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EX-12.1 - STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES - VENTAS INCvtr-ex121_2015930.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - VENTAS INCvtr-ex322_2015930.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - VENTAS INCvtr-ex312_2015930.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - VENTAS INCvtr-ex311_2015930.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - VENTAS INCvtr-ex321_2015930.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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: 1-10989
 
Ventas, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
 
61-1055020
(I.R.S. Employer
Identification No.)
353 N. Clark Street, Suite 3300
Chicago, Illinois
(Address of Principal Executive Offices)
60654
(Zip Code)
(877) 483-6827
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    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 x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
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 in Rule 12b-2 of the Exchange Act). Yes ¨    No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class of Common Stock:
 
Outstanding at October 22, 2015:
Common Stock, $0.25 par value
 
332,982,775



VENTAS, INC.
FORM 10-Q
INDEX

 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014
 
 
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2015 and 2014
 
 
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014
 
 
 
Consolidated Statements of Equity for the Nine Months Ended September 30, 2015 and the Year Ended December 31, 2014
 
 
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
VENTAS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Real estate investments:
 
 
 
Land and improvements
$
2,065,664

 
$
1,708,851

Buildings and improvements
20,203,784

 
17,403,552

Construction in progress
124,377

 
109,689

Acquired lease intangibles
1,344,708

 
952,251

 
23,738,533

 
20,174,343

Accumulated depreciation and amortization
(3,966,947
)
 
(3,420,089
)
Net real estate property
19,771,586

 
16,754,254

Secured loans receivable and investments, net
766,707

 
802,881

Investments in unconsolidated real estate entities
96,208

 
91,872

Net real estate investments
20,634,501

 
17,649,007

Cash and cash equivalents
65,231

 
55,348

Escrow deposits and restricted cash
74,491

 
71,771

Goodwill
1,052,321

 
363,971

Assets held for sale
168,931

 
2,574,174

Other assets
418,502

 
451,642

Total assets
$
22,413,977

 
$
21,165,913

Liabilities and equity
 
 
 
Liabilities:
 
 
 
Senior notes payable and other debt
$
11,268,560

 
$
10,827,764

Accrued interest
67,358

 
62,097

Accounts payable and other liabilities
791,430

 
750,622

Liabilities related to assets held for sale
65,465

 
254,680

Deferred income taxes
352,658

 
344,337

Total liabilities
12,545,471

 
12,239,500

Redeemable OP unitholder and noncontrolling interests
198,832

 
172,016

Commitments and contingencies

 

Equity:
 
 
 
Ventas stockholders’ equity:
 
 
 
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

 

Common stock, $0.25 par value; 600,000 shares authorized, 333,027 and 298,478 shares issued at September 30, 2015 and December 31, 2014, respectively
83,238

 
74,656

Capital in excess of par value
11,523,312

 
10,119,306

Accumulated other comprehensive income
(592
)
 
13,121

Retained earnings (deficit)
(1,992,848
)
 
(1,526,388
)
Treasury stock, 61 and 7 shares at September 30, 2015 and December 31, 2014, respectively
(3,675
)
 
(511
)
Total Ventas stockholders’ equity
9,609,435

 
8,680,184

Noncontrolling interest
60,239

 
74,213

Total equity
9,669,674

 
8,754,397

Total liabilities and equity
$
22,413,977

 
$
21,165,913

See accompanying notes.

1


VENTAS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Rental income:
 
 
 
 
 
 
 
Triple-net leased
$
201,028

 
$
170,873

 
$
571,591

 
$
500,047

Medical office buildings
142,755

 
116,686

 
420,287

 
346,942

 
343,783

 
287,559

 
991,878

 
846,989

Resident fees and services
454,825

 
396,247

 
1,356,384

 
1,141,781

Medical office building and other services revenue
10,000

 
7,573

 
29,951

 
18,240

Income from loans and investments
18,924

 
13,186

 
66,192

 
36,902

Interest and other income
74

 
367

 
719

 
811

Total revenues
827,606

 
704,932

 
2,445,124

 
2,044,723

Expenses:
 
 
 
 
 
 
 
Interest
97,135

 
77,325

 
263,422

 
214,117

Depreciation and amortization
226,332

 
173,006

 
657,262

 
507,167

Property-level operating expenses:
 
 
 
 
 
 
 
Senior living
304,540

 
265,274

 
902,154

 
762,993

Medical office buildings
43,305

 
41,262

 
129,152

 
120,021

 
347,845

 
306,536

 
1,031,306

 
883,014

Medical office building services costs
6,416

 
4,568

 
19,098

 
9,565

General, administrative and professional fees
32,114

 
29,464

 
100,399

 
93,632

Loss on extinguishment of debt, net
15,331

 
2,414

 
14,897

 
5,079

Merger-related expenses and deal costs
62,145

 
16,188

 
105,023

 
35,944

Other
4,795

 
9,413

 
13,948

 
18,070

Total expenses
792,113

 
618,914

 
2,205,355

 
1,766,588

Income before (loss) income from unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest
35,493

 
86,018

 
239,769

 
278,135

(Loss) income from unconsolidated entities
(955
)
 
(47
)
 
(1,197
)
 
549

Income tax benefit (expense)
10,697

 
1,887

 
27,736

 
(4,820
)
Income from continuing operations
45,235

 
87,858

 
266,308

 
273,864

Discontinued operations
(22,383
)
 
18,171

 
13,434

 
79,026

Gain on real estate dispositions
265

 
3,625

 
14,420

 
16,514

Net income
23,117

 
109,654

 
294,162

 
369,404

Net income attributable to noncontrolling interest
265

 
522

 
1,047

 
827

Net income attributable to common stockholders
$
22,852

 
$
109,132

 
$
293,115

 
$
368,577

Earnings per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.14

 
$
0.31

 
$
0.85

 
$
0.98

Discontinued operations
(0.07
)
 
0.06

 
0.04

 
0.27

Net income attributable to common stockholders
$
0.07

 
$
0.37

 
$
0.89

 
$
1.25

Diluted:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.14

 
$
0.31

 
$
0.84

 
$
0.97

Discontinued operations
(0.07
)
 
0.06

 
0.04

 
0.27

Net income attributable to common stockholders
$
0.07

 
$
0.37

 
$
0.88

 
$
1.24

Weighted average shares used in computing earnings per common share:
 
 
 
 
 
 
 
Basic
332,491

 
294,030

 
329,440

 
293,965

Diluted
336,338

 
296,495

 
333,210

 
296,411

Dividends declared per common share
$
0.73

 
$
0.725

 
$
2.31

 
$
2.175

See accompanying notes.

2


VENTAS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
23,117

 
$
109,654

 
$
294,162

 
$
369,404

Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation
(11,239
)
 
(12,885
)
 
(7,718
)
 
(7,906
)
Change in unrealized gain on marketable securities

 
(334
)
 
(5,046
)
 
1,237

Other
467

 
3,120

 
(949
)
 
3,166

Total other comprehensive loss
(10,772
)
 
(10,099
)
 
(13,713
)
 
(3,503
)
Comprehensive income
12,345

 
99,555

 
280,449

 
365,901

Comprehensive income attributable to noncontrolling interest
265

 
522

 
1,047

 
827

Comprehensive income attributable to common stockholders
$
12,080

 
$
99,033

 
$
279,402

 
$
365,074

   
See accompanying notes.

3


VENTAS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Nine Months Ended September 30, 2015 and the Year Ended December 31, 2014
(Unaudited)
(In thousands, except per share amounts)
 
Common
Stock Par
Value
 
Capital in
Excess of
Par Value
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings
(Deficit)
 
Treasury
Stock
 
Total Ventas
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total Equity
Balance at January 1, 2014
$
74,488

 
$
10,078,592

 
$
19,659

 
$
(1,126,541
)
 
$
(221,917
)
 
$
8,824,281

 
$
79,530

 
$
8,903,811

Net income

 

 

 
475,767

 

 
475,767

 
1,419

 
477,186

Other comprehensive loss

 

 
(6,538
)
 

 

 
(6,538
)
 

 
(6,538
)
Retirement of stock
(924
)
 
(220,152
)
 

 

 
221,076

 

 

 

Acquisition-related activity
37

 
10,141

 

 

 

 
10,178

 

 
10,178

Net change in noncontrolling interest

 
1,163

 

 

 

 
1,163

 
(8,662
)
 
(7,499
)
Dividends to common stockholders—$2.965 per share

 

 

 
(875,614
)
 

 
(875,614
)
 

 
(875,614
)
Issuance of common stock
845

 
241,262

 

 

 

 
242,107

 

 
242,107

Issuance of common stock for stock plans
173

 
29,266

 

 

 
3,858

 
33,297

 

 
33,297

Change in redeemable noncontrolling interest

 
(1,082
)
 

 

 

 
(1,082
)
 
1,926

 
844

Adjust redeemable OP unitholder interests to current fair value

 
(32,993
)
 

 

 

 
(32,993
)
 

 
(32,993
)
Purchase of OP units
1

 
(83
)
 

 

 

 
(82
)
 

 
(82
)
Grant of restricted stock, net of forfeitures
36

 
13,192

 

 

 
(3,528
)
 
9,700

 

 
9,700

Balance at December 31, 2014
74,656

 
10,119,306

 
13,121

 
(1,526,388
)
 
(511
)
 
8,680,184

 
74,213

 
8,754,397

Net income

 

 

 
293,115

 

 
293,115

 
1,047

 
294,162

Other comprehensive loss

 

 
(13,713
)
 

 

 
(13,713
)
 

 
(13,713
)
Acquisition-related activity
7,103

 
2,209,202

 

 

 

 
2,216,305

 
13

 
2,216,318

Impact of CCP Spin-Off

 
(1,248,407
)
 

 

 

 
(1,248,407
)
 
(4,717
)
 
(1,253,124
)
Net change in noncontrolling interest

 

 

 

 

 

 
(11,131
)
 
(11,131
)
Dividends to common stockholders—$2.31 per share

 

 

 
(759,575
)
 

 
(759,575
)
 

 
(759,575
)
Issuance of common stock
1,457

 
416,361

 

 

 

 
417,818

 

 
417,818

Issuance of common stock for stock plans
22

 
5,877

 

 

 
4,489

 
10,388

 

 
10,388

Change in redeemable noncontrolling interest

 
(1,663
)
 

 

 

 
(1,663
)
 
814

 
(849
)
Adjust redeemable OP unitholder interests to current fair value

 
10,223

 

 

 

 
10,223

 

 
10,223

Purchase of OP units

 
1,719

 

 

 

 
1,719

 

 
1,719

Grant of restricted stock, net of forfeitures

 
10,694

 

 

 
(7,653
)
 
3,041

 

 
3,041

Balance at September 30, 2015
$
83,238

 
$
11,523,312

 
$
(592
)
 
$
(1,992,848
)
 
$
(3,675
)
 
$
9,609,435

 
$
60,239

 
$
9,669,674

See accompanying notes.

4


VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
For the Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
294,162

 
$
369,404

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amounts in discontinued operations)
736,870

 
587,176

Amortization of deferred revenue and lease intangibles, net
(19,312
)
 
(14,775
)
Other non-cash amortization
3,051

 
(616
)
Stock-based compensation
16,061

 
16,792

Straight-lining of rental income, net
(25,118
)
 
(29,644
)
Loss on extinguishment of debt, net
14,897

 
5,079

Gain on real estate dispositions (including amounts in discontinued operations)
(14,649
)
 
(17,726
)
Gain on real estate loan investments

 
(249
)
Gain on sale of marketable securities
(5,800
)
 

Income tax (benefit) expense
(30,717
)
 
4,420

Loss (income) from unconsolidated entities
1,197

 
(549
)
Other
23,826

 
13,736

Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in other assets
11,164

 
(3,306
)
Increase in accrued interest
6,338

 
14,835

Increase (decrease) in accounts payable and other liabilities
10,075

 
(24,605
)
Net cash provided by operating activities
1,022,045

 
919,972

Cash flows from investing activities:
 
 
 
Net investment in real estate property
(2,556,988
)
 
(1,184,036
)
Investment in loans receivable and other
(74,386
)
 
(66,436
)
Proceeds from real estate disposals
409,633

 
112,746

Proceeds from loans receivable
106,909

 
55,573

Purchase of marketable securities

 
(46,689
)
Proceeds from sale or maturity of marketable securities
76,800

 
21,689

Funds held in escrow for future development expenditures
4,003

 
2,602

Development project expenditures
(90,458
)
 
(71,375
)
Capital expenditures
(75,812
)
 
(56,235
)
Investment in unconsolidated operating entity
(26,282
)
 

Other
(27,984
)
 
(4,009
)
Net cash used in investing activities
(2,254,565
)
 
(1,236,170
)
Cash flows from financing activities:
 
 
 
Net change in borrowings under credit facility
(790,406
)
 
(153,684
)
Net cash impact of CCP Spin-Off
(128,749
)
 

Proceeds from debt
2,511,061

 
2,007,707

Proceeds from debt related to CCP Spin-Off
1,400,000

 

Repayment of debt
(1,329,070
)
 
(905,117
)
Purchase of noncontrolling interest
(3,819
)
 

Payment of deferred financing costs
(23,893
)
 
(14,946
)
Issuance of common stock, net
417,818

 

Cash distribution to common stockholders
(759,575
)
 
(640,414
)
Cash distribution to redeemable OP unitholders
(12,776
)
 
(4,214
)
Purchases of redeemable OP units
(33,188
)
 

Distributions to noncontrolling interest
(11,250
)
 
(6,760
)
Other
6,489

 
(551
)
Net cash provided by financing activities
1,242,642

 
282,021

Net increase (decrease) in cash and cash equivalents
10,122

 
(34,177
)
Effect of foreign currency translation on cash and cash equivalents
(239
)
 
3,956

Cash and cash equivalents at beginning of period
55,348

 
94,816

Cash and cash equivalents at end of period
$
65,231

 
$
64,595

See accompanying notes.

5



VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(In thousands)
 
For the Nine Months Ended September 30,
 
2015
 
2014
Supplemental schedule of non-cash activities:
 
 
 
Assets and liabilities assumed from acquisitions:
 
 
 
Real estate investments
$
2,558,239

 
$
353,995

Other assets acquired
20,221

 
3,683

Debt assumed
177,857

 
228,150

Other liabilities
57,937

 
19,441

Deferred income tax liability
50,836

 
110,087

Redeemable OP unitholder interests assumed

87,245

 

Equity issued
2,204,585

 

Non-cash impact of CCP Spin-Off
1,256,404

 

See accompanying notes.


6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—DESCRIPTION OF BUSINESS
Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”), an S&P 500 company, is a real estate investment trust (“REIT”) with a highly diversified portfolio of seniors housing and healthcare properties located throughout the United States, Canada and the United Kingdom. As of September 30, 2015, we owned approximately 1,300 properties (including properties classified as held for sale), consisting of seniors housing communities, medical office buildings (“MOBs”), skilled nursing and other facilities, and hospitals, and we had one property under development. Our company was originally founded in 1983 and is currently headquartered in Chicago, Illinois. As further discussed in “Note 5—Dispositions”, in August 2015 we completed the spin off of most of our post-acute/skilled nursing facility portfolio into an independent, publicly traded REIT named Care Capital Properties, Inc. (“CCP”) (the “CCP Spin-Off”). The historical results of operations of the CCP properties as well as the related assets and liabilities are presented as discontinued operations in the accompanying consolidated financial statements.
We primarily invest in seniors housing and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. As of September 30, 2015, we leased a total of 608 properties (excluding MOBs and properties classified as held for sale) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and we engaged independent operators, such as Atria Senior Living, Inc. (together with its subsidiaries, “Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage a total of 305 of our seniors housing communities for us pursuant to long-term management agreements. Our two largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”) and Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) leased from us 141 properties (excluding six properties included in investments in unconsolidated entities) and 78 properties, respectively, as of September 30, 2015.
Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary and our ownership interest in PMB Real Estate Services LLC (“PMBRES”), we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and unsecured loans and other investments relating to seniors housing and healthcare operators or properties.
NOTE 2—ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 13, 2015. Certain prior period amounts have been reclassified to conform to the current period presentation.
Principles of Consolidation
The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.
GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our

7


investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.
We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.
As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner(s). We assess limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner when an investor becomes the sole general partner, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We also apply this guidance to managing member interests in limited liability companies.
Redeemable OP Unitholder and Noncontrolling Interests
We own a majority interest in NHP/PMB L.P. (“NHP/PMB”), a limited partnership formed in 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC. We consolidate NHP/PMB, as our wholly owned subsidiary is the general partner and exercises control of the partnership. As of September 30, 2015, third party investors owned 2,812,318 Class A limited partnership units in NHP/PMB (“OP Units”), which represented 28.9% of the total units then outstanding, and we owned 6,917,009 Class B limited partnership units in NHP/PMB, representing the remaining 71.1%. At any time following the first anniversary of the date of their issuance, the OP Units may be redeemed at the election of the holder for cash or, at our option, 0.9051 shares of our common stock per unit, as adjusted from 0.7866 shares of common stock per unit in connection with the CCP Spin-Off, and subject to further adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the OP Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of OP Units.
On January 16, 2015, in connection with our acquisition of American Realty Capital Healthcare Trust, Inc. (“HCT”), each of the 7,057,271 issued and outstanding limited partnership units of American Realty Capital Healthcare Trust Operating Partnership, L.P. (subsequently renamed Ventas Realty Capital Healthcare Trust Operating Partnership, L.P. (“Ventas Realty OP”)), a limited partnership in which HCT was the sole general partner prior to the acquisition, was converted into a newly created class of limited partnership units (“Class C Units”) at the 0.1688 exchange ratio payable to HCT stockholders in the acquisition, net of any Class C Units withheld to pay taxes. We consolidate Ventas Realty OP, as our wholly owned subsidiary is the general partner and exercises control of the partnership. The Class C Units may be redeemed at the election of the holder for one share of our common stock per unit or, at our option, an equivalent amount in cash, subject to adjustment in certain circumstances. As of September 30, 2015, third party investors owned 672,984 Class C Units, which represented 2.3% of the total units then outstanding, and we owned 28,550,812 Class C Units and 176,374 OP units in Ventas Realty OP, representing the remaining 97.7%. In April 2015, third party investors redeemed 445,541 Class C Units for approximately $32.6 million. We are party by assumption to a registration rights agreement with the holders of the Class C Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of Class C Units.
As redemption rights are outside of our control, the redeemable OP unitholder interests are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP unitholder interests at the greater of cost or fair value. As of September 30, 2015 and December 31, 2014, the fair value of the redeemable OP unitholder interests was $188.5 million and $159.1 million, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Units or Class C Units. Our diluted earnings per share (“EPS”) includes the effect of any potential shares outstanding from redemption of the OP Units or Class C Units.
Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at September 30, 2015 and December 31, 2014. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interest’s share of net income or loss and distributions) or the redemption value. Our joint venture partners have certain redemption rights with respect to their noncontrolling interests in these joint ventures that are outside of our control, and the redeemable noncontrolling interests are classified outside of permanent equity on our Consolidated Balance Sheets. We recognize changes in the carrying value of redeemable noncontrolling interests through capital in excess of par value.

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Noncontrolling Interests
Excluding the redeemable noncontrolling interests described above, we present the portion of any equity that we do not own in entities that we control (and thus consolidate) as noncontrolling interests and classify those interests as a component of consolidated equity, separate from total Ventas stockholders’ equity, on our Consolidated Balance Sheets. For consolidated joint ventures with pro rata distribution allocations, net income or loss is allocated between the joint venture partners based on their respective stated ownership percentages. In other cases, net income or loss is allocated between the joint venture partners based on the hypothetical liquidation at book value method. We account for purchases or sales of equity interests that do not result in a change of control as equity transactions, through capital in excess of par value. In addition, we include net income attributable to the noncontrolling interests in net income in our Consolidated Statements of Income.
Business Combinations
We account for acquisitions using the acquisition method and record the cost of the businesses acquired among tangible and recognized intangible assets and liabilities based upon their estimated fair values as of the acquisition date. Recognized intangibles primarily include the value of in-place leases, acquired lease contracts, tenant and customer relationships, trade names/trademarks and goodwill. We do not amortize goodwill, which represents the excess of the purchase price paid over the fair value of the net assets of the acquired business and is included in other assets on our Consolidated Balance Sheets.
We estimate the fair value of buildings acquired on an as-if-vacant basis and depreciate the building value over the estimated remaining life of the building, generally not to exceed 35 years. We determine the fair value of other fixed assets, such as site improvements and furniture, fixtures and equipment, based upon the replacement cost and depreciate such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. We determine the value of land either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within our portfolio. We generally determine the value of construction in progress based upon the replacement cost. However, for certain acquired properties that are part of a ground-up development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development. During the remaining construction period, we capitalize interest expense until the development has reached substantial completion. Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion.
The fair value of acquired lease-related intangibles, if any, reflects: (i) the estimated value of any above and/or below market leases, determined by discounting the difference between the estimated market rent and in-place lease rent; and (ii) the estimated value of in-place leases related to the cost to obtain tenants, including leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant. We amortize any acquired lease-related intangibles to revenue or amortization expense over the remaining life of the associated lease plus any assumed bargain renewal periods. If a lease is terminated prior to its stated expiration or not renewed upon expiration, we recognize all unamortized amounts of lease-related intangibles associated with that lease in operations at that time.
We estimate the fair value of tenant or other customer relationships acquired, if any, by considering the nature and extent of existing business relationships with the tenant or customer, growth prospects for developing new business with the tenant or customer, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant, and we amortize that value over the expected life of the associated arrangements or leases, including the remaining terms of the related leases and any expected renewal periods.
In connection with a business combination, we may assume rights and obligations under certain lease agreements pursuant to which we become the lessee of a given property. We assume the lease classification previously determined by the prior lessee absent a modification in the assumed lease agreement. We assess assumed operating leases, including ground leases, to determine whether the lease terms are favorable or unfavorable to us given current market conditions on the acquisition date. To the extent the lease terms are favorable or unfavorable to us relative to market conditions on the acquisition date, we recognize an intangible asset or liability at fair value and amortize that asset or liability to interest or rental expense in our Consolidated Statements of Income over the applicable lease term. We include all lease-related intangible assets and liabilities within acquired lease intangibles and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.
We determine the fair value of loans receivable acquired in connection with a business combination by discounting the estimated future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings. We do not establish a valuation allowance at the acquisition date because the estimated future cash flows already reflect our judgment regarding their uncertainty. We recognize the difference between the acquisition date fair value and the total expected cash flows as interest income using an effective interest method over the life

9


of the applicable loan. Subsequent to the acquisition date, we evaluate changes regarding the uncertainty of future cash flows and the need for a valuation allowance, as appropriate.
We estimate the fair value of noncontrolling interests assumed consistent with the manner in which we value all of the underlying assets and liabilities.
We calculate the fair value of long-term debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate at which we would expect to incur a replacement instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.
Assets Held for Sale and Discontinued Operations
We sell properties from time to time for various reasons, including favorable market conditions or the exercise of purchase options by tenants. We classify certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell and are no longer depreciated. We report discontinued operations when the following criteria are met: (1) a component of an entity or group of components that has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results; or (2) an acquired business that is classified as held for sale on the acquisition date. Assets relating to the CCP Spin-Off were reported as discontinued operations once the transaction was completed. The results of operations for assets meeting the definition of discontinued operations are reflected in our Consolidated Statements of Income as discontinued operations for all periods presented. We allocate estimated interest expense to discontinued operations based on property values and our weighted average interest rate or the property’s actual mortgage interest.
Impairment of Long-Lived Assets
We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize any shortfall from carrying value as an impairment loss in the current period.
Fair Values of Financial Instruments
Fair value is a market-based measurement, not an entity-specific measurement, and we determine fair value based on the assumptions that we expect market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. Level two inputs consist of inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves. Level three inputs are unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. If the volume and level of market activity for an asset or liability has decreased significantly relative to the normal market activity for that asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that a transaction for an asset or liability is not orderly, little, if any, weight is placed on that transaction price as an indicator of fair value. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
We use the following methods and assumptions in estimating the fair value of our financial instruments.
Cash and cash equivalents - The carrying amount of unrestricted and restricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

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Loans receivable - We estimate the fair value of loans receivable using level two and level three inputs: we discount the future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings.
Marketable debt securities - We estimate the fair value of corporate bonds using level two inputs: we observe quoted prices for similar assets or liabilities in active markets that we have the ability to access. We estimate the fair value of certain government-sponsored pooled loan investments using level three inputs: we consider credit spreads, underlying asset performance and credit quality, default rates and any other applicable criteria.
Derivative instruments - With the assistance of a third party, we estimate the fair value of derivative instruments, including interest rate caps, interest rate swaps and foreign currency forward contracts, using level two inputs: for interest rate caps, we observe forward yield curves and other relevant information; for interest rate swaps, we observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates; and for foreign currency forward contracts, we estimate the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculate a present value of the net amount using a discount factor based on observable traded interest rates.
Senior notes payable and other debt - We estimate the fair value of senior notes payable and other debt using level two inputs: we discount the future cash flows using current interest rates at which we could obtain similar borrowings. For mortgage debt, we may estimate fair value using level three inputs.
Redeemable OP unitholder interests - We estimate the fair value of our redeemable OP unitholder interests using level one inputs: we base fair value on the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, shares of our common stock, subject to adjustment in certain circumstances.
Revenue Recognition
Triple-Net Leased Properties and MOB Operations
Certain of our triple-net leases and most of our MOB leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the applicable lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our Consolidated Balance Sheets. At September 30, 2015 and December 31, 2014, this cumulative excess totaled $210.6 million (net of allowances of $96.4 million) and $187.6 million (net of allowances of $83.5 million), respectively.
Certain of our leases provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term.
Senior Living Operations
We recognize resident fees and services, other than move-in fees, monthly as services are provided. We generally recognize move-in fees on a straight-line basis over the average resident stay. Our lease agreements with residents generally have terms of 12 to 18 months and are cancelable by the resident upon 30 days’ notice.
Other
We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectibility is reasonably assured. We apply the effective interest method on a loan-by-loan basis and recognize discounts and premiums as yield adjustments over the related loan term. We recognize interest income on an impaired loan to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loan, other receivables and all related accrued interest. When the balance of the loan, other receivables and all related accrued interest is equal to or less than our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide a reserve against an impaired loan to the extent our total investment in the loan exceeds our estimate of the fair value of the loan collateral.
We recognize income from rent, lease termination fees, development services, management advisory services, and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.
 

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Allowances
We assess the collectibility of our rent receivables, including straight-line rent receivables. We base our assessment of the collectibility of rent receivables (other than straight-line rent receivables) on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, if any, and current economic conditions. If our evaluation of these factors indicates it is probable that we will be unable to recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. We also base our assessment of the collectibility of straight-line rent receivables on several factors, including, among other things, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant and the type of property. If our evaluation of these factors indicates it is probable that we will be unable to receive the rent payments due in the future, we provide a reserve against the recognized straight-line rent receivable asset for the portion, up to its full value, that we estimate may not be recovered. If we change our assumptions or estimates regarding the collectibility of future rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized in the period we make such change in our assumptions or estimates.
Recently Issued or Adopted Accounting Standards
In April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which 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. The recognition and measurement guidance for debt issuance costs are not affected. Also in August 2015, the FASB issues ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line-of-Credit Arrangements (“ASU 2015-15”) which clarifies the SEC staff’s position not objecting to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing such costs, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted ASU 2015-03 and 2015-15 for the quarter ended September 30, 2015. There were deferred financing costs of $72.0 million and $60.3 million as of September 30, 2015 and December 31, 2014, respectively that are now classified within senior notes payable and other debt on our Consolidated Balance Sheets.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) to simplify the accounting for business combinations, specifically as it relates to measurement-period adjustments. Acquiring entities in a business combination must recognize measurement-period adjustments in the reporting period in which the adjustment amounts are determined. Also, ASU 2015-16 requires entities to present separately on the face of the income statement (or disclose in the notes to the financial statements) the portion of the amount recorded in the current period earnings, by line item, that would have 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 the Company beginning January 1, 2016 and is to be applied prospectively to measurement-period adjustments that occur after the effective date. We do not expect the adoption of this ASU to have a significant impact on our consolidated financial statements.
In 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue 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.” While ASU 2014-09 specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. In 2015, the FASB provided for a one-year deferral of the effective date for ASU 2014-09 which is now effective for us beginning January 1, 2018. We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements, as a substantial portion of our revenue consists of rental income from leasing arrangements, which are specifically excluded from ASU 2014-09.
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for us beginning January 1, 2016. We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.
NOTE 3—CONCENTRATION OF CREDIT RISK
As of September 30, 2015, Atria, Sunrise, Brookdale Senior Living and Kindred managed or operated approximately 22.8%, 11.8%, 8.5% and 2.1%, respectively, of our real estate investments based on gross book value (excluding properties classified as held for sale as of September 30, 2015). Seniors housing communities constituted approximately 65.1% of our real

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estate investments based on gross book value (excluding properties classified as held for sale as of September 30, 2015), while MOBs, skilled nursing and other facilities, and hospitals collectively comprised the remaining 34.9%. Our properties were located in 47 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of September 30, 2015, with properties in one state (California) accounting for more than 10% of our total revenues and total net operating income (“NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and medical office building services costs) for the three months then ended.
Triple-Net Leased Properties
For the three months ended September 30, 2015 and 2014, approximately 5.1% and 6.2%, respectively, of our total revenues and 8.9% and 11.2%, respectively, of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Brookdale Senior Living. For the same periods, approximately 5.6% and 5.7%, respectively, of our total revenues and 9.7% and 10.3%, respectively, of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Kindred. Each of our leases with Brookdale Senior Living and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of these leases has guaranty and cross-default provisions tied to other leases with the same tenant or its affiliates, as well as bundled lease renewals.
The properties we lease to Brookdale Senior Living and Kindred accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended September 30, 2015 and 2014. If either Brookdale Senior Living or Kindred becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline and our ability to service our indebtedness and to make distributions to our stockholders could be limited. We cannot assure you that Brookdale Senior Living and Kindred will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by Brookdale Senior Living or Kindred to do so could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Brookdale Senior Living and Kindred will elect to renew their respective leases with us upon expiration of the leases or that we will be able to reposition any non-renewed properties on a timely basis or on the same or better economic terms, if at all.
In December 2014, we entered into favorable agreements with Kindred to transition or sell the operations of nine licensed healthcare assets, make modifications to the master leases governing 34 leased assets, and reimburse us for certain deferred capital expenditures at skilled nursing facilities previously transferred to new operators. In January 2015, Kindred paid us $37 million in connection with these agreements, which is being amortized over the remaining lease term for the 34 assets governed by the modified master leases. We own or have the rights to all licenses and certificates of need at the nine properties to be transitioned or sold, and Kindred has extensive and detailed obligations to cooperate and ensure an orderly transition of the properties to another operator. As of September 30, 2015, three of the nine properties have been sold and three of the nine properties were disposed of as part of the CCP Spin-Off.
Senior Living Operations
As of September 30, 2015, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 269 of our seniors housing communities, for which we pay annual management fees pursuant to long-term management agreements.
Because our independent operators, including Atria and Sunrise, manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants. However, we rely on our managers’ 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 our managers to set appropriate resident fees and otherwise operate our seniors housing communities in compliance with the terms of our management agreements and all applicable laws and regulations. Although we have various rights as the property owner under our management agreements, including various rights to terminate and exercise remedies under the agreements as provided therein, Atria’s or Sunrise’s failure, inability or unwillingness to satisfy its respective obligations under those agreements, to efficiently and effectively manage our properties or to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. In addition, significant changes in Atria’s or Sunrise’s senior management or equity ownership or any adverse developments in their businesses and affairs or financial condition could have a Material Adverse Effect on us.

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Our 34% ownership interest in Atria entitles us to certain rights and minority protections, as well as the right to appoint two of five members on the Atria Board of Directors.
Brookdale Senior Living, Kindred, Atria and Sunrise Information
Each of Brookdale Senior Living and Kindred is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale Senior Living and Kindred contained or referred to in this Quarterly Report on Form 10-Q has been derived from SEC filings made by Brookdale Senior Living or Kindred, as the case may be, or other publicly available information, or was provided to us by Brookdale Senior Living or Kindred, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy. We are providing this data for informational purposes only, and you are encouraged to obtain Brookdale Senior Living’s and Kindred’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.
Neither Atria nor Sunrise is currently subject to the reporting requirements of the SEC. The information related to Atria and Sunrise contained or referred to within this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Atria or Sunrise, as the case may be, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.
NOTE 4—ACQUISITIONS OF REAL ESTATE PROPERTY
The following summarizes our acquisition and development activities during the nine months ended September 30, 2015 and the year ended December 31, 2014. We acquire and invest in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source.
2015 Acquisitions
HCT Acquisition
In January 2015, we acquired HCT in a stock and cash transaction, which added 152 properties to our portfolio. At the effective time of the merger, each share of HCT common stock outstanding (other than shares held by us, HCT or our respective subsidiaries, which shares were canceled) was converted into the right to receive either 0.1688 shares of our common stock (with cash paid in lieu of fractional shares) or $11.33 per share in cash, at the election of each HCT shareholder. Shares of HCT common stock for which a valid election was not made were converted into the stock consideration. We funded the transaction through the issuance of approximately 28.4 million shares of our common stock and 1.1 million limited partnership units that are redeemable for shares of our common stock and the payment of approximately $11 million in cash (excluding cash in lieu of fractional shares). In addition, we assumed $167 million of mortgage debt and repaid approximately $730 million of debt, net of HCT cash on hand. In August 2015, 20 of the properties that we acquired in the HCT acquisition were disposed of as part of the CCP Spin-Off.
Ardent Health Services Acquisition
On August 4, 2015, we completed our acquisition of Ardent Health Services, Inc. (“AHS”) and simultaneous separation and sale of the Ardent hospital operating company (“Ardent”) to a consortium composed of an entity controlled by Equity Group Investments, Ardent’s management team and us (collectively the “Ardent Transaction”). As of the acquisition date, we recorded the estimated fair value of our investment in owned hospital and other real estate of approximately $1.3 billion. At closing, we paid $26.3 million for our 9.9% interest in Ardent which represents our estimate of the acquisition date fair value of this interest. Upon closing, we entered into a long-term triple-net master lease with Ardent to operate the ten hospitals and other real estate we acquired.
Other 2015 Acquisitions
In 2015, we made other investments totaling approximately $514 million, including the acquisition of eleven triple-net
leased properties; one MOB; and 12 skilled nursing facilities (all of which were disposed of as part of the CCP Spin-Off).
Completed Developments
During 2015, we completed the development of one triple-net leased seniors housing community, representing $7.8 million of net real estate property on our Consolidated Balance Sheets as of September 30, 2015.

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Estimated Fair Value
We are accounting for our 2015 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Our initial accounting for acquisitions completed during the nine months ended September 30, 2015 remains subject to further adjustment. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:
 
Triple-Net Leased Properties
 
Senior Living Operations
 
MOB Operations
 
Total
 
(In thousands)
Land and improvements
$
190,566

 
$
70,713

 
$
171,650

 
$
432,929

Buildings and improvements
1,726,553

 
703,080

 
1,125,726

 
3,555,359

Acquired lease intangibles
169,362

 
83,867

 
178,165

 
431,394

Other assets
173,144

 
273,523

 
398,097

 
844,764

Total assets acquired
2,259,625

 
1,131,183

 
1,873,638

 
5,264,446

Notes payable and other debt

 
77,940

 
99,917

 
177,857

Other liabilities
43,841

 
43,412

 
48,789

 
136,042

Total liabilities assumed
43,841

 
121,352

 
148,706

 
313,899

Net assets acquired
2,215,784

 
1,009,831

 
1,724,932

 
4,950,547

Redeemable OP unitholder interests assumed
 
 
 
 
 
 
87,245

Cash acquired
 
 
 
 
 
 
54,778

Equity issued
 
 
 
 
 
 
2,216,355

Total cash used


 


 


 
$
2,592,169

For certain acquisitions, the determination of fair values of the assets acquired and liabilities assumed has changed and is subject to further adjustment from the amounts reported in ‘‘Note 4-Acquisitions of Real Estate Property’’ of the Notes to Consolidated Financial Statements included in Part I of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with the SEC on July 27, 2015, due primarily to reclassification adjustments for presentation and adjustments to our valuation assumptions. The changes to our valuation assumptions were based on more accurate information concerning the subject assets and liabilities. None of these changes had a material impact on our Consolidated Financial Statements.
Included in other assets above is $746.5 million of goodwill, which represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed as of the acquisition date. Goodwill has been allocated to our reportable business segments based on the respective fair value of the net assets acquired, as follows: triple-net leased properties - $133.5 million; senior living operations - $219.7 million; and MOB operations - $393.4 million.
Aggregate Revenue and NOI
For the nine months ended September 30, 2015, aggregate revenue and NOI derived from our 2015 real estate acquisitions during our period of ownership were $223.0 million and $132.3 million, respectively, excluding revenue and NOI for any assets contributed in the CCP Spin-Off.
Transaction Costs
Transaction costs are expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income. For the nine months ended September 30, 2015 and 2014, we expensed, as incurred, $96.9 million and $5.4 million, respectively, costs related to our completed 2015 transactions, $4.0 million and $0.8 million of which are reported within discontinued operations.

15


Unaudited Pro Forma
The following table illustrates the effect on net income and earnings per share if we had consummated the HCT acquisition and Ardent Transaction as of January 1, 2014 and excludes assets that were acquired in the HCT acquisition but subsequently disposed of as part of the CCP Spin-Off.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share amounts)
Revenues
$
837,203

 
$
801,333

 
$
2,519,122

 
$
2,333,926

Income from continuing operations attributable to common stockholders, including real estate dispositions
$
73,329

 
$
131,160

 
$
375,553

 
$
410,149

Earnings per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.22

 
$
0.41

 
$
1.14

 
$
1.27

Diluted:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.22

 
$
0.40

 
$
1.13

 
$
1.26

Weighted average shares used in computing earnings per common share:
 
 
 
 
 
 
 
Basic
332,491

 
322,445

 
329,440

 
322,380

Diluted
336,338

 
326,028

 
332,210

 
325,944

Costs related to the HCT acquisition and Ardent Transaction are not expected to have a continuing impact and, therefore, have been excluded from these pro forma results. The pro forma results also do not include the impact of any synergies that may be achieved in the HCT acquisition and Ardent Transaction, any reduction in our borrowing costs resulting from the acquisition or any strategies that management may consider in order to continue to efficiently manage our operations, nor do they give pro forma effect to any other acquisitions, dispositions or capital markets transactions that we completed during the periods presented. These pro forma results are not necessarily indicative of the operating results that would have been obtained had the HCT and Ardent acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.
2014 Acquisitions
Holiday Canada Acquisition
In August 2014, we acquired 29 seniors housing communities located in Canada from Holiday Retirement (the “Holiday Canada Acquisition”) for a purchase price of CAD 957.0 million. We also paid CAD 26.9 million in costs relating to the early repayment of debt at closing. We funded the Holiday Canada Acquisition initially through borrowings under a CAD 791.0 million unsecured term loan that we incurred in July 2014 (and subsequently repaid primarily through a private placement of senior notes in Canada) and the assumption of CAD 193.7 million of debt.
Other 2014 Acquisitions
During the year ended December 31, 2014, we also acquired three triple-net leased private hospitals (located in the United Kingdom), 26 triple-net leased seniors housing communities and four seniors housing communities that are being operated by independent third-party managers for aggregate consideration of approximately $812.0 million. We also paid $18.8 million in costs relating to the early repayment of debt at closing of the applicable transactions. In addition, we acquired a construction design, planning and consulting business to complement our MOB operations through the issuance of 148,241 shares of our common stock.
Completed Developments
During 2014, we completed the development of two MOBs and one seniors housing community, representing $41.2 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2014.

16


Estimated Fair Value
We are accounting for our 2014 acquisitions under the acquisition method in accordance with ASC 805 and have completed our initial accounting, which is subject to further adjustment. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed in our 2014 real estate acquisitions, which we determined using level two and level three inputs:
 
Triple-Net Leased Properties
 
Senior Living Operations
 
Total
 
(In thousands)
Land and improvements
$
45,586

 
$
100,281

 
$
145,867

Buildings and improvements
546,849

 
1,081,630

 
1,628,479

Acquired lease intangibles
28,883

 
36,452

 
65,335

Other assets
227

 
12,393

 
12,620

Total assets acquired
621,545

 
1,230,756

 
1,852,301

Notes payable and other debt
12,927

 
228,150

 
241,077

Other liabilities
8,609

 
124,960

 
133,569

Total liabilities assumed
21,536

 
353,110

 
374,646

Net assets acquired
600,009

 
877,646

 
1,477,655

Cash acquired
227

 
8,704

 
8,931

Total cash used
$
599,782

 
$
868,942

 
$
1,468,724

NOTE 5—DISPOSITIONS
CCP Spin-Off
On August 17, 2015, we completed the CCP Spin-Off. In connection with the CCP Spin-Off, we disposed of 355 high-quality triple-net leased skilled nursing facilities and other healthcare assets operated by private regional and local care providers. The CCP Spin-Off was effectuated through a distribution of the common shares of CCP to holders of our common stock as of the distribution record date, and qualified as a tax-free distribution to our stockholders. For every four shares of Ventas common stock held as of the distribution record date of August 10, 2015, Ventas stockholders received one CCP common share on August 17, 2015. On August 17, 2015, just prior to the effective time of the spin-off, CCP (as our then wholly owned subsidiary) received approximately $1.4 billion of proceeds from a recently completed term loan and revolving credit facility. CCP paid us a distribution of $1.3 billion from these proceeds. We used this distribution from CCP to pay down our existing debt ($1.1 billion) and to pay for a portion of our quarterly installment of dividends to our stockholders ($0.2 billion).
The historical results of operations of the CCP properties as well as the related assets and liabilities have been presented as discontinued operations in the consolidated statements of operations and comprehensive income. Discontinued operations also include separation costs incurred to complete the CCP Spin-Off of $40.3 million and $0.2 million for the nine months ended September 30, 2015 and 2014, respectively Separation costs for 2015 include $3.2 million of stock-based compensation expense representing the incremental fair value of unvested stock-based compensation awards as of the spin date. In addition, the assets and liabilities of CCP are presented separately from assets and liabilities from continuing operations in the accompanying consolidated balance sheets. The accompanying consolidated statements of cash flows include within operating, investing and financing cash flows those activities which related to our period of ownership of the CCP properties.

17


The following is a summary of the assets and liabilities of CCP at the CCP Spin-Off date (dollars in thousands):
 
August 17, 2015
 
December 31, 2014
 
(In thousands)
Assets:
 
 
 
Net real estate investments
$
2,588,255

 
$
2,274,310

Cash and cash equivalents
1,749

 
2,710

Goodwill
135,446

 
88,959

Assets held for sale
7,610

 
8,435

Other assets
15,089

 
16,596

Total assets
2,748,149

 
2,391,010

 
 
 
 
Liabilities:


 


Accounts payable and other liabilities
217,760

 
204,359

Liabilities related to assets held for sale
985

 
1,288

Total liabilities
218,745

 
205,647

 


 


Net assets:
$
2,529,404

 
$
2,185,363

 


 


Summarized financial information for CCP discontinued operations for the three and nine months ended September 30, 2015 and 2014, respectively is as follows (dollars in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
Rental income
$
40,642

 
$
73,332

 
$
196,848

 
$
224,668

Income from loans and investments
449

 
857

 
2,148

 
2,533

Interest and other income

 
1

 
63

 
2

 
41,091

 
74,190

 
199,059

 
227,203

Expenses:
 
 
 
 
 
 
 
Interest
12,384

 
21,859

 
61,613

 
65,855

Depreciation and amortization
13,878

 
28,230

 
79,478

 
78,520

Property-level operating expenses

 
(1
)
 

 

General, administrative and professional fees
2

 
2

 
9

 
7

Merger-related expenses and deal costs
37,191

 
562

 
44,070

 
1,163

Other
162

 
5,816

 
1,332

 
7,252

 
63,617

 
56,468

 
186,502

 
152,797

(Loss) income before real estate dispositions and noncontrolling interest
(22,526
)
 
17,722

 
12,557

 
74,406

Gain (loss) on real estate dispositions

 

 

 

Net (loss) income from discontinued operations
(22,526
)
 
17,722

 
12,557

 
74,406

Net income attributable to noncontrolling interest
9

 
47

 
120

 
137

Net (loss) income from discontinued operations attributable to common stockholders
$
(22,535
)
 
$
17,675

 
$
12,437

 
$
74,269


Capital and development project expenditures relating to CCP for the three months ended September 30, 2015 and 2014 were $7.0 million and 3.9 million, respectively. Capital and development project expenditures relating to CCP for the nine

18


months ended September 30, 2015 and 2014 were $21.8 million and $10.1 million, respectively. Other than capital and development project expenditures there were no other significant non-cash operating or investing activities relating CCP.
We and CCP entered into a transition services agreement prior to the CCP Spin-Off pursuant to which we and our subsidiaries provide to CCP, on an interim, transitional basis, various services. The services provided include information technology, accounting and tax services. The overall fee charged by us for such services (the "Service Fee") is $2.5 million for one year. For the three and nine months ended September 30, 2015, we recognized income of $0.3 million relating to the Service Fee, which is payable in four quarterly installments. The transition services agreement will terminate on the expiration of the term of the last service provided under the agreement, which will be on or prior to August 31, 2016.
Discontinued Operations - Other than CCP Spin-Off
In addition to the amounts reported within discontinued operations relating to the CCP Spin-Off, we reported net income from discontinued operations attributable to common stockholders of $0.2 million and $1.0 million for the three and nine months ended September 30, 2015, respectively. In addition to the amounts reported within discontinued operations relating to the CCP Spin-Off, we reported net income from discontinued operations attributable to common stockholders of $0.5 million and $4.8 million within discontinued operations for the three months and nine months ended September 30, 2014, respectively.
As of September 30, 2015, all properties whose results are presented within discontinued operations have been sold.
2015 Activity
During the nine months ended September 30, 2015, we sold 32 triple-net leased properties and 25 MOBs for aggregate consideration of $436.0 million, including lease termination fees of $6.0 million (included within triple-net leased rental income in our Consolidated Statements of Income). We recognized a gain on the sales of these assets of $32.8 million (net of taxes), of which $18.1 million is being deferred due to an unsecured loan we made to the buyer in connection with the sale of certain assets. The gain will be deferred and subsequently recognized into income as principal payments are made on the loan over its five-year term.
In October 2015 we sold five triple-net leased properties for $78.4 million, to an existing tenant that had exercised their purchase option. In connection with this sale we provided the tenant with a $78.4 million secured loan, which is also guaranteed by the tenant. We plan to record an estimated gain on the sale of these assets of $9.4 million, which will be deferred due to the purchase financing. The gain will be deferred and subsequently recognized into income as principal payments are made on the loan over its six-year term.
2014 Activity
During the nine months ended September 30, 2014, we sold fifteen triple-net leased properties and four MOBs for aggregate consideration of $112.7 million and recognized a net gain on the sales of these assets of $19.9 million, of which $1.5 million is reported within discontinued operations in our Consolidated Statements of Income.
Assets Held for Sale
The table below summarizes our real estate assets classified as held for sale as of September 30, 2015 and December 31, 2014, including the amounts reported on our Consolidated Balance Sheets.
 
 
September 30, 2015
 
December 31, 2014
 
 
Number of Properties Held for Sale
 
Assets Held for Sale
 
Liabilities Held for Sale
 
Number of Properties Held for Sale (1)
 
Assets Held for Sale
 
Liabilities Held for Sale
 
 
(Dollars in thousands)
Triple-net leased properties (2)
 
8

 
$
80,178

 
$
12,265

 
333

 
$
2,410,840

 
$
205,931

MOB operations
 
10

 
88,753

 
53,200

 
34

 
163,334

 
48,749

Total
 
18

 
$
168,931

 
$
65,465

 
367

 
$
2,574,174

 
$
254,680

 
 
 
 
 
(1)
Two MOBs previously reported as held for sale (and discontinued operations) were classified as held and used (and part of continuing operations) as of September 30, 2015.
(2)
December 31, 2014 includes 323 properties disposed of as part of the CCP Spin-Off. Also included are loans, goodwill and other assets and liabilities contributed to CCP.

19


Real Estate Impairment
We recognized impairments of $4.1 million and $8.8 million for the three months ended September 30, 2015 and 2014, respectively, and $31.3 million and $17.2 million for the nine months ended September 30, 2015 and 2014, respectively, which are recorded primarily as a component of depreciation and amortization. Of these impairments, $0 and $4.3 million for the three months ended September 30, 2015 and 2014, respectively, and $8.9 million and $10.3 million for the nine months ended September 30, 2015 and 2014, were reported in discontinued operations in our Consolidated Statements of Income.
NOTE 6—LOANS RECEIVABLE AND INVESTMENTS
As of September 30, 2015 and December 31, 2014, we had $799.9 million and $896.5 million, respectively, of net loans receivable and investments relating to seniors housing and healthcare operators or properties. The following is a summary of our net loans receivable and investments as of September 30, 2015 and December 31, 2014, including amortized cost, fair value and unrealized gains (losses) on available-for-sale investments:
 
 
September 30, 2015
 
 
Carrying Amount
 
Amortized Cost
 
Fair Value
 
Unrealized Gain (Loss)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Secured mortgage loans and other
 
$
703,003

 
$
703,003

 
$
709,527

 
$

Government-sponsored pooled loan investments
 
63,704

 
61,921

 
63,704

 
1,783

Total investments reported as Secured loans receivable and investments, net
 
766,707

 
764,924

 
773,231

 
1,783

 
 
 
 
 
 
 
 
 
Unsecured loans receivable
 
33,210

 
33,210

 
34,421

 

Total investments reported as Other assets
 
33,210

 
33,210

 
34,421

 

Total net loans receivable and investments
 
$
799,917

 
$
798,134

 
$
807,652

 
$
1,783

 
 
December 31, 2014
 
 
Carrying Amount
 
Amortized Cost
 
Fair Value
 
Unrealized Gain (Loss)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Secured mortgage loans and other
 
$
739,766

 
$
739,766

 
$
748,842

 
$

Government-sponsored pooled loan investments
 
63,115

 
61,377

 
63,115

 
1,738

Total investments reported as Secured loans receivable and investments, net
 
802,881

 
801,143

 
811,957

 
1,738

 
 
 
 
 
 
 
 
 
Unsecured loans receivable
 
17,620

 
17,620

 
19,058

 

Marketable securities
 
76,046

 
71,000

 
76,046

 
5,046

Total investments reported as Other assets
 
93,666

 
88,620

 
95,104

 
5,046

Total net loans receivable and investments
 
$
896,547

 
$
889,763

 
$
907,061

 
$
6,784

2015 Activity

In June 2015 we sold our $71.0 million investment in senior unsecured corporate bonds for $76.8 million. We recognized a gain of $5.8 million that is included within income from loans and investments in our Consolidated Statements of Income for the nine months ended September 30, 2015. This gain includes $5.0 million that was previously unrealized within accumulated other comprehensive income on our Consolidated Balance Sheets as of December 31, 2014.

During the nine months ended September 30, 2015, we received aggregate proceeds of $97.0 million in final repayment of three secured and one unsecured loans receivable. We recognized gains aggregating $1.9 million on the repayment of these loans receivable that are recorded in income from loans and investments in our Consolidated Statements of Income for the nine months ended September 30, 2015.


20


We disposed of two secured and seven unsecured loans receivable as part of the CCP Spin-Off having carrying amounts of $26.9 million and $4.2 million, respectively, as of the CCP Spin-Off date and carrying amounts of $26.9 million and $4.3 million, respectively, as of December 31, 2014. These loans are reported as assets held for sale on our Consolidated Balance Sheets as of December 31, 2014.

2014 Activity

During the year ended December 31, 2014, we made a $425.0 million secured mezzanine loan investment that has a blended annual interest rate of 8.1% and has contractual maturities ranging between 2016 and 2019, and we purchased $71.0 million principal amount of senior unsecured corporate bonds, a $38.7 million interest in a government-sponsored pooled loan investment, and $21.7 million of marketable equity securities. During the year ended December 31, 2014, we sold all of our marketable equity securities for $22.3 million and recognized a gain of $0.6 million. Our investments in marketable debt securities and government-sponsored pooled loans are classified as available-for-sale, with contractual maturity dates in 2022 and 2023.

During the year ended December 31, 2014, we received aggregate proceeds of $55.9 million in final repayment of three secured and two unsecured loans receivable. We recognized aggregate gains aggregating $5.2 million on the repayment of these loans receivable that are recorded in income from loans and investments in our Consolidated Statements of Income for the year ended December 31, 2014.
NOTE 7—INVESTMENTS IN UNCONSOLIDATED ENTITIES
We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital. At September 30, 2015 and December 31, 2014, we had ownership interests (ranging from 5% to 25%) in joint ventures that owned 51 properties which is reported as Investments in unconsolidated real estate entities on our Consolidated Balance Sheets. Our ownership interests in operating entities, such as Atria and Ardent, are currently reported within Other assets on our Consolidated Balance Sheets. We account for our interests in real estate joint ventures, as well as our 34% interest in Atria and 9.9% interest in Ardent, under the equity method of accounting.
With the exception of our interests in Atria and Ardent, we serve as the managing member of each unconsolidated entity and provide various services in exchange for fees and reimbursements. Total management fees earned in connection with these entities were $1.7 million and $2.0 million for the three months ended September 30, 2015 and 2014, respectively, and $5.4 million and $6.2 million for the nine months ended September 30, 2015 and 2014, respectively.

21


NOTE 8—INTANGIBLES
The following is a summary of our intangibles as of September 30, 2015 and December 31, 2014:
 
September 30, 2015
 
December 31, 2014
 
Balance
 
Remaining
Weighted Average
Amortization
Period in Years
 
Balance
 
Remaining
Weighted Average
Amortization
Period in Years
 
(Dollars in thousands)
Intangible assets:
 
 
 
 
 
 
 
Above market lease intangibles
$
154,944

 
7.1
 
$
150,474

 
6.8
In-place and other lease intangibles
1,189,764

 
20.4
 
801,776

 
24.4
Goodwill
1,052,321

 
 N/A
 
363,971

 
 N/A
Other intangibles
35,932

 
8.3
 
36,454

 
7.9
Accumulated amortization
(615,599
)
 
 N/A
 
(514,133
)
 
 N/A
Net intangible assets
$
1,817,362

 
18.8
 
$
838,542

 
20.9
Intangible liabilities:
 
 
 
 
 
 
 
Below market lease intangibles
$
256,081

 
14.2
 
$
229,495

 
14.1
Other lease intangibles
34,160

 
27.8
 
32,103

 
26.1
Accumulated amortization
(108,151
)
 
 N/A
 
(97,371
)
 
 N/A
Purchase option intangibles
3,568

 
 N/A
 
13,549

 
 N/A
Net intangible liabilities
$
185,658

 
15.3
 
$
177,776

 
15.1
 
 
 
 
 
N/A—Not Applicable.
Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets. For the nine months ended September 30, 2015 and 2014, our net amortization expense related to these intangibles was $106.3 million and $53.8 million, respectively. The estimated net amortization expense related to these intangibles for each of the next five years is as follows: 2015—$35.7 million; 2016—$97.6 million; 2017—$51.4 million; 2018—$42.3 million; and 2019—$36.3 million.
NOTE 9—OTHER ASSETS
The following is a summary of our other assets as of September 30, 2015 and December 31, 2014:
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Straight-line rent receivables, net
$
210,644

 
$
187,572

Unsecured loans receivable and investments, net
33,210

 
17,620

Other intangibles, net
14,598

 
19,122

Marketable securities

 
76,046

Other
160,050

 
151,282

Total other assets
$
418,502

 
$
451,642


22


NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT
The following is a summary of our senior notes payable and other debt as of September 30, 2015 and December 31, 2014:
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
Unsecured revolving credit facility (1)
$
114,052

 
$
919,099

3.125% Senior Notes due 2015

 
400,000

6% Senior Notes due 2015

 
234,420

1.55% Senior Notes due 2016
550,000

 
550,000

1.250% Senior Notes due 2017
300,000

 
300,000

2.00% Senior Notes due 2018
700,000

 
700,000

Unsecured term loan due 2018 (3)
200,000

 
200,000

Unsecured term loan due 2019 (3)
472,036

 
790,634

4.00% Senior Notes due 2019
600,000

 
600,000

3.00% Senior Notes, Series A due 2019 (2)
300,482

 
344,204

2.700% Senior Notes due 2020
500,000

 
500,000

Unsecured term loan due 2020
900,000

 

4.750% Senior Notes due 2021
700,000

 
700,000

4.25% Senior Notes due 2022
600,000

 
600,000

3.25% Senior Notes due 2022
500,000

 
500,000

3.300% Senior Notes due 2022 (2)
187,800

 

3.750% Senior Notes due 2024
400,000

 
400,000

4.125% Senior Notes, Series B due 2024 (2)
187,800

 
215,128

3.500% Senior Notes due 2025
600,000

 

4.125% Senior Notes due 2026
500,000

 

6.90% Senior Notes due 2037
52,400

 
52,400

6.59% Senior Notes due 2038
22,973

 
22,973

5.45% Senior Notes due 2043
258,750

 
258,750

5.70% Senior Notes due 2043
300,000

 
300,000

4.375% Senior Notes due 2045
300,000

 

Mortgage loans and other (4)
2,087,414

 
2,284,763

Total
11,333,707

 
10,872,371

Deferred financing costs, net
(71,978
)
 
(60,328
)
Unamortized fair value adjustment
36,408

 
41,853

Unamortized discounts
(29,577
)
 
(26,132
)
Senior notes payable and other debt
$
11,268,560

 
$
10,827,764

 
 
 
 
 
(1)
$17.1 million and $164.1 million of aggregate borrowings were in the form of Canadian dollars as of September 30, 2015 and December 31, 2014, respectively.
(2)
These borrowings are in the form of Canadian dollars.
(3)
These amounts represent in aggregate the $672 million of unsecured term loan borrowings under our unsecured credit facility, of which $93.4 million included in the 2019 tranche is in the form of Canadian dollars.
(4)
2015 excludes debt related to real estate assets classified as held for sale as of September 30, 2015. The total mortgage debt for these properties as of September 30, 2015 was $48.3 million and is included in accounts payable and other liabilities on our Consolidated Balance Sheet. 2014 excludes debt related to real estate assets classified as held for sale as of December 31, 2014. The total mortgage debt for these properties as of December 31, 2014 was $43.5 million and was included in liabilities related to assets held for sale on our Consolidated Balance Sheet.


23


As of September 30, 2015, our indebtedness had the following maturities:
 
Principal Amount
Due at Maturity
 
Unsecured
Revolving Credit
Facility (1)
 
Scheduled Periodic
Amortization
 
Total Maturities
 
(In thousands)
2015
$
9,057

 
$

 
$
9,052

 
$
18,109

2016
615,077

 

 
33,366

 
648,443

2017
822,764

 

 
29,493

 
852,257

2018
1,101,879

 
114,052

 
23,503

 
1,239,434

2019
1,920,978

 

 
15,901

 
1,936,879

Thereafter (2)
6,501,581

 

 
137,004

 
6,638,585

Total maturities
$
10,971,336

 
$
114,052

 
$
248,319

 
$
11,333,707

 
 
 
 
 
(1)
As of September 30, 2015, we had $65.2 million of unrestricted cash and cash equivalents, for $48.8 million of net borrowings outstanding under our unsecured revolving credit facility.
(2)
Includes $52.4 million aggregate principal amount of our 6.90% senior notes due 2037 that is subject to repurchase, at the option of the holders, on October 1 in each of 2017 and 2027, and $23.0 million aggregate principal amount of 6.59% senior notes due 2038 that is subject to repurchase, at the option of the holders, on July 7 in each of 2018, 2023 and 2028.
Unsecured Revolving Credit Facility and Unsecured Term Loans
Our unsecured credit facility is comprised of a $2.0 billion revolving credit facility priced at LIBOR plus 1.0% as of September 30, 2015, and a $200.0 million four-year term loan and an $800.0 million five-year term loan, each priced at LIBOR plus 1.05% as of September 30, 2015. The revolving credit facility matures in January 2018, but may be extended, at our option subject to the satisfaction of certain conditions, for an additional period of one year. The $200.0 million and $800.0 million term loans mature in January 2018 and January 2019, respectively. The unsecured credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.5 billion.
In August 2015, we completed a $900 million five year term loan having a variable interest rate of LIBOR plus 97.5 basis points. The term loan matures in 2020.
Also in August 2015, we repaid $305.0 million of our unsecured term loan due 2019 and recognized a loss on extinguishment of debt of $1.6 million representing a write-off of the then unamortized deferred financing fees.