HEALTHPEAK PROPERTIES, INC. - Quarter Report: 2020 March (Form 10-Q)

---

---

---

---

---

(1)	On January 1, 2020, the Company adopted a series of Accounting Standards Updates (“ASUs”) related to accounting for credit losses and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.

(2)	On January 1, 2019, the Company adopted a series of ASUs related to accounting for leases and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.

---

---

---

---

•	The Company, which owned a 49% interest in the CCRC JV, purchased Brookdale’s 51% interest in 13 of the 15 communities in the CCRC JV based on a valuation of $1.06 billion (the “CCRC Acquisition”);

•	The management agreements related to the CCRC Acquisition communities were terminated and management transitioned (under new management agreements) from Brookdale to Life Care Services LLC (“LCS”); and

•	The Company paid a $100 million management termination fee to Brookdale.

•	Brookdale acquired 18 of the properties from the Company (the “Brookdale Acquisition Assets”) for cash proceeds of $385 million;

•	The remaining 24 properties (excludes the one property to be transitioned to LCS, as discussed below) were restructured into a single master lease with 2.4% annual rent escalators and a maturity date of December 31, 2027 (the “2019 Amended Master Lease”);

•	A portion of annual rent (amount in excess of 6.5% of sales proceeds) related to 14 of the 18 Brookdale Acquisition Assets was reallocated to the remaining properties under the 2019 Amended Master Lease; and

•	Brookdale paid down $20 million of future rent under the 2019 Amended Master Lease.

•	The remaining two CCRCs will be jointly marketed for sale to third parties.

•	The Company will terminate the triple-net lease related to one property and transition it to a RIDEA structure with LCS as the manager;

•	The Company will provide up to $35 million of capital investment in the 2019 Amended Master Lease properties over a five-year term, which will increase rent by 7% of the amount spent, per annum.

---

•

The Company, which owned 90% of the interests in its RIDEA I and RIDEA III joint ventures with Brookdale at the time the 2017 MTCA was executed, agreed to purchase Brookdale’s 10% noncontrolling interest in each joint venture. At the time the 2017 MTCA was executed, these joint ventures collectively owned and operated 58 independent living, assisted living, memory care, and/or skilled nursing facilities (the “RIDEA Facilities”). The Company completed its acquisitions of the RIDEA III noncontrolling interest for $32 million in December 2017 and the RIDEA I noncontrolling interest for $63 million in March 2018;

•	The Company received the right to sell, or transition to other operators, 32 of the 78 total assets under an Amended and Restated Master Lease and Security Agreement (the “2017 Amended Master Lease”) with Brookdale and 36 of the RIDEA Facilities (and terminate related management agreements with an affiliate of Brookdale without penalty), certain of which were sold during 2018 and 2019;

•	The Company provided an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018; and

•	Brookdale agreed to purchase two of the assets under the 2017 Amended Master Lease for $35 million and four of the RIDEA Facilities for $240 million, all of which were sold in 2018.

---

---

---

(1)	At March 31, 2020, the Company had $16 million remaining of commitments to fund $174 million of senior housing development projects. At December 31, 2019, the Company had $25 million remaining of commitments to fund $174 million of senior housing development projects.

---

---

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

(2)	Property count and ownership percentage are as of March 31, 2020.

(3)	In December 2019, the Company formed the SWF SH JV with a sovereign wealth fund. See Note 4 for discussion of the formation of the SWF SH JV.

(4)	In June 2019, the Company acquired the outstanding equity interests in, and began consolidating, the Vintage Park JV (see Note 4). Remaining unconsolidated SHOP joint ventures (and the Company’s ownership percentage) include: (i) Waldwick JV (85%); (ii) Otay Ranch JV (90%); and (iii) MBK Development JV (50%).

(5)	Includes three unconsolidated medical office joint ventures (and the Company’s ownership percentage): (i) Ventures IV (20%); (ii) Ventures III (30%); and (iii) Suburban Properties, LLC (67%).

(6)

Unconsolidated other joint ventures (and the Company’s ownership percentage) include: (i) Discovery Naples JV (41%) and (ii) Discovery Sarasota JV (47%). The Discovery Naples JV and Discovery Sarasota JV are joint ventures that are developing senior housing facilities and the Company’s investments in those joint ventures are preferred equity investments earning a 10% per annum fixed-rate return. In January 2020, the Company sold its interest in the remaining K&Y joint venture for $12 million. At December 31, 2019, K&Y joint venture includes an ownership percentage of 80% and one unconsolidated joint venture. In October 2019, the Company sold its interest in one of the K&Y joint ventures for $4 million.

(7)	See Note 3 for discussion of the 2019 MTCA with Brookdale, including the acquisition of Brookdale’s interest in 13 of the 15 communities in the CCRC JV in January 2020.

---

---

(1)	The Company recognized a $22 million loss on debt extinguishment related to the repurchase of senior notes.

(2)	Upon completing the redemption of the 2.625% senior unsecured notes due February 2020 and repurchasing a portion of the 4.250% senior unsecured notes due 2023 and the 4.000% senior unsecured notes due 2022, the Company recognized a $35 million loss on debt extinguishment.

---

(1)	Effective interest rates on the senior notes range from 3.14% to 6.87% with a weighted average effective interest rate of 3.94% and a weighted average maturity of 7 years.

(2)	Excluding mortgage debt on assets held for sale, effective interest rates on the mortgage debt range from 2.16% to 5.91% with a weighted average effective interest rate of 3.91% and a weighted average maturity of 9 years.

(3)	Represents mortgage debt on assets held for sale with an interest rate of 3.45% and maturity in 2044.

---

---

(1)	See Note 7 for a discussion of the U.K. JV transaction.

---

---

(1)	For the three months ended March 31, 2020, represents the dilutive impact of 32 million shares that were settled during the three months then ended. For the three months ended March 31, 2019, represents the dilutive impact of 19 million shares of common stock under forward sales agreements that had not been settled as of March 31, 2019.

---

---

(1)

Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.

(2)

Income tax benefit (expense) for the quarter ended March 31, 2020 includes: (i) a $52 million tax benefit recognized in conjunction with internal restructuring activities, which resulted in the transfer of assets subject to certain deferred tax liabilities from taxable REIT subsidiaries to the REIT in connection with the 2019 MTCA (see Note 3) and (ii) a $2.9 million net tax benefit recognized due to changes under the Coronavirus Aid, Relief, and Economic Security (“CARES”) act, which resulted in net operating losses being utilized at a higher income tax rate than previously available.

---

(1)

Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.

---

---

---

(1)	The Company’s maximum loss exposure represents the aggregate carrying amount of such investments (including accrued interest).

(2)	The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

---

---

(1)	Level 1: Fair value calculated based on quoted prices in active markets.

(2)

Level 2: Fair value based on (i) for marketable debt securities, quoted prices for similar or identical instruments in active or inactive markets, respectively, or (ii) for loans receivable, net, mortgage debt and swaps, calculated utilizing standardized pricing models in which significant inputs or value drivers are observable in active markets. For bank line of credit, commercial paper, and term loans, the carrying values are a reasonable estimate of fair value because the borrowings are primarily based on market interest rates and the Company’s credit rating.

(3)	During the three months ended March 31, 2020 and year ended December 31, 2019, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

(1)	Derivative liabilities are recorded in accounts payable, accrued liabilities, and other liabilities in the consolidated balance sheets.

(2)	Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

---

---

•	the severity and duration of the COVID-19 pandemic;

•	actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact;

•	the impact of the COVID-19 pandemic and health and safety measures taken to slow its spread;

•	operational risks associated with third party management contracts, including the additional regulation and liabilities of our RIDEA lease structures;

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

•	the imposition of laws or regulations prohibiting eviction of our tenants or operators, including new governmental efforts in response to COVID-19;

•	the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which may result in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases and borrowers’ loans;

•	our concentration in the healthcare property sector, particularly in senior housing, life sciences and medical office buildings, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries;

•

the effect on us and our tenants and operators of legislation, executive orders and other legal requirements, including compliance with the Americans with Disabilities Act, fire, safety and health regulations, environmental laws, the Affordable Care Act, licensure, certification and inspection requirements, and laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements or fines for noncompliance;

•	our ability to identify replacement tenants and operators and the potential renovation costs and regulatory approvals associated therewith;

•	the risks associated with property development and redevelopment, including costs above original estimates, project delays and lower occupancy rates and rents than expected;

•	the potential impact of uninsured or underinsured losses, including as a result of hurricanes, earthquakes and other natural disasters, pandemics such as COVID-19, acts of war and/or terrorism and other events that may cause such losses and/or performance declines by us or our tenants and operators;

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

•	competition for the acquisition and financing of suitable healthcare properties as well as competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

---

•	our, or our counterparties’, ability to fulfill obligations, such as financing conditions and/or regulatory approval requirements, required to successfully consummate acquisitions, dispositions, transitions, developments, redevelopments, joint venture transactions or other transactions;

•	our ability to achieve the benefits of acquisitions or other investments within expected time frames or at all, or within expected cost projections;

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

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

•	our ability to foreclose on collateral securing our real estate-related loans;

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

•	changes in global, national and local economic and other conditions, including the ongoing economic downturn, volatility in the financial markets and high unemployment rates;

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

•	competition for skilled management and other key personnel;

•	our reliance on information technology systems and the potential impact of system failures, disruptions or breaches; and

•	our ability to maintain our qualification as a real estate investment trust (“REIT”).

•	Executive Summary

•	COVID-19 Update

•	2020 Transaction Overview

•	Dividends

•	Results of Operations

•	Liquidity and Capital Resources

•	Contractual Obligations and Off-Balance Sheet Arrangements

•	Non-GAAP Financial Measures Reconciliations

•	Critical Accounting Policies and Recent Accounting Pronouncements

---

(i)	Our real estate: Our portfolio is grounded in high-quality properties in desirable locations. We focus on three purposely selected private pay asset classes, senior housing, life science and medical office, to provide stability through inevitable market cycles.

(ii)	Our financials: We maintain a strong investment-grade balance sheet with ample liquidity as well as long-term fixed-rate debt financing with staggered maturities to reduce our exposure to interest-rate volatility and refinancing risk.

(iii)	Our partnerships: We work with leading healthcare companies, operators and service providers and are responsive to their space and capital needs. We provide high-quality management services to encourage tenants to renew, expand and relocate into our properties, which drives increased occupancy, rental rates, and property values.

(iv)	Our platform: We have a people-first culture that we believe attracts, develops and retains top talent. We continually strive to create and maintain an industry-leading platform, with systems and tools that allow us to effectively and efficiently manage our assets and investment activity.

---

---

•	We acquired Brookdale’s 51% interest in 13 of the 15 communities in the CCRC JV based on a valuation of $1.06 billion (the “CCRC Acquisition”) and transitioned management (under new management agreements) of those 13 communities to Life Care Services LLC (“LCS”);

•	We paid Brookdale $100 million to terminate the previous management agreements related to those 13 communities;

•	Brookdale acquired 18 of the triple-net lease properties (the “Brookdale Acquisition Assets”) from us for cash proceeds of $385 million;

•	The remaining 24 triple-net lease properties were restructured into a single master lease with 2.4% annual rent escalators and a maturity date of December 31, 2027 (the “2019 Amended Master Lease”);

•	A portion of annual rent (amount in excess of 6.5% of sales proceeds) related to 14 of the 18 Brookdale Acquisition Assets was reallocated to the remaining properties under the 2019 Amended Master Lease; and

•	Brookdale paid down $20 million of future rent under the 2019 Amended Master Lease.

•	In January 2020, we entered into definitive agreements to acquire a life science campus in Waltham, Massachusetts for $320 million. We made a $20 million nonrefundable deposit upon completing due diligence in January 2020 and closed the transaction in April 2020.

•	During the first quarter of 2020, we sold seven SHOP assets for $36 million.

•	During the first quarter of 2020, we sold a hospital under a direct financing lease (“DFL”) for $82 million.

•

During the three months ended March 31, 2020, we transitioned six senior housing triple-net assets with Capital Senior Living Corporation (“CSL”) into a RIDEA structure, with CSL remaining as the manager, and transitioned one senior housing triple-net asset with CSL into a RIDEA structure with Discovery Senior Living, LLC as the operator. We expect to transition two senior housing triple-net assets to a RIDEA structure with Sunrise Senior Living, LLC as the operator during 2020.

•	In April 2020, we sold one SHOP asset for $12 million.

•	In April 2020, one of our tenants exercised its option to acquire three of our MOBs in San Diego, California for $106 million. We received a $5 million nonrefundable deposit in May 2020. The sale is scheduled to close during the second quarter of 2020.

•	During the three months ended March 31, 2020, we utilized the forward provisions under the at-the-market equity offering program established in February 2019 (the “2019 ATM Program”) to allow for the sale of up to an aggregate of 2 million shares of our common stock at an initial weighted average net price of $35.23 per share, after commissions.

•	During the three months ended March 31, 2020, we settled all 32.5 million shares previously outstanding under (i) ATM forward contracts and (ii) a 2019 forward equity sales agreement at a weighted average net price of $32.73 per share, after commissions, resulting in net proceeds of $1.06 billion.

•	As part of the development program with HCA Healthcare Inc., at March 31, 2020, we had seven medical office building (“MOB”) developments under contract, six of which will be on-campus, with an aggregate total estimated cost of $166 million.

•	At March 31, 2020, we had six life science development projects in process with an aggregate total estimated cost of approximately $855 million.

---

---

---

---

•	an increase in other income, net as a result of (i) a gain on consolidation related to the acquisition of the outstanding equity interests in 13 CCRCs from Brookdale during the first quarter of 2020 and (ii) a gain on sale related to the sale of a hospital underlying a DFL during the first quarter of 2020;

•	an increase in net gain on sales of real estate during the first quarter of 2020;

•

an increase in income tax benefit as a result of the above-mentioned acquisition of Brookdale’s interest in 13 CCRCs and related management termination fee expense paid to Brookdale in connection with transitioning management to LCS during the first quarter of 2020 and the extension of the net operating loss carryback period provided by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”); and

•	NOI generated from: (i) 2019 and 2020 acquisitions and consolidations of real estate, (ii) development and redevelopment projects placed in service during 2019 and 2020, and (iii) new leasing activity during 2019 and 2020.

•	a reduction in income related to assets sold or deconsolidated during 2019 and 2020;

•	increased depreciation and amortization expense as a result of: (i) assets acquired during 2019 and 2020, (ii) the acquisition of Brookdale’s interest in and consolidation of 13 CCRCs during the first quarter of 2020, and (iii) development and redevelopment projects placed into service during 2019 and 2020, partially offset by dispositions of real estate throughout 2019 and 2020;

•	an increase in impairment charges related to real estate during the first quarter of 2020;

•	increased interest expense as a result of senior unsecured notes issuances and assumed mortgage debt in conjunction with real estate acquisitions, partially offset by senior unsecured notes redemptions, repurchases, and repayments during the third and fourth quarters of 2019; and

•	increased credit losses related to loans receivable as a result of adopting the new current expected credit losses model required under Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and the impact of COVID-19 on expected credit losses.

•	impairments of real estate;

•	net gain on sales of real estate;

•	the gain on consolidation related to the acquisition of Brookdale’s interest in 13 CCRCs; and

•	depreciation and amortization expense.

•	the gain related to the sale of a hospital underlying a DFL; and

•	the increase in credit losses.

---

(1)	Total Portfolio includes results of operations from disposed properties and properties that transitioned segments through the disposition or transition date.

(2)	From our 2019 presentation of Same-Store, we removed 31 senior housing triple-net properties that were sold, 33 senior housing triple-net properties that were transitioned, or we agreed to transition, to SHOP, 9 senior housing triple-net properties that were classified as held for sale, and 1 senior housing triple-net property that was moved to other non-reportable.

(3)	Represents average capacity as reported by the respective tenants or operators for the three-month period.

•	the transfer of 21 and 7 senior housing triple-net facilities to our SHOP segment during 2019 and 2020, respectively;

•	the transfer of two senior housing triple-net facilities to our CCRC segment during 2020, and

•	senior housing triple-net facilities sold during 2019 and 2020.

---

(1)	Total Portfolio includes results of operations from disposed properties and properties that transitioned segments through the disposition or transition date.

(2)	From our 2019 presentation of Same-Store, we removed seven SHOP properties that were sold, five SHOP properties that were classified as held for sale, and two SHOP properties that were placed in redevelopment.

(3)	Represents average capacity as reported by the respective tenants or operators for the three-month period.

•	additional expenses related to COVID-19 and

•	higher labor costs, partially offset by

•	increased rates for resident fees.

•	increased NOI from (i) 2019 acquisitions and (ii) the transfer of 21 and 7 senior housing triple-net assets to our SHOP segment during 2019 and 2020, respectively; partially offset by

•	decreased NOI from assets sold in 2019 and 2020.

---

(1)	All CCRC properties have been removed from the Same-Store population as they are classified as held for sale, experienced a change in reporting structure, or underwent an operator transition during the periods presented. As such, no Same-Store results are presented in the table above.

(2)	Total Portfolio includes results of operations from disposed properties and properties that transitioned segments through the disposition or transition date.

(3)	Represents average capacity as reported by the respective tenants or operators for the three-month period.

•	the acquisition of the remaining 51% interest in 13 communities previously held in a joint venture; and

•	the transfer of two CCRC properties that transitioned from senior housing triple-net to RIDEA structures.

---

(1)	Total Portfolio includes results of operations from disposed properties through the disposition date.

(2)	From our 2019 presentation of Same-Store, we removed one life science facility that was sold, three life science facilities that were placed in redevelopment, one life science facility related to a significant tenant relocation, and one life science facility related to a casualty event.

(3)	Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).

•	annual rent escalations;

•	new leasing activity; and

•	mark-to-market lease renewals.

•	increased NOI from (i) increased occupancy in developments and redevelopments placed into service in 2019 and 2020 and (ii) acquisitions in 2019, partially offset by

•	decreased NOI from (i) decreased overall portfolio occupancy and (ii) the placement of facilities into redevelopment in 2019 and 2020.

---

(1)	Total Portfolio includes results of operations from disposed properties through the disposition date.

(2)	From our 2019 presentation of Same-Store, we removed six MOBs that were sold, two MOBs that were classified as held for sale, one MOB that was placed into redevelopment, and one MOB that we intend to demolish.

(3)	Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).

•	mark-to-market lease renewals and

•	annual rent escalations.

•	increased NOI from 2019 acquisitions; and

•	increased occupancy in former redevelopment and development properties that have been placed into service; partially offset by

•	decreased NOI from MOB sales during 2019 and 2020.

---

---

•	fund capital expenditures, including tenant improvements and leasing costs and

•	fund future acquisition, transactional and development activities.

•	cash flow from operations;

•	sale or exchange of ownership interests in properties or other investments;

•	borrowings under our revolving line of credit facility and unsecured commercial paper program;

•	issuance of additional debt, including unsecured notes, term loans and mortgage debt; and/or

•	issuance of common or preferred stock or its equivalent.

---

•	made investments of $657 million primarily related to the acquisition, development, and redevelopment of real estate and funding of a participating development loan and

•	received net proceeds of $506 million primarily from sales of real estate assets.

•	made investments of $289 million primarily related to the acquisition, development, and redevelopment of real estate; and

•	received net proceeds of $129 million primarily from sales of real estate assets.

•	made net repayments of $98 million primarily under our bank line of credit and commercial paper program;

•	issued common stock of $1.1 billion; and

•	paid cash dividends on common stock of $189 million.

•	made net borrowings of $193 million under our bank line of credit, senior unsecured notes and mortgage debt; and

•	paid cash dividends on common stock of $177 million.

---

---

---

(1)	For the three months ended March 31, 2020, relates to the gain on consolidation of 13 continuing care retirement communities in which we acquired Brookdale's interest and began consolidating during the first quarter of 2020. The gain upon change of control is included in other income (expense), net in the consolidated statements of operations.

(2)

For the three months ended March 31, 2020, includes the termination fee and transition fee expenses related to terminating the management agreements with Brookdale for 13 CCRCs and transitioning those communities to LCS, partially offset by the tax benefit recognized related to those expenses. The expense related to terminating the CCRC management agreements with Brookdale is included in operating expenses in the consolidated statement of operations for the three months ended March 31, 2020.

(3)

For the three months ended March 31, 2020, includes the gain on sale of a hospital that was in a direct financing lease ("DFL"), partially offset by $8 million of additional reserves for loan losses under the new current expected credit losses accounting standard in accordance with ASC 326, Financial Instruments – Credit Losses. The $42 million gain on sale of the hospital that was in a DFL is included in other income (expense), net in the consolidated statement of operations for the three months ended March 31, 2020.

(4)	For the three months ended March 31, 2020, represents the tax benefit of the CARES Act extending the net operating loss carryback period to five years.

(5)

In connection with the acquisition of the remaining 51% interest in the CCRC JV in January 2020, we consolidated the 13 communities in the CCRC JV and recorded the assets and liabilities at their acquisition date relative fair values, including the CCRC contract liabilities associated with previously collected non-refundable entrance fees. In conjunction with increasing those CCRC contract liabilities to their fair value, we concluded that we will no longer adjust for the timing difference between non-refundable entrance fees collected and amortized as we believe the amortization of these fees is a meaningful representation of how we satisfy the performance obligations of the fees. As such, upon consolidation of the CCRC assets, we no longer exclude the difference between CCRC entrance fees collected and amortized from the calculation of AFFO. For comparative periods presented, the adjustment continues to represent our 49% share of non-refundable entrance fees collected by the CCRC JV, net of reserves and net of CCRC JV entrance fee amortization.

(6)	For the three months ended March 31, 2020, includes an $8 million current tax refund receivable due to the changes in tax legislation enacted under the CARES Act.

(7)	Primarily includes our share of AFFO capital expenditures from unconsolidated joint ventures, partially offset by noncontrolling interests' share of AFFO capital expenditures from consolidated joint ventures.

---

---

---

•	risks related to our business and operations;

•	risks related to our capital structure and market conditions;

•	risks related to other events; and

•	risks related to tax, including REIT-related risks.

---

•	rent deferrals or delays in rent commencement for many of our tenants, which we have granted to date for tenants within our medical office and life science segments, will result in a significant decrease in our cash receipts during the period of the deferrals;

•	material cost increases at our SHOP facilities, for which we are responsible;

•	non-payment of contractual obligations by our tenants or operators, and any limitations on our ability to enforce our lease agreements or management agreements with our tenants or operators, as applicable, as a result of any federal, state or local restrictions on tenant evictions for failure to make contractual rent payments, which may result in higher reserves for bad debt;

•	our tenants, operators or borrowers becoming insolvent or initiating bankruptcy or similar proceedings, which would adversely affect our ability to collect rent or interest payments from such tenants or borrowers, as applicable, and result in increased costs to us, as well as decreased revenues;

•	the complete or partial closures of, or other operational issues at, one or more of our properties resulting from government action or directives, which may intensify the risk of rent deferrals or non-payment of contractual obligations by our tenants or operators;

•	any possession taken of our properties, in whole or in part, by governmental authorities for public purposes in eminent domain proceedings;

•	the likelihood that we will amend existing lease agreements and existing rental terms, with our tenants, and management agreements and existing fee structures, with our RIDEA operators, particularly in our senior housing portfolio, which would have an adverse effect on our revenues and results of operations;

•	increased costs or delays that may result if we determine to reposition or transition any of our currently-leased properties to another tenant or operator, which could adversely impact our revenues and results of operations;

•

the impact on our results of operations and financial condition resulting from (i) suspensions or delays in development and redevelopment activities and tenant improvement projects, including due to shelter-in-place orders, local, state and federal guidelines, delays caused by slow-downs in construction as a result of implementing social distancing and other health and safety protocols, or delays caused by a shortage of construction materials or labor, as well as potential postponement of rent commencement dates due to delays in tenant improvement projects, and (ii) an expected decrease in acquisitions and dispositions of properties compared to historical levels;

•	the need to provide sell-side financing in order to dispose of certain properties in our portfolio at acceptable prices;

•	the impact on our tenants or operators, particularly in our senior housing portfolio, of lawsuits related to COVID-19 outbreaks that have occurred or may occur at our properties and the potential that insurance coverage may not be sufficient to cover any potential losses;

•	material increases in our insurance costs and larger deductibles;

•	significant expenses likely to be incurred in connection with our pursuit of creditor rights resulting from operator and tenant defaults and insolvency;

•	a potential downgrade of our issuer and long-term credit rating following the change in our outlook from “stable” to “negative” by Moody’s, which could increase our cost of capital and any future debt financing;

•	refusal or failure by one or more of our lenders under our credit facility to fund their financing commitments to us as a result of lender liquidity and/or viability challenges, which financing commitments we may not be able to replace on favorable terms, or at all;

•	the likelihood that conditions related to the COVID-19 pandemic may require us to recognize impairments of long-lived assets or credit losses related to loans receivable;

---

•	the impact on our business if our executive officers, management team or a significant percentage of our employees are unable to continue to work because of illness caused by COVID-19, as well as the significant time and attention devoted by our management team to monitor the COVID-19 pandemic and seek to mitigate its effect on our business; and

•	the deterioration of state and local economic conditions and job losses, particularly in San Francisco, San Diego and Boston, which may decrease demand for and occupancy levels at our life science properties and cause our rental rates and property values to be negatively impacted.

---

---

---

---

---

---

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

•

the development and construction costs of a project may exceed original estimates due to increased interest rates, higher costs relating to materials, transportation, labor, leasing, negligent construction or construction defects, damage, vandalism or accidents, among others, and increased costs as a result of COVID-19 related delays and/or pressure on supply chains, which could make the completion of the development project less profitable;

•

the project may not be completed on schedule as a result of a variety of factors that are beyond our control, including natural disasters and other catastrophic events, health crises or other pandemics such as the COVID-19 pandemic and related restrictions on development and redevelopment activities, labor conditions, material shortages, regulatory hurdles, including the ability to obtain necessary zoning or land use permits, civil unrest and acts of war or terrorism, which result in increases in construction costs and debt service expenses or provide tenants or operators with the right to terminate pre-construction leases; and

•	demand for the new project may decrease prior to completion, due to competition or other developments such as the COVID-19 pandemic, and occupancy rates and rents at a newly completed property may not meet expected levels and could be insufficient to make the property profitable.

---

•

some of our tenants require significant funding for the research, development, clinical testing, manufacture and commercialization of their products and technologies, as well as to fund their obligations, including rent payments due to us, and our tenants’ ability to raise capital depends on the viability of their products and technologies, their financial and operating condition and outlook, and the overall financial, banking and economic environment. If venture capital firms, private investors, the public markets, companies in the life science industry, the government or other sources of funding are difficult to obtain or unavailable to support our tenants’ activities, including as a result of general economic conditions, adverse market conditions or government shutdowns that limit our tenants’ ability to raise capital, such as those resulting from the current COVID-19 pandemic, a tenant’s business would be adversely affected or fail;

•

the research, development, clinical testing, manufacture and marketing of some of our tenants’ products require federal, state and foreign regulatory approvals which may be costly or difficult to obtain, may take several years and be subject to delay, including delays brought on by the COVID-19 pandemic, may not be obtained at all, require validation through clinical trials that may face delays or difficulties resulting from the COVID-19 pandemic or otherwise, require the use of substantial resources, and may often be unpredictable;

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

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

•	our tenants with marketable products may be unable to successfully manufacture their drugs economically;

•	our tenants depend on the commercial success of certain products, which may be reliant on the efficacy of the product, as well as acceptance among doctors and patients; negative publicity or negative results or safety signals from the clinical trials of competitors may reduce demand or prompt regulatory actions; and

•	our tenants may be unable to adapt to the rapid technological advances in the industry and to adequately protect their intellectual property under patent, copyright or trade secret laws and defend against third-party claims of intellectual property violations.

---

---

•	our joint venture partners could have investment and financing goals that are not consistent with our objectives, including the timing, terms and strategies for any investments, and what levels of debt to incur or carry;

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

•	our joint venture partners may have competing interests in our markets that could create conflicts of interest;

•	our ability to transfer our interest in a joint venture to a third party may be restricted and the market for our interest may be limited and/or valued lower than fair market value;

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

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

---

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

•	unasserted claims of vendors, residents, patients or other persons dealing with the seller;

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

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

•	claims for return of government reimbursement payments; and

•	liabilities for taxes relating to periods prior to our acquisition.

---

---

•	statutory and regulatory changes;

•	retroactive rate adjustments;

•	recovery of program overpayments or set-offs;

•	federal, state and local litigation and enforcement actions;

•	administrative proceedings;

•	policy interpretations;

•	payment or other delays by fiscal intermediaries or carriers;

•	government funding restrictions (at a program level or with respect to specific properties);

•	reduced reimbursement rates under managed care contracts;

•	interruption or delays in payments due to any ongoing governmental investigations and audits at such properties; and

•	reputational harm of publicly disclosed enforcement actions, audits or investigations related to billing and reimbursements.

---

---

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

•	the market price of the shares of our equity securities and the credit ratings of our debt and any preferred securities we may issue;

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

•	our degree of financial leverage and operational flexibility;

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

•	the stability of the market value of our properties;

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

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

---

•	issues facing the healthcare industry, including, but not limited to, healthcare reform, changes in government reimbursement policies and the unique challenges posed by the COVID-19 pandemic; and

•	the performance of the national and global economies generally, including the ongoing economic downturn and volatility in the financial markets as a result of the COVID-19 pandemic.

---

---

---

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

•	we will be subject to corporate-level income tax on our taxable income at regular corporate rates;

•	we will be subject to increased state and local income taxes; and

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

---

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

---

---