 19,567 |  |  | 1,505 |  |  | 4,320 |  |  | 20,494 |  |  | 24,814 |  |  | (4,811) |  | 2006 |  | 45 |
0881 |  | Chesapeake |  | VA |  |  | — |  |  | 1,090 |  |  | 12,444 |  |  | — |  |  | 1,090 |  |  | 11,944 |  |  | 13,034 |  |  | (2,712) |  | 2006 |  | 40 |
1247 |  | Falls Church |  | VA |  |  | — |  |  | 2,228 |  |  | 8,887 |  |  | 529 |  |  | 2,228 |  |  | 9,201 |  |  | 11,429 |  |  | (2,195) |  | 2006 |  | 40 |
1164 |  | Fort Belvoir |  | VA |  |  | — |  |  | 11,594 |  |  | 99,528 |  |  | 8,125 |  |  | 11,594 |  |  | 105,655 |  |  | 117,249 |  |  | (25,636) |  | 2006 |  | 40 |
1250 |  | Leesburg |  | VA |  |  | — |  |  | 607 |  |  | 3,236 |  |  | 125 |  |  | 607 |  |  | 3,216 |  |  | 3,823 |  |  | (2,703) |  | 2006 |  | 35 |
2361 |  | Richmond |  | VA |  |  | — |  |  | 2,110 |  |  | 11,469 |  |  | 1,956 |  |  | 2,110 |  |  | 12,999 |  |  | 15,109 |  |  | (2,768) |  | 2006 |  | 45 |
2514 |  | Richmond |  | VA |  |  | — |  |  | 3,015 |  |  | 54,373 |  |  | 141 |  |  | 3,015 |  |  | 54,513 |  |  | 57,528 |  |  | (961) |  | 2015 |  | 35 |
1246 |  | Sterling |  | VA |  |  | — |  |  | 2,360 |  |  | 22,932 |  |  | 640 |  |  | 2,360 |  |  | 23,060 |  |  | 25,420 |  |  | (5,528) |  | 2006 |  | 40 |
2077 |  | Sterling |  | VA |  |  | — |  |  | 1,046 |  |  | 15,788 |  |  | 160 |  |  | 1,046 |  |  | 15,948 |  |  | 16,994 |  |  | (1,301) |  | 2012 |  | 45 |
0225 |  | Woodbridge |  | VA |  |  | — |  |  | 950 |  |  | 6,983 |  |  | 1,122 |  |  | 950 |  |  | 8,104 |  |  | 9,054 |  |  | (2,742) |  | 1997 |  | 45 |
1173 |  | Bellevue |  | WA |  |  | — |  |  | 3,734 |  |  | 16,171 |  |  | 323 |  |  | 3,737 |  |  | 15,926 |  |  | 19,663 |  |  | (3,733) |  | 2006 |  | 40 |
2095 |  | College Place |  | WA |  |  | — |  |  | 758 |  |  | 8,051 |  |  | 90 |  |  | 758 |  |  | 8,141 |  |  | 8,899 |  |  | (816) |  | 2012 |  | 45 |
1240 |  | Edmonds |  | WA |  |  | — |  |  | 1,418 |  |  | 16,502 |  |  | 91 |  |  | 1,418 |  |  | 16,121 |  |  | 17,539 |  |  | (3,753) |  | 2006 |  | 40 |
2160 |  | Kenmore |  | WA |  |  | — |  |  | 3,284 |  |  | 16,641 |  |  | 75 |  |  | 3,284 |  |  | 16,716 |  |  | 20,000 |  |  | (1,402) |  | 2012 |  | 45 |
0797 |  | Kirkland |  | WA |  |  | — |  |  | 1,000 |  |  | 13,403 |  |  | — |  |  | 1,000 |  |  | 13,043 |  |  | 14,043 |  |  | (3,397) |  | 2005 |  | 40 |
1251 |  | Mercer Island |  | WA |  |  | — |  |  | 4,209 |  |  | 8,123 |  |  | 468 |  |  | 4,209 |  |  | 8,386 |  |  | 12,595 |  |  | (2,124) |  | 2006 |  | 40 |
2141 |  | Moses Lake |  | WA |  |  | — |  |  | 429 |  |  | 4,417 |  |  | 80 |  |  | 429 |  |  | 4,497 |  |  | 4,926 |  |  | (609) |  | 2012 |  | 50 |
2096 |  | Poulsbo |  | WA |  |  | — |  |  | 1,801 |  |  | 18,068 |  |  | 136 |  |  | 1,801 |  |  | 18,204 |  |  | 20,005 |  |  | (1,644) |  | 2012 |  | 45 |
2102 |  | Richland |  | WA |  |  | — |  |  | 249 |  |  | 5,067 |  |  | 89 |  |  | 249 |  |  | 5,156 |  |  | 5,405 |  |  | (446) |  | 2012 |  | 45 |
0794 |  | Shoreline |  | WA |  |  | 8,512 |  |  | 1,590 |  |  | 10,671 |  |  | — |  |  | 1,590 |  |  | 10,261 |  |  | 11,851 |  |  | (2,672) |  | 2005 |  | 40 |
0795 |  | Shoreline |  | WA |  |  | — |  |  | 4,030 |  |  | 26,421 |  |  | — |  |  | 4,030 |  |  | 25,651 |  |  | 29,681 |  |  | (6,610) |  | 2005 |  | 39 |
2097 |  | Spokane |  | WA |  |  | — |  |  | 903 |  |  | 5,363 |  |  | 71 |  |  | 903 |  |  | 5,434 |  |  | 6,337 |  |  | (638) |  | 2012 |  | 45 |
2061 |  | Vancouver |  | WA |  |  | — |  |  | 513 |  |  | 4,556 |  |  | 98 |  |  | 513 |  |  | 4,654 |  |  | 5,167 |  |  | (515) |  | 2012 |  | 45 |
2062 |  | Vancouver |  | WA |  |  | — |  |  | 1,498 |  |  | 9,997 |  |  | 91 |  |  | 1,498 |  |  | 10,088 |  |  | 11,586 |  |  | (879) |  | 2012 |  | 45 |
2052 |  | Yakima |  | WA |  |  | — |  |  | 557 |  |  | 5,897 |  |  | 31 |  |  | 557 |  |  | 5,928 |  |  | 6,485 |  |  | (551) |  | 2012 |  | 50 |
2078 |  | Yakima |  | WA |  |  | — |  |  | 353 |  |  | 5,668 |  |  | 11 |  |  | 353 |  |  | 5,679 |  |  | 6,032 |  |  | (475) |  | 2012 |  | 45 |
2114 |  | Yakima |  | WA |  |  | — |  |  | 721 |  |  | 8,872 |  |  | 1,203 |  |  | 721 |  |  | 10,075 |  |  | 10,796 |  |  | (953) |  | 2012 |  | 45 |
2382 |  | Appleton |  | WI |  |  | — |  |  | 182 |  |  | 12,581 |  |  | 159 |  |  | 182 |  |  | 12,740 |  |  | 12,922 |  |  | (1,085) |  | 2012 |  | 45 |
2170 |  | Madison |  | WI |  |  | — |  |  | 834 |  |  | 10,050 |  |  | 234 |  |  | 834 |  |  | 10,284 |  |  | 11,118 |  |  | (996) |  | 2012 |  | 40 |
2398 |  | Stevens Point |  | WI |  |  | — |  |  | 801 |  |  | 16,687 |  |  | 112 |  |  | 801 |  |  | 16,799 |  |  | 17,600 |  |  | (1,229) |  | 2012 |  | 45 |
2117 |  | Bridgeport |  | WV |  |  | — |  |  | 3,174 |  |  | 15,437 |  |  | 208 |  |  | 3,174 |  |  | 15,645 |  |  | 18,819 |  |  | (1,784) |  | 2012 |  | 45 |
2142 |  | Cody |  | WY |  |  | — |  |  | 708 |  |  | 9,926 |  |  | 155 |  |  | 708 |  |  | 10,081 |  |  | 10,789 |  |  | (774) |  | 2012 |  | 50 |
2148 |  | Sheridan |  | WY |  |  | — |  |  | 915 |  |  | 12,047 |  |  | 458 |  |  | 915 |  |  | 12,505 |  |  | 13,420 |  |  | (1,119) |  | 2012 |  | 45 |
United Kingdom |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2210 |  | Adlington |  | UK |  |  | — |  |  | 597 |  |  | 7,747 |  |  | 104 |  |  | 597 |  |  | 7,851 |  |  | 8,448 |  |  | (327) |  | 2014 |  | 45 |
2211 |  | Adlington |  | UK |  |  | — |  |  | 619 |  |  | 4,706 |  |  | — |  |  | 620 |  |  | 4,706 |  |  | 5,326 |  |  | (173) |  | 2014 |  | 60 |
2216 |  | Alderley Edge |  | UK |  |  | — |  |  | 1,364 |  |  | 9,502 |  |  | — |  |  | 1,364 |  |  | 9,503 |  |  | 10,867 |  |  | (316) |  | 2014 |  | 60 |
2217 |  | Alderley Edge |  | UK |  |  | — |  |  | 1,327 |  |  | 7,441 |  |  | — |  |  | 1,327 |  |  | 7,441 |  |  | 8,768 |  |  | (260) |  | 2014 |  | 60 |
2340 |  | Altrincham |  | UK |  |  | — |  |  | 1,902 |  |  | 20,373 |  |  | — |  |  | 1,902 |  |  | 20,373 |  |  | 22,275 |  |  | (229) |  | 2015 |  | 45 |
2312 |  | Armley |  | UK |  |  | — |  |  | 487 |  |  | 2,910 |  |  | — |  |  | 487 |  |  | 2,910 |  |  | 3,397 |  |  | (83) |  | 2015 |  | 45 |
2313 |  | Armley |  | UK |  |  | — |  |  | 1,091 |  |  | 3,394 |  |  | — |  |  | 1,091 |  |  | 3,394 |  |  | 4,485 |  |  | (100) |  | 2015 |  | 45 |
2309 |  | Ashton under Lyne |  | UK |  |  | — |  |  | 708 |  |  | 4,912 |  |  | — |  |  | 708 |  |  | 4,912 |  |  | 5,620 |  |  | (140) |  | 2015 |  | 40 |
2206 |  | Bangor |  | UK |  |  | — |  |  | 420 |  |  | 2,249 |  |  | — |  |  | 420 |  |  | 2,249 |  |  | 2,669 |  |  | (102) |  | 2014 |  | 50 |
2207 |  | Batley |  | UK |  |  | — |  |  | 708 |  |  | 3,491 |  |  | — |  |  | 707 |  |  | 3,491 |  |  | 4,198 |  |  | (219) |  | 2014 |  | 45 |
2223 |  | Catterick Garrison |  | UK |  |  | — |  |  | 870 |  |  | 1,599 |  |  | — |  |  | 870 |  |  | 1,598 |  |  | 2,468 |  |  | (142) |  | 2014 |  | 50 |
2226 |  | Christleton |  | UK |  |  | — |  |  | 575 |  |  | 5,562 |  |  | — |  |  | 575 |  |  | 5,561 |  |  | 6,136 |  |  | (161) |  | 2014 |  | 50 |
2221 |  | Disley |  | UK |  |  | — |  |  | 376 |  |  | 1,766 |  |  | — |  |  | 376 |  |  | 1,766 |  |  | 2,142 |  |  | (84) |  | 2014 |  | 50 |
2227 |  | Disley |  | UK |  |  | — |  |  | 752 |  |  | 4,320 |  |  | — |  |  | 752 |  |  | 4,319 |  |  | 5,071 |  |  | (128) |  | 2014 |  | 60 |
2306 |  | Dukinfield |  | UK |  |  | — |  |  | 826 |  |  | 4,418 |  |  | — |  |  | 826 |  |  | 4,418 |  |  | 5,244 |  |  | (123) |  | 2015 |  | 40 |
2316 |  | Dukinfield |  | UK |  |  | — |  |  | 428 |  |  | 2,715 |  |  | — |  |  | 428 |  |  | 2,715 |  |  | 3,143 |  |  | (70) |  | 2015 |  | 50 |
2317 |  | Dukinfield |  | UK |  |  | — |  |  | 575 |  |  | 3,064 |  |  | — |  |  | 575 |  |  | 3,064 |  |  | 3,639 |  |  | (92) |  | 2015 |  | 40 |
2303 |  | Eckington |  | UK |  |  | — |  |  | 546 |  |  | 1,785 |  |  | — |  |  | 546 |  |  | 1,785 |  |  | 2,331 |  |  | (63) |  | 2015 |  | 40 |
2208 |  | Elstead |  | UK |  |  | — |  |  | 973 |  |  | 3,336 |  |  | — |  |  | 973 |  |  | 3,336 |  |  | 4,309 |  |  | (167) |  | 2014 |  | 45 |
2214 |  | Gilroyd |  | UK |  |  | — |  |  | 1,088 |  |  | 1,843 |  |  | — |  |  | 1,088 |  |  | 1,842 |  |  | 2,930 |  |  | (155) |  | 2014 |  | 50 |
2213 |  | Ilkley |  | UK |  |  | — |  |  | 1,040 |  |  | 2,744 |  |  | — |  |  | 1,039 |  |  | 2,745 |  |  | 3,784 |  |  | (194) |  | 2014 |  | 45 |
2209 |  | Kingswood |  | UK |  |  | — |  |  | 1,136 |  |  | 4,233 |  |  | — |  |  | 1,136 |  |  | 4,232 |  |  | 5,368 |  |  | (195) |  | 2014 |  | 45 |
2212 |  | Kirk Hammerton |  | UK |  |  | — |  |  | 478 |  |  | 611 |  |  | — |  |  | 478 |  |  | 611 |  |  | 1,089 |  |  | (63) |  | 2014 |  | 50 |

129

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
2304 |  | Knotty Ash |  | UK |  |  | — |  |  | 708 |  |  | 2,479 |  |  | — |  |  | 708 |  |  | 2,479 |  |  | 3,187 |  |  | (80) |  | 2015 |  | 40 |
2310 |  | Kirkby |  | UK |  |  | — |  |  | 619 |  |  | 2,956 |  |  | — |  |  | 619 |  |  | 2,956 |  |  | 3,575 |  |  | (90) |  | 2015 |  | 40 |
2322 |  | Laindon |  | UK |  |  | — |  |  | 1,298 |  |  | 3,020 |  |  | — |  |  | 1,298 |  |  | 3,020 |  |  | 4,318 |  |  | (98) |  | 2015 |  | 40 |
2215 |  | Leeds |  | UK |  |  | — |  |  | 549 |  |  | 867 |  |  | — |  |  | 549 |  |  | 867 |  |  | 1,416 |  |  | (95) |  | 2014 |  | 45 |
2326 |  | Limehouse |  | UK |  |  | — |  |  | 2,419 |  |  | 3,453 |  |  | — |  |  | 2,419 |  |  | 3,453 |  |  | 5,872 |  |  | (120) |  | 2015 |  | 40 |
2321 |  | Luton |  | UK |  |  | — |  |  | 1,165 |  |  | 3,454 |  |  | — |  |  | 1,165 |  |  | 3,454 |  |  | 4,619 |  |  | (100) |  | 2015 |  | 40 |
2339 |  | Manchester |  | UK |  |  | — |  |  | 1,836 |  |  | 16,496 |  |  | — |  |  | 1,836 |  |  | 16,496 |  |  | 18,332 |  |  | (189) |  | 2015 |  | 45 |
2225 |  | N Wadebridge |  | UK |  |  | — |  |  | 324 |  |  | 6,712 |  |  | — |  |  | 324 |  |  | 6,712 |  |  | 7,036 |  |  | (249) |  | 2014 |  | 50 |
2305 |  | Prescot |  | UK |  |  | — |  |  | 693 |  |  | 2,596 |  |  | — |  |  | 693 |  |  | 2,596 |  |  | 3,289 |  |  | (84) |  | 2015 |  | 40 |
2219 |  | Ripon |  | UK |  |  | — |  |  | 206 |  |  | 987 |  |  | — |  |  | 206 |  |  | 987 |  |  | 1,193 |  |  | (63) |  | 2014 |  | 45 |
2314 |  | Stalybridge |  | UK |  |  | — |  |  | 767 |  |  | 3,932 |  |  | — |  |  | 767 |  |  | 3,932 |  |  | 4,699 |  |  | (113) |  | 2015 |  | 40 |
2218 |  | Stapeley |  | UK |  |  | — |  |  | 1,084 |  |  | 7,074 |  |  | — |  |  | 1,084 |  |  | 7,074 |  |  | 8,158 |  |  | (273) |  | 2014 |  | 60 |
2224 |  | Stockton-on-Tees |  | UK |  |  | — |  |  | 319 |  |  | 2,273 |  |  | — |  |  | 319 |  |  | 2,273 |  |  | 2,592 |  |  | (116) |  | 2014 |  | 50 |
2220 |  | Thornton-Cleveleys |  | UK |  |  | — |  |  | 995 |  |  | 4,977 |  |  | — |  |  | 995 |  |  | 4,977 |  |  | 5,972 |  |  | (232) |  | 2014 |  | 50 |
2228 |  | Upper Wortley |  | UK |  |  | — |  |  | 495 |  |  | 3,668 |  |  | — |  |  | 496 |  |  | 3,669 |  |  | 4,165 |  |  | (134) |  | 2014 |  | 50 |
2311 |  | Wigan |  | UK |  |  | — |  |  | 782 |  |  | 2,899 |  |  | — |  |  | 782 |  |  | 2,899 |  |  | 3,681 |  |  | (109) |  | 2015 |  | 40 |
2222 |  | Woolmer Green |  | UK |  |  | — |  |  | 907 |  |  | 6,606 |  |  | — |  |  | 907 |  |  | 6,606 |  |  | 7,513 |  |  | (278) |  | 2014 |  | 50 |
|  |  |  |  |  | $ | 743,711 |  | $ | 704,737 |  | $ | 6,046,900 |  | $ | 294,271 |  | $ | 706,373 |  | $ | 6,243,621 |  | $ | 6,949,994 |  | $ | (1,040,078) |  |  |  |  |
Post-acute/skilled nursing |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
0002 |  | Fort Collins |  | CO |  |  | — |  |  | 499 |  |  | 1,913 |  |  | 1,454 |  |  | 499 |  |  | 3,114 |  |  | 3,613 |  |  | (3,114) |  | 1985 |  | 25 |
0018 |  | Morrison |  | CO |  |  | — |  |  | 1,429 |  |  | 5,464 |  |  | 4,019 |  |  | 1,429 |  |  | 8,758 |  |  | 10,187 |  |  | (8,638) |  | 1985 |  | 24 |
0280 |  | Statesboro |  | GA |  |  | — |  |  | 168 |  |  | 1,507 |  |  | — |  |  | 168 |  |  | 1,507 |  |  | 1,675 |  |  | (962) |  | 1992 |  | 25 |
0297 |  | Rexburg |  | ID |  |  | — |  |  | 200 |  |  | 5,310 |  |  | — |  |  | 200 |  |  | 5,057 |  |  | 5,257 |  |  | (2,528) |  | 1998 |  | 35 |
0378 |  | Anderson |  | IN |  |  | — |  |  | 500 |  |  | 4,724 |  |  | 10,341 |  |  | 1,166 |  |  | 13,998 |  |  | 15,164 |  |  | (3,077) |  | 1999 |  | 35 |
0384 |  | Angola |  | IN |  |  | — |  |  | 130 |  |  | 2,900 |  |  | 2,791 |  |  | 130 |  |  | 5,691 |  |  | 5,821 |  |  | (1,730) |  | 1999 |  | 35 |
0385 |  | Fort Wayne |  | IN |  |  | — |  |  | 200 |  |  | 4,150 |  |  | 2,667 |  |  | 200 |  |  | 6,817 |  |  | 7,017 |  |  | (2,484) |  | 1999 |  | 38 |
0386 |  | Fort Wayne |  | IN |  |  | — |  |  | 140 |  |  | 3,760 |  |  | — |  |  | 140 |  |  | 3,760 |  |  | 3,900 |  |  | (1,737) |  | 1999 |  | 35 |
0387 |  | Huntington |  | IN |  |  | — |  |  | 30 |  |  | 2,970 |  |  | 338 |  |  | 30 |  |  | 3,308 |  |  | 3,338 |  |  | (1,439) |  | 1999 |  | 35 |
0373 |  | Kokomo |  | IN |  |  | — |  |  | 480 |  |  | 4,622 |  |  | 4,663 |  |  | 480 |  |  | 9,022 |  |  | 9,502 |  |  | (1,884) |  | 1999 |  | 45 |
0454 |  | New Albany |  | IN |  |  | — |  |  | 230 |  |  | 6,595 |  |  | — |  |  | 230 |  |  | 6,595 |  |  | 6,825 |  |  | (2,779) |  | 2001 |  | 35 |
0484 |  | Tell City |  | IN |  |  | — |  |  | 95 |  |  | 6,210 |  |  | 1,299 |  |  | 95 |  |  | 7,509 |  |  | 7,604 |  |  | (2,308) |  | 2001 |  | 45 |
0688 |  | Cynthiana |  | KY |  |  | — |  |  | 192 |  |  | 4,875 |  |  | — |  |  | 192 |  |  | 4,875 |  |  | 5,067 |  |  | (1,327) |  | 2004 |  | 40 |
0298 |  | Franklin |  | LA |  |  | — |  |  | 405 |  |  | 3,424 |  |  | — |  |  | 405 |  |  | 3,424 |  |  | 3,829 |  |  | (2,153) |  | 1998 |  | 25 |
0299 |  | Morgan City |  | LA |  |  | — |  |  | 203 |  |  | 2,050 |  |  | — |  |  | 203 |  |  | 2,050 |  |  | 2,253 |  |  | (1,289) |  | 1998 |  | 25 |
0388 |  | Las Vegas |  | NV |  |  | — |  |  | 1,300 |  |  | 3,950 |  |  | 5,124 |  |  | 1,300 |  |  | 9,074 |  |  | 10,374 |  |  | (2,462) |  | 1999 |  | 35 |
0389 |  | Las Vegas |  | NV |  |  | — |  |  | 1,300 |  |  | 5,800 |  |  | — |  |  | 1,300 |  |  | 5,800 |  |  | 7,100 |  |  | (2,679) |  | 1999 |  | 35 |
0390 |  | Fairborn |  | OH |  |  | — |  |  | 250 |  |  | 4,850 |  |  | — |  |  | 250 |  |  | 4,850 |  |  | 5,100 |  |  | (2,240) |  | 1999 |  | 35 |
0391 |  | Georgetown |  | OH |  |  | — |  |  | 130 |  |  | 4,970 |  |  | — |  |  | 130 |  |  | 4,970 |  |  | 5,100 |  |  | (2,296) |  | 1999 |  | 35 |
0392 |  | Port Clinton |  | OH |  |  | — |  |  | 370 |  |  | 3,630 |  |  | — |  |  | 370 |  |  | 3,630 |  |  | 4,000 |  |  | (1,677) |  | 1999 |  | 35 |
0393 |  | Springfield |  | OH |  |  | — |  |  | 213 |  |  | 3,950 |  |  | 2,113 |  |  | 213 |  |  | 6,063 |  |  | 6,276 |  |  | (2,194) |  | 1999 |  | 35 |
0394 |  | Toledo |  | OH |  |  | — |  |  | 120 |  |  | 5,130 |  |  | — |  |  | 120 |  |  | 5,130 |  |  | 5,250 |  |  | (2,370) |  | 1999 |  | 35 |
0395 |  | Versailles |  | OH |  |  | — |  |  | 120 |  |  | 4,980 |  |  | — |  |  | 120 |  |  | 4,980 |  |  | 5,100 |  |  | (2,300) |  | 1999 |  | 35 |
0285 |  | Fort Worth |  | TX |  |  | — |  |  | 243 |  |  | 2,036 |  |  | 269 |  |  | 243 |  |  | 2,305 |  |  | 2,548 |  |  | (1,464) |  | 1998 |  | 25 |
0296 |  | Ogden |  | UT |  |  | — |  |  | 250 |  |  | 4,685 |  |  | — |  |  | 250 |  |  | 4,432 |  |  | 4,682 |  |  | (2,194) |  | 1998 |  | 35 |
0681 |  | Fishersville |  | VA |  |  | — |  |  | 751 |  |  | 7,734 |  |  | — |  |  | 751 |  |  | 7,220 |  |  | 7,971 |  |  | (2,111) |  | 2004 |  | 40 |
0682 |  | Floyd |  | VA |  |  | — |  |  | 309 |  |  | 2,263 |  |  | — |  |  | 309 |  |  | 1,893 |  |  | 2,202 |  |  | (881) |  | 2004 |  | 25 |
0689 |  | Independence |  | VA |  |  | — |  |  | 206 |  |  | 8,366 |  |  | — |  |  | 206 |  |  | 7,810 |  |  | 8,016 |  |  | (2,262) |  | 2004 |  | 40 |
0683 |  | Newport News |  | VA |  |  | — |  |  | 535 |  |  | 6,192 |  |  | — |  |  | 535 |  |  | 5,719 |  |  | 6,254 |  |  | (1,672) |  | 2004 |  | 40 |
0684 |  | Roanoke |  | VA |  |  | — |  |  | 586 |  |  | 7,159 |  |  | — |  |  | 586 |  |  | 6,696 |  |  | 7,282 |  |  | (1,957) |  | 2004 |  | 40 |
0685 |  | Staunton |  | VA |  |  | — |  |  | 422 |  |  | 8,681 |  |  | — |  |  | 422 |  |  | 8,136 |  |  | 8,558 |  |  | (2,376) |  | 2004 |  | 40 |
0686 |  | Williamsburg |  | VA |  |  | — |  |  | 699 |  |  | 4,886 |  |  | — |  |  | 699 |  |  | 4,464 |  |  | 5,163 |  |  | (1,306) |  | 2004 |  | 40 |
0690 |  | Windsor |  | VA |  |  | — |  |  | 319 |  |  | 7,543 |  |  | — |  |  | 319 |  |  | 7,018 |  |  | 7,337 |  |  | (2,032) |  | 2004 |  | 40 |
0687 |  | Woodstock |  | VA |  |  | — |  |  | 603 |  |  | 5,394 |  |  | 8 |  |  | 607 |  |  | 4,987 |  |  | 5,594 |  |  | (1,459) |  | 2004 |  | 40 |
United Kingdom |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2335 |  | Cardiff |  | UK |  |  | — |  |  | 1,563 |  |  | 5,272 |  |  | — |  |  | 1,563 |  |  | 5,272 |  |  | 6,835 |  |  | (157) |  | 2015 |  | 45 |
2327 |  | Croydon |  | UK |  |  | — |  |  | 1,740 |  |  | 2,718 |  |  | — |  |  | 1,740 |  |  | 2,718 |  |  | 4,458 |  |  | (87) |  | 2015 |  | 45 |
2336 |  | Birmingham |  | UK |  |  | — |  |  | 737 |  |  | 2,671 |  |  | — |  |  | 737 |  |  | 2,671 |  |  | 3,408 |  |  | (93) |  | 2015 |  | 45 |
2320 |  | Bishopbriggs |  | UK |  |  | — |  |  | 988 |  |  | 4,540 |  |  | — |  |  | 988 |  |  | 4,540 |  |  | 5,528 |  |  | (134) |  | 2015 |  | 40 |
2323 |  | Bonnyrigg |  | UK |  |  | — |  |  | 1,032 |  |  | 6,799 |  |  | — |  |  | 1,032 |  |  | 6,799 |  |  | 7,831 |  |  | (191) |  | 2015 |  | 40 |
2318 |  | Dumbarton |  | UK |  |  | — |  |  | 1,003 |  |  | 4,169 |  |  | — |  |  | 1,003 |  |  | 4,169 |  |  | 5,172 |  |  | (128) |  | 2015 |  | 40 |
2333 |  | Edinburgh |  | UK |  |  | — |  |  | 4,940 |  |  | 26,304 |  |  | — |  |  | 4,940 |  |  | 26,304 |  |  | 31,244 |  |  | (669) |  | 2015 |  | 40 |
2328 |  | Forfar |  | UK |  |  | — |  |  | 929 |  |  | 6,757 |  |  | — |  |  | 929 |  |  | 6,757 |  |  | 7,686 |  |  | (183) |  | 2015 |  | 40 |
2330 |  | Glasgow |  | UK |  |  | — |  |  | 2,020 |  |  | 7,243 |  |  | — |  |  | 2,020 |  |  | 7,243 |  |  | 9,263 |  |  | (224) |  | 2015 |  | 40 |
2307 |  | Hyde |  | UK |  |  | — |  |  | 1,519 |  |  | 5,607 |  |  | — |  |  | 1,519 |  |  | 5,607 |  |  | 7,126 |  |  | (173) |  | 2015 |  | 45 |
2324 |  | Lewisham |  | UK |  |  | — |  |  | 2,094 |  |  | 7,752 |  |  | — |  |  | 2,094 |  |  | 7,752 |  |  | 9,846 |  |  | (215) |  | 2015 |  | 40 |
2332 |  | Linlithgow |  | UK |  |  | — |  |  | 1,578 |  |  | 8,102 |  |  | — |  |  | 1,578 |  |  | 8,102 |  |  | 9,680 |  |  | (222) |  | 2015 |  | 40 |
2331 |  | Paisley |  | UK |  |  | — |  |  | 1,342 |  |  | 4,354 |  |  | — |  |  | 1,342 |  |  | 4,354 |  |  | 5,696 |  |  | (131) |  | 2015 |  | 40 |
2308 |  | Prescot |  | UK |  |  | — |  |  | 590 |  |  | 2,108 |  |  | — |  |  | 590 |  |  | 2,108 |  |  | 2,698 |  |  | (74) |  | 2015 |  | 40 |
2319 |  | Sheffield |  | UK |  |  | — |  |  | 811 |  |  | 2,948 |  |  | — |  |  | 811 |  |  | 2,948 |  |  | 3,759 |  |  | (90) |  | 2015 |  | 40 |
2315 |  | Stalybridge |  | UK |  |  | — |  |  | 605 |  |  | 2,056 |  |  | — |  |  | 605 |  |  | 2,056 |  |  | 2,661 |  |  | (63) |  | 2015 |  | 50 |
2325 |  | Stirling |  | UK |  |  | — |  |  | 988 |  |  | 5,372 |  |  | — |  |  | 988 |  |  | 5,372 |  |  | 6,360 |  |  | (145) |  | 2015 |  | 40 |
2329 |  | Stirling |  | UK |  |  | — |  |  | 1,209 |  |  | 4,405 |  |  | — |  |  | 1,209 |  |  | 4,405 |  |  | 5,614 |  |  | (137) |  | 2015 |  | 40 |
2337 |  | Wigan |  | UK |  |  | — |  |  | 590 |  |  | 1,983 |  |  | — |  |  | 590 |  |  | 1,983 |  |  | 2,573 |  |  | (72) |  | 2015 |  | 40 |
2338 |  | Wigan |  | UK |  |  | — |  |  | 516 |  |  | 4,129 |  |  | — |  |  | 516 |  |  | 4,129 |  |  | 4,645 |  |  | (117) |  | 2015 |  | 40 |
2334 |  | Wotton under Edge |  | UK |  |  | — |  |  | 693 |  |  | 2,714 |  |  | — |  |  | 693 |  |  | 2,714 |  |  | 3,407 |  |  | (96) |  | 2015 |  | 40 |
|  |  |  |  |  | $ | — |  | $ | 41,114 |  | $ | 280,676 |  | $ | 35,086 |  | $ | 41,784 |  | $ | 308,665 |  | $ | 350,449 |  | $ | (78,782) |  |  |  |  |

130

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
Life science |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1482 |  | Brisbane |  | CA |  |  | — |  |  | 50,989 |  |  | 1,789 |  |  | 39,456 |  |  | 50,989 |  |  | 41,242 |  |  | 92,231 |  |  | — |  | 2007 |  | ** |
1522 |  | Carlsbad |  | CA |  |  | — |  |  | 23,475 |  |  | — |  |  | 2,826 |  |  | 23,475 |  |  | 2,826 |  |  | 26,301 |  |  | — |  | 2007 |  | ** |
1401 |  | Hayward |  | CA |  |  | — |  |  | 900 |  |  | 7,100 |  |  | 915 |  |  | 900 |  |  | 8,015 |  |  | 8,915 |  |  | (2,012) |  | 2007 |  | 40 |
1402 |  | Hayward |  | CA |  |  | — |  |  | 1,500 |  |  | 6,400 |  |  | 3,682 |  |  | 1,719 |  |  | 9,863 |  |  | 11,582 |  |  | (3,076) |  | 2007 |  | 40 |
1403 |  | Hayward |  | CA |  |  | — |  |  | 1,900 |  |  | 7,100 |  |  | 1,358 |  |  | 1,900 |  |  | 8,205 |  |  | 10,105 |  |  | (1,662) |  | 2007 |  | 40 |
1404 |  | Hayward |  | CA |  |  | — |  |  | 2,200 |  |  | 17,200 |  |  | 12 |  |  | 2,200 |  |  | 17,212 |  |  | 19,412 |  |  | (3,623) |  | 2007 |  | 40 |
1405 |  | Hayward |  | CA |  |  | — |  |  | 1,000 |  |  | 3,200 |  |  | 7,478 |  |  | 1,000 |  |  | 10,678 |  |  | 11,678 |  |  | (4,697) |  | 2007 |  | 40 |
1549 |  | Hayward |  | CA |  |  | — |  |  | 1,006 |  |  | 4,259 |  |  | 2,744 |  |  | 1,055 |  |  | 6,835 |  |  | 7,890 |  |  | (2,489) |  | 2007 |  | 29 |
1550 |  | Hayward |  | CA |  |  | — |  |  | 677 |  |  | 2,761 |  |  | 5,570 |  |  | 710 |  |  | 8,243 |  |  | 8,953 |  |  | (3,535) |  | 2007 |  | 29 |
1551 |  | Hayward |  | CA |  |  | — |  |  | 661 |  |  | 1,995 |  |  | 4,258 |  |  | 693 |  |  | 6,221 |  |  | 6,914 |  |  | (2,310) |  | 2007 |  | 29 |
1552 |  | Hayward |  | CA |  |  | — |  |  | 1,187 |  |  | 7,139 |  |  | 1,346 |  |  | 1,222 |  |  | 8,148 |  |  | 9,370 |  |  | (2,446) |  | 2007 |  | 29 |
1553 |  | Hayward |  | CA |  |  | — |  |  | 1,189 |  |  | 9,465 |  |  | 3,982 |  |  | 1,225 |  |  | 13,411 |  |  | 14,636 |  |  | (3,174) |  | 2007 |  | 29 |
1554 |  | Hayward |  | CA |  |  | — |  |  | 1,246 |  |  | 5,179 |  |  | 1,867 |  |  | 1,283 |  |  | 6,525 |  |  | 7,808 |  |  | (2,475) |  | 2007 |  | 29 |
1555 |  | Hayward |  | CA |  |  | — |  |  | 1,521 |  |  | 13,546 |  |  | 5,913 |  |  | 1,566 |  |  | 19,414 |  |  | 20,980 |  |  | (4,950) |  | 2007 |  | 29 |
1556 |  | Hayward |  | CA |  |  | — |  |  | 1,212 |  |  | 5,120 |  |  | 3,049 |  |  | 1,249 |  |  | 7,795 |  |  | 9,044 |  |  | (3,466) |  | 2007 |  | 29 |
1424 |  | La Jolla |  | CA |  |  | — |  |  | 9,600 |  |  | 25,283 |  |  | 7,356 |  |  | 9,719 |  |  | 30,596 |  |  | 40,315 |  |  | (6,370) |  | 2007 |  | 40 |
1425 |  | La Jolla |  | CA |  |  | — |  |  | 6,200 |  |  | 19,883 |  |  | 125 |  |  | 6,276 |  |  | 19,931 |  |  | 26,207 |  |  | (4,247) |  | 2007 |  | 40 |
1426 |  | La Jolla |  | CA |  |  | — |  |  | 7,200 |  |  | 12,412 |  |  | 4,784 |  |  | 7,291 |  |  | 17,105 |  |  | 24,396 |  |  | (6,555) |  | 2007 |  | 27 |
1427 |  | La Jolla |  | CA |  |  | — |  |  | 8,700 |  |  | 16,983 |  |  | 4,342 |  |  | 8,746 |  |  | 20,795 |  |  | 29,541 |  |  | (5,513) |  | 2007 |  | 30 |
1949 |  | La Jolla |  | CA |  |  | — |  |  | 2,686 |  |  | 11,045 |  |  | 608 |  |  | 2,686 |  |  | 11,323 |  |  | 14,009 |  |  | (1,889) |  | 2011 |  | 30 |
2229 |  | La Jolla |  | CA |  |  | — |  |  | 8,753 |  |  | 32,528 |  |  | 2,614 |  |  | 8,753 |  |  | 35,143 |  |  | 43,896 |  |  | (1,451) |  | 2014 |  | 35 |
1488 |  | Mountain View |  | CA |  |  | — |  |  | 7,300 |  |  | 25,410 |  |  | 1,901 |  |  | 7,567 |  |  | 27,044 |  |  | 34,611 |  |  | (5,975) |  | 2007 |  | 40 |
1489 |  | Mountain View |  | CA |  |  | — |  |  | 6,500 |  |  | 22,800 |  |  | 1,866 |  |  | 6,500 |  |  | 24,666 |  |  | 31,166 |  |  | (5,501) |  | 2007 |  | 40 |
1490 |  | Mountain View |  | CA |  |  | — |  |  | 4,800 |  |  | 9,500 |  |  | 442 |  |  | 4,800 |  |  | 9,942 |  |  | 14,742 |  |  | (2,207) |  | 2007 |  | 40 |
1491 |  | Mountain View |  | CA |  |  | — |  |  | 4,200 |  |  | 8,400 |  |  | 1,249 |  |  | 4,209 |  |  | 8,998 |  |  | 13,207 |  |  | (1,951) |  | 2007 |  | 40 |
1492 |  | Mountain View |  | CA |  |  | — |  |  | 3,600 |  |  | 9,700 |  |  | 730 |  |  | 3,600 |  |  | 9,703 |  |  | 13,303 |  |  | (2,042) |  | 2007 |  | 40 |
1493 |  | Mountain View |  | CA |  |  | — |  |  | 7,500 |  |  | 16,300 |  |  | 1,904 |  |  | 7,500 |  |  | 17,603 |  |  | 25,103 |  |  | (3,891) |  | 2007 |  | 40 |
1494 |  | Mountain View |  | CA |  |  | — |  |  | 9,800 |  |  | 24,000 |  |  | 203 |  |  | 9,800 |  |  | 24,203 |  |  | 34,003 |  |  | (5,136) |  | 2007 |  | 40 |
1495 |  | Mountain View |  | CA |  |  | — |  |  | 6,900 |  |  | 17,800 |  |  | 3,245 |  |  | 6,900 |  |  | 21,045 |  |  | 27,945 |  |  | (4,793) |  | 2007 |  | 40 |
1496 |  | Mountain View |  | CA |  |  | — |  |  | 7,000 |  |  | 17,000 |  |  | 6,364 |  |  | 7,000 |  |  | 23,364 |  |  | 30,364 |  |  | (9,132) |  | 2007 |  | 40 |
1497 |  | Mountain View |  | CA |  |  | — |  |  | 14,100 |  |  | 31,002 |  |  | 10,111 |  |  | 14,100 |  |  | 41,113 |  |  | 55,213 |  |  | (15,042) |  | 2007 |  | 40 |
1498 |  | Mountain View |  | CA |  |  | — |  |  | 7,100 |  |  | 25,800 |  |  | 8,101 |  |  | 7,100 |  |  | 33,901 |  |  | 41,001 |  |  | (11,688) |  | 2013 |  | 40 |
2017 |  | Mountain View |  | CA |  |  | — |  |  | — |  |  | 20,350 |  |  | 1,007 |  |  | — |  |  | 21,255 |  |  | 21,255 |  |  | (2,262) |  | 2004 |  | 40 |
1470 |  | Poway |  | CA |  |  | — |  |  | 5,826 |  |  | 12,200 |  |  | 6,046 |  |  | 5,826 |  |  | 18,246 |  |  | 24,072 |  |  | (7,570) |  | 2007 |  | 40 |
1471 |  | Poway |  | CA |  |  | — |  |  | 5,978 |  |  | 14,200 |  |  | 4,253 |  |  | 5,978 |  |  | 18,453 |  |  | 24,431 |  |  | (6,304) |  | 2007 |  | 40 |
1472 |  | Poway |  | CA |  |  | — |  |  | 8,654 |  |  | — |  |  | 11,934 |  |  | 8,654 |  |  | 11,934 |  |  | 20,588 |  |  | (474) |  | 2007 |  | 40 |
1473 |  | Poway |  | CA |  |  | — |  |  | 17,146 |  |  | 2,405 |  |  | 2,236 |  |  | 17,146 |  |  | 4,641 |  |  | 21,787 |  |  | — |  | 2007 |  | ** |
1477 |  | Poway |  | CA |  |  | — |  |  | 29,943 |  |  | 2,475 |  |  | 17,868 |  |  | 29,943 |  |  | 20,343 |  |  | 50,286 |  |  | — |  | 2007 |  | ** |
1478 |  | Poway |  | CA |  |  | — |  |  | 6,700 |  |  | 14,400 |  |  | 6,145 |  |  | 6,700 |  |  | 14,400 |  |  | 21,100 |  |  | (3,030) |  | 2007 |  | 40 |
1499 |  | Redwood City |  | CA |  |  | — |  |  | 3,400 |  |  | 5,500 |  |  | 2,265 |  |  | 3,407 |  |  | 7,226 |  |  | 10,633 |  |  | (1,864) |  | 2007 |  | 40 |
1500 |  | Redwood City |  | CA |  |  | — |  |  | 2,500 |  |  | 4,100 |  |  | 1,220 |  |  | 2,506 |  |  | 4,563 |  |  | 7,069 |  |  | (1,209) |  | 2007 |  | 40 |
1501 |  | Redwood City |  | CA |  |  | — |  |  | 3,600 |  |  | 4,600 |  |  | 860 |  |  | 3,607 |  |  | 5,453 |  |  | 9,060 |  |  | (1,714) |  | 2007 |  | 30 |
1502 |  | Redwood City |  | CA |  |  | — |  |  | 3,100 |  |  | 5,100 |  |  | 843 |  |  | 3,107 |  |  | 5,690 |  |  | 8,797 |  |  | (1,530) |  | 2007 |  | 31 |
1503 |  | Redwood City |  | CA |  |  | — |  |  | 4,800 |  |  | 17,300 |  |  | 3,298 |  |  | 4,818 |  |  | 20,581 |  |  | 25,399 |  |  | (4,790) |  | 2007 |  | 31 |
1504 |  | Redwood City |  | CA |  |  | — |  |  | 5,400 |  |  | 15,500 |  |  | 949 |  |  | 5,418 |  |  | 16,431 |  |  | 21,849 |  |  | (3,414) |  | 2007 |  | 31 |
1505 |  | Redwood City |  | CA |  |  | — |  |  | 3,000 |  |  | 3,500 |  |  | 869 |  |  | 3,006 |  |  | 4,363 |  |  | 7,369 |  |  | (1,457) |  | 2007 |  | 40 |
1506 |  | Redwood City |  | CA |  |  | — |  |  | 6,000 |  |  | 14,300 |  |  | 3,871 |  |  | 6,018 |  |  | 17,545 |  |  | 23,563 |  |  | (3,626) |  | 2007 |  | 40 |
1507 |  | Redwood City |  | CA |  |  | — |  |  | 1,900 |  |  | 12,800 |  |  | 13,559 |  |  | 1,912 |  |  | 26,347 |  |  | 28,259 |  |  | (3,737) |  | 2007 |  | 39 |
1508 |  | Redwood City |  | CA |  |  | — |  |  | 2,700 |  |  | 11,300 |  |  | 12,120 |  |  | 2,712 |  |  | 23,409 |  |  | 26,121 |  |  | (3,503) |  | 2007 |  | 39 |
1509 |  | Redwood City |  | CA |  |  | — |  |  | 2,700 |  |  | 10,900 |  |  | 9,122 |  |  | 2,712 |  |  | 19,540 |  |  | 22,252 |  |  | (4,606) |  | 2007 |  | 40 |
1510 |  | Redwood City |  | CA |  |  | — |  |  | 2,200 |  |  | 12,000 |  |  | 5,418 |  |  | 2,212 |  |  | 17,407 |  |  | 19,619 |  |  | (5,412) |  | 2007 |  | 38 |
1511 |  | Redwood City |  | CA |  |  | — |  |  | 2,600 |  |  | 9,300 |  |  | 1,822 |  |  | 2,612 |  |  | 10,555 |  |  | 13,167 |  |  | (2,143) |  | 2007 |  | 26 |
1512 |  | Redwood City |  | CA |  |  | — |  |  | 3,300 |  |  | 18,000 |  |  | 12,336 |  |  | 3,300 |  |  | 30,336 |  |  | 33,636 |  |  | (4,836) |  | 2007 |  | 40 |
1513 |  | Redwood City |  | CA |  |  | — |  |  | 3,300 |  |  | 17,900 |  |  | 14,629 |  |  | 3,300 |  |  | 32,529 |  |  | 35,829 |  |  | (4,788) |  | 2007 |  | 40 |
0679 |  | San Diego |  | CA |  |  | — |  |  | 7,872 |  |  | 34,617 |  |  | 18,167 |  |  | 8,272 |  |  | 51,638 |  |  | 59,910 |  |  | (16,156) |  | 2002 |  | 39 |
0837 |  | San Diego |  | CA |  |  | — |  |  | 4,630 |  |  | 2,029 |  |  | 8,967 |  |  | 4,630 |  |  | 10,996 |  |  | 15,626 |  |  | (4,400) |  | 2006 |  | 31 |
0838 |  | San Diego |  | CA |  |  | — |  |  | 2,040 |  |  | 902 |  |  | 4,975 |  |  | 2,040 |  |  | 5,878 |  |  | 7,918 |  |  | (1,446) |  | 2006 |  | 40 |
0839 |  | San Diego |  | CA |  |  | — |  |  | 3,940 |  |  | 3,184 |  |  | 4,860 |  |  | 3,951 |  |  | 4,813 |  |  | 8,764 |  |  | (1,076) |  | 2006 |  | 40 |
0840 |  | San Diego |  | CA |  |  | — |  |  | 5,690 |  |  | 4,579 |  |  | 711 |  |  | 5,703 |  |  | 4,851 |  |  | 10,554 |  |  | (1,219) |  | 2006 |  | 40 |
1418 |  | San Diego |  | CA |  |  | — |  |  | 11,700 |  |  | 31,243 |  |  | 6,403 |  |  | 11,700 |  |  | 37,647 |  |  | 49,347 |  |  | (9,954) |  | 2007 |  | 40 |
1420 |  | San Diego |  | CA |  |  | — |  |  | 6,524 |  |  | — |  |  | 4,341 |  |  | 6,524 |  |  | 4,340 |  |  | 10,864 |  |  | — |  | 2007 |  | ** |
1421 |  | San Diego |  | CA |  |  | — |  |  | 7,000 |  |  | 33,779 |  |  | 683 |  |  | 7,000 |  |  | 34,462 |  |  | 41,462 |  |  | (7,108) |  | 2007 |  | 40 |
1422 |  | San Diego |  | CA |  |  | — |  |  | 7,179 |  |  | 3,687 |  |  | 934 |  |  | 7,184 |  |  | 4,615 |  |  | 11,799 |  |  | (1,248) |  | 2007 |  | 30 |
1423 |  | San Diego |  | CA |  |  | — |  |  | 8,400 |  |  | 33,144 |  |  | 18 |  |  | 8,400 |  |  | 33,162 |  |  | 41,562 |  |  | (6,976) |  | 2007 |  | 40 |
1514 |  | San Diego |  | CA |  |  | — |  |  | 5,200 |  |  | — |  |  | — |  |  | 5,200 |  |  | — |  |  | 5,200 |  |  | — |  | 2007 |  | ** |
1558 |  | San Diego |  | CA |  |  | — |  |  | 7,740 |  |  | 22,654 |  |  | 2,174 |  |  | 7,888 |  |  | 24,530 |  |  | 32,418 |  |  | (5,586) |  | 2007 |  | 38 |
1947 |  | San Diego |  | CA |  |  | 11,528 |  |  | 2,581 |  |  | 10,534 |  |  | 3,207 |  |  | 2,581 |  |  | 13,741 |  |  | 16,322 |  |  | (1,840) |  | 2011 |  | 30 |
1948 |  | San Diego |  | CA |  |  | 23,797 |  |  | 5,879 |  |  | 25,305 |  |  | 2,417 |  |  | 5,879 |  |  | 27,718 |  |  | 33,597 |  |  | (4,942) |  | 2011 |  | 30 |
1950 |  | San Diego |  | CA |  |  | 802 |  |  | 884 |  |  | 2,796 |  |  | — |  |  | 884 |  |  | 2,796 |  |  | 3,680 |  |  | (466) |  | 2011 |  | 30 |
2197 |  | San Diego |  | CA |  |  | — |  |  | 7,621 |  |  | 3,913 |  |  | 3,750 |  |  | 7,626 |  |  | 7,657 |  |  | 15,283 |  |  | (2,932) |  | 2007 |  | 33 |

131

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
1407 |  | South San Francisco |  | CA |  |  | — |  |  | 28,600 |  |  | 48,700 |  |  | 14,739 |  |  | 28,600 |  |  | 59,820 |  |  | 88,420 |  |  | (13,782) |  | 2007 |  | 35 |
1408 |  | South San Francisco |  | CA |  |  | — |  |  | 9,000 |  |  | 17,800 |  |  | 1,076 |  |  | 9,000 |  |  | 18,877 |  |  | 27,877 |  |  | (4,273) |  | 2007 |  | 40 |
1409 |  | South San Francisco |  | CA |  |  | — |  |  | 18,000 |  |  | 38,043 |  |  | 4,235 |  |  | 18,000 |  |  | 42,279 |  |  | 60,279 |  |  | (8,071) |  | 2007 |  | 40 |
1410 |  | South San Francisco |  | CA |  |  | — |  |  | 4,900 |  |  | 18,100 |  |  | 157 |  |  | 4,900 |  |  | 18,257 |  |  | 23,157 |  |  | (3,857) |  | 2007 |  | 40 |
1411 |  | South San Francisco |  | CA |  |  | — |  |  | 8,000 |  |  | 27,700 |  |  | 313 |  |  | 8,000 |  |  | 28,013 |  |  | 36,013 |  |  | (5,872) |  | 2007 |  | 40 |
1412 |  | South San Francisco |  | CA |  |  | — |  |  | 10,100 |  |  | 22,521 |  |  | 2,011 |  |  | 10,100 |  |  | 24,532 |  |  | 34,632 |  |  | (4,905) |  | 2007 |  | 40 |
1413 |  | South San Francisco |  | CA |  |  | — |  |  | 8,000 |  |  | 28,299 |  |  | 252 |  |  | 8,000 |  |  | 28,550 |  |  | 36,550 |  |  | (5,986) |  | 2007 |  | 40 |
1414 |  | South San Francisco |  | CA |  |  | — |  |  | 3,700 |  |  | 20,800 |  |  | 1,257 |  |  | 3,700 |  |  | 22,056 |  |  | 25,756 |  |  | (4,518) |  | 2007 |  | 40 |
1430 |  | South San Francisco |  | CA |  |  | — |  |  | 10,700 |  |  | 23,621 |  |  | 1,233 |  |  | 10,700 |  |  | 24,854 |  |  | 35,554 |  |  | (5,050) |  | 2007 |  | 40 |
1431 |  | South San Francisco |  | CA |  |  | — |  |  | 7,000 |  |  | 15,500 |  |  | 195 |  |  | 7,000 |  |  | 15,695 |  |  | 22,695 |  |  | (3,283) |  | 2007 |  | 40 |
1435 |  | South San Francisco |  | CA |  |  | — |  |  | 13,800 |  |  | 42,500 |  |  | 33,050 |  |  | 13,800 |  |  | 75,550 |  |  | 89,350 |  |  | (13,906) |  | 2008 |  | 40 |
1436 |  | South San Francisco |  | CA |  |  | — |  |  | 14,500 |  |  | 45,300 |  |  | 34,087 |  |  | 14,500 |  |  | 79,387 |  |  | 93,887 |  |  | (14,547) |  | 2008 |  | 40 |
1437 |  | South San Francisco |  | CA |  |  | — |  |  | 9,400 |  |  | 24,800 |  |  | 45,116 |  |  | 9,400 |  |  | 69,917 |  |  | 79,317 |  |  | (8,763) |  | 2008 |  | 40 |
1439 |  | South San Francisco |  | CA |  |  | — |  |  | 11,900 |  |  | 68,848 |  |  | 112 |  |  | 11,900 |  |  | 68,960 |  |  | 80,860 |  |  | (14,498) |  | 2007 |  | 40 |
1440 |  | South San Francisco |  | CA |  |  | — |  |  | 10,000 |  |  | 57,954 |  |  | — |  |  | 10,000 |  |  | 57,954 |  |  | 67,954 |  |  | (12,195) |  | 2007 |  | 40 |
1441 |  | South San Francisco |  | CA |  |  | — |  |  | 9,300 |  |  | 43,549 |  |  | — |  |  | 9,300 |  |  | 43,549 |  |  | 52,849 |  |  | (9,163) |  | 2007 |  | 40 |
1442 |  | South San Francisco |  | CA |  |  | — |  |  | 11,000 |  |  | 47,289 |  |  | 81 |  |  | 11,000 |  |  | 47,370 |  |  | 58,370 |  |  | (9,993) |  | 2007 |  | 40 |
1443 |  | South San Francisco |  | CA |  |  | — |  |  | 13,200 |  |  | 60,932 |  |  | 1,158 |  |  | 13,200 |  |  | 62,090 |  |  | 75,290 |  |  | (12,381) |  | 2007 |  | 40 |
1444 |  | South San Francisco |  | CA |  |  | — |  |  | 10,500 |  |  | 33,776 |  |  | 352 |  |  | 10,500 |  |  | 34,127 |  |  | 44,627 |  |  | (7,237) |  | 2007 |  | 40 |
1445 |  | South San Francisco |  | CA |  |  | — |  |  | 10,600 |  |  | 34,083 |  |  | — |  |  | 10,600 |  |  | 34,083 |  |  | 44,683 |  |  | (7,172) |  | 2007 |  | 40 |
1448 |  | South San Francisco |  | CA |  |  | — |  |  | 14,100 |  |  | 71,344 |  |  | 1,051 |  |  | 14,100 |  |  | 72,395 |  |  | 86,495 |  |  | (15,022) |  | 2007 |  | 40 |
1449 |  | South San Francisco |  | CA |  |  | — |  |  | 12,800 |  |  | 63,600 |  |  | 472 |  |  | 12,800 |  |  | 64,072 |  |  | 76,872 |  |  | (13,572) |  | 2007 |  | 40 |
1450 |  | South San Francisco |  | CA |  |  | — |  |  | 11,200 |  |  | 79,222 |  |  | 20 |  |  | 11,200 |  |  | 79,242 |  |  | 90,442 |  |  | (16,673) |  | 2007 |  | 40 |
1451 |  | South San Francisco |  | CA |  |  | — |  |  | 7,200 |  |  | 50,856 |  |  | 1,075 |  |  | 7,200 |  |  | 51,931 |  |  | 59,131 |  |  | (10,713) |  | 2007 |  | 40 |
1452 |  | South San Francisco |  | CA |  |  | — |  |  | 14,400 |  |  | 101,362 |  |  | (115) |  |  | 14,400 |  |  | 101,247 |  |  | 115,647 |  |  | (21,294) |  | 2007 |  | 40 |
1454 |  | South San Francisco |  | CA |  |  | — |  |  | 11,100 |  |  | 47,738 |  |  | 9,369 |  |  | 11,100 |  |  | 57,108 |  |  | 68,208 |  |  | (14,671) |  | 2008 |  | 40 |
1455 |  | South San Francisco |  | CA |  |  | — |  |  | 9,700 |  |  | 41,937 |  |  | 5,958 |  |  | 10,261 |  |  | 47,334 |  |  | 57,595 |  |  | (11,525) |  | 2008 |  | 40 |
1456 |  | South San Francisco |  | CA |  |  | — |  |  | 6,300 |  |  | 22,900 |  |  | 8,196 |  |  | 6,300 |  |  | 31,096 |  |  | 37,396 |  |  | (8,150) |  | 2008 |  | 40 |
1458 |  | South San Francisco |  | CA |  |  | — |  |  | 10,900 |  |  | 20,900 |  |  | 8,264 |  |  | 10,909 |  |  | 25,125 |  |  | 36,034 |  |  | (5,461) |  | 2007 |  | 40 |
1459 |  | South San Francisco |  | CA |  |  | — |  |  | 3,600 |  |  | 100 |  |  | 208 |  |  | 3,600 |  |  | 309 |  |  | 3,909 |  |  | (94) |  | 2007 |  | ** |
1460 |  | South San Francisco |  | CA |  |  | — |  |  | 2,300 |  |  | 100 |  |  | 108 |  |  | 2,300 |  |  | 208 |  |  | 2,508 |  |  | (100) |  | 2007 |  | ** |
1461 |  | South San Francisco |  | CA |  |  | — |  |  | 3,900 |  |  | 200 |  |  | 202 |  |  | 3,900 |  |  | 402 |  |  | 4,302 |  |  | (200) |  | 2007 |  | ** |
1462 |  | South San Francisco |  | CA |  |  | — |  |  | 7,117 |  |  | 600 |  |  | 4,911 |  |  | 7,117 |  |  | 5,163 |  |  | 12,280 |  |  | (1,543) |  | 2007 |  | 40 |
1463 |  | South San Francisco |  | CA |  |  | — |  |  | 10,381 |  |  | 2,300 |  |  | 17,849 |  |  | 10,381 |  |  | 20,149 |  |  | 30,530 |  |  | (3,573) |  | 2007 |  | 40 |
1464 |  | South San Francisco |  | CA |  |  | — |  |  | 7,403 |  |  | 700 |  |  | 11,638 |  |  | 7,403 |  |  | 12,338 |  |  | 19,741 |  |  | (3,149) |  | 2007 |  | 40 |
1468 |  | South San Francisco |  | CA |  |  | — |  |  | 10,100 |  |  | 24,013 |  |  | 4,774 |  |  | 10,100 |  |  | 26,642 |  |  | 36,742 |  |  | (5,720) |  | 2007 |  | 40 |
1480 |  | South San Francisco |  | CA |  |  | — |  |  | 32,210 |  |  | 3,110 |  |  | 11,196 |  |  | 32,210 |  |  | 14,306 |  |  | 46,516 |  |  | — |  | 2007 |  | ** |
1559 |  | South San Francisco |  | CA |  |  | — |  |  | 5,666 |  |  | 5,773 |  |  | 12,958 |  |  | 5,695 |  |  | 18,633 |  |  | 24,328 |  |  | (6,467) |  | 2007 |  | 5 |
1560 |  | South San Francisco |  | CA |  |  | — |  |  | 1,204 |  |  | 1,293 |  |  | 454 |  |  | 1,210 |  |  | 1,726 |  |  | 2,936 |  |  | (1,329) |  | 2007 |  | 5 |
1983 |  | South San Francisco |  | CA |  |  | — |  |  | 16,493 |  |  | — |  |  | 76,433 |  |  | 16,493 |  |  | 76,433 |  |  | 92,926 |  |  | — |  | 2011 |  | * |
1985 |  | South San Francisco |  | CA |  |  | — |  |  | 13,416 |  |  | — |  |  | 7,277 |  |  | 13,416 |  |  | 7,277 |  |  | 20,693 |  |  | — |  | 2011 |  | ** |
1987 |  | South San Francisco |  | CA |  |  | — |  |  | 27,833 |  |  | — |  |  | 7,429 |  |  | 27,833 |  |  | 7,429 |  |  | 35,262 |  |  | — |  | 2011 |  | ** |
2553 |  | South San Francisco |  | CA |  |  | — |  |  | 2,897 |  |  | 8,691 |  |  | — |  |  | 2,897 |  |  | 8,691 |  |  | 11,588 |  |  | (21) |  | 2015 |  | 35 |
2554 |  | South San Francisco |  | CA |  |  | — |  |  | 995 |  |  | 2,754 |  |  | — |  |  | 995 |  |  | 2,754 |  |  | 3,749 |  |  | (7) |  | 2015 |  | 35 |
2555 |  | South San Francisco |  | CA |  |  | — |  |  | 2,202 |  |  | 10,776 |  |  | — |  |  | 2,202 |  |  | 10,776 |  |  | 12,978 |  |  | (26) |  | 2015 |  | 35 |
2556 |  | South San Francisco |  | CA |  |  | — |  |  | 2,962 |  |  | 15,108 |  |  | — |  |  | 2,962 |  |  | 15,108 |  |  | 18,070 |  |  | (36) |  | 2015 |  | 35 |
2557 |  | South San Francisco |  | CA |  |  | — |  |  | 2,453 |  |  | 13,063 |  |  | — |  |  | 2,453 |  |  | 13,063 |  |  | 15,516 |  |  | (31) |  | 2015 |  | 35 |
2558 |  | South San Francisco |  | CA |  |  | — |  |  | 1,163 |  |  | 5,925 |  |  | — |  |  | 1,163 |  |  | 5,925 |  |  | 7,088 |  |  | (14) |  | 2015 |  | 35 |
1604 |  | Cambridge |  | MA |  |  | — |  |  | 8,389 |  |  | 10,630 |  |  | 29,587 |  |  | 8,389 |  |  | 40,201 |  |  | 48,590 |  |  | (4,940) |  | 2010 |  | 30 |
2011 |  | Durham |  | NC |  |  | 7,389 |  |  | 448 |  |  | 6,152 |  |  | 21,379 |  |  | 448 |  |  | 27,494 |  |  | 27,942 |  |  | (2,418) |  | 2011 |  | 30 |
2030 |  | Durham |  | NC |  |  | — |  |  | 1,920 |  |  | 5,661 |  |  | 33,871 |  |  | 1,920 |  |  | 39,533 |  |  | 41,453 |  |  | (3,262) |  | 2012 |  | 30 |
9999 |  | Denton |  | TX |  |  | — |  |  | 100 |  |  | — |  |  | — |  |  | 100 |  |  | — |  |  | 100 |  |  | — |  | 2015 |  | ** |
0461 |  | Salt Lake City |  | UT |  |  | — |  |  | 500 |  |  | 8,548 |  |  | — |  |  | 500 |  |  | 8,548 |  |  | 9,048 |  |  | (3,678) |  | 2001 |  | 33 |
0462 |  | Salt Lake City |  | UT |  |  | — |  |  | 890 |  |  | 15,623 |  |  | — |  |  | 890 |  |  | 15,624 |  |  | 16,514 |  |  | (5,917) |  | 2001 |  | 38 |
0463 |  | Salt Lake City |  | UT |  |  | — |  |  | 190 |  |  | 9,875 |  |  | — |  |  | 190 |  |  | 9,875 |  |  | 10,065 |  |  | (3,213) |  | 2001 |  | 43 |
0464 |  | Salt Lake City |  | UT |  |  | — |  |  | 630 |  |  | 6,921 |  |  | 62 |  |  | 630 |  |  | 6,984 |  |  | 7,614 |  |  | (2,718) |  | 2001 |  | 38 |
0465 |  | Salt Lake City |  | UT |  |  | — |  |  | 125 |  |  | 6,368 |  |  | 68 |  |  | 125 |  |  | 6,436 |  |  | 6,561 |  |  | (2,083) |  | 2001 |  | 43 |
0466 |  | Salt Lake City |  | UT |  |  | — |  |  | — |  |  | 14,614 |  |  | 7 |  |  | — |  |  | 14,621 |  |  | 14,621 |  |  | (4,217) |  | 2001 |  | 43 |
0507 |  | Salt Lake City |  | UT |  |  | — |  |  | 280 |  |  | 4,345 |  |  | 226 |  |  | 280 |  |  | 4,572 |  |  | 4,852 |  |  | (1,425) |  | 2002 |  | 43 |
0537 |  | Salt Lake City |  | UT |  |  | — |  |  | — |  |  | 6,517 |  |  | — |  |  | — |  |  | 6,517 |  |  | 6,517 |  |  | (2,092) |  | 2002 |  | 35 |
0799 |  | Salt Lake City |  | UT |  |  | — |  |  | — |  |  | 14,600 |  |  | 90 |  |  | — |  |  | 14,690 |  |  | 14,690 |  |  | (3,241) |  | 2005 |  | 40 |
1593 |  | Salt Lake City |  | UT |  |  | — |  |  | — |  |  | 23,998 |  |  | — |  |  | — |  |  | 23,998 |  |  | 23,998 |  |  | (3,939) |  | 2010 |  | 33 |
|  |  |  |  |  | $ | 43,516 |  | $ | 919,896 |  | $ | 2,306,927 |  | $ | 749,119 |  | $ | 922,361 |  | $ | 3,023,094 |  | $ | 3,945,455 |  | $ | (618,902) |  |  |  |  |
Medical office |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
0638 |  | Anchorage |  | AK |  |  | — |  |  | 1,456 |  |  | 10,650 |  |  | 10,250 |  |  | 1,456 |  |  | 20,847 |  |  | 22,303 |  |  | (3,793) |  | 2006 |  | ** |
0520 |  | Chandler |  | AZ |  |  | — |  |  | 3,669 |  |  | 13,503 |  |  | 2,368 |  |  | 3,669 |  |  | 15,581 |  |  | 19,250 |  |  | (4,785) |  | 2002 |  | 40 |
2040 |  | Mesa |  | AZ |  |  | — |  |  | — |  |  | 17,314 |  |  | 483 |  |  | — |  |  | 17,780 |  |  | 17,780 |  |  | (1,538) |  | 2012 |  | 45 |
0468 |  | Oro Valley |  | AZ |  |  | — |  |  | 1,050 |  |  | 6,774 |  |  | 918 |  |  | 1,050 |  |  | 7,117 |  |  | 8,167 |  |  | (2,389) |  | 2001 |  | 43 |
0356 |  | Phoenix |  | AZ |  |  | — |  |  | 780 |  |  | 3,199 |  |  | 1,160 |  |  | 780 |  |  | 3,633 |  |  | 4,413 |  |  | (1,756) |  | 1999 |  | 32 |
0470 |  | Phoenix |  | AZ |  |  | — |  |  | 280 |  |  | 877 |  |  | 104 |  |  | 280 |  |  | 970 |  |  | 1,250 |  |  | (307) |  | 2001 |  | 43 |
1066 |  | Scottsdale |  | AZ |  |  | — |  |  | 5,115 |  |  | 14,064 |  |  | 3,234 |  |  | 4,791 |  |  | 16,972 |  |  | 21,763 |  |  | (4,344) |  | 2006 |  | 40 |
2021 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 12,312 |  |  | 1,196 |  |  | — |  |  | 13,461 |  |  | 13,461 |  |  | (2,208) |  | 2012 |  | 25 |
2022 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 9,179 |  |  | 519 |  |  | — |  |  | 9,699 |  |  | 9,699 |  |  | (1,853) |  | 2012 |  | 25 |
2023 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 6,398 |  |  | 636 |  |  | — |  |  | 7,034 |  |  | 7,034 |  |  | (1,094) |  | 2012 |  | 25 |
2024 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 9,522 |  |  | 570 |  |  | — |  |  | 10,093 |  |  | 10,093 |  |  | (1,472) |  | 2012 |  | 25 |
2025 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 4,102 |  |  | 994 |  |  | — |  |  | 5,089 |  |  | 5,089 |  |  | (958) |  | 2012 |  | 25 |
2026 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 3,655 |  |  | 554 |  |  | — |  |  | 4,179 |  |  | 4,179 |  |  | (598) |  | 2012 |  | 25 |
2027 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 7,168 |  |  | 862 |  |  | — |  |  | 8,030 |  |  | 8,030 |  |  | (1,245) |  | 2012 |  | 25 |
2028 |  | Scottsdale |  | AZ |  |  | — |  |  | — |  |  | 6,659 |  |  | 840 |  |  | — |  |  | 7,499 |  |  | 7,499 |  |  | (1,126) |  | 2012 |  | 25 |
0453 |  | Tucson |  | AZ |  |  | — |  |  | 215 |  |  | 6,318 |  |  | 1,189 |  |  | 326 |  |  | 6,977 |  |  | 7,303 |  |  | (2,896) |  | 2000 |  | 35 |
0556 |  | Tucson |  | AZ |  |  | — |  |  | 215 |  |  | 3,940 |  |  | 1,084 |  |  | 267 |  |  | 4,544 |  |  | 4,811 |  |  | (1,174) |  | 2003 |  | 43 |
1041 |  | Brentwood |  | CA |  |  | — |  |  | — |  |  | 30,864 |  |  | 2,640 |  |  | 187 |  |  | 33,121 |  |  | 33,308 |  |  | (8,091) |  | 2006 |  | 40 |
1200 |  | Encino |  | CA |  |  | — |  |  | 6,151 |  |  | 10,438 |  |  | 3,206 |  |  | 6,534 |  |  | 12,746 |  |  | 19,280 |  |  | (4,013) |  | 2006 |  | 33 |
0436 |  | Murietta |  | CA |  |  | — |  |  | 400 |  |  | 9,266 |  |  | 2,800 |  |  | 578 |  |  | 10,883 |  |  | 11,461 |  |  | (4,869) |  | 1999 |  | 33 |
0239 |  | Poway |  | CA |  |  | — |  |  | 2,700 |  |  | 10,839 |  |  | 2,665 |  |  | 2,872 |  |  | 11,684 |  |  | 14,556 |  |  | (5,928) |  | 1997 |  | 35 |

132

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
0318 |  | Sacramento |  | CA |  |  | — |  |  | 2,860 |  |  | 21,850 |  |  | 35,287 |  |  | 2,860 |  |  | 56,290 |  |  | 59,150 |  |  | (6,279) |  | 1998 |  | * |
2404 |  | Sacramento |  | CA |  |  | — |  |  | 1,268 |  |  | 5,109 |  |  | 130 |  |  | 1,268 |  |  | 5,239 |  |  | 6,507 |  |  | (137) |  | 2015 |  | 30 |
0234 |  | San Diego |  | CA |  |  | — |  |  | 2,848 |  |  | 5,879 |  |  | 1,450 |  |  | 3,009 |  |  | 5,214 |  |  | 8,223 |  |  | (2,975) |  | 1997 |  | 21 |
0235 |  | San Diego |  | CA |  |  | — |  |  | 2,863 |  |  | 8,913 |  |  | 2,913 |  |  | 3,068 |  |  | 9,450 |  |  | 12,518 |  |  | (5,672) |  | 1997 |  | 21 |
0236 |  | San Diego |  | CA |  |  | — |  |  | 4,619 |  |  | 19,370 |  |  | 4,023 |  |  | 4,711 |  |  | 17,954 |  |  | 22,665 |  |  | (10,161) |  | 1997 |  | 21 |
0421 |  | San Diego |  | CA |  |  | — |  |  | 2,910 |  |  | 17,362 |  |  | 14,088 |  |  | 2,915 |  |  | 31,444 |  |  | 34,359 |  |  | (6,901) |  | 1999 |  | 22 |
0564 |  | San Jose |  | CA |  |  | 2,762 |  |  | 1,935 |  |  | 1,728 |  |  | 2,136 |  |  | 1,935 |  |  | 3,203 |  |  | 5,138 |  |  | (1,226) |  | 2003 |  | 37 |
0565 |  | San Jose |  | CA |  |  | 6,432 |  |  | 1,460 |  |  | 7,672 |  |  | 527 |  |  | 1,460 |  |  | 8,192 |  |  | 9,652 |  |  | (2,955) |  | 2003 |  | 37 |
0659 |  | Los Gatos |  | CA |  |  | — |  |  | 1,718 |  |  | 3,124 |  |  | 622 |  |  | 1,758 |  |  | 3,598 |  |  | 5,356 |  |  | (1,043) |  | 2000 |  | 34 |
1209 |  | Sherman Oaks |  | CA |  |  | — |  |  | 7,472 |  |  | 10,075 |  |  | 4,233 |  |  | 7,931 |  |  | 13,523 |  |  | 21,454 |  |  | (5,736) |  | 2006 |  | 22 |
0439 |  | Valencia |  | CA |  |  | — |  |  | 2,300 |  |  | 6,967 |  |  | 2,534 |  |  | 2,390 |  |  | 7,861 |  |  | 10,251 |  |  | (3,209) |  | 1999 |  | 35 |
1211 |  | Valencia |  | CA |  |  | — |  |  | 1,344 |  |  | 7,507 |  |  | 630 |  |  | 1,383 |  |  | 7,932 |  |  | 9,315 |  |  | (1,955) |  | 2006 |  | 40 |
0440 |  | West Hills |  | CA |  |  | — |  |  | 2,100 |  |  | 11,595 |  |  | 2,987 |  |  | 2,156 |  |  | 11,548 |  |  | 13,704 |  |  | (5,121) |  | 1999 |  | 32 |
0728 |  | Aurora |  | CO |  |  | — |  |  | — |  |  | 8,764 |  |  | 2,223 |  |  | — |  |  | 10,986 |  |  | 10,986 |  |  | (4,746) |  | 2005 |  | 39 |
1196 |  | Aurora |  | CO |  |  | — |  |  | 210 |  |  | 12,362 |  |  | 1,513 |  |  | 210 |  |  | 13,635 |  |  | 13,845 |  |  | (3,513) |  | 2006 |  | 40 |
1197 |  | Aurora |  | CO |  |  | — |  |  | 200 |  |  | 8,414 |  |  | 978 |  |  | 200 |  |  | 9,268 |  |  | 9,468 |  |  | (2,892) |  | 2006 |  | 33 |
0882 |  | Colorado Springs |  | CO |  |  | — |  |  | — |  |  | 12,933 |  |  | 10,602 |  |  | — |  |  | 22,864 |  |  | 22,864 |  |  | (6,053) |  | 2006 |  | 40 |
0814 |  | Conifer |  | CO |  |  | — |  |  | — |  |  | 1,485 |  |  | 35 |  |  | 13 |  |  | 1,508 |  |  | 1,521 |  |  | (398) |  | 2005 |  | 40 |
1199 |  | Denver |  | CO |  |  | — |  |  | 493 |  |  | 7,897 |  |  | 1,865 |  |  | 622 |  |  | 9,400 |  |  | 10,022 |  |  | (2,581) |  | 2006 |  | 33 |
0808 |  | Englewood |  | CO |  |  | — |  |  | — |  |  | 8,616 |  |  | 7,829 |  |  | 11 |  |  | 15,671 |  |  | 15,682 |  |  | (4,243) |  | 2005 |  | 35 |
0809 |  | Englewood |  | CO |  |  | — |  |  | — |  |  | 8,449 |  |  | 3,444 |  |  | — |  |  | 11,255 |  |  | 11,255 |  |  | (3,744) |  | 2005 |  | 35 |
0810 |  | Englewood |  | CO |  |  | — |  |  | — |  |  | 8,040 |  |  | 4,792 |  |  | — |  |  | 12,411 |  |  | 12,411 |  |  | (4,745) |  | 2005 |  | 35 |
0811 |  | Englewood |  | CO |  |  | — |  |  | — |  |  | 8,472 |  |  | 2,551 |  |  | — |  |  | 10,573 |  |  | 10,573 |  |  | (3,627) |  | 2005 |  | 35 |
0812 |  | Littleton |  | CO |  |  | — |  |  | — |  |  | 4,562 |  |  | 2,200 |  |  | 257 |  |  | 6,145 |  |  | 6,402 |  |  | (2,110) |  | 2005 |  | 35 |
0813 |  | Littleton |  | CO |  |  | — |  |  | — |  |  | 4,926 |  |  | 1,796 |  |  | 106 |  |  | 6,144 |  |  | 6,250 |  |  | (1,693) |  | 2005 |  | 38 |
0570 |  | Lone Tree |  | CO |  |  | — |  |  | — |  |  | — |  |  | 19,241 |  |  | — |  |  | 18,822 |  |  | 18,822 |  |  | (5,552) |  | 2003 |  | 39 |
0666 |  | Lone Tree |  | CO |  |  | — |  |  | — |  |  | 23,274 |  |  | 2,382 |  |  | — |  |  | 25,328 |  |  | 25,328 |  |  | (6,597) |  | 2000 |  | 37 |
2233 |  | Lone Tree |  | CO |  |  | — |  |  | — |  |  | — |  |  | 23,315 |  |  | — |  |  | 23,316 |  |  | 23,316 |  |  | — |  | 2014 |  | * |
1076 |  | Parker |  | CO |  |  | — |  |  | — |  |  | 13,388 |  |  | 640 |  |  | 8 |  |  | 13,946 |  |  | 13,954 |  |  | (3,471) |  | 2006 |  | 40 |
0510 |  | Thornton |  | CO |  |  | — |  |  | 236 |  |  | 10,206 |  |  | 3,089 |  |  | 454 |  |  | 13,054 |  |  | 13,508 |  |  | (4,325) |  | 2002 |  | 43 |
0433 |  | Atlantis |  | FL |  |  | — |  |  | — |  |  | 5,651 |  |  | 836 |  |  | 33 |  |  | 5,596 |  |  | 5,629 |  |  | (2,556) |  | 1999 |  | 35 |
0434 |  | Atlantis |  | FL |  |  | — |  |  | — |  |  | 2,027 |  |  | 263 |  |  | 5 |  |  | 2,139 |  |  | 2,144 |  |  | (982) |  | 1999 |  | 34 |
0435 |  | Atlantis |  | FL |  |  | — |  |  | — |  |  | 2,000 |  |  | 738 |  |  | — |  |  | 2,484 |  |  | 2,484 |  |  | (1,179) |  | 1999 |  | 32 |
0602 |  | Atlantis |  | FL |  |  | — |  |  | 455 |  |  | 2,231 |  |  | 344 |  |  | 455 |  |  | 2,371 |  |  | 2,826 |  |  | (725) |  | 2000 |  | 34 |
0604 |  | Englewood |  | FL |  |  | — |  |  | 170 |  |  | 1,134 |  |  | 400 |  |  | 198 |  |  | 1,400 |  |  | 1,598 |  |  | (463) |  | 2000 |  | 34 |
0609 |  | Kissimmee |  | FL |  |  | — |  |  | 788 |  |  | 174 |  |  | 226 |  |  | 788 |  |  | 311 |  |  | 1,099 |  |  | (104) |  | 2000 |  | 34 |
0610 |  | Kissimmee |  | FL |  |  | — |  |  | 481 |  |  | 347 |  |  | 731 |  |  | 486 |  |  | 1,032 |  |  | 1,518 |  |  | (339) |  | 2000 |  | 34 |
0671 |  | Kissimmee |  | FL |  |  | — |  |  | — |  |  | 7,574 |  |  | 2,065 |  |  | — |  |  | 8,450 |  |  | 8,450 |  |  | (2,349) |  | 2000 |  | 36 |
0603 |  | Lake Worth |  | FL |  |  | — |  |  | 1,507 |  |  | 2,894 |  |  | 1,807 |  |  | 1,507 |  |  | 4,569 |  |  | 6,076 |  |  | (1,450) |  | 2000 |  | 34 |
0612 |  | Margate |  | FL |  |  | — |  |  | 1,553 |  |  | 6,898 |  |  | 1,275 |  |  | 1,553 |  |  | 8,058 |  |  | 9,611 |  |  | (2,216) |  | 2000 |  | 34 |
0613 |  | Miami |  | FL |  |  | — |  |  | 4,392 |  |  | 11,841 |  |  | 3,325 |  |  | 4,392 |  |  | 14,245 |  |  | 18,637 |  |  | (4,505) |  | 2000 |  | 34 |
2202 |  | Miami |  | FL |  |  | — |  |  | — |  |  | 13,123 |  |  | 2,760 |  |  | — |  |  | 15,883 |  |  | 15,883 |  |  | (996) |  | 2014 |  | 25 |
2203 |  | Miami |  | FL |  |  | — |  |  | — |  |  | 8,877 |  |  | 1,184 |  |  | — |  |  | 10,061 |  |  | 10,061 |  |  | (569) |  | 2014 |  | 30 |
1067 |  | Milton |  | FL |  |  | — |  |  | — |  |  | 8,566 |  |  | 248 |  |  | — |  |  | 8,795 |  |  | 8,795 |  |  | (2,077) |  | 2006 |  | 40 |
0563 |  | Orlando |  | FL |  |  | — |  |  | 2,144 |  |  | 5,136 |  |  | 4,664 |  |  | 2,343 |  |  | 8,570 |  |  | 10,913 |  |  | (3,282) |  | 2003 |  | 37 |
0833 |  | Pace |  | FL |  |  | — |  |  | — |  |  | 10,309 |  |  | 2,595 |  |  | 26 |  |  | 10,584 |  |  | 10,610 |  |  | (2,321) |  | 2006 |  | 44 |
0834 |  | Pensacola |  | FL |  |  | — |  |  | — |  |  | 11,166 |  |  | 478 |  |  | — |  |  | 11,644 |  |  | 11,644 |  |  | (2,724) |  | 2006 |  | 45 |
0614 |  | Plantation |  | FL |  |  | — |  |  | 969 |  |  | 3,241 |  |  | 1,299 |  |  | 1,017 |  |  | 4,144 |  |  | 5,161 |  |  | (1,287) |  | 2000 |  | 34 |
0673 |  | Plantation |  | FL |  |  | — |  |  | 1,091 |  |  | 7,176 |  |  | 902 |  |  | 1,091 |  |  | 7,744 |  |  | 8,835 |  |  | (2,006) |  | 2002 |  | 36 |
0701 |  | St. Petersburg |  | FL |  |  | — |  |  | — |  |  | 10,141 |  |  | 9,016 |  |  | — |  |  | 18,532 |  |  | 18,532 |  |  | (4,359) |  | 2006 |  | ɫ |
1210 |  | Tampa |  | FL |  |  | — |  |  | 1,967 |  |  | 6,602 |  |  | 5,061 |  |  | 2,142 |  |  | 10,834 |  |  | 12,976 |  |  | (4,758) |  | 2006 |  | 25 |
1058 |  | Mccaysville |  | GA |  |  | — |  |  | — |  |  | 3,231 |  |  | 18 |  |  | — |  |  | 3,249 |  |  | 3,249 |  |  | (761) |  | 2006 |  | 40 |
1065 |  | Marion |  | IL |  |  | — |  |  | 99 |  |  | 11,484 |  |  | 389 |  |  | 100 |  |  | 11,854 |  |  | 11,954 |  |  | (2,920) |  | 2006 |  | 40 |
1057 |  | Newburgh |  | IN |  |  | — |  |  | — |  |  | 14,019 |  |  | 4,080 |  |  | — |  |  | 18,093 |  |  | 18,093 |  |  | (3,910) |  | 2006 |  | 40 |
2039 |  | Kansas City |  | KS |  |  | 1,722 |  |  | 440 |  |  | 2,173 |  |  | 9 |  |  | 448 |  |  | 2,173 |  |  | 2,621 |  |  | (232) |  | 2012 |  | 35 |
2043 |  | Overland Park |  | KS |  |  | — |  |  | — |  |  | 7,668 |  |  | 294 |  |  | — |  |  | 7,962 |  |  | 7,962 |  |  | (764) |  | 2012 |  | 40 |
0483 |  | Wichita |  | KS |  |  | — |  |  | 530 |  |  | 3,341 |  |  | 460 |  |  | 530 |  |  | 3,801 |  |  | 4,331 |  |  | (1,389) |  | 2001 |  | 45 |
1064 |  | Lexington |  | KY |  |  | — |  |  | — |  |  | 12,726 |  |  | 1,164 |  |  | — |  |  | 13,777 |  |  | 13,777 |  |  | (3,663) |  | 2006 |  | 40 |
0735 |  | Louisville |  | KY |  |  | — |  |  | 936 |  |  | 8,426 |  |  | 4,551 |  |  | 936 |  |  | 11,435 |  |  | 12,371 |  |  | (8,935) |  | 2005 |  | 11 |
0737 |  | Louisville |  | KY |  |  | — |  |  | 835 |  |  | 27,627 |  |  | 4,144 |  |  | 877 |  |  | 30,240 |  |  | 31,117 |  |  | (9,139) |  | 2005 |  | 37 |
0738 |  | Louisville |  | KY |  |  | 4,743 |  |  | 780 |  |  | 8,582 |  |  | 4,561 |  |  | 818 |  |  | 11,856 |  |  | 12,674 |  |  | (6,339) |  | 2005 |  | 18 |
0739 |  | Louisville |  | KY |  |  | 7,667 |  |  | 826 |  |  | 13,814 |  |  | 1,712 |  |  | 832 |  |  | 14,622 |  |  | 15,454 |  |  | (4,476) |  | 2005 |  | 38 |
0740 |  | Louisville |  | KY |  |  | 8,301 |  |  | 2,983 |  |  | 13,171 |  |  | 4,065 |  |  | 2,991 |  |  | 16,612 |  |  | 19,603 |  |  | (6,130) |  | 2005 |  | 30 |
1944 |  | Louisville |  | KY |  |  | — |  |  | 788 |  |  | 2,414 |  |  | — |  |  | 788 |  |  | 2,414 |  |  | 3,202 |  |  | (483) |  | 2010 |  | 25 |
1945 |  | Louisville |  | KY |  |  | 24,644 |  |  | 3,255 |  |  | 28,644 |  |  | 665 |  |  | 3,255 |  |  | 29,008 |  |  | 32,263 |  |  | (5,127) |  | 2010 |  | 30 |
1946 |  | Louisville |  | KY |  |  | — |  |  | 430 |  |  | 6,125 |  |  | 53 |  |  | 430 |  |  | 6,178 |  |  | 6,608 |  |  | (1,031) |  | 2010 |  | 30 |
2237 |  | Louisville |  | KY |  |  | 9,901 |  |  | 1,519 |  |  | 15,386 |  |  | 495 |  |  | 1,542 |  |  | 15,857 |  |  | 17,399 |  |  | (671) |  | 2014 |  | 25 |
2238 |  | Louisville |  | KY |  |  | 9,901 |  |  | 1,334 |  |  | 12,172 |  |  | 378 |  |  | 1,423 |  |  | 12,461 |  |  | 13,884 |  |  | (548) |  | 2014 |  | 25 |
2239 |  | Louisville |  | KY |  |  | 12,557 |  |  | 1,644 |  |  | 10,832 |  |  | 649 |  |  | 1,661 |  |  | 11,465 |  |  | 13,126 |  |  | (476) |  | 2014 |  | 25 |
1324 |  | Haverhill |  | MA |  |  | — |  |  | 800 |  |  | 8,537 |  |  | 1,911 |  |  | 869 |  |  | 10,122 |  |  | 10,991 |  |  | (3,066) |  | 2007 |  | 40 |
1213 |  | Ellicott City |  | MD |  |  | — |  |  | 1,115 |  |  | 3,206 |  |  | 2,554 |  |  | 1,222 |  |  | 5,432 |  |  | 6,654 |  |  | (1,853) |  | 2006 |  | 34 |
0361 |  | GlenBurnie |  | MD |  |  | — |  |  | 670 |  |  | 5,085 |  |  | — |  |  | 670 |  |  | 5,085 |  |  | 5,755 |  |  | (2,421) |  | 1999 |  | 35 |
1052 |  | Towson |  | MD |  |  | — |  |  | — |  |  | 14,233 |  |  | 3,611 |  |  | — |  |  | 15,800 |  |  | 15,800 |  |  | (5,491) |  | 2006 |  | 40 |
0240 |  | Minneapolis |  | MN |  |  | — |  |  | 117 |  |  | 13,213 |  |  | 1,734 |  |  | 117 |  |  | 14,463 |  |  | 14,580 |  |  | (7,380) |  | 1997 |  | 32 |
0300 |  | Minneapolis |  | MN |  |  | — |  |  | 160 |  |  | 10,131 |  |  | 3,251 |  |  | 160 |  |  | 12,437 |  |  | 12,597 |  |  | (6,038) |  | 1997 |  | 35 |
2032 |  | Independence |  | MO |  |  | 31,274 |  |  | — |  |  | 48,025 |  |  | 572 |  |  | — |  |  | 48,596 |  |  | 48,596 |  |  | (3,795) |  | 2012 |  | 45 |
1078 |  | Flowood |  | MS |  |  | — |  |  | — |  |  | 8,413 |  |  | 729 |  |  | — |  |  | 9,115 |  |  | 9,115 |  |  | (2,422) |  | 2006 |  | 40 |
1059 |  | Jackson |  | MS |  |  | — |  |  | — |  |  | 8,868 |  |  | 73 |  |  | — |  |  | 8,941 |  |  | 8,941 |  |  | (2,071) |  | 2006 |  | 40 |
1060 |  | Jackson |  | MS |  |  | — |  |  | — |  |  | 7,187 |  |  | 2,160 |  |  | — |  |  | 9,347 |  |  | 9,347 |  |  | (2,639) |  | 2006 |  | 40 |
1068 |  | Omaha |  | NE |  |  | — |  |  | — |  |  | 16,243 |  |  | 932 |  |  | 17 |  |  | 17,097 |  |  | 17,114 |  |  | (4,139) |  | 2006 |  | 40 |
0729 |  | Albuquerque |  | NM |  |  | — |  |  | — |  |  | 5,380 |  |  | 388 |  |  | — |  |  | 5,768 |  |  | 5,768 |  |  | (1,713) |  | 2005 |  | 39 |
0348 |  | Elko |  | NV |  |  | — |  |  | 55 |  |  | 2,637 |  |  | 12 |  |  | 55 |  |  | 2,649 |  |  | 2,704 |  |  | (1,279) |  | 1999 |  | 35 |
0571 |  | Las Vegas |  | NV |  |  | — |  |  | — |  |  | — |  |  | 18,729 |  |  | — |  |  | 17,638 |  |  | 17,638 |  |  | (5,320) |  | 2003 |  | 40 |
0660 |  | Las Vegas |  | NV |  |  | — |  |  | 1,121 |  |  | 4,363 |  |  | 4,611 |  |  | 1,302 |  |  | 7,363 |  |  | 8,665 |  |  | (2,719) |  | 2000 |  | 34 |
0661 |  | Las Vegas |  | NV |  |  | — |  |  | 2,305 |  |  | 4,829 |  |  | 4,513 |  |  | 2,447 |  |  | 8,362 |  |  | 10,809 |  |  | (2,918) |  | 2000 |  | 34 |
0662 |  | Las Vegas |  | NV |  |  | — |  |  | 3,480 |  |  | 12,305 |  |  | 4,637 |  |  | 3,480 |  |  | 15,258 |  |  | 18,738 |  |  | (4,563) |  | 2000 |  | 34 |
0663 |  | Las Vegas |  | NV |  |  | — |  |  | 1,717 |  |  | 3,597 |  |  | 3,273 |  |  | 1,724 |  |  | 5,789 |  |  | 7,513 |  |  | (1,816) |  | 2000 |  | 34 |
0664 |  | Las Vegas |  | NV |  |  | — |  |  | 1,172 |  |  | — |  |  | 175 |  |  | 1,172 |  |  | 175 |  |  | 1,347 |  |  | — |  | 2000 |  | * |
0691 |  | Las Vegas |  | NV |  |  | — |  |  | 3,244 |  |  | 18,339 |  |  | 7,095 |  |  | 3,273 |  |  | 24,277 |  |  | 27,550 |  |  | (7,800) |  | 2004 |  | 30 |
2037 |  | Mesquite |  | NV |  |  | 2,908 |  |  | — |  |  | 5,559 |  |  | 57 |  |  | — |  |  | 5,616 |  |  | 5,616 |  |  | (534) |  | 2012 |  | 40 |
1285 |  | Cleveland |  | OH |  |  | — |  |  | 823 |  |  | 2,726 |  |  | 925 |  |  | 853 |  |  | 2,917 |  |  | 3,770 |  |  | (977) |  | 2006 |  | 40 |
0400 |  | Harrison |  | OH |  |  | — |  |  | — |  |  | 4,561 |  |  | 300 |  |  | — |  |  | 4,861 |  |  | 4,861 |  |  | (2,257) |  | 1999 |  | 35 |
1054 |  | Durant |  | OK |  |  | — |  |  | 619 |  |  | 9,256 |  |  | 1,636 |  |  | 659 |  |  | 10,833 |  |  | 11,492 |  |  | (2,454) |  | 2006 |  | 40 |
0817 |  | Owasso |  | OK |  |  | — |  |  | — |  |  | 6,582 |  |  | 808 |  |  | — |  |  | 7,275 |  |  | 7,275 |  |  | (3,262) |  | 2005 |  | 40 |
0404 |  | Roseburg |  | OR |  |  | — |  |  | — |  |  | 5,707 |  |  | — |  |  | — |  |  | 5,707 |  |  | 5,707 |  |  | (2,570) |  | 1999 |  | 35 |
2234 |  | Philadelphia |  | PA |  |  | — |  |  | 24,264 |  |  | 99,904 |  |  | 2,204 |  |  | 24,264 |  |  | 102,108 |  |  | 126,372 |  |  | (3,968) |  | 2014 |  | 35 |
2403 |  | Philadelphia |  | PA |  |  | — |  |  | 26,063 |  |  | 97,646 |  |  | 3,405 |  |  | 26,084 |  |  | 101,031 |  |  | 127,115 |  |  | (2,685) |  | 2015 |  | 25 |
0252 |  | Clarksville |  | TN |  |  | — |  |  | 765 |  |  | 4,184 |  |  | 60 |  |  | 765 |  |  | 4,244 |  |  | 5,009 |  |  | (2,130) |  | 1998 |  | 35 |
0624 |  | Hendersonville |  | TN |  |  | — |  |  | 256 |  |  | 1,530 |  |  | 1,483 |  |  | 256 |  |  | 2,656 |  |  | 2,912 |  |  | (789) |  | 2000 |  | 34 |
0559 |  | Hermitage |  | TN |  |  | — |  |  | 830 |  |  | 5,036 |  |  | 5,698 |  |  | 830 |  |  | 10,136 |  |  | 10,966 |  |  | (3,621) |  | 2003 |  | 35 |
0561 |  | Hermitage |  | TN |  |  | — |  |  | 596 |  |  | 9,698 |  |  | 4,377 |  |  | 596 |  |  | 13,454 |  |  | 14,050 |  |  | (5,123) |  | 2003 |  | 37 |
0562 |  | Hermitage |  | TN |  |  | — |  |  | 317 |  |  | 6,528 |  |  | 2,589 |  |  | 317 |  |  | 8,538 |  |  | 8,855 |  |  | (3,168) |  | 2003 |  | 37 |
0154 |  | Knoxville |  | TN |  |  | — |  |  | 700 |  |  | 4,559 |  |  | 4,856 |  |  | 700 |  |  | 9,322 |  |  | 10,022 |  |  | (3,600) |  | 1994 |  | 19 |
0625 |  | Nashville |  | TN |  |  | — |  |  | 955 |  |  | 14,289 |  |  | 2,319 |  |  | 955 |  |  | 15,545 |  |  | 16,500 |  |  | (4,649) |  | 2000 |  | 34 |
0626 |  | Nashville |  | TN |  |  | — |  |  | 2,050 |  |  | 5,211 |  |  | 3,498 |  |  | 2,055 |  |  | 8,320 |  |  | 10,375 |  |  | (2,682) |  | 2000 |  | 34 |
0627 |  | Nashville |  | TN |  |  | — |  |  | 1,007 |  |  | 181 |  |  | 649 |  |  | 1,007 |  |  | 805 |  |  | 1,812 |  |  | (324) |  | 2000 |  | 34 |
0628 |  | Nashville |  | TN |  |  | — |  |  | 2,980 |  |  | 7,164 |  |  | 2,186 |  |  | 2,980 |  |  | 8,979 |  |  | 11,959 |  |  | (2,800) |  | 2000 |  | 34 |
0630 |  | Nashville |  | TN |  |  | — |  |  | 515 |  |  | 848 |  |  | 286 |  |  | 528 |  |  | 1,120 |  |  | 1,648 |  |  | (394) |  | 2000 |  | 34 |
0631 |  | Nashville |  | TN |  |  | — |  |  | 266 |  |  | 1,305 |  |  | 1,384 |  |  | 266 |  |  | 2,469 |  |  | 2,735 |  |  | (771) |  | 2000 |  | 34 |
0632 |  | Nashville |  | TN |  |  | — |  |  | 827 |  |  | 7,642 |  |  | 3,699 |  |  | 827 |  |  | 10,316 |  |  | 11,143 |  |  | (3,200) |  | 2000 |  | 34 |
0633 |  | Nashville |  | TN |  |  | — |  |  | 5,425 |  |  | 12,577 |  |  | 4,144 |  |  | 5,425 |  |  | 16,440 |  |  | 21,865 |  |  | (5,616) |  | 2000 |  | 34 |
0634 |  | Nashville |  | TN |  |  | — |  |  | 3,818 |  |  | 15,185 |  |  | 7,422 |  |  | 3,818 |  |  | 21,238 |  |  | 25,056 |  |  | (6,348) |  | 2000 |  | 34 |
0636 |  | Nashville |  | TN |  |  | — |  |  | 583 |  |  | 450 |  |  | 303 |  |  | 583 |  |  | 753 |  |  | 1,336 |  |  | (205) |  | 2000 |  | 34 |

133

Table of Contents

|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Life on Which |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized |  | Gross Amount at Which Carried |  |  |  |  |  |  | Depreciation in |
|  |  |  |  |  |  |  |  | Initial Cost to Company |  | Subsequent |  | As of December 31, 2015 |  |  |  |  | Year |  | Latest Income |
|  |  |  |  |  | Encumbrances at |  |  |  |  | Buildings and |  | to |  |  |  |  | Buildings and |  |  |  |  | Accumulated |  | Acquired/ |  | Statement is |
City |  |  |  | State |  | December 31, 2015 |  | Land |  | Improvements |  | Acquisition |  | Land |  | Improvements |  | Total(1) |  | Depreciation |  | Constructed |  | Computed |
0573 |  | Arlington |  | TX |  |  | — |  |  | 769 |  |  | 12,355 |  |  | 3,707 |  |  | 769 |  |  | 15,342 |  |  | 16,111 |  |  | (4,278) |  | 2003 |  | 34 |
0576 |  | Conroe |  | TX |  |  | — |  |  | 324 |  |  | 4,842 |  |  | 2,024 |  |  | 324 |  |  | 5,902 |  |  | 6,226 |  |  | (1,778) |  | 2000 |  | 34 |
0577 |  | Conroe |  | TX |  |  | — |  |  | 397 |  |  | 7,966 |  |  | 2,363 |  |  | 397 |  |  | 9,840 |  |  | 10,237 |  |  | (2,839) |  | 2000 |  | 34 |
0578 |  | Conroe |  | TX |  |  | — |  |  | 388 |  |  | 7,975 |  |  | 3,862 |  |  | 388 |  |  | 11,649 |  |  | 12,037 |  |  | (3,271) |  | 2006 |  | 31 |
0579 |  | Conroe |  | TX |  |  | — |  |  | 188 |  |  | 3,618 |  |  | 983 |  |  | 188 |  |  | 4,583 |  |  | 4,771 |  |  | (1,322) |  | 2000 |  | 34 |
0581 |  | Corpus Christi |  | TX |  |  | — |  |  | 717 |  |  | 8,181 |  |  | 4,852 |  |  | 717 |  |  | 12,204 |  |  | 12,921 |  |  | (3,903) |  | 2000 |  | 34 |
0600 |  | Corpus Christi |  | TX |  |  | — |  |  | 328 |  |  | 3,210 |  |  | 3,735 |  |  | 328 |  |  | 6,483 |  |  | 6,811 |  |  | (2,139) |  | 2000 |  | 34 |
0601 |  | Corpus Christi |  | TX |  |  | — |  |  | 313 |  |  | 1,771 |  |  | 1,663 |  |  | 313 |  |  | 2,999 |  |  | 3,312 |  |  | (813) |  | 2000 |  | 34 |
2244 |  | Cypress |  | TX |  |  | — |  |  | — |  |  | — |  |  | 20,330 |  |  | — |  |  | 20,330 |  |  | 20,330 |  |  | — |  | 2015 |  | * |
0582 |  | Dallas |  | TX |  |  | — |  |  | 1,664 |  |  | 6,785 |  |  | 3,251 |  |  | 1,706 |  |  | 9,398 |  |  | 11,104 |  |  | (3,020) |  | 2000 |  | 34 |
1314 |  | Dallas |  | TX |  |  | — |  |  | 15,230 |  |  | 162,971 |  |  | 8,480 |  |  | 15,860 |  |  | 169,116 |  |  | 184,976 |  |  | (44,163) |  | 2006 |  | 35 |
2201 |  | Dallas |  | TX |  |  | — |  |  | 1,043 |  |  | 25,841 |  |  | 61 |  |  | 1,043 |  |  | 25,901 |  |  | 26,944 |  |  | (1,053) |  | 2014 |  | 35 |
0583 |  | Fort Worth |  | TX |  |  | — |  |  | 898 |  |  | 4,866 |  |  | 1,776 |  |  | 898 |  |  | 6,439 |  |  | 7,337 |  |  | (2,174) |  | 2000 |  | 34 |
0805 |  | Fort Worth |  | TX |  |  | — |  |  | — |  |  | 2,481 |  |  | 1,138 |  |  | 2 |  |  | 3,444 |  |  | 3,446 |  |  | (1,420) |  | 2005 |  | 25 |
0806 |  | Fort Worth |  | TX |  |  | — |  |  | — |  |  | 6,070 |  |  | 371 |  |  | 5 |  |  | 6,335 |  |  | 6,340 |  |  | (1,696) |  | 2005 |  | 40 |
2231 |  | Fort Worth |  | TX |  |  | — |  |  | 902 |  |  | — |  |  | 44 |  |  | 946 |  |  | — |  |  | 946 |  |  | (3) |  | 2014 |  | ** |
1061 |  | Granbury |  | TX |  |  | — |  |  | — |  |  | 6,863 |  |  | 197 |  |  | — |  |  | 7,060 |  |  | 7,060 |  |  | (1,683) |  | 2006 |  | 40 |
0430 |  | Houston |  | TX |  |  | — |  |  | 1,927 |  |  | 33,140 |  |  | 4,344 |  |  | 2,070 |  |  | 36,424 |  |  | 38,494 |  |  | (16,662) |  | 1999 |  | 35 |
0446 |  | Houston |  | TX |  |  | — |  |  | 2,200 |  |  | 19,585 |  |  | 8,033 |  |  | 2,209 |  |  | 22,938 |  |  | 25,147 |  |  | (15,751) |  | 1999 |  | 17 |
0586 |  | Houston |  | TX |  |  | — |  |  | 1,033 |  |  | 3,165 |  |  | 1,218 |  |  | 1,033 |  |  | 3,938 |  |  | 4,971 |  |  | (1,247) |  | 2000 |  | 34 |
0589 |  | Houston |  | TX |  |  | — |  |  | 1,676 |  |  | 12,602 |  |  | 4,559 |  |  | 1,706 |  |  | 15,562 |  |  | 17,268 |  |  | (4,569) |  | 2000 |  | 34 |
0670 |  | Houston |  | TX |  |  | — |  |  | 257 |  |  | 2,884 |  |  | 1,252 |  |  | 318 |  |  | 3,843 |  |  | 4,161 |  |  | (1,302) |  | 2000 |  | 35 |
0702 |  | Houston |  | TX |  |  | — |  |  | — |  |  | 7,414 |  |  | 1,639 |  |  | 7 |  |  | 8,877 |  |  | 8,884 |  |  | (2,925) |  | 2004 |  | 36 |
1044 |  | Houston |  | TX |  |  | — |  |  | — |  |  | 4,838 |  |  | 3,218 |  |  | — |  |  | 7,964 |  |  | 7,964 |  |  | (2,853) |  | 2006 |  | 40 |
2542 |  | Houston |  | TX |  |  | — |  |  | 304 |  |  | 17,764 |  |  | — |  |  | 304 |  |  | 17,764 |  |  | 18,068 |  |  | (272) |  | 2015 |  | 35 |
2543 |  | Houston |  | TX |  |  | — |  |  | 116 |  |  | 6,555 |  |  | — |  |  | 116 |  |  | 6,555 |  |  | 6,671 |  |  | (118) |  | 2015 |  | 30 |
2544 |  | Houston |  | TX |  |  | — |  |  | 312 |  |  | 12,094 |  |  | — |  |  | 312 |  |  | 12,094 |  |  | 12,406 |  |  | (222) |  | 2015 |  | 30 |
2545 |  | Houston |  | TX |  |  | — |  |  | 316 |  |  | 13,931 |  |  | — |  |  | 316 |  |  | 13,931 |  |  | 14,247 |  |  | (194) |  | 2015 |  | 40 |
2546 |  | Houton |  | TX |  |  | — |  |  | 408 |  |  | 18,332 |  |  | — |  |  | 408 |  |  | 18,332 |  |  | 18,740 |  |  | (400) |  | 2015 |  | 25 |
2547 |  | Houston |  | TX |  |  | — |  |  | 470 |  |  | 18,197 |  |  | — |  |  | 470 |  |  | 18,197 |  |  | 18,667 |  |  | (336) |  | 2015 |  | 30 |
2548 |  | Houston |  | TX |  |  | — |  |  | 313 |  |  | 7,036 |  |  | — |  |  | 313 |  |  | 7,036 |  |  | 7,349 |  |  | (166) |  | 2015 |  | 25 |
2549 |  | Houston |  | TX |  |  | — |  |  | 530 |  |  | 22,711 |  |  | — |  |  | 530 |  |  | 22,711 |  |  | 23,241 |  |  | (278) |  | 2015 |  | 45 |
0590 |  | Irving |  | TX |  |  | — |  |  | 828 |  |  | 6,160 |  |  | 2,572 |  |  | 828 |  |  | 8,543 |  |  | 9,371 |  |  | (2,619) |  | 2000 |  | 34 |
0700 |  | Irving |  | TX |  |  | — |  |  | — |  |  | 8,550 |  |  | 3,362 |  |  | — |  |  | 11,471 |  |  | 11,471 |  |  | (3,968) |  | 2006 |  | 34 |
1202 |  | Irving |  | TX |  |  | — |  |  | 1,604 |  |  | 16,107 |  |  | 987 |  |  | 1,633 |  |  | 17,034 |  |  | 18,667 |  |  | (4,101) |  | 2006 |  | 40 |
1207 |  | Irving |  | TX |  |  | — |  |  | 1,955 |  |  | 12,793 |  |  | 1,616 |  |  | 1,986 |  |  | 14,377 |  |  | 16,363 |  |  | (3,472) |  | 2006 |  | 40 |
1062 |  | Lancaster |  | TX |  |  | — |  |  | 172 |  |  | 2,692 |  |  | 1,091 |  |  | 185 |  |  | 3,715 |  |  | 3,900 |  |  | (1,172) |  | 2006 |  | 39 |
2195 |  | Lancaster |  | TX |  |  | — |  |  | — |  |  | 1,138 |  |  | 672 |  |  | 131 |  |  | 1,679 |  |  | 1,810 |  |  | (178) |  | 2006 |  | 39 |
0591 |  | Lewisville |  | TX |  |  | — |  |  | 561 |  |  | 8,043 |  |  | 1,425 |  |  | 561 |  |  | 9,374 |  |  | 9,935 |  |  | (2,708) |  | 2000 |  | 34 |
0144 |  | Longview |  | TX |  |  | — |  |  | 102 |  |  | 7,998 |  |  | 450 |  |  | 102 |  |  | 8,447 |  |  | 8,549 |  |  | (4,269) |  | 1992 |  | 45 |
0143 |  | Lufkin |  | TX |  |  | — |  |  | 338 |  |  | 2,383 |  |  | 47 |  |  | 338 |  |  | 2,390 |  |  | 2,728 |  |  | (1,114) |  | 1992 |  | 45 |
0568 |  | Mckinney |  | TX |  |  | — |  |  | 541 |  |  | 6,217 |  |  | 1,039 |  |  | 541 |  |  | 6,588 |  |  | 7,129 |  |  | (2,212) |  | 2003 |  | 36 |
0569 |  | Mckinney |  | TX |  |  | — |  |  | — |  |  | 636 |  |  | 7,748 |  |  | — |  |  | 7,703 |  |  | 7,703 |  |  | (2,345) |  | 2003 |  | 40 |
1079 |  | Nassau Bay |  | TX |  |  | — |  |  | — |  |  | 8,942 |  |  | 1,178 |  |  | — |  |  | 9,985 |  |  | 9,985 |  |  | (2,491) |  | 2006 |  | 40 |
0596 |  | North Richland Hills |  | TX |  |  | — |  |  | 812 |  |  | 8,883 |  |  | 2,350 |  |  | 812 |  |  | 10,890 |  |  | 11,702 |  |  | (3,013) |  | 2000 |  | 37 |
2048 |  | North Richland Hills |  | TX |  |  | — |  |  | 1,385 |  |  | 10,213 |  |  | 1,427 |  |  | 1,399 |  |  | 11,626 |  |  | 13,025 |  |  | (1,566) |  | 2012 |  | 30 |
1048 |  | Pearland |  | TX |  |  | — |  |  | — |  |  | 4,014 |  |  | 4,173 |  |  | — |  |  | 7,783 |  |  | 7,783 |  |  | (2,370) |  | 2006 |  | 40 |
2232 |  | Pearland |  | TX |  |  | — |  |  | — |  |  | — |  |  | 13,874 |  |  | — |  |  | 13,874 |  |  | 13,874 |  |  | (3) |  | 2014 |  | * |
0447 |  | Plano |  | TX |  |  | — |  |  | 1,700 |  |  | 7,810 |  |  | 6,191 |  |  | 1,727 |  |  | 13,355 |  |  | 15,082 |  |  | (5,124) |  | 1999 |  | 20 |
0597 |  | Plano |  | TX |  |  | — |  |  | 1,210 |  |  | 9,588 |  |  | 3,831 |  |  | 1,210 |  |  | 12,641 |  |  | 13,851 |  |  | (3,565) |  | 2000 |  | 34 |
0672 |  | Plano |  | TX |  |  | — |  |  | 1,389 |  |  | 12,768 |  |  | 1,824 |  |  | 1,389 |  |  | 13,385 |  |  | 14,774 |  |  | (3,567) |  | 2002 |  | 36 |
1284 |  | Plano |  | TX |  |  | — |  |  | 2,049 |  |  | 18,793 |  |  | 1,950 |  |  | 2,101 |  |  | 18,735 |  |  | 20,836 |  |  | (6,125) |  | 2006 |  | 40 |
1286 |  | Plano |  | TX |  |  | — |  |  | 3,300 |  |  | — |  |  | — |  |  | 3,300 |  |  | — |  |  | 3,300 |  |  | — |  | 2006 |  | ** |
0815 |  | San Antonio |  | TX |  |  | — |  |  | — |  |  | 9,193 |  |  | 1,472 |  |  | 12 |  |  | 10,191 |  |  | 10,203 |  |  | (3,022) |  | 2006 |  | 35 |
0816 |  | San Antonio |  | TX |  |  | 3,854 |  |  | — |  |  | 8,699 |  |  | 2,640 |  |  | 148 |  |  | 10,673 |  |  | 10,821 |  |  | (2,920) |  | 2006 |  | 35 |
1591 |  | San Antonio |  | TX |  |  | — |  |  | — |  |  | 7,309 |  |  | 355 |  |  | 12 |  |  | 7,653 |  |  | 7,665 |  |  | (1,474) |  | 2010 |  | 30 |
1977 |  | San Antonio |  | TX |  |  | — |  |  | — |  |  | 26,191 |  |  | 1,118 |  |  | — |  |  | 27,301 |  |  | 27,301 |  |  | (4,819) |  | 2011 |  | 30 |
0598 |  | Sugarland |  | TX |  |  | — |  |  | 1,078 |  |  | 5,158 |  |  | 2,236 |  |  | 1,170 |  |  | 6,879 |  |  | 8,049 |  |  | (2,219) |  | 2000 |  | 34 |
0599 |  | Texas City |  | TX |  |  | — |  |  | — |  |  | 9,519 |  |  | 157 |  |  | — |  |  | 9,676 |  |  | 9,676 |  |  | (2,489) |  | 2000 |  | 37 |
0152 |  | Victoria |  | TX |  |  | — |  |  | 125 |  |  | 8,977 |  |  | 394 |  |  | 125 |  |  | 9,370 |  |  | 9,495 |  |  | (4,314) |  | 1994 |  | 45 |
2550 |  | The Woodlands |  | TX |  |  | — |  |  | 115 |  |  | 5,141 |  |  | — |  |  | 115 |  |  | 5,141 |  |  | 5,256 |  |  | (80) |  | 2015 |  | 35 |
2551 |  | The Woodlands |  | TX |  |  | — |  |  | 296 |  |  | 18,282 |  |  | — |  |  | 296 |  |  | 18,282 |  |  | 18,578 |  |  | (248) |  | 2015 |  | 40 |
2552 |  | The Woodlands |  | TX |  |  | — |  |  | 374 |  |  | 25,125 |  |  | — |  |  | 374 |  |  | 25,125 |  |  | 25,499 |  |  | (302) |  | 2015 |  | 45 |
1592 |  | Bountiful |  | UT |  |  | 4,870 |  |  | 999 |  |  | 7,426 |  |  | 161 |  |  | 999 |  |  | 7,587 |  |  | 8,586 |  |  | (1,374) |  | 2010 |  | 30 |
0169 |  | Bountiful |  | UT |  |  | — |  |  | 276 |  |  | 5,237 |  |  | 1,078 |  |  | 348 |  |  | 6,086 |  |  | 6,434 |  |  | (2,682) |  | 1995 |  | 45 |
0346 |  | Castle Dale |  | UT |  |  | — |  |  | 50 |  |  | 1,818 |  |  | 63 |  |  | 50 |  |  | 1,881 |  |  | 1,931 |  |  | (934) |  | 1998 |  | 35 |
0347 |  | Centerville |  | UT |  |  | — |  |  | 300 |  |  | 1,288 |  |  | 191 |  |  | 300 |  |  | 1,479 |  |  | 1,779 |  |  | (790) |  | 1999 |  | 35 |
2035 |  | Draper |  | UT |  |  | 5,384 |  |  | — |  |  | 10,803 |  |  | 113 |  |  | — |  |  | 10,916 |  |  | 10,916 |  |  | (972) |  | 2012 |  | 45 |
0469 |  | Kaysville |  | UT |  |  | — |  |  | 530 |  |  | 4,493 |  |  | 226 |  |  | 530 |  |  | 4,719 |  |  | 5,249 |  |  | (1,517) |  | 2001 |  | 43 |
0456 |  | Layton |  | UT |  |  | — |  |  | 371 |  |  | 7,073 |  |  | 861 |  |  | 389 |  |  | 7,675 |  |  | 8,064 |  |  | (3,117) |  | 2001 |  | 35 |
2042 |  | Layton |  | UT |  |  | — |  |  | — |  |  | 10,975 |  |  | 83 |  |  | — |  |  | 11,058 |  |  | 11,058 |  |  | (900) |  | 2012 |  | 45 |
0359 |  | Ogden |  | UT |  |  | — |  |  | 180 |  |  | 1,695 |  |  | 187 |  |  | 180 |  |  | 1,761 |  |  | 1,941 |  |  | (819) |  | 1999 |  | 35 |
1283 |  | Ogden |  | UT |  |  | — |  |  | 106 |  |  | 4,464 |  |  | 696 |  |  | 106 |  |  | 4,241 |  |  | 4,347 |  |  | (4,167) |  | 2006 |  | 40 |
0357 |  | Orem |  | UT |  |  | — |  |  | 337 |  |  | 8,744 |  |  | 1,622 |  |  | 306 |  |  | 8,128 |  |  | 8,434 |  |  | (3,898) |  | 1999 |  | 35 |
0371 |  | Providence |  | UT |  |  | — |  |  | 240 |  |  | 3,876 |  |  | 250 |  |  | 256 |  |  | 3,820 |  |  | 4,076 |  |  | (1,788) |  | 1999 |  | 35 |
0353 |  | Salt Lake City |  | UT |  |  | — |  |  | 190 |  |  | 779 |  |  | 148 |  |  | 201 |  |  | 916 |  |  | 1,117 |  |  | (446) |  | 1999 |  | 35 |
0354 |  | Salt Lake City |  | UT |  |  | — |  |  | 220 |  |  | 10,732 |  |  | 1,727 |  |  | 220 |  |  | 12,179 |  |  | 12,399 |  |  | (5,885) |  | 1999 |  | 35 |
0355 |  | Salt Lake City |  | UT |  |  | — |  |  | 180 |  |  | 14,792 |  |  | 1,835 |  |  | 180 |  |  | 16,102 |  |  | 16,282 |  |  | (7,674) |  | 1999 |  | 35 |
0467 |  | Salt Lake City |  | UT |  |  | — |  |  | 3,000 |  |  | 7,541 |  |  | 2,013 |  |  | 3,126 |  |  | 9,081 |  |  | 12,207 |  |  | (3,024) |  | 2001 |  | 38 |
0566 |  | Salt Lake City |  | UT |  |  | — |  |  | 509 |  |  | 4,044 |  |  | 1,512 |  |  | 509 |  |  | 5,200 |  |  | 5,709 |  |  | (1,752) |  | 2003 |  | 37 |
2041 |  | Salt Lake City |  | UT |  |  | — |  |  | — |  |  | 12,326 |  |  | 73 |  |  | — |  |  | 12,399 |  |  | 12,399 |  |  | (1,039) |  | 2012 |  | 45 |
2033 |  | Sandy |  | UT |  |  | — |  |  | 867 |  |  | 3,513 |  |  | 718 |  |  | 867 |  |  | 4,231 |  |  | 5,098 |  |  | (717) |  | 2012 |  | 20 |
0358 |  | Springville |  | UT |  |  | — |  |  | 85 |  |  | 1,493 |  |  | 233 |  |  | 95 |  |  | 1,618 |  |  | 1,713 |  |  | (779) |  | 1999 |  | 35 |
0482 |  | Stansbury |  | UT |  |  | — |  |  | 450 |  |  | 3,201 |  |  | 374 |  |  | 450 |  |  | 3,448 |  |  | 3,898 |  |  | (1,182) |  | 2001 |  | 45 |
0351 |  | Washington Terrace |  | UT |  |  | — |  |  | — |  |  | 4,573 |  |  | 2,299 |  |  | 17 |  |  | 6,421 |  |  | 6,438 |  |  | (3,141) |  | 1999 |  | 35 |
0352 |  | Washington Terrace |  | UT |  |  | — |  |  | — |  |  | 2,692 |  |  | 1,159 |  |  | 15 |  |  | 3,470 |  |  | 3,485 |  |  | (1,591) |  | 1999 |  | 35 |
2034 |  | West Jordan |  | UT |  |  | 7,118 |  |  | — |  |  | 12,021 |  |  | — |  |  | — |  |  | 12,021 |  |  | 12,021 |  |  | (996) |  | 2012 |  | 45 |
2036 |  | West Jordan |  | UT |  |  | 947 |  |  | — |  |  | 1,383 |  |  | 329 |  |  | — |  |  | 1,713 |  |  | 1,713 |  |  | (308) |  | 2012 |  | 20 |
0495 |  | West Valley City |  | UT |  |  | — |  |  | 410 |  |  | 8,266 |  |  | 1,002 |  |  | 410 |  |  | 9,268 |  |  | 9,678 |  |  | (3,909) |  | 2002 |  | 35 |
0349 |  | West Valley City |  | UT |  |  | — |  |  | 1,070 |  |  | 17,463 |  |  | 128 |  |  | 1,036 |  |  | 17,581 |  |  | 18,617 |  |  | (8,461) |  | 1999 |  | 35 |
1208 |  | Fairfax |  | VA |  |  | — |  |  | 8,396 |  |  | 16,709 |  |  | 4,406 |  |  | 8,494 |  |  | 20,467 |  |  | 28,961 |  |  | (6,819) |  | 2006 |  | 28 |
2230 |  | Fredericksburg |  | VA |  |  | — |  |  | 1,101 |  |  | 8,570 |  |  | — |  |  | 1,101 |  |  | 8,570 |  |  | 9,671 |  |  | (347) |  | 2014 |  | 40 |
0572 |  | Reston |  | VA |  |  | — |  |  | — |  |  | 11,902 |  |  | 563 |  |  | — |  |  | 12,394 |  |  | 12,394 |  |  | (4,328) |  | 2003 |  | 43 |
0448 |  | Renton |  | WA |  |  | — |  |  | — |  |  | 18,724 |  |  | 1,973 |  |  | — |  |  | 19,469 |  |  | 19,469 |  |  | (8,824) |  | 1999 |  | 35 |
0781 |  | Seattle |  | WA |  |  | — |  |  | — |  |  | 52,703 |  |  | 11,475 |  |  | — |  |  | 60,430 |  |  | 60,430 |  |  | (17,488) |  | 2004 |  | 39 |
0782 |  | Seattle |  | WA |  |  | — |  |  | — |  |  | 24,382 |  |  | 11,409 |  |  | 125 |  |  | 34,502 |  |  | 34,627 |  |  | (9,828) |  | 2004 |  | 36 |
0783 |  | Seattle |  | WA |  |  | — |  |  | — |  |  | 5,625 |  |  | 1,318 |  |  | 183 |  |  | 6,685 |  |  | 6,868 |  |  | (6,147) |  | 2004 |  | 10 |
0785 |  | Seattle |  | WA |  |  | — |  |  | — |  |  | 7,293 |  |  | 4,596 |  |  | — |  |  | 10,723 |  |  | 10,723 |  |  | (2,740) |  | 2004 |  | 33 |
1385 |  | Seattle |  | WA |  |  | — |  |  | — |  |  | 45,027 |  |  | 2,271 |  |  | — |  |  | 47,120 |  |  | 47,120 |  |  | (11,601) |  | 2007 |  | 30 |
2038 |  | Evanston |  | WY |  |  | — |  |  | — |  |  | 4,601 |  |  | 8 |  |  | — |  |  | 4,609 |  |  | 4,609 |  |  | (429) |  | 2012 |  | 40 |
0884 |  | Coyoacan |  | MX |  |  | — |  |  | 415 |  |  | 3,739 |  |  | (666) |  |  | 70 |  |  | 3,417 |  |  | 3,487 |  |  | (799) |  | 2006 |  | 40 |
|  |  |  |  |  | $ | 144,985 |  | $ | 253,637 |  | $ | 2,433,193 |  | $ | 587,192 |  | $ | 259,512 |  | $ | 2,913,075 |  | $ | 3,172,587 |  | $ | (735,839) |  |  |  |  |
Hospital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
0126 |  | Sherwood |  | AR |  |  | — |  |  | 709 |  |  | 9,604 |  |  | — |  |  | 709 |  |  | 9,588 |  |  | 10,297 |  |  | (5,311) |  | 1990 |  | 45 |
0113 |  | Glendale |  | AZ |  |  | — |  |  | 1,565 |  |  | 7,050 |  |  | — |  |  | 1,565 |  |  | 7,050 |  |  | 8,615 |  |  | (3,984) |  | 1988 |  | 45 |
1038 |  | Fresno |  | CA |  |  | — |  |  | 3,652 |  |  | 29,113 |  |  | 21,935 |  |  | 3,652 |  |  | 51,048 |  |  | 54,700 |  |  | (13,923) |  | 2006 |  | 40 |
0423 |  | Irvine |  | CA |  |  | — |  |  | 18,000 |  |  | 70,800 |  |  | — |  |  | 18,000 |  |  | 70,800 |  |  | 88,800 |  |  | (32,709) |  | 1999 |  | 35 |
0127 |  | Colorado Springs |  | CO |  |  | — |  |  | 690 |  |  | 8,338 |  |  | — |  |  | 690 |  |  | 8,338 |  |  | 9,028 |  |  | (4,599) |  | 1989 |  | 45 |
0887 |  | Atlanta |  | GA |  |  | — |  |  | 4,300 |  |  | 13,690 |  |  | — |  |  | 4,300 |  |  | 11,890 |  |  | 16,190 |  |  | (5,251) |  | 2007 |  | 40 |
0112 |  | Overland Park |  | KS |  |  | — |  |  | 2,316 |  |  | 10,681 |  |  | — |  |  | 2,316 |  |  | 10,680 |  |  | 12,996 |  |  | (6,250) |  | 1988 |  | 45 |
1383 |  | Baton Rouge |  | LA |  |  | — |  |  | 690 |  |  | 8,545 |  |  | 87 |  |  | 690 |  |  | 8,502 |  |  | 9,192 |  |  | (3,110) |  | 2007 |  | 40 |
0877 |  | Slidell |  | LA |  |  | — |  |  | 1,490 |  |  | 22,034 |  |  | — |  |  | 1,490 |  |  | 20,934 |  |  | 22,424 |  |  | (4,799) |  | 2006 |  | 40 |
2031 |  | Slidell |  | LA |  |  | — |  |  | 3,000 |  |  | — |  |  | 643 |  |  | 3,000 |  |  | 643 |  |  | 3,643 |  |  | — |  | 2012 |  | ** |
0886 |  | Dallas |  | TX |  |  | — |  |  | 1,820 |  |  | 8,508 |  |  | 26 |  |  | 1,820 |  |  | 7,454 |  |  | 9,274 |  |  | (1,646) |  | 2007 |  | 40 |
1319 |  | Dallas |  | TX |  |  | — |  |  | 18,840 |  |  | 155,659 |  |  | 1,465 |  |  | 18,840 |  |  | 157,124 |  |  | 175,964 |  |  | (39,257) |  | 2007 |  | 35 |
1384 |  | Plano |  | TX |  |  | — |  |  | 6,290 |  |  | 22,686 |  |  | 5,705 |  |  | 6,290 |  |  | 28,202 |  |  | 34,492 |  |  | (9,617) |  | 2007 |  | 25 |
2198 |  | Webster |  | TX |  |  | — |  |  | 2,220 |  |  | 9,602 |  |  | — |  |  | 2,220 |  |  | 9,602 |  |  | 11,822 |  |  | (979) |  | 2013 |  | 35 |
|  |  |  |  |  | $ | — |  | $ | 65,582 |  | $ | 376,310 |  | $ | 29,861 |  | $ | 65,582 |  | $ | 401,855 |  | $ | 467,437 |  | $ | (131,435) |  |  |  |  |
Total operations properties |  |  |  |  |  | $ | 932,212 |  | $ | 1,984,966 |  | $ | 11,444,006 |  | $ | 1,695,529 |  | $ | 1,995,612 |  | $ | 12,890,310 |  | $ | 14,885,922 |  | $ | (2,605,036) |  |  |  |  |
Corporate and other assets |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 313 |  |  | 45 |  |  | 1,785 |  |  | 1,830 |  |  | — |  |  |  |  |
Total |  |  |  |  |  | $ | 932,212 |  | $ | 1,984,966 |  | $ | 11,444,006 |  | $ | 1,695,842 |  | $ | 1,995,657 |  | $ | 12,892,095 |  | $ | 14,887,752 |  | $ | (2,605,036) |  |  |  |  |

134

Table of Contents

* | Property is in development and not yet placed in service or taken out of service and placed in redevelopment.
** | Represents land parcels which are not depreciated.
† | A portion of the property has been taken out of service and placed in redevelopment.

| (1) |  | At December 31, 2015, the tax basis of the Company’s net real estate assets is less than the reported amounts by approximately $1.6 billion (unaudited).

| (b) |  | A summary of activity for real estate and accumulated depreciation follows (in thousands):

|  | Year ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Real estate: |  |  |  |  |  |  |  |  |  |
Balances at beginning of year |  | $ | 13,137,644 |  | $ | 12,592,841 |  | $ | 12,524,224 |
Acquisition of real estate and development and improvements |  |  | 1,930,931 |  |  | 756,043 |  |  | 257,189 |
Disposition of real estate |  |  | (121,374) |  |  | (169,311) |  |  | (78,151) |
Impairments |  |  | (3,118) |  |  | — |  |  | — |
Balances associated with changes in reporting presentation(1) |  |  | (56,331) |  |  | (41,929) |  |  | (110,421) |
Balances at end of year |  | $ | 14,887,752 |  | $ | 13,137,644 |  | $ | 12,592,841 |
Accumulated depreciation: |  |  |  |  |  |  |  |  |  |
Balances at beginning of year |  | $ | 2,250,757 |  | $ | 1,965,592 |  | $ | 1,694,892 |
Depreciation expense |  |  | 418,591 |  |  | 384,019 |  |  | 353,344 |
Disposition of real estate |  |  | (17,251) |  |  | (55,745) |  |  | (38,447) |
Balances associated with changes in reporting presentation(1) |  |  | (47,061) |  |  | (43,109) |  |  | (44,197) |
Balances at end of year |  | $ | 2,605,036 |  | $ | 2,250,757 |  | $ | 1,965,592 |

| (1) |  | The balances associated with changes in reporting presentation represent real estate and accumulated depreciation related to fully depreciated assets written off, properties placed into discontinued operations or where the lease classification has changed to direct financing leases.

(a) 2.Exhibits

See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K.

135

Table of Contents

SIG NATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 9, 201 6

| HCP, Inc. (Registrant)
| /s/ Lauralee E. Martin
| Lauralee E. Martin,
| President and Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature |  | Title |  | Date
/s/ Lauralee E. Martin |  | Presid ent and Chief Executive Officer |  | February 9, 201 6
Lauralee E. Martin |  | (Principal Executive Officer), Director |  |
/s/ Timothy M. Schoen |  | Exe cutive Vice President and Chief |  | February 9, 201 6
Timothy M. Schoen |  | Financi al Officer (Principal Financial Officer) |  |
/s/ Scott A. Anderson |  | Executive Vice President and Chief |  | February 9, 201 6
Scott A. Anderson |  | Accounting Officer (Principal Accounting Officer) |  |
/s/ Brian G. Cartwright |  | Director |  | February 9, 201 6
Brian G. Cartwright |  |  |  |
/s/ Christine N. Garvey |  | Director |  | February 9, 201 6
Christine N. Garvey |  |  |  |
/s/ David B. Henry |  | Director |  | February 9, 201 6
David B. Henry |  |  |  |
/s/ James P. H offma n n |  | Director |  | February 9, 201 6
James P. Hoffmann |  |  |  |
/s/ Michael D. McKee |  | Director |  | February 9, 201 6
Michael D. McKee |  |  |  |
/s/ Peter L. Rhein |  | Director |  | February 9, 201 6
Peter L. Rhein |  |  |  |
/s/ Joseph P. Sullivan |  | Director |  | February 9, 201 6
Joseph P. Sullivan |  |  |  |

136

Table of Contents

EXHIBIT INDEX

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
2.1 |  | Purchase Agreement, dated as of December 13, 2010, by and among HCP, Inc., HCP 2010 REIT LLC, HCR ManorCare, Inc., HCR Properties, LLC and HCR Healthcare, LLC.*** |  | Current Report on Form 8‑K (File No. 001‑08895) |  | December 14, 2010
2.1.1 |  | Amendment to Purchase Agreement, dated as of April 7, 2011, by and among HCP, Inc., HCP 2010 REIT LLC, HCR ManorCare MergeCo, Inc., HCR ManorCare, LLC, HCR Properties, LLC and HCR Healthcare, LLC.** |  | Current Report on Form 8‑K (File No. 001‑08895) |  | April 13, 2011
2.2 |  | Purchase and Sale Agreement, dated as of October 16, 2012, by and among BRE/SW Portfolio LLC, those owner entities listed on Schedule 1 thereto, HCP, Inc. and Emeritus Corporation; and First Amendment to such Purchase and Sale Agreement, by and among such parties, dated as of December 4, 2012.*** |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 2, 2013
2.3 |  | Master Contribution and Transactions Agreement, dated April 23, 2014, by and between HCP, Inc. and Brookdale Senior Living Inc.*** |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
3.1 |  | Articles of Restatement of HCP. |  | Registration Statement on Form S‑3 (Registration No. 333‑182824) |  | July 24, 2012
3.2 |  | Fifth Amended and Restated Bylaws of HCP. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 11, 2015
3.3 |  | Amendment No. 1 to Fifth Amended and Restated Bylaws of HCP. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 1, 2016
4.1 |  | Indenture, dated as of September 1, 1993, between HCP and The Bank of New York, as Trustee. |  | Registration Statement on Form S‑3/A (Registration No. 333‑86654) |  | May 21, 2002
4.1.1 |  | First Supplemental Indenture dated as of January 24, 2011, to the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York Mellon Trust Company, N.A., as Trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 24, 2011
4.2 |  | Indenture, dated November 19, 2012, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑ 08895) |  | November 19, 2012
4.2.1 |  | First Supplemental Indenture, dated November 19, 2012, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 19, 2012
4.2.2 |  | Second Supplemental Indenture, dated November 12, 2013, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 13, 2013
4.2.3 |  | Third Supplemental Indenture dated February 21, 2014, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 24, 2014
4.2.4 |  | Fourth Supplemental Indenture, dated August 14, 2014, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | August 14, 2014
4.2.5 |  | Fifth Supplemental Indenture, dated January 21, 2015, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 21, 2015

137

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
4.2.6 |  | Sixth Supplemental Indenture, dated May 20, 2015, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | May 20, 2015
4.2.7 |  | Seventh Supplemental Indenture dated December 1, 2015, between HCP and The Bank of New York Mellon Trust Company, N.A., as trustee. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | December 1, 2015
4.3 |  | Form of Fixed Rate Global Medium‑Term Note. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 20, 2003
4.4 |  | Form of Floating Rate Global Medium‑Term Note. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 20, 2003
4.5 |  | Form of Fixed Rate Global Medium‑Term Note. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 17, 2006
4.6 |  | Form of Floating Rate Global Medium‑Term Note. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 17, 2006
4.7 |  | Officers’ Certificate, dated February 25, 2003, pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “6.00% Senior Notes due March 1, 2015”. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 28, 2003
4.8 |  | Officers’ Certificate, dated April 22, 2005, pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “5 5/8% Senior Notes due May 1, 2017”. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | April 27, 2005
4.9 |  | Officers’ Certificate, dated February 17, 2006, pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as trustee, setting forth the terms of HCP’s Fixed Rate Medium‑Term Notes and Floating Rate Medium‑Term Notes. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 17, 2006
4.10 |  | Form of 6.30% Notes Due 2016. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | September 19, 2006
4.11 |  | Form of 6.00% Senior Notes Due 2017. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 22, 2007
4.12 |  | Officers’ Certificate (including Form of 6.70% Senior Notes Due 2018 as Annex A thereto), dated October 15, 2007, pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York Trust Company, N.A., as successor trustee to The Bank of New York, establishing a series of securities entitled “6.70% Senior Notes due 2018”. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | October 30, 2007
4.13 |  | Form of 3.750% Senior Notes due 2016. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 24, 2011
4.14 |  | Form of 5.375% Senior Notes due 2021. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 24, 2011
4.15 |  | Form of 6.750% Senior Notes due 2041. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 24, 2011
4.16 |  | Form of 3.75% Senior Notes due 2019. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 23, 2012

138

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
4.17 |  | Form of 3.15% Senior Notes due 2022. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | July 23, 2012
4.18 |  | Form of 2.625% Senior Notes due 2020. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 19, 2012
4.19 |  | Form of 4.250% Senior Notes due 2023. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 13, 2013
4.20 |  | Form of 4.20% Senior Notes due 2024. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | February 24, 2014
4.21 |  | Form of 3.875% Senior Notes due 2024. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | August 14, 2014
4.22 |  | Form of 3.400% Senior Notes due 2025. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | January 21, 2015
4.23 |  | Form of 4.000% Senior Notes due 2025. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | May 20, 2015
4.24 |  | Form of 4.000% Senior Notes due 2022. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | December 1, 2015
10.1 |  | Second Amended and Restated Director Deferred Compensation Plan.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 3, 2009
10.2 |  | Amended and Restated Executive Retirement Plan, effective as of May 7, 2003.* |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | March 15, 2004
10.3 |  | 2006 Performance Incentive Plan, as amended and restated.* |  | Annex 2 to HCP’s Proxy Statement (File No. 001‑08895) |  | March 10, 2009
10.3.1 |  | Form of Employee 2006 Performance Incentive Plan Performance Restricted Stock Unit Agreement with five‑year installment vesting.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | April 28, 2009
10.3.2 |  | Form of Director 2006 Performance Incentive Plan Director Stock Unit Award Agreement with four‑year installment vesting.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | August 4, 2009
10.3.3 |  | HCP, Inc. Terms and Conditions Applicable to Restricted Stock Unit Awards Granted Under the 2006 Performance Incentive Plan.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 3, 2011
10.3.4 |  | Form of Employee 2006 Performance Incentive Plan Nonqualified Stock Option Agreement.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 1, 2012
10.3.5 |  | Form of Employee 2006 Performance Incentive Plan Performance‑Based Restricted Stock Unit Agreement.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 1, 2012
10.3.6 |  | Form of Employee 2006 Performance Incentive Plan Time‑Based Restricted Stock Unit Agreement.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 1, 2012
10.3.7 |  | Restricted Stock Unit Award Agreement, dated as of October 3, 2013, by and between HCP and Paul F. Gallagher.* |  | Quarterly Report on Form 10‑Q (File 001‑ 08895) |  | November 4, 2013
10.3.8 |  | Restricted Stock Unit Award Agreement, dated as of October 3, 2013, by and between HCP and Timothy M. Schoen.* |  | Quarterly Report on Form 10‑Q (File 001‑ 08895) |  | November 4, 2013
10.3.9 |  | Restricted Stock Unit Award Agreement, dated as of October 31, 2013, by and between HCP and James W. Mercer.* |  | Quarterly Report on Form 10‑Q (File 001‑ 08895) |  | November 4, 2013
10.3.10 |  | Amended 2013 Restricted Stock Award Agreement, dated as of December 20, 2013, by and between HCP and Lauralee E. Martin.* |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 11, 2014

139

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.4 |  | HCP, Inc. 2014 Performance Incentive Plan.* |  | Current Report on Form 8‑K (File No. 001‑08895) |  | May 6, 2014
10.4.1 |  | Form of 2014 Performance Incentive Plan Non-Employee Director Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.2 |  | Form of 2014 Performance Incentive Plan CEO Annual LTIP Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.3 |  | Form of 2014 Performance Incentive Plan CEO Annual LTIP Option Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.4 |  | Form of 2014 Performance Incentive Plan CEO 3-Year LTIP Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.5 |  | Form of 2014 Performance Incentive Plan NEO Annual LTIP Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.6 |  | Form of 2014 Performance Incentive Plan NEO Annual LTIP Option Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.7 |  | Form of 2014 Performance Incentive Plan NEO 3-Year LTIP Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.8 |  | Form of 2014 Performance Incentive Plan Non-NEO Restricted Stock Unit Award Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.9 |  | Form of 2014 Performance Incentive Plan Non-NEO Option Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.10 |  | Form of 2014 Performance Incentive Plan Non-Employee Directors Stock-for-Fees Program.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.4.11 |  | Form of CEO 3-Year LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.12 |  | Form of CEO 1-Year LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.13 |  | Form of CEO Retentive LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.14 |  | Form of NEO 3-Year LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.15 |  | Form of NEO 1-Year LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.16 |  | Form of NEO Retentive LTIP RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.4.17 |  | Form of Non-Employee Director RSU Agreement.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | May 5, 2015
10.5 |  | Change in Control Severance Plan.* |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | October 30, 2012
10.5.1 |  | HCP, Inc. Change in Control Severance Plan (as Amended and Restated as of March 13, 2014).* |  | Annual Report on Form 10-K (File No. 001‑08895) |  | February 10, 2015
10.6 |  | Amended and Restated Dividend Reinvestment and Stock Purchase Plan, amended as of July 25, 2012. |  | Registration Statement on Form S‑3 (Registration No. 333‑182824) |  | July 24, 2012 and as supplemented on July 25, 2012
10.7 |  | Amended and Restated Dividend Reinvestment and Stock Purchase Plan, amended as of June 26, 2015. |  | Registration Statement on Form S‑3 (Registration No. 333‑205241) |  | June 26, 2015 and as supplemented on June 26, 2015

140

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.8 |  | Form of Directors and Officers Indemnification Agreement.* |  | Annual Report on Form 10‑K, as amended (File No. 001‑08895) |  | February 12, 2008
10.9 |  | Employment Agreement, dated as of January 26, 2012, by and between HCP and Paul F. Gallagher.* |  | Current Report on Form 8‑K (File 001‑08895) |  | February 1, 2012
10.9.1 |  | Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and Paul F. Gallagher.* |  | Current Report on Form 8‑K (File 001‑08895) |  | April 5, 2013
10.9.2 |  | Term Sheet Amendment to Employment Agreement, dated as of October 3, 2013, by and between HCP and Paul F. Gallagher.* |  | Current Report on Form 8‑K (File 001‑08895) |  | October 3, 2013
10.9.3 |  | Amendment No. 2, dated as of October 31, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and Paul F. Gallagher.* |  | Quarterly Report on Form 10‑Q (File 001‑08895) |  | November 4, 2013
10.10 |  | Employment Agreement, dated as of January 26, 2012, by and between HCP and Timothy M. Schoen.* |  | Current Report on Form 8‑K (File 001‑08895) |  | February 1, 2012
10.10.1 |  | Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and Timothy M. Schoen.* |  | Current Report on Form 8‑K (File 001‑08895) |  | April 5, 2013
10.10.2 |  | Term Sheet Amendment to Employment Agreement, dated as of October 3, 2013, by and between HCP and Timothy M. Schoen.* |  | Current Report on Form 8‑K (File 001‑ 08895) |  | October 3, 2013
10.10.3 |  | Amendment No. 2, dated as of October 31, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and Timothy M. Schoen.* |  | Quarterly Report on Form 10‑Q (File 001‑08895) |  | November 4, 2013
10.11 |  | Employment Agreement, dated October 25, 2012, by and between HCP, Inc. and James W. Mercer.* |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | October 30, 2012
10.11.1 |  | Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and James W. Mercer.* |  | Current Report on Form 8‑K (File 001‑08895) |  | April 5, 2013
10.11.2 |  | Amendment No. 2, dated as of October 31, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between HCP and James W. Mercer.* |  | Quarterly Report on Form 10‑Q (File 001‑08895) |  | November 4, 2013
10.12 |  | Employment Agreement, dated as of October 2, 2013, by and between HCP and Lauralee E. Martin.* |  | Current Report on Form 8‑K (File 001‑08895) |  | October 3, 2013
10.13 |  | Employment Agreement, effective as of September 8, 2015, by and between HCP and J. Justin Hutchens.* |  | Quarterly Report on Form 10‑Q (File 001‑08895) |  | November 3, 2015
10.13.1 |  | Amendment No. 1 to Employment Agreement, dated as of September 1, 2015, by and between HCP and J. Justin Hutchens.* |  | Quarterly Report on Form 10‑Q (File 001‑08895) |  | November 3, 2015
10.14 |  | Separation, Consulting and General Release Agreement, dated as of June 18, 2015, between HCP and Paul F. Gallagher.* |  | Current Report on Form 8‑K (File 001‑08895) |  | June 18, 2015
10.15 |  | Separation, Consulting and General Release Agreement, dated as of January 12, 2016, between HCP and James W. Mercer.* |  | Current Report on Form 8‑K (File 001‑08895) |  | January 13, 2016

141

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.16 |  | Amended and Restated Limited Liability Company Agreement of HCPI/Utah, LLC, dated as of January 20, 1999. |  | Annual Report on Form 10‑K (File No. 001‑ 08895) |  | March 29, 1999
10.17 |  | Amended and Restated Limited Liability Company Agreement of HCPI/Utah II, LLC, dated as of August 17, 2001, as amended. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | November 9, 2012
10.18 |  | Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of October 2, 2003. |  | Quarterly Report on Form 10‑Q (File No. 001‑ 08895) |  | November 12, 2003
10.18.1 |  | Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of September 29, 2004. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 8, 2004
10.18.2 |  | Amendment No. 2 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of October 29, 2004. |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | March 15, 2005
10.18.3 |  | Amendment No. 3 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC and New Member Joinder Agreement, dated as of October 19, 2005, by and among HCP, HCPI/Tennessee, LLC and A. Daniel Weyland. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 1, 2005
10.18.4 |  | Amendment No. 4 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, effective as of January 1, 2007. |  | Annual Report on Form 10‑K, as amended (File No. 001‑08895) |  | February 12, 2008
10.19 |  | Amended and Restated Limited Liability Company Agreement of HC PDR MCD, LLC, dated as of February 9, 2007. |  | Current Report on Form 8‑K (File No. 001‑ 08895) |  | April 20, 2012
10.20 |  | Amended and Restated Limited Liability Company Agreement of HCP DR California II, LLC, dated as of June 1, 2014. |  | Quarterly Report on Form 10-Q (File No. 001‑08895) |  | August 5, 2014
10.21 |  | Stockholders Agreement, dated as of December 13, 2010, among HCP, Inc., HCR ManorCare, Inc. and certain stockholders of HCR ManorCare, Inc. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | December 14, 2010
10.22 |  | Credit Agreement, dated March 11, 2011, by and among HCP, as borrower, the lenders referred to therein, and Bank of America, N.A., as administrative agent. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | March 15, 2011
10.22.1 |  | Amendment No. 1 to Credit Agreement, dated March 27, 2012, by and among HCP, as borrower, the lenders referred to therein and Bank of America, N.A., as administrative agent. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | March 29, 2012
10.22.2 |  | Amendment No. 2 to Credit Agreement, dated May 7, 2013, by and among HCP, as borrower, the financial institutions referred to therein, and Bank of America, N.A., as administrative agent. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | August 2, 2013
10.22.3 |  | Amendment No. 3 to Credit Agreement, dated March 31, 2014, by and among the Company, as borrower, the financial institutions referred to therein, and Bank of America, N.A., as administrative agent. |  | Current Report on Form 8‑K (File No. 001‑08895) |  | March 31, 2014

142

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.22.4 |  | Amendment No. 4 to Credit Agreement, dated November 24, 2014, by and among the Company, as borrower, the financial institutions referred to therein, and Bank of America, N.A., as administrative agent. |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 10, 2015
10.23 |  | Master Lease and Security Agreement, dated as of April 7, 2011, by and between the parties set forth on Exhibit A‑1, Exhibit A‑2, Exhibit A‑3 and Exhibit A‑4 attached thereto and HCR III Healthcare, LLC.** |  | Current Report on Form 8‑K (File No. 001‑08895) |  | July 12, 2011
10.23.1 |  | First Amendment to Master Lease and Security Agreement, dated as of April 7, 2011, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 14, 2012
10.23.2 |  | Second Amendment to Master Lease and Security Agreement, dated as of May 16, 2011, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 14, 2012
10.23.3 |  | Third Amendment to Master Lease and Security Agreement, dated as of January 10, 2012, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 14, 2012
10.23.4 |  | Fourth Amendment to Master Lease and Security Agreement, dated as of April 18, 2012, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 1, 2012
10.23.5 |  | Fifth Amendment to Master Lease and Security Agreement, dated as of May 4, 2012, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | July 31, 2012
10.23.6 |  | Sixth Amendment to Master Lease and Security Agreement, dated as of May 30, 2012, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | July 31, 2012
10.23.7 |  | Seventh Amendment to Master Lease and Security Agreement, dated as of February 11, 2013, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 2, 2013
10.23.8 |  | Eighth Amendment to Master Lease and Security Agreement, dated as of July 31, 2014, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 4, 2014
10.23.9 |  | Ninth Amendment to Master Lease and Security Agreement, dated as of September 30, 2014, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 4, 2014
10.23.10 |  | Tenth Amendment to Master Lease and Security Agreement, dated as of March 29, 2015, by and among the parties signatory thereto and HCR III Healthcare, LLC.** |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | May 5, 2015
10.23.11 |  | Eleventh Amendment to Master Lease and Security Agreement, dated as of August 1, 2015, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | August 4, 2015

143

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.23.12 |  | Addendum #1 to Master Lease and Security Agreement, dated as of October 23, 2015, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 3, 2015
10.23.13 |  | Addendum #2 to Master Lease and Security Agreement, dated as of November 2, 2015, by and among the parties signatory thereto and HCR III Healthcare, LLC. |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 3, 2015
10.23.14 |  | Addendum #3 to Master Lease and Security Agreement, dated as of December 16, 2015, by and among the parties signatory thereto and HCR III Healthcare, LLC.† |  |  |  |
10.24 |  | Master Lease and Security Agreement, dated as of October 31, 2012, by and between HCPI Trust, HCP Senior Housing Properties Trust, HCP SH ELP1 Properties, LLC, HCP SH ELP2 Properties, LLC, HCP SH ELP3 Properties, LLC, HCP SH Lassen House, LLC, HCP SH Mountain Laurel, LLC, HCP SH Mountain View, LLC, HCP SH Oakridge, LLC, HCP SH River Valley Landing, LLC and HCP SH Sellwood Landing, LLC, as lessor, and Emeritus Corporation, as lessee.** |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 12, 2013
10.24.1 |  | First Amendment to Master Lease and Security Agreement, dated as of December 4, 2012, by and between HCPI Trust, HCP Senior Housing Properties Trust, HCP SH ELP1 Properties, LLC, HCP SH ELP2 Properties, LLC, HCP SH ELP3 Properties, LLC, HCP SH Lassen House, LLC, HCP SH Mountain Laurel, LLC, HCP SH Mountain View, LLC, HCP SH Oakridge, LLC, HCP SH River Valley Landing, LLC and HCP SH Sellwood Landing, LLC, as lessor, and Emeritus Corporation, as lessee.** |  | Annual Report on Form 10‑K (File No. 001‑08895) |  | February 12, 2013
10.24.2 |  | Omnibus Amendment to Leases, dated as of July 31, 2014, which amends the Master Lease and Security Agreement, dated as of October 31, 2012, by and between HCPI Trust, HCP Senior Housing Properties Trust, HCP SH ELP1 Properties, LLC, HCP SH ELP2 Properties, LLC, HCP SH ELP3 Properties, LLC, HCP SH Lassen House, LLC, HCP SH Mountain Laurel, LLC, HCP SH Mountain View, LLC, HCP SH Oakridge, LLC, HCP SH River Valley Landing, LLC and HCP SH Sellwood Landing, LLC, as lessor, and Emeritus Corporation, as lessee, as amended.** |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 4, 2014

144

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
10.25 |  | Amended and Restated Master Lease and Security Agreement, dated as of August 29, 2014, by and between HCP AUR1 California A Pack, LLC, HCP EMOH, LLC, HCP Hazel Creek, LLC, HCP MA2 California, LP, HCP MA2 Massachusetts, LP, HCP MA2 Ohio, LP, HCP MA2 Oklahoma, LP, HCP MA3 California, LP, HCP MA3 South Carolina, LP, HCP MA3 Washington LP, HCP Partners, LP, HCP Senior Housing Properties Trust, HCP SH Eldorado Heights LLC, HCP SH ELP1Properties, LLC, HCP SH ELP2 Properties, LLC, HCP SH ELP3 Properties, LLC, HCP SH Lassen House, LLC, HCP SH Mountain Laurel, LLC, HCP SH Mountain View, LLC, HCP SH River Valley Landing, LLC, HCP SH Sellwood Landing, LLC, HCP ST1 Colorado, LP, HCP, Inc. and HCPI Trust, as their interests may appear, as lessor, and Emeritus Corporation, Summerville at Hazel Creek, LLC and Summerville at Prince William, Inc., as lessee.** |  | Quarterly Report on Form 10‑Q (File No. 001‑08895) |  | November 4, 2014
10.25.1 |  | First Amendment to Amended and Restated Master Lease and Security Agreement and Option Exercise Notice, dated as of December 29, 2014, by and between HCP, Inc. and Brookdale Senior Living Inc.** |  | Annual Report on Form 10-K (File No. 1-08895) |  | February 10, 2015
10.25.2 |  | Second Amendment to Amended and Restated Master Lease and Security Agreement, dated as of January 1, 2015, by and among the entities collectively defined therein as Lessor, consisting of HCP and certain of its subsidiaries, the entities collectively defined therein as Lessee, each a subsidiary of Brookdale Senior Living Inc., and Brookdale Senior Living Inc. as guarantor.** |  | Annual Report on Form 10-K (File No. 1-08895) |  | February 10, 2015
10.25.3 |  | Third Amendment to Amended and Restated Master Lease and Security Agreement, dated as of May 1, 2015, by and among the entities collectively defined therein as Lessor, consisting of HCP and certain of its subsidiaries, the entities collectively defined therein as Lessee, each a subsidiary of Brookdale Senior Living Inc., and Brookdale Senior Living Inc. as guarantor. |  | Quarterly Report on Form 10-Q (File No. 1-08895) |  | August 4, 2015
10.26 |  | At-the-Market Equity Offering Sales Agreement, dated June 26, 2015, among HCP, J.P. Morgan Securities LLC, BNY Mellon Capital Markets, Citigroup Global Markets Inc., LLC, Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC and UBS Securities LLC. |  | Current Report on Form 8-K (File No. 1-08895) |  | June 26, 2015
21.1 |  | Subsidiaries of the Company.† |  |  |  |
23.1 |  | Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP.† |  |  |  |
23.2 |  | Consent of Independent Registered Public Accounting Firm—Ernst & Young LLP.† |  |  |  |

145

Table of Contents

Exhibit |  |  |  | Incorporated by reference herein
Number |  | Description |  | Form |  | Date Filed
31.1 |  | Certification by Lauralee E. Martin, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a‑14(a).† |  |  |  |
31.2 |  | Certification by Timothy M. Schoen, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a‑14(a).† |  |  |  |
32.1 |  | Certification by Lauralee E. Martin, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a‑14(b) and 18 U.S.C. Section 1350.† |  |  |  |
32.2 |  | Certification by Timothy M. Schoen, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a‑14(b) and 18 U.S.C. Section 1350.† |  |  |  |
99.1 |  | HCR ManorCare, Inc. Financial Statements as of December 31, 2015 and 2014 and for the three years in the periods ended December 31, 2015.† |  |  |  |
101.INS |  | XBRL Instance Document.† |  |  |  |
101.SCH |  | XBRL Taxonomy Extension Schema Document.† |  |  |  |
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document.† |  |  |  |
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document.† |  |  |  |
101.LAB |  | XBRL Taxonomy Extension Labels Linkbase Document.† |  |  |  |
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document.† |  |  |  |

* Management Contract or Compensatory Plan or Arrangement.

** Portions of this exhibit have been omitted pursuant to a request for confidential treatment with the SEC.

*** Certain schedules or similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplemental copies of any of the omitted schedules or attachments upon request by the SEC.

† Filed herewith.

†† Furnished herewith.

146