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EX-12.1 - STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES - VENTAS INCvtr-ex121_2016930.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - VENTAS INCvtr-ex322_2016930.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - VENTAS INCvtr-ex321_2016930.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - VENTAS INCvtr-ex312_2016930.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - VENTAS INCvtr-ex311_2016930.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, 2016
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 26, 2016:
Common Stock, $0.25 par value
 
354,109,643



VENTAS, INC.
FORM 10-Q
INDEX

 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015
 
 
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
 
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
 
 
Consolidated Statements of Equity for the Nine Months Ended September 30, 2016 and the Year Ended December 31, 2015
 
 
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
VENTAS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Real estate investments:
 
 
 
Land and improvements
$
2,089,329

 
$
2,056,428

Buildings and improvements
21,551,049

 
20,309,599

Construction in progress
192,848

 
92,005

Acquired lease intangibles
1,522,708

 
1,344,422

 
25,355,934


23,802,454

Accumulated depreciation and amortization
(4,754,532
)
 
(4,177,234
)
Net real estate property
20,601,402

 
19,625,220

Secured loans receivable and investments, net
821,663

 
857,112

Investments in unconsolidated real estate entities
97,814

 
95,707

Net real estate investments
21,520,879

 
20,578,039

Cash and cash equivalents
89,279

 
53,023

Escrow deposits and restricted cash
89,521

 
77,896

Goodwill
1,043,075

 
1,047,497

Assets held for sale
195,252

 
93,060

Other assets
488,258

 
412,403

Total assets
$
23,426,264

 
$
22,261,918

Liabilities and equity
 
 
 
Liabilities:
 
 
 
Senior notes payable and other debt
$
11,252,327

 
$
11,206,996

Accrued interest
70,790

 
80,864

Accounts payable and other liabilities
930,103

 
779,380

Liabilities related to assets held for sale
77,608

 
34,340

Deferred income taxes
315,713

 
338,382

Total liabilities
12,646,541

 
12,439,962

Redeemable OP unitholder and noncontrolling interests
209,278

 
196,529

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, 353,793 and 334,386 shares issued at September 30, 2016 and December 31, 2015, respectively
88,431

 
83,579

Capital in excess of par value
12,870,566

 
11,602,838

Accumulated other comprehensive loss
(49,614
)
 
(7,565
)
Retained earnings (deficit)
(2,420,766
)
 
(2,111,958
)
Treasury stock, 1 and 44 shares at September 30, 2016 and December 31, 2015, respectively
(78
)
 
(2,567
)
Total Ventas stockholders’ equity
10,488,539

 
9,564,327

Noncontrolling interest
81,906

 
61,100

Total equity
10,570,445

 
9,625,427

Total liabilities and equity
$
23,426,264

 
$
22,261,918

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,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Rental income:
 
 
 
 
 
 
 
Triple-net leased
$
210,424

 
$
201,028

 
$
635,030

 
$
571,591

Office
158,273

 
142,755

 
446,496

 
420,287

 
368,697

 
343,783

 
1,081,526

 
991,878

Resident fees and services
461,974

 
454,825

 
1,390,387

 
1,356,384

Office building and other services revenue
4,317

 
10,000

 
17,006

 
29,951

Income from loans and investments
31,566

 
18,924

 
78,098

 
66,192

Interest and other income
562

 
74

 
792

 
719

Total revenues
867,116

 
827,606

 
2,567,809

 
2,445,124

Expenses:
 
 
 
 
 
 
 
Interest
105,063

 
97,135

 
312,001

 
263,422

Depreciation and amortization
208,387

 
226,332

 
666,735

 
657,262

Property-level operating expenses:
 
 
 
 
 
 
 
Senior living
312,145

 
304,540

 
932,675

 
902,154

Office
48,972

 
43,305

 
136,619

 
129,152

 
361,117

 
347,845

 
1,069,294

 
1,031,306

Office building services costs
974

 
6,416

 
6,277

 
19,098

General, administrative and professional fees
31,567

 
32,114

 
95,387

 
100,399

Loss on extinguishment of debt, net
383

 
15,331

 
3,165

 
14,897

Merger-related expenses and deal costs
16,217

 
62,145

 
25,073

 
105,023

Other
2,430

 
4,795

 
8,901

 
13,948

Total expenses
726,138

 
792,113

 
2,186,833

 
2,205,355

Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest
140,978

 
35,493

 
380,976

 
239,769

Income (loss) from unconsolidated entities
931

 
(955
)
 
2,151

 
(1,197
)
Income tax benefit
8,537

 
10,697

 
28,507

 
27,736

Income from continuing operations
150,446

 
45,235

 
411,634

 
266,308

Discontinued operations
(118
)
 
(22,383
)
 
(755
)
 
13,434

(Loss) gain on real estate dispositions
(144
)
 
265

 
31,779

 
14,420

Net income
150,184

 
23,117

 
442,658

 
294,162

Net income attributable to noncontrolling interest
732

 
265

 
1,064

 
1,047

Net income attributable to common stockholders
$
149,452

 
$
22,852

 
$
441,594

 
$
293,115

Earnings per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.43

 
$
0.14

 
$
1.29

 
$
0.85

Discontinued operations
(0.00
)
 
(0.07
)
 
(0.00
)
 
0.04

Net income attributable to common stockholders
$
0.43

 
$
0.07

 
$
1.29

 
$
0.89

Diluted:
 
 
 
 
 
 
 
Income from continuing operations attributable to common stockholders, including real estate dispositions
$
0.42

 
$
0.14

 
$
1.28

 
$
0.84

Discontinued operations
(0.00
)
 
(0.07
)
 
(0.00
)
 
0.04

Net income attributable to common stockholders
$
0.42

 
$
0.07

 
$
1.28

 
$
0.88

Weighted average shares used in computing earnings per common share:
 
 
 
 
 
 
 
Basic
350,274

 
332,491

 
341,610

 
329,440

Diluted
354,186

 
336,338

 
345,352

 
333,210

Dividends declared per common share
$
0.73

 
$
0.73

 
$
2.19

 
$
2.31

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,
 
2016
 
2015
 
2016
 
2015
Net income
$
150,184

 
$
23,117

 
$
442,658

 
$
294,162

Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation
(6,421
)
 
(11,239
)
 
(39,804
)
 
(7,718
)
Change in unrealized gain on marketable securities
(92
)
 

 
158

 
(5,046
)
Other
1,094

 
467

 
(2,403
)
 
(949
)
Total other comprehensive loss
(5,419
)
 
(10,772
)
 
(42,049
)
 
(13,713
)
Comprehensive income
144,765

 
12,345

 
400,609

 
280,449

Comprehensive income attributable to noncontrolling interest
732

 
265

 
1,064

 
1,047

Comprehensive income attributable to common stockholders
$
144,033

 
$
12,080

 
$
399,545

 
$
279,402

   
See accompanying notes.

3


VENTAS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Nine Months Ended September 30, 2016 and the Year Ended December 31, 2015
(Unaudited)
(In thousands, except per share amounts)
 
Common
Stock Par
Value
 
Capital in
Excess of
Par Value
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Deficit)
 
Treasury
Stock
 
Total Ventas
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total Equity
Balance at January 1, 2015
$
74,656

 
$
10,119,306

 
$
13,121

 
$
(1,526,388
)
 
$
(511
)
 
$
8,680,184

 
$
74,213

 
$
8,754,397

Net income

 

 

 
417,843

 

 
417,843

 
1,379

 
419,222

Other comprehensive loss

 

 
(20,686
)
 

 

 
(20,686
)
 

 
(20,686
)
Acquisition-related activity
7,103

 
2,209,202

 

 

 

 
2,216,305

 
853

 
2,217,158

Impact of CCP Spin-Off

 
(1,247,356
)
 

 

 

 
(1,247,356
)
 
(4,717
)
 
(1,252,073
)
Net change in noncontrolling interest

 

 

 

 

 

 
(12,530
)
 
(12,530
)
Dividends to common stockholders—$3.04 per share

 

 

 
(1,003,413
)
 

 
(1,003,413
)
 

 
(1,003,413
)
Issuance of common stock
1,797

 
489,227

 

 

 

 
491,024

 

 
491,024

Issuance of common stock for stock plans
23

 
6,068

 

 

 
5,945

 
12,036

 

 
12,036

Change in redeemable noncontrolling interest

 
(374
)
 

 

 

 
(374
)
 
1,902

 
1,528

Adjust redeemable OP unitholder interests to current fair value

 
7,831

 

 

 

 
7,831

 

 
7,831

Purchase of OP units

 
1,719

 

 

 

 
1,719

 

 
1,719

Grant of restricted stock, net of forfeitures

 
17,215

 

 

 
(8,001
)
 
9,214

 

 
9,214

Balance at December 31, 2015
83,579

 
11,602,838

 
(7,565
)
 
(2,111,958
)
 
(2,567
)
 
9,564,327

 
61,100

 
9,625,427

Net income

 

 

 
441,594

 

 
441,594

 
1,064

 
442,658

Other comprehensive loss

 

 
(42,049
)
 

 

 
(42,049
)
 

 
(42,049
)
Impact of CCP Spin-Off

 
523

 

 

 

 
523

 

 
523

Net change in noncontrolling interest

 
(1,173
)
 

 

 

 
(1,173
)
 
19,310

 
18,137

Dividends to common stockholders—$2.19 per share

 

 

 
(750,402
)
 

 
(750,402
)
 

 
(750,402
)
Issuance of common stock
4,642

 
1,261,043

 

 

 
17

 
1,265,702

 

 
1,265,702

Issuance of common stock for stock plans
95

 
24,081

 

 

 
2,424

 
26,600

 

 
26,600

Change in redeemable noncontrolling interest

 
(615
)
 

 

 

 
(615
)
 
432

 
(183
)
Adjust redeemable OP unitholder interests to current fair value

 
(41,577
)
 

 

 

 
(41,577
)
 

 
(41,577
)
Purchase of OP units
88

 
21,415

 

 

 
1,020

 
22,523

 

 
22,523

Grant of restricted stock, net of forfeitures
27

 
4,031

 

 

 
(972
)
 
3,086

 

 
3,086

Balance at September 30, 2016
$
88,431

 
$
12,870,566

 
$
(49,614
)
 
$
(2,420,766
)
 
$
(78
)
 
$
10,488,539

 
$
81,906

 
$
10,570,445

See accompanying notes.

4


VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
For the Nine Months Ended September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
442,658

 
$
294,162

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amounts in discontinued operations)
666,735

 
736,870

Amortization of deferred revenue and lease intangibles, net
(15,307
)
 
(19,312
)
Other non-cash amortization
7,174

 
3,051

Stock-based compensation
15,885

 
16,061

Straight-lining of rental income, net
(21,386
)
 
(25,118
)
Loss on extinguishment of debt, net
3,165

 
14,897

Gain on real estate dispositions (including amounts in discontinued operations)
(31,779
)
 
(14,649
)
Gain on real estate loan investments
(2,271
)
 

Gain on sale of marketable debt securities

 
(5,800
)
Income tax benefit
(30,832
)
 
(30,717
)
(Income) loss from unconsolidated entities
(2,151
)
 
1,197

Distributions from unconsolidated entities
5,574

 
20,550

Other
(1,075
)
 
3,276

Changes in operating assets and liabilities:
 
 
 
Decrease in other assets
1,753

 
11,164

(Decrease) increase in accrued interest
(10,053
)
 
6,338

(Decrease) increase in accounts payable and other liabilities
(26,820
)
 
10,075

Net cash provided by operating activities
1,001,270

 
1,022,045

Cash flows from investing activities:
 
 
 
Net investment in real estate property
(1,421,592
)
 
(2,556,988
)
Investment in loans receivable and other
(154,949
)
 
(74,386
)
Proceeds from real estate disposals
63,561

 
409,633

Proceeds from loans receivable
194,063

 
106,909

Proceeds from sale or maturity of marketable securities

 
76,800

Funds held in escrow for future development expenditures

 
4,003

Development project expenditures
(94,398
)
 
(90,458
)
Capital expenditures
(75,296
)
 
(75,812
)
Investment in unconsolidated operating entity

 
(26,282
)
Other
(6,175
)
 
(27,984
)
Net cash used in investing activities
(1,494,786
)
 
(2,254,565
)
Cash flows from financing activities:
 
 
 
Net change in borrowings under credit facility
46,728

 
(790,406
)
Net cash impact of CCP Spin-Off

 
(128,749
)
Proceeds from debt
876,617

 
2,511,061

Proceeds from debt related to CCP Spin-Off

 
1,400,000

Repayment of debt
(916,505
)
 
(1,329,070
)
Purchase of noncontrolling interest
(1,604
)
 
(3,819
)
Payment of deferred financing costs
(6,147
)
 
(23,893
)
Issuance of common stock, net
1,265,702

 
417,818

Cash distribution to common stockholders
(750,402
)
 
(759,575
)
Cash distribution to redeemable OP unitholders
(6,486
)
 
(12,776
)
Purchases of redeemable OP units

 
(33,188
)
Contributions from noncontrolling interest
5,926

 

Distributions to noncontrolling interest
(5,121
)
 
(11,250
)
Other
21,507

 
6,489

Net cash provided by financing activities
530,215

 
1,242,642

Net increase in cash and cash equivalents
36,699

 
10,122

Effect of foreign currency translation on cash and cash equivalents
(443
)
 
(239
)
Cash and cash equivalents at beginning of period
53,023

 
55,348

Cash and cash equivalents at end of period
$
89,279

 
$
65,231

See accompanying notes.

5



VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(In thousands)
 
For the Nine Months Ended September 30,
 
2016
 
2015
Supplemental schedule of non-cash activities:
 
 
 
Assets and liabilities assumed from acquisitions:
 
 
 
Real estate investments
$
59,666

 
$
2,567,150

Utilization of funds held for an Internal Revenue Code Section 1031 exchange
(6,954
)
 
(8,911
)
Other assets acquired
79,879

 
20,221

Debt assumed
47,641

 
177,857

Other liabilities
60,446

 
57,937

Deferred income tax liability
2,279

 
50,836

Redeemable OP unitholder interests assumed

 
87,245

Noncontrolling interest
22,225

 

Equity issued

 
2,204,585

Non-cash impact of CCP Spin-Off

 
1,256,404

Equity issued for purchase of OP and Class C units
22,970

 

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, 2016, we owned approximately 1,300 properties (including properties classified as held for sale), consisting of seniors housing communities, medical office buildings (“MOBs”), life science and innovation centers, skilled nursing facilities, specialty hospitals and general acute care hospitals, and we had five properties under development, including two properties that are owned by an unconsolidated real estate entity. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois.
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 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, 2016, we leased a total of 575 properties (excluding MOBs and life science and innovation centers and 34 properties owned through investments in unconsolidated entities, and including 25 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. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 298 seniors housing communities for us pursuant to long-term management agreements. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) and Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) leased from us 140 properties (excluding six properties owned through investments in unconsolidated real estate entities and one property managed by Brookdale Senior Living pursuant to a long-term management agreement), 68 properties (excluding one MOB) and ten properties, respectively, as of September 30, 2016.
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 other loans and investments relating to seniors housing and healthcare operators or properties.
In September 2016, we completed the acquisition of substantially all of the university affiliated life science and innovation real estate assets of Wexford Science & Technology, LLC (“Wexford”) from affiliates of Blackstone Real Estate Partners VIII, L.P. (together with its affiliates, “Blackstone”) (the “Wexford Acquisition”).   As a result, we renamed our MOB operations reportable business segment “office operations,” which now includes both MOBs and life science assets.
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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015, filed with the SEC on February 12, 2016. 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

7


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 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 our consolidation conclusions, 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.
On January 1, 2016, we adopted Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which makes certain changes to both the variable interest and voting models. The adoption of ASU 2015-02 did not result in any changes to our conclusions regarding the consolidation of investments under the new standard. We identified several entities already consolidated under the previous standard but not considered VIEs, which under the new standard are considered VIEs and will continue to be consolidated. In general, each of these consolidated VIEs has the following common characteristics:

VIEs in the legal form of a limited partnership (“LP”) or Limited Liability Company (“LLC”);
The VIEs were designed to own and manage their underlying real estate investments;
Ventas (or a subsidiary thereof) is the general partner or managing member of the VIE;
Ventas (or a subsidiary thereof) also owns a majority of the voting interests in the VIE;
A minority of voting interests in the VIE are owned by external third parties, unrelated to us;
The minority owners do not have substantive kick-out or participating rights in the VIEs; and
Ventas (or a subsidiary thereof) is the primary beneficiary of the VIE.
As part of the Wexford Acquisition, we identified certain special purpose entities that were established to allow investments in life science projects by tax credit investors (“TCIs”). We have determined that these special purpose entities are VIEs and that Ventas is the primary beneficiary of the VIEs, and therefore we consolidate these special purpose entities. Our primary beneficiary determination is based upon several factors, including but not limited to the rights we have in directing the activities which most significantly impact the VIEs’ economic performance as well as certain guarantees which protect the TCIs from losses should a tax credit recapture event occur.


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In general, the assets of the consolidated VIEs are available only for the settlement of the obligations of the respective entities. Unless otherwise required by the LP or LLC agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets.
 
 
September 30, 2016
 
December 31, 2015
 
 
Total Assets
 
Total Liabilities
 
Total Assets
 
Total Liabilities
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
NHP/PMB L.P.
 
$
645,846

 
$
202,200

 
$
645,109

 
$
203,235

Ventas Realty Capital Healthcare Trust Operating Partnership, L.P.
 
2,165,226

 
162,019

 
2,367,296

 
233,600

Other identified VIEs
 
1,886,133

 
381,933

 
1,582,430

 
431,582

Wexford tax credit VIEs (1)
 
982,233

 
223,723

 
 
(1)
Balances relate to our September 2016 Wexford Acquisition.
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, who is the primary beneficiary of this VIE. As of September 30, 2016, third party investors owned 2,746,737 Class A limited partnership units in NHP/PMB (“OP Units”), which represented 27.7% of the total units then outstanding, and we owned 7,156,146 Class B limited partnership units in NHP/PMB, representing the remaining 72.3%. 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, 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.
We own a majority interest in Ventas Realty Capital Healthcare Trust Operating Partnership, L.P. (“Ventas Realty OP”) and we consolidate this entity, as our wholly owned subsidiary is the general partner, who is the primary beneficiary of this VIE. The limited partnership units (“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. 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 of September 30, 2016, third party investors owned 361,776 Class C Units, which represented 1.2% of the total units then outstanding, and we owned 29,307,561 Class C Units and 176,374 OP units in Ventas Realty OP, representing the remaining 98.8%.
During the nine months ended September 30, 2016, third party investors redeemed 65,581 OP Units and 311,208 Class C Units for 370,558 shares of Ventas common stock, valued at $23.0 million.
As redemption rights are outside of our control, the redeemable OP unitholder interests (OP Units and Class C Units) 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, 2016 and December 31, 2015, the fair value of the redeemable OP unitholder interests was $201.1 million and $188.5 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, 2016 and December 31, 2015. 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.
Accounting for Historic and New Markets Tax Credits
As part of the Wexford Acquisition, we are party to certain contractual arrangements with tax credit investors (“TCIs”) that were established to enable the TCIs to receive benefits of historic tax credits (“HTCs”) and/or new market tax credits (“NMTCs”) for certain properties owned by Ventas. As of September 30, 2016, we own eleven properties (two of which were in development) that had syndicated HTCs or NMTCs, or both, to TCIs.
In general, capital contributions are made by TCIs into special purpose entities that invest in entities owning the subject property that generates the tax credits. The TCIs receive substantially all of the tax credits and hold only a noncontrolling interest in the economic risk and benefits of the special purpose entities.
HTCs are delivered to the TCIs upon substantial completion of the project. NMTCs are allowed for up to 39% of a qualified investment and are delivered to the TCIs after the investment has been funded and spent on a qualified business. HTCs are subject to 20% recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to 100% recapture until the end of the seventh year following the qualifying investment. We have provided the TCIs with certain guarantees which protect the TCIs from losses should a tax credit recapture event occur. The contractual arrangements with the TCIs include a put/call provision whereby we may be obligated or entitled to repurchase the ownership interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. We anticipate that either the TCIs will exercise their put rights or we will exercise our call rights.
The portion of the TCI’s capital contribution that is attributed to the put is recorded at fair value at inception in accounts payable and other liabilities on our Consolidated Balance Sheets, and is accreted to the expected put price as interest expense in our Consolidated Statements of Income over the recapture period. The remaining balance of the TCI’s capital contribution is initially recorded in accounts payable and other liabilities on our Consolidated Balance Sheets and will be relieved upon delivery of the tax credit to the TCI, as a reduction in the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above.
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, or replacement cost 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 project costs 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

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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 purchase option intangible assets and liabilities, if any, by discounting the difference between the applicable property’s acquisition date fair value and an estimate of its future option price. We do not amortize the resulting intangible asset or liability over the term of the lease, but rather adjust the recognized value of the asset or liability upon sale.
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. We estimate the fair value of trade names and trademarks using a royalty rate methodology and amortize that value over the estimated useful life of the trade name or trademark.
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 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 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 is classified as held for sale on the acquisition date. 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

11


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 an impairment loss at the time we make any such determination.
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 are 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 such 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 cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.
Escrow deposits and restricted cash - The carrying amount of escrow deposits and restricted cash reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.
Loans receivable - We estimate the fair value of loans receivable using level two and level three inputs: we discount 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, if any, 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, and default rates.
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, similar to those used in determining fair value of loans receivable (above).
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 OP units and Class C 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.

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Revenue Recognition
Triple-Net Leased Properties and Office Operations
Certain of our triple-net leases and most of our MOB and life science and innovation center (collectively, “office operations”) 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, 2016 and December 31, 2015, this cumulative excess totaled $239.0 million (net of allowances of $106.9 million) and $219.1 million (net of allowances of $101.4 million), respectively (excluding properties classified as held for sale).
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 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.
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
On January 1, 2016, we adopted 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. Adoption of this ASU did not have a significant impact on our consolidated financial statements.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which provides for an impairment model that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses. ASU 2016-13 is effective for the Company beginning January 1, 2020 and we do not expect its adoption will have a significant effect on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which introduces a lessee model that brings most leases on the balance sheet and amongst other changes, eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification. The amendments in ASU 2016-02 do not significantly change the current lessor accounting model. ASU 2016-02 is not effective for the Company until January 1, 2019 with early adoption permitted. We are continuing to evaluate this guidance and the impact to us, as both lessor and lessee, on our consolidated financial statements.
In 2014, the FASB issued 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 ASU 2014-09 (and related clarifying guidance issued by the FASB); 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 is specifically excluded from ASU 2014-09.
NOTE 3—CONCENTRATION OF CREDIT RISK
As of September 30, 2016, Atria, Sunrise, Brookdale Senior Living, Kindred and Ardent managed or operated approximately 22.4%, 11.2%, 8.0%, 1.7% and 5.1%, respectively, of our real estate investments based on gross book value (excluding properties classified as held for sale as of September 30, 2016). Because 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.
Seniors housing communities constituted approximately 61.4% of our real estate investments based on gross book value (excluding properties classified as held for sale as of September 30, 2016), while MOBs, life science and innovation centers, skilled nursing facilities, specialty hospitals and general acute care hospitals collectively comprised the remaining 38.6%. Our properties were located in 46 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of September 30, 2016, 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 office building services costs) (in each case excluding amounts in discontinued operations) for the three months then ended.
Triple-Net Leased Properties
For the three months ended September 30, 2016 and 2015, approximately 4.8% and 5.1%, respectively, of our total revenues and 8.2% and 8.9%, 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 5.3% and 5.6%, respectively, of our total revenues and 9.1% and 9.7%, respectively, of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Kindred (“Kindred Master Leases”). For the three months ended September 30, 2016, approximately 3.1% of our total revenues and 5.3% of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Ardent. Each of our leases with Brookdale Senior Living, Kindred and Ardent 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 our Brookdale Senior Living, Kindred and Ardent leases has a corporate guaranty. Brookdale Senior Living and Kindred have multiple leases with us and those leases contain cross-default provisions tied to each other, as well as bundled lease renewals.
The properties we lease to Brookdale Senior Living, Kindred and Ardent accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended September 30, 2016 and 2015. If either Brookdale Senior Living, Kindred or Ardent 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 impaired. We cannot assure you that Brookdale Senior

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Living, Kindred and Ardent 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, Kindred or Ardent 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, Kindred and Ardent 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.
On April 3, 2016, we entered into several agreements with Kindred to improve the quality and productivity of the long term acute care hospital (“LTAC”) portfolio leased by Ventas to Kindred. Certain of the agreements consist of lease amendments to the Kindred Master Leases. Under these lease amendments, annual rent on seven identified LTACs (the “7 LTACs”), which was approximately $8 million, was immediately re-allocated to other more productive post-acute assets subject to the Kindred Master Leases. Total annual rent under the Kindred Master Leases remains the same. Separately, we agreed to sell the 7 LTACs to an unrelated third party, subject to conditions to closing. The 7 LTACs are reported as assets held for sale on our Consolidated Balance Sheets as of September 30, 2016. As a result of this disposition, we recognized an impairment of $10.3 million during the nine months ended September 30, 2016, which is reported in depreciation and amortization in our Consolidated Statements of Income. Also in April, we received $3.5 million from Kindred in connection with the lease amendments, which is being amortized over the lease term of certain assets remaining in the Kindred Master Leases. On October 1, 2016, we sold the 7 LTACs for $3.0 million, and we expect to recognize a gain of approximately $2.8 million.
Senior Living Operations
As of September 30, 2016, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 266 of our 298 seniors housing communities, for which we pay annual management fees pursuant to long-term management agreements.
In September 2016, we modified existing agreements with Sunrise related to the management of certain of the seniors housing communities owned by us and operated by Sunrise to reduce management fees payable to Sunrise under such agreements, maintain the existing term of such agreements and provide Sunrise with incentives for future outperformance. We also entered into a new multi-year development pipeline agreement with Sunrise that gives us the option to fund certain future Sunrise developments.
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.
Our 34% ownership interest in Atria entitles us to certain rights and minority protections, as well as the right to appoint two of six members on the Atria Board of Directors.
Brookdale Senior Living, Kindred, Atria, Sunrise and Ardent 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.
Atria, Sunrise and Ardent are not currently subject to the reporting requirements of the SEC. The information related to Atria, Sunrise and Ardent contained or referred to in this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Atria, Sunrise or Ardent, as the case may be, and we have not verified this

15


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, 2016 and the year ended December 31, 2015. We acquire and invest in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source.
2016 Acquisitions
Wexford Acquisition
In September 2016, we completed the acquisition of substantially all of the university affiliated life science and innovation real estate assets of Wexford from Blackstone for total consideration of $1.5 billion. The Wexford Acquisition added to our portfolio 23 operating properties, two development assets and nine future development sites. The properties acquired will continue to be managed by Wexford, which will remain a separate management company owned and operated by the existing Wexford management team. We have exclusive rights to fund and own future life science projects developed by Wexford.

Other 2016 Acquisitions

During the nine months ended September 30, 2016, we made other investments totaling approximately $42 million, including the acquisition of one triple-net leased property and two MOBs.
    
Completed Developments
During 2016, we completed the development of three triple-net leased properties (two of which were expansions of existing seniors housing assets), representing $31.6 million of net real estate property on our Consolidated Balance Sheets as of September 30, 2016.
Estimated Fair Value
We are accounting for our 2016 acquisitions under the acquisition method in accordance with ASC 805 and have completed our initial accounting, which is subject to further adjustment. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed in our 2016 real estate acquisitions, which we determined using level two and level three inputs:
 
 
Triple-Net Leased Properties
 
Office Operations
 
Total
 
(In thousands)
Land and improvements
 
$
1,279

 
$
48,366

 
$
49,645

Buildings and improvements
 
12,558

 
1,322,598

 
1,335,156

Acquired lease intangibles
 
163

 
203,174

 
203,337

Other assets
 

 
98,137

 
98,137

Total assets acquired
 
14,000

 
1,672,275

 
1,686,275

Notes payable and other debt
 

 
47,641

 
47,641

Intangible liabilities
 

 
108,132

 
108,132

Other liabilities
 
380

 
60,233

 
60,613

Total liabilities assumed
 
380

 
216,006

 
216,386

Noncontrolling interest assumed
 

 
22,225

 
22,225

Net assets acquired
 
13,620

 
1,434,044

 
1,447,664

Cash acquired
 

 
19,119

 
19,119

Total cash used
 
$
13,620

 
$
1,414,925

 
$
1,428,545


16


Aggregate Revenue and NOI
For the three months ended September 30, 2016, aggregate revenue and net operating income (“NOI”) derived from our completed 2016 acquisitions during our period of ownership were $14.0 million and $9.6 million, respectively. For the nine months ended September 30, 2016, aggregate revenue and NOI derived from our completed 2016 acquisitions during our period of ownership were $14.7 million and $10.2 million, respectively.
Transaction Costs
Transaction costs are expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income. For the three and nine months ended September 30, 2016, we expensed as incurred $14.0 million and $18.6 million, respectively, related to our completed 2016 transactions.
2015 Acquisitions
HCT Acquisition
In January 2015, we acquired American Realty Healthcare Trust, Inc. (“HCT”) in a stock and cash transaction, which added 152 properties to our portfolio. At the effective time of the merger, each share of HCT common stock outstanding (other than shares held by us, HCT or our respective subsidiaries, which shares were canceled) was converted into the right to receive either 0.1688 shares of our common stock (with cash paid in lieu of fractional shares) or $11.33 per share in cash, at the election of each HCT shareholder. Shares of HCT common stock for which a valid election was not made were converted into the stock consideration. We funded the transaction through the issuance of approximately 28.4 million shares of our common stock and 1.1 million limited partnership units that are redeemable for shares of our common stock and the payment of approximately $11.0 million in cash (excluding cash in lieu of fractional shares). In addition, we assumed $167.0 million of mortgage debt and repaid approximately $730.0 million of debt, net of HCT cash on hand. In August 2015, 20 of the properties that we acquired in the HCT acquisition were disposed of as part of the CCP Spin-Off.
Ardent Health Services Acquisition
On August 4, 2015, we completed our acquisition of Ardent Health Services, Inc. (“AHS”) and simultaneous separation and sale of Ardent to a consortium composed of an entity controlled by Equity Group Investments, Ardent’s management team and us (collectively the “Ardent Transaction”). As of the acquisition date, we recorded the estimated fair value of our investment in owned hospital and other real estate of approximately $1.3 billion. At closing, we paid $26.3 million for our 9.9% interest in Ardent which represents our estimate of the acquisition date fair value of this interest. Upon closing, we entered into a long-term triple-net master lease with Ardent to operate the 10 hospitals and other real estate we acquired.
Other 2015 Acquisitions
In 2015, we made other investments totaling approximately $612.0 million, including the acquisition of 11 triple-net leased properties; 11 MOBs (including eight MOBs that we had previously accounted for as investments in unconsolidated entities; and 12 skilled nursing facilities (all of which were disposed of as part of the CCP Spin-Off).
Completed Developments
During 2015, we completed the development of one triple-net leased seniors housing community, representing $9.3 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2015.

17


Estimated Fair Value
We are accounting for our 2015 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Our initial accounting for acquisitions completed during the year ended December 31, 2015 remains subject to further adjustment. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:
 
Triple-Net Leased Properties
 
Senior Living Operations
 
Office Operations
 
Total
 
(In thousands)
Land and improvements
$
190,566

 
$
70,713

 
$
173,307

 
$
434,586

Buildings and improvements
1,726,064

 
703,080

 
1,214,403

 
3,643,547

Acquired lease intangibles
169,362

 
83,867

 
184,540

 
437,769

Other assets
174,093

 
272,888

 
403,046

 
850,027

Total assets acquired
2,260,085

 
1,130,548

 
1,975,296

 
5,365,929

Notes payable and other debt

 
77,940

 
99,917

 
177,857

Other liabilities
45,924

 
45,408

 
46,734

 
138,066

Total liabilities assumed
45,924

 
123,348

 
146,651

 
315,923

Net assets acquired
2,214,161

 
1,007,200

 
1,828,645

 
5,050,006

Redeemable OP unitholder interests assumed
 
 
 
 
 
 
88,085

Cash acquired
 
 
 
 
 
 
59,584

Equity issued
 
 
 
 
 
 
2,216,355

Total cash used
 
 
 
 
 
 
$
2,685,982

Included in other assets above is $746.9 million of goodwill, which represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed as of the acquisition date. Goodwill has been allocated to our reportable business segments based on the respective fair value of the net assets acquired, as follows: triple-net leased properties - $133.6 million; senior living operations - $219.1 million; and office operations - $394.2 million.
NOTE 5—DISPOSITIONS
2016 Activity
During the nine months ended September 30, 2016, we sold three triple-net leased properties, one seniors housing community included in our senior living operations reportable business segment and one MOB for aggregate consideration of $63.8 million. We recognized a gain on the sales of these assets of $31.8 million.
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 $6.0 million of lease termination fees (included within triple-net leased rental income in our Consolidated Statements of Income). For the nine months ended September 30, 2015, we recognized a gain on the sales of these assets of $32.8 million (net of taxes), of which $18.1 million was deferred due to an unsecured loan we made to the buyer in connection with the sale of certain assets. The gain is being recognized into income as principal payments are made on the loan over its five-year term.
Real Estate Impairment
There was no impairment recognized for the three months ended September 30, 2016. An impairment of $2.5 million was recognized for the three months ended September 30, 2015. We recognized impairments of $14.5 million and $31.3 million for the nine months ended September 30, 2016 and 2015, respectively, which are recorded in depreciation and amortization. Of these impairments, none and $13.0 million for the nine months ended September 30, 2016 and 2015, respectively, were reported in discontinued operations in our Consolidated Statements of Income.


18


Discontinued Operations and Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale as of September 30, 2016 and December 31, 2015, including the amounts reported on our Consolidated Balance Sheets.
 
 
September 30, 2016
 
December 31, 2015
 
 
Number of Properties Held for Sale
 
Assets Held for Sale
 
Liabilities Held for Sale
 
Number of Properties Held for Sale
 
Assets Held for Sale
 
Liabilities Held for Sale
 
 
(Dollars in thousands)
Triple-net Leased Properties
 
25

 
$
140,948

 
$
76,092

 
2

 
$
4,488

 
$
44

Office Operations
 
7

 
52,487

 
1,507

 
8

 
68,619

 
24,759

Senior Living Operations*
 

 
1,817

 
9

 
1

 
19,953

 
9,537

Total
 
32

 
$
195,252

 
$
77,608

 
11

 
$
93,060

 
$
34,340

 
 
 
 
 
 
 
 
 
 
 
 
 
* As of September 30, 2016 there is one vacant land parcel classified as held for sale.
Set forth below is a summary of our results of operations for properties within discontinued operations for the three and nine months ended September 30, 2016 and 2015.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
Rental income
$

 
$
40,641

 
$

 
$
196,848

Income from loans and investments

 
449

 

 
2,148

Interest and other income

 

 

 
63

 

 
41,090

 

 
199,059

Expenses:
 
 
 
 
 
 
 
Interest

 
12,172

 

 
60,428

Depreciation and amortization

 
13,878

 

 
79,608

General, administrative and professional fees

 
2

 

 
9

Merger-related expenses and deal costs
118

 
37,190

 
754

 
44,069

Other

 
175

 

 
1,620

 
118

 
63,417

 
754

 
185,734

(Loss) income before real estate dispositions and noncontrolling interest
(118
)
 
(22,327
)
 
(754
)
 
13,325

(Loss) gain on real estate dispositions

 
(48
)
 
(1
)
 
229

Net (loss) income from discontinued operations
(118
)
 
(22,375
)
 
(755
)
 
13,554

Net income attributable to noncontrolling interest

 
8

 

 
120

Net (loss) income from discontinued operations attributable to common stockholders
$
(118
)
 
$
(22,383
)
 
$
(755
)
 
$
13,434


Substantially all of the amounts reported for 2015 as discontinued operations in the table above reflect the historical results of operations of the CCP properties prior to the CCP Spin-Off. All merger-related expenses and deal costs presented above reflect separation costs relating to the CCP Spin-Off.

Transition Services Agreement
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") was $2.5 million for one year. For the three and nine months ended September 30, 2016, we recognized income of $0.4 million and $1.6 million,

19


respectively, relating to the Service Fee, which was payable in four quarterly installments. The transition services agreement expired on August 31, 2016.
NOTE 6—LOANS RECEIVABLE AND INVESTMENTS
As of September 30, 2016 and December 31, 2015, we had $874.3 million and $895.0 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, 2016 and December 31, 2015, including amortized cost, fair value and unrealized gains or losses on available-for-sale investments:
 
 
September 30, 2016
 
 
Carrying Amount
 
Amortized Cost
 
Fair Value
 
Unrealized Gain
 
 
(In thousands)
Secured mortgage loans and other
 
$
757,107

 
$
757,107

 
$
776,410

 
$

Government-sponsored pooled loan investments (1)
 
64,556

 
62,849

 
64,556

 
1,707

Total investments reported as Secured loans receivable and investments, net
 
821,663

 
819,956

 
840,966

 
1,707

 
 
 
 
 
 
 
 
 
Non-mortgage loans receivable
 
52,664

 
52,664

 
53,736

 

Total investments reported as Other assets
 
52,664

 
52,664

 
53,736

 

Total loans receivable and investments, net
 
$
874,327

 
$
872,620

 
$
894,702

 
$
1,707

 
 
December 31, 2015
 
 
Carrying Amount
 
Amortized Cost
 
Fair Value
 
Unrealized Gain
 
 
(In thousands)
Secured mortgage loans and other
 
$
793,433

 
$
793,433

 
$
816,849

 
$

Government-sponsored pooled loan investments (1)
 
63,679

 
62,130

 
63,679

 
1,549

Total investments reported as Secured loans receivable and investments, net
 
857,112

 
855,563

 
880,528

 
1,549

 
 
 
 
 
 
 
 
 
Non-mortgage loans receivable
 
37,926

 
37,926

 
38,806

 

Total investments reported as Other assets
 
37,926

 
37,926

 
38,806

 

Total loans receivable and investments, net
 
$
895,038

 
$
893,489

 
$
919,334

 
$
1,549

(1) Investments in government-sponsored pool loans have contractual maturity dates in 2023 for September 30, 2016 and 2022 and 2023 for December 31, 2015.

2016 Activity

For the nine months ended September 30, 2016, we received aggregate proceeds of $198.5 million in final repayment of three secured loans receivable and recognized gains of $8.7 million that is recorded in income from loans and investments in our Consolidated Statements of Income.

In connection with the Wexford Acquisition, we acquired three non-mortgage loans receivable totaling $13.4 million.

In February 2016, we made a $140.0 million secured mezzanine loan investment, at par, relating to Class A life sciences properties in California and Massachusetts, that has an annual interest rate of 9.95% and matures in 2021.

In October 2016, we committed to provide secured debt financing in the amount of $700 million to a subsidiary of Ardent to facilitate Ardent’s acquisition of LHP Hospital Group, Inc. (“LHP”). The loan (the “Loan”) has a five-year term and is LIBOR-based with an initial interest rate of approximately 8% and is guaranteed by Ardent’s parent company. Ardent will also receive an equity contribution from its majority owner, an affiliate of Equity Group Investments. The Loan is subject to the satisfaction of customary closing conditions. Ardent’s acquisition of LHP is expected to close in the first quarter of 2017, but there can be no assurance as to whether, when or on what terms Ardent’s acquisition of LHP or the Loan will be completed.

20


2015 Activity

We issued one non-mortgage loan ($20.0 million) and one secured loan ($78.4 million) to buyers in connection with the sales of certain assets in February and October, respectively. 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 year ended December 31, 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 year ended December 31, 2015, we received aggregate proceeds of $97.0 million in final repayment of three secured and one non-mortgage 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 year ended December 31, 2015.

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, 2016, we had ownership interests (ranging from 5% to 25%) in joint ventures that owned 39 properties, excluding properties in development. We account for our interests in real estate joint ventures, as well as our 34% interest in Atria and 9.9% interest in Ardent (which are included within other assets on our Consolidated Balance Sheets), under the equity method of accounting.
With the exception of our interests in Atria and Ardent, we provide various services to each unconsolidated entity in exchange for fees and reimbursements. Total management fees earned in connection with these entities were $1.8 million and $1.4 million for the three months ended September 30, 2016 and 2015, respectively, and $5.0 million and $5.1 million for the nine months ended September 30, 2016 and 2015, respectively (which is included in office building and other services revenue in our Consolidated Statements of Income).
NOTE 8—INTANGIBLES
The following is a summary of our intangibles as of September 30, 2016 and December 31, 2015:
 
September 30, 2016
 
December 31, 2015
 
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
$
186,424

 
7.4
 
$
155,161

 
7.0
In-place and other lease intangibles
1,336,284

 
23.3
 
1,189,261

 
20.9
Goodwill
1,043,075

 
N/A
 
1,047,497

 
N/A
Other intangibles
35,819

 
10.3
 
35,792

 
8.6
Accumulated amortization
(748,554
)
 
N/A
 
(655,176
)
 
N/A
Net intangible assets
$
1,853,048

 
21.2
 
$
1,772,535

 
19.2
Intangible liabilities:
 
 
 
 
 
 
 
Below market lease intangibles
$
350,637

 
14.2
 
$
256,034

 
14.2
Other lease intangibles
40,851

 
38.0
 
35,925

 
30.1
Accumulated amortization
(127,426
)
 
N/A
 
(113,647
)
 
N/A
Purchase option intangibles
3,568

 
N/A
 
3,568

 
N/A
Net intangible liabilities
$
267,630

 
15.9
 
$
181,880

 
15.6
 
 
 
 
 
N/A—Not Applicable.

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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.
NOTE 9—OTHER ASSETS
The following is a summary of our other assets as of September 30, 2016 and December 31, 2015:
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
Straight-line rent receivables, net
$
239,046

 
$
219,064

Non-mortgage loans receivable, net
52,664

 
37,926

Other intangibles, net
9,466

 
13,224

Investment in unconsolidated operating entities
28,832

 
28,199

Other
158,250

 
113,990

Total other assets
$
488,258

 
$
412,403


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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, 2016 and December 31, 2015:
 
September 30, 2016
 
December 31, 2015
 
(In thousands)
Unsecured revolving credit facility (1)
$
232,405

 
$
180,683

1.55% Senior Notes due 2016

 
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 (2)
200,000

 
200,000

Unsecured term loan due 2019 (2)
373,353

 
468,477

4.00% Senior Notes due 2019
600,000

 
600,000

3.00% Senior Notes, Series A due 2019 (3)
304,715

 
289,038

2.700% Senior Notes due 2020
500,000

 
500,000

Unsecured term loan due 2020
900,000

 
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 (3)
190,447

 
180,649

3.125% Senior Notes due 2023
400,000

 

3.750% Senior Notes due 2024
400,000

 
400,000

4.125% Senior Notes, Series B due 2024 (3)
190,447

 
180,649

3.500% Senior Notes due 2025
600,000

 
600,000

4.125% Senior Notes due 2026
500,000

 
500,000

3.25% Senior Notes due 2026
450,000

 

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

 
300,000

Mortgage loans and other (4)
1,742,347

 
1,987,401

Total
11,317,837

 
11,271,020

Deferred financing costs, net
(64,238
)
 
(69,121
)
Unamortized fair value adjustment
27,416

 
33,570

Unamortized discounts
(28,688
)
 
(28,473
)
Senior notes payable and other debt
$
11,252,327

 
$
11,206,996

 
 
 
 
 
(1)
$155.4 million and $9.7 million of aggregate borrowings are denominated in Canadian dollars as of September 30, 2016 and December 31, 2015, respectively.
(2)
These amounts represent in aggregate the $573.4 million of unsecured term loan borrowings under our unsecured credit facility, of which $94.8 million included in the 2019 tranche is in the form of Canadian dollars.
(3)
These borrowings are in the form of Canadian dollars.
(4)
2016 and 2015 exclude $66.0 million and $22.9 million, respectively, of mortgage debt related to real estate assets classified as held for sale that is included in liabilities related to assets held for sale on our Consolidated Balance Sheets.


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As of September 30, 2016, our indebtedness had the following maturities:
 
Principal Amount
Due at Maturity
 
Unsecured
Revolving Credit
Facility (1)
 
Scheduled Periodic
Amortization
 
Total Maturities
 
(In thousands)
2016 (2)
$

 
$

 
$
7,467

 
$
7,467

2017
631,902

 

 
26,044

 
657,946

2018
1,101,879

 
232,405

 
21,085

 
1,355,369

2019
1,702,650

 

 
14,607

 
1,717,257

2020
1,416,913

 

 
11,620

 
1,428,533

Thereafter (3)
6,023,925

 

 
127,340

 
6,151,265

Total maturities
$
10,877,269

 
$
232,405

 
$
208,163

 
$
11,317,837

 
 
 
 
 
(1)
As of September 30, 2016, we had $89.3 million of unrestricted cash and cash equivalents, for $143.1 million of net borrowings outstanding under our unsecured revolving credit facility.
(2)
Excludes $66.0 million of mortgage debt related to real estate assets classified as held for sale as of September 30, 2016 that are scheduled to mature in 2017.
(3)
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, 2016, and a $200.0 million fully funded four-year term loan and an $800.0 million five-year term loan (with $373.4 million outstanding), each priced at LIBOR plus 1.05% as of September 30, 2016. 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.

As of September 30, 2016, we had $232.4 million of borrowings outstanding, $14.1 million of letters of credit outstanding and $1.8 billion of unused borrowing capacity available under our unsecured revolving credit facility.

As of September 30, 2016, we also had a $900.0 million fully funded term loan due 2020 priced at LIBOR plus 97.5 basis points.

In May 2016, we repaid $100.0 million outstanding on our unsecured term loan due 2019 using cash on hand and recognized a loss on extinguishment of debt of $0.4 million.

Senior Notes

In May 2016, we issued and sold $400.0 million aggregate principal amount of 3.125% senior notes due 2023 at a public offering price equal to 99.343% of par, for total proceeds of $397.4 million before the underwriting discount and expenses.

In June 2016, we redeemed $455.5 million aggregate principal amount then outstanding of our 1.55% senior notes due September 2016 at a public offering price of 100.335% of par, plus accrued and unpaid interest to the redemption date, and recognized a loss on extinguishment of debt of $2.1 million. The redemption was funded using proceeds from our May 2016 senior note issuance, cash on hand and borrowings under our revolving credit facility. In July 2016, we repaid the remaining balance then outstanding of our 1.55% senior notes due September 2016 of $94.5 million and recognized a loss on extinguishment of debt of $0.3 million.

In September 2016, we issued and sold $450.0 million aggregate principal amount of 3.25% senior notes due 2026 at a public offering price equal to 99.811% of par, for total proceeds of $449.1 million before the underwriting discount and expenses.


24


Mortgages

During the nine months ended September 30, 2016, we repaid in full mortgage loans outstanding in the aggregate principal amount of $254.7 million with a weighted average maturity of 2.1 years and recognized a loss on extinguishment of debt of $0.4 million in connection with these repayments.

Derivatives and Hedging

In February 2016, we entered into a $200 million notional amount interest rate swap with a maturity of August 3, 2020 that effectively converts LIBOR-based floating rate debt to fixed rate debt, setting LIBOR at 1.132% through the maturity date of the swap.

In July 2016, we entered into $225 million notional forward starting swaps that reduced our exposure to fluctuations in interest rates between July and the September issuance of 3.25% senior notes due 2026.  On the issuance date, we realized a gain of $1.9 million from these swaps which will be recognized over the life of the notes using an effective interest method.


NOTE 11—FAIR VALUES OF FINANCIAL INSTRUMENTS
As of September 30, 2016 and December 31, 2015, the carrying amounts and fair values of our financial instruments were as follows:
 
September 30, 2016
 
December 31, 2015
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
89,279

 
$
89,279

 
$
53,023

 
$
53,023

Secured loans receivable, net
757,107

 
776,410

 
793,433

 
816,849

Non-mortgage loans receivable, net
52,664

 
53,736

 
37,926

 
38,806

Government-sponsored pooled loan investments
64,556

 
64,556

 
63,679