Ventas, Inc. - Quarter Report: 2017 June (Form 10-Q)

Number of Shares
Repurchased ⁽¹⁾

Average Price
Per Share

April 1 through April 30

May 1 through May 31

June 1 through June 30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
x	EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED	JUNE 30, 2017
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 ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 July 26, 2017:
Common Stock, $0.25 par value		356,150,173

VENTAS, INC.

FORM 10-Q

INDEX




		Page
PART I—FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	1
	Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	1
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2017 and 2016	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016	3
	Consolidated Statements of Equity for the Six Months Ended June 30, 2017 and the Year Ended December 31, 2016	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	69
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 6.	Exhibits	70

PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	As of June 30, 2017			As of December 31, 2016
	(In thousands, except per share amounts)
Assets
Real estate investments:
Land and improvements	$	2,117,692		$	2,089,591
Buildings and improvements	21,827,419			21,516,396
Construction in progress	281,093			210,599
Acquired lease intangibles	1,534,173			1,510,629
	25,760,377			25,327,215
Accumulated depreciation and amortization	(5,220,611		)	(4,932,461		)
Net real estate property	20,539,766			20,394,754
Secured loans receivable and investments, net	1,395,404			702,021
Investments in unconsolidated real estate entities	119,794			95,921
Net real estate investments	22,054,964			21,192,696
Cash and cash equivalents	103,353			286,707
Escrow deposits and restricted cash	68,343			80,647
Goodwill	1,034,054			1,033,225
Assets held for sale	89,569			54,961
Other assets	505,475			518,364
Total assets	$	23,855,758		$	23,166,600
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	11,907,997		$	11,127,326
Accrued interest	87,248			83,762
Accounts payable and other liabilities	929,573			907,928
Liabilities related to assets held for sale	9,812			1,462
Deferred income taxes	296,822			316,641
Total liabilities	13,231,452			12,437,119
Redeemable OP unitholder and noncontrolling interests	182,154			200,728
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, 356,134 and 354,125 shares issued at June 30, 2017 and December 31, 2016, respectively	89,016			88,514
Capital in excess of par value	13,019,023			12,917,002
Accumulated other comprehensive loss	(45,035		)	(57,534		)
Retained earnings (deficit)	(2,688,946		)	(2,487,695		)
Treasury stock, 0 and 1 shares at June 30, 2017 and December 31, 2016, respectively	—			(47		)
Total Ventas stockholders’ equity	10,374,058			10,460,240
Noncontrolling interests	68,094			68,513
Total equity	10,442,152			10,528,753
Total liabilities and equity	$	23,855,758		$	23,166,600

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands, except per share amounts)
Revenues
Rental income:
Triple-net leased	$	213,258		$	210,119		$	422,585		$	424,606
Office	186,240			144,087			372,135			288,223
	399,498			354,206			794,720			712,829
Resident fees and services	460,243			464,437			924,431			928,413
Office building and other services revenue	3,179			5,504			6,585			12,689
Income from loans and investments	32,368			24,146			52,514			46,532
Interest and other income	202			111			683			230
Total revenues	895,490			848,404			1,778,933			1,700,693
Expenses
Interest	113,572			103,665			222,376			206,938
Depreciation and amortization	224,108			221,961			441,891			458,348
Property-level operating expenses:
Senior living	308,625			307,989			620,698			620,530
Office	57,205			43,966			114,119			87,647
	365,830			351,955			734,817			708,177
Office building services costs	552			1,852			1,290			5,303
General, administrative and professional fees	33,282			32,094			67,243			63,820
Loss on extinguishment of debt, net	36			2,468			345			2,782
Merger-related expenses and deal costs	6,043			7,224			8,099			8,856
Other	1,848			2,303			3,036			6,471
Total expenses	745,271			723,522			1,479,097			1,460,695
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	150,219			124,882			299,836			239,998
(Loss) income from unconsolidated entities	(106		)	1,418			3,044			1,220
Income tax benefit	2,159			11,549			5,304			19,970
Income from continuing operations	152,272			137,849			308,184			261,188
Discontinued operations	(23		)	(148		)	(76		)	(637		)
Gain on real estate dispositions	719			5,739			44,008			31,923
Net income	152,968			143,440			352,116			292,474
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Net income attributable to common stockholders	$	151,831		$	143,162		$	349,958		$	292,142
Earnings per common share
Basic:
Income from continuing operations	$	0.43		$	0.41		$	0.87		$	0.77
Net income attributable to common stockholders	0.43			0.42			0.99			0.87
Diluted:
Income from continuing operations	$	0.42		$	0.40		$	0.86		$	0.77
Net income attributable to common stockholders	0.42			0.42			0.98			0.86
Weighted average shares used in computing earnings per common share:
Basic	355,024			338,901			354,719			337,230
Diluted	358,311			342,571			357,919			340,851
Dividends declared per common share	$	0.775		$	0.73		$	1.55		$	1.46

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands)
Net income	$	152,968		$	143,440		$	352,116		$	292,474
Other comprehensive income (loss):
Foreign currency translation	8,286			(22,715		)	12,368			(33,383		)
Change in unrealized gain on marketable securities	(62		)	69			(185		)	250
Other	398			(1,617		)	316			(3,497		)
Total other comprehensive income (loss)	8,622			(24,263		)	12,499			(36,630		)
Comprehensive income	161,590			119,177			364,615			255,844
Comprehensive income attributable to noncontrolling interests	1,137			278			2,158			332
Comprehensive income attributable to common stockholders	$	160,453		$	118,899		$	362,457		$	255,512

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2017 and the Year Ended December 31, 2016

(Unaudited)



June 30, 2017	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 Interests			Total Equity
2017	(In thousands, except per share amounts
Balance at January 1, 2016	$	83,579	$	11,602,838		$	(7,565	)	$	(2,111,958	)	$	(2,567	)	$	9,564,327		$	61,100		$	9,625,427
Net income	—		—			—			649,231			—			649,231			2,259			651,490
Other comprehensive loss	—		—			(49,969		)	—			—			(49,969		)	—			(49,969		)
Impact of CCP Spin-Off	—		640			—			—			—			640			—			640
Net change in noncontrolling interests	—		(2,179		)	—			—			—			(2,179		)	19,008			16,829
Dividends to common stockholders—$2.965 per share	—		—			—			(1,024,968		)	—			(1,024,968		)	—			(1,024,968		)
Issuance of common stock	4,716		1,281,947			—			—			17			1,286,680			—			1,286,680
Issuance of common stock for stock plans	99		26,594			—			—			2,572			29,265			—			29,265
Change in redeemable noncontrolling interests	—		(1,714		)	—			—			—			(1,714		)	(13,854		)	(15,568		)
Adjust redeemable OP unitholder interests to current fair value	—		(21,085		)	—			—			—			(21,085		)	—			(21,085		)
Redemption of OP units	92		22,622			—			—			1,098			23,812			—			23,812
Grant of restricted stock, net of forfeitures	28		7,339			—			—			(1,167		)	6,200			—			6,200
Balance at December 31, 2016	88,514		12,917,002			(57,534		)	(2,487,695		)	(47		)	10,460,240			68,513			10,528,753
Net income	—		—			—			349,958			—			349,958			2,158			352,116
Other comprehensive income	—		—			12,499			—			—			12,499			—			12,499
Impact of CCP Spin-Off	—		74			—			—			—			74			—			74
Net change in noncontrolling interests	—		(1,427		)	—			—			—			(1,427		)	(8,272		)	(9,699		)
Dividends to common stockholders—$1.55 per share	—		—			—			(551,209		)	—			(551,209		)	—			(551,209		)
Issuance of common stock	276		72,768			—			—			552			73,596			—			73,596
Issuance of common stock for stock plans	80		17,870			—			—			226			18,176			—			18,176
Change in redeemable noncontrolling interests	—		746			—			—			—			746			5,695			6,441
Adjust redeemable OP unitholder interests to current fair value	—		(20,163		)	—			—			—			(20,163		)	—			(20,163		)
Redemption of OP units	80		19,644			—			—			2,783			22,507			—			22,507
Grant of restricted stock, net of forfeitures	66		12,509			—			—			(3,514		)	9,061			—			9,061
Balance at June 30, 2017	$	89,016	$	13,019,023		$	(45,035	)	$	(2,688,946	)	$	—		$	10,374,058		$	68,094		$	10,442,152

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	For the Six Months Ended June 30,
	2017			2016
	(In thousands)
Cash flows from operating activities:
Net income	$	352,116		$	292,474
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	441,891			458,348
Amortization of deferred revenue and lease intangibles, net	(10,849		)	(10,090		)
Other non-cash amortization	6,584			4,687
Stock-based compensation	13,396			10,037
Straight-lining of rental income, net	(11,155		)	(15,426		)
Loss on extinguishment of debt, net	345			2,782
Gain on real estate dispositions	(44,008		)	(31,923		)
Gain on re-measurement of equity interest upon acquisition, net	(3,027		)	—
Gain on real estate loan investments	(4		)	(33		)
Income tax benefit	(7,104		)	(21,443		)
Income from unconsolidated entities	(17		)	(1,220		)
Distributions from unconsolidated entities	3,134			3,873
Other	1,348			724
Changes in operating assets and liabilities:
Decrease in other assets	29,934			10,609
Increase (decrease) in accrued interest	4,550			(769		)
Decrease in accounts payable and other liabilities	(39,878		)	(41,894		)
Net cash provided by operating activities	737,256			660,736
Cash flows from investing activities:
Net investment in real estate property	(239,498		)	(34,453		)
Investment in loans receivable and other	(718,233		)	(152,450		)
Proceeds from real estate disposals	19,570			63,561
Proceeds from loans receivable	25,067			7,644
Development project expenditures	(143,269		)	(69,679		)
Capital expenditures	(55,952		)	(46,925		)
Investment in unconsolidated entities	(39,048		)	(4,265		)
Net cash used in investing activities	(1,151,363		)	(236,567		)
Cash flows from financing activities:
Net change in borrowings under revolving credit facility	364,456			24,304
Proceeds from debt	1,028,509			416,217
Repayment of debt	(656,536		)	(740,337		)
Purchase of noncontrolling interests	(15,809		)	(1,604		)
Payment of deferred financing costs	(19,687		)	(3,844		)
Issuance of common stock, net	73,596			377,739
Cash distribution to common stockholders	(550,965		)	(493,471		)
Cash distribution to redeemable OP unitholders	(3,720		)	(4,437		)
Contributions from noncontrolling interests	2,227			5,680
Distributions to noncontrolling interests	(4,156		)	(3,582		)
Other	9,702			3,622
Net cash provided by (used in) financing activities	227,617			(419,713		)
Net (decrease) increase in cash and cash equivalents	(186,490		)	4,456
Effect of foreign currency translation on cash and cash equivalents	3,136			(157		)
Cash and cash equivalents at beginning of period	286,707			53,023
Cash and cash equivalents at end of period	$	103,353		$	57,322

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)



	For the Six Months Ended June 30,
	2017			2016
	(In thousands)
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments	$	205,266		$	8,665
Utilization of funds held for an Internal Revenue Code Section 1031 exchange	(84,995		)	(6,954		)
Other assets acquired	(4,096		)	861
Debt assumed	64,629			—
Other liabilities	65,754			2,638
Deferred income tax liability	(16,180		)	(66		)
Noncontrolling interests	1,972			—
Equity issued for redemption of OP and Class C units	22,359			20,770

See accompanying notes.

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 June 30, 2017, we owned approximately 1,300 properties (including properties owned through investments in unconsolidated entities and properties classified as held for sale), consisting of seniors housing communities, medical office buildings (“MOBs”), life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, general acute care hospitals and skilled nursing facilities (“SNFs”), and we had eight properties under development, including one property that is owned by an unconsolidated real estate entity. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois.

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 June 30, 2017, we leased a total of 580 properties (excluding MOBs) 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 301 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”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) leased from us 141 properties (excluding one property managed by Brookdale Senior Living pursuant to a long-term management agreement), 10 properties and 68 properties (excluding one MOB included within our office operations reportable business segment), respectively, as of June 30, 2017.

Through our Lillibridge Healthcare Services, Inc. subsidiary and our ownership interest in PMB Real Estate Services LLC, 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 non-mortgage loans and other investments relating to seniors housing and healthcare operators or properties.

NOTE 2—ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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, 2016, filed with the SEC on February 14, 2017. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

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 (“LP”) interests or there is an increase or decrease in the number of outstanding LP interests. We also apply this guidance to managing member interests in limited liability companies (“LLCs”).

We consolidate several VIEs that share the following common characteristics:

•the VIE is in the legal form of an LP or LLC;

•the VIE was designed to own and manage its underlying real estate investments;

•we are the general partner or managing member of the VIE;

•we own 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 VIE; and

•we are the primary beneficiary of the VIE.

We have separately 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 we are 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.

In general, the assets of 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.



	June 30, 2017				December 31, 2016
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In thousands)

NHP/PMB L.P.	$	626,227	$	194,369	$	639,763	$	199,674
Ventas Realty Capital Healthcare Trust Operating Partnership, L.P.	—		—		2,143,139		162,426
Other identified VIEs	1,945,402		332,971		1,882,336		354,034
Tax credit VIEs	949,241		222,644		981,752		234,109

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. Under this method of accounting, our share of the investee’s earnings or losses is included in our Consolidated Statements of Income.

We base the initial carrying value of investments in unconsolidated entities on the fair value of the assets at the time we acquired the joint venture interest. We estimate fair values for our equity method investments based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums or discounts. The capitalization rates, discount rates and credit spreads we use in these models are based upon assumptions that we believe to be within a reasonable range of current market rates for the respective investments.

We generally amortize any difference between our cost basis and the basis reflected at the joint venture level, if any, over the lives of the related assets and liabilities and include that amortization in our share of income or loss from unconsolidated entities. For earnings of equity method investments with pro rata distribution allocations, net income or loss is allocated between the partners in the joint venture based on their respective stated ownership percentages. In other instances, net income or loss is allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the joint venture at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the joint venture is calculated as the amount that the partner would receive if the joint venture were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under the HLBV method, in any given period, we could record more or less income than the joint venture has generated, than actual cash distributions received or than the amount we may receive in the event of an actual liquidation.

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 June 30, 2017, third party investors owned 2.7 million Class A limited partnership units in NHP/PMB (“OP Units”), which represented 27.5% of the total units then outstanding, and we owned 7.2 million Class B limited partnership units in NHP/PMB, representing the remaining 72.5%. 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 OP 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.

Prior to January 2017, we owned a majority interest in Ventas Realty Capital Healthcare Trust Operating Partnership, L.P. (“Ventas Realty OP”) and we consolidated this entity, as our wholly owned subsidiary is the general partner, and was the primary beneficiary of this VIE. In January 2017, third party investors redeemed the remaining 341,776 limited partnership units (“Class C Units”) outstanding for 341,776 shares of Ventas common stock, valued at $20.9 million. After giving effect to such redemptions, Ventas Realty OP is our wholly owned subsidiary.

As redemption rights are outside of our control, the redeemable OP Units and Class C Units (together, the “OP Unitholder Interests”) are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP Unitholder Interests at the greater of cost or fair value. As of June 30, 2017 and December 31, 2016, the fair value of the redeemable OP Unitholder Interests was $171.1 million and $177.2 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 Unitholder Interests. Our diluted earnings per share (“EPS”) includes the effect of any potential shares outstanding from redemption of the OP Unitholder Interests.

Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at June 30, 2017 and December 31, 2016. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interests’ 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. In March 2017, certain joint venture partners redeemed all (or a portion) of their interests for $15.8 million.

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 HLBV 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

For certain of our life science and innovation centers, we are party to contractual arrangements with TCIs that were established to enable the TCIs to receive benefits of historic tax credits (“HTCs”) and/or new market tax credits (“NMTCs”). As of June 30, 2017, we owned ten 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 prior to the applicable tax credit recapture periods.

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.

Accounting for Real Estate Acquisitions

On January 1, 2017, we adopted Accounting Standards Update (“ASU”) 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the FASB’s definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recognition of goodwill at the acquisition date and expense recognition for transaction costs as incurred. We are applying ASU 2017-01 prospectively for acquisitions after January 1, 2017.

Regardless of whether an acquisition is considered a business combination or an asset acquisition, we record the cost of the businesses or assets acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date. Intangibles primarily include the value of in-place leases and acquired lease contracts.

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 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 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 an acquisition, we may assume rights and obligations under certain lease agreements pursuant to which we become the lessee of a given property. We generally 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 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 assumed 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.

Impairment of Long-Lived and Intangible Assets

We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination.

If impairment indicators arise with respect to intangible assets with finite useful lives, we evaluate impairment by comparing the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, then we estimate the fair value of the asset and compare the estimated fair value to the intangible asset’s carrying value. We recognize any shortfall from carrying value as an impairment loss in the current period.

We evaluate our investments in unconsolidated entities for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of our investment may exceed its fair value. If we determine that a decline in the fair value of our investment in an unconsolidated entity is other-than-temporary, and if such reduced fair value is below the carrying value, we record an impairment.

We test goodwill for impairment at least annually, and more frequently if indicators arise. We first assess qualitative factors, such as current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed with a two-step approach to evaluating impairment. First, we estimate the fair value of the reporting unit and compare it to the reporting unit’s carrying value. If the carrying value exceeds fair value, we proceed with the second step, which requires us to assign the fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment. We recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value in the current period.

Estimates of fair value used in our evaluation of goodwill (if necessary based on our qualitative assessment), investments in real estate, investments in unconsolidated entities and intangible assets are based upon discounted future cash flow projections or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data. Our ability to accurately predict future operating results and cash flows and to estimate and determine fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

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.

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.


◦	Interest rate caps - We observe forward yield curves and other relevant information;


◦	Interest rate swaps - We observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates; and


◦	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 previously 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.

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 June 30, 2017 and December 31, 2016, this cumulative excess totaled $256.2 million (net of allowances of $113.1 million) and $244.6 million (net of allowances of $109.8 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

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 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, 2017, we adopted ASU 2016-09, Compensation - Stock Compensation (“ASU 2016-09”) which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Adoption of ASU 2016-09 did not have a significant impact on our Consolidated Financial Statements.

In 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”, as codified in “ASC 606”), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASC 606 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 ASC 606 specifically references contracts with customers, it may also apply to certain other transactions such as the sale of real estate. ASC 606 is effective for us beginning January 1, 2018 and we plan to adopt ASC 606 using the modified retrospective method.

We have evaluated all of our revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition. Based on a review of our various revenue streams, we believe the following items in our Consolidated Statements of Income are subject to ASC 606: office building and other services revenue, certain elements of our resident fees and services, common area maintenance in our office operations and gains on the sale of real estate. Our office building and other services revenues are primarily generated by management contracts where we provide management, leasing, marketing, facility development and advisory services. Resident fees and services include revenues generated through services we provide to residents of our seniors housing communities that are ancillary to the residents’ contractual rights to occupy living and common-area space at the communities, such as care, meals, transportation and activities. While these revenue streams are subject to the application of ASC 606, we believe that the recognition of income will be consistent with the current accounting model because currently the revenues associated with these services are generally recognized on a monthly basis, the period in which the related services are performed. We will not apply the principles of ASC 606 to our common area maintenance revenues until January 1, 2019, when we adopt ASU 2016-02, Leases (“ASU 2016-02”).

As it relates to gains on sale of real estate, we expect to recognize any gains when we transfer control of a property and will no longer apply existing sales criteria in ASC 360 Property, Plant, and Equipment. We are evaluating the impact of ASC 606 to $31.2 million of deferred gains relating to sales of real estate assets in 2015. Other than the potential cumulative effect adjustment relating to such deferred gains, we do not expect the adoption of ASC 606 to have a significant impact on our Consolidated Financial Statements. Our remaining implementation items include calculating the cumulative effect adjustment,

if any, to be recorded upon adoption of ASC 606, drafting revised disclosures in accordance with the new standard and implementing changes to internal control policies and procedures, if any.

In February 2016, the FASB issued ASU 2016-02, which introduces a lessee model that brings most leases on the balance sheet and, among 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 us 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 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”), which provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires an entity to show the changes in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-15 and ASU 2016-18 are effective for us beginning January 1, 2018 and will be applied by us using a retrospective transition method. Adoption of these standards is not expected to have a significant impact on our Consolidated Financial Statements.

In 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which requires a company to recognize the tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for us beginning January 1, 2018, with early adoption permitted. ASU 2016-16 will be applied by us using a modified retrospective method. Adoption of this standard is not expected to have a significant impact on our Consolidated Financial Statements.

NOTE 3—CONCENTRATION OF CREDIT RISK

As of June 30, 2017, Atria, Sunrise, Brookdale Senior Living, Ardent and Kindred managed or operated approximately 21.9%, 10.9%, 7.7%, 4.9% and 1.1%, respectively, of our real estate investments based on gross book value (excluding properties classified as held for sale and properties owned through investments in unconsolidated entities as of June 30, 2017). 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 lease tenants.

Seniors housing communities, based on gross book value, constituted approximately 25.1% of real estate investments in the triple-net leased properties reportable business segment and 35.3% of real estate investments in the senior living operations reportable business segment (excluding properties classified as held for sale and properties owned through investments in unconsolidated entities as of June 30, 2017). MOBs, life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, general acute care hospitals, SNFs and secured loans receivable and investments collectively comprised the remaining 39.6% of real estate investments. Our consolidated properties were located in 46 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of June 30, 2017, with properties in one state (California) accounting for more than 10% of our total continuing revenues and 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) for the three months then ended.

Triple-Net Leased Properties



	For the Three Months Ended June 30,
	2017		2016
Revenues⁽¹⁾:
Kindred⁽²⁾	5.1	%	5.4	%
Brookdale Senior Living⁽³⁾	4.7		4.9
Ardent	3.1		3.1
NOI:
Kindred⁽²⁾	8.6	%	9.3	%
Brookdale Senior Living⁽³⁾	7.9		8.3
Ardent	5.2		5.4


⁽¹⁾	Total revenues include office building and other services revenue, income from loans and investments and interest and other income.


⁽²⁾	Includes 36 skilled nursing facilities classified as held for sale at June 30, 2017 that are included in continuing operations.


⁽³⁾	Excludes one seniors housing community included in senior living operations and includes one seniors housing community classified as held for sale at June 30, 2017 that is included in continuing operations.

Each of our leases with Brookdale Senior Living, Ardent and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Ardent and Kindred 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 lease renewals by lease agreement or by pool of assets.

The properties we lease to Brookdale Senior Living, Ardent and Kindred accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended June 30, 2017 and 2016. If any of Brookdale Senior Living, Ardent or Kindred becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline, and our ability to service our indebtedness and to make distributions to our stockholders could be impaired. We cannot assure you that Brookdale Senior Living, Ardent and Kindred will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by Brookdale Senior Living, Ardent or Kindred to do so could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Brookdale Senior Living, Ardent and Kindred will elect to renew their respective leases with us upon expiration of the leases or that we will be able to reposition any non-renewed properties on a timely basis or on the same or better economic terms, if at all.

Senior Living Operations

As of June 30, 2017, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 269 of our 301 seniors housing communities, for which we pay annual management fees pursuant to long-term management agreements.

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.

Atria, Sunrise, Brookdale Senior Living, Ardent, and Kindred 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 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

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.

During the six months ended June 30, 2017, we acquired 14 triple-net leased properties (including six assets previously owned by an equity method investee) and one life science, research and medical campus (reported within our office operations reportable business segment) for an aggregate purchase price of $404.4 million. Each of these acquisitions was accounted for as an asset acquisition.

NOTE 5—DISPOSITIONS

2017 Activity

During the six months ended June 30, 2017, we sold 10 triple-net leased properties, two MOBs, and two vacant land parcels for aggregate consideration of $104.6 million and we recognized a gain on the sale of these assets of $44.0 million.

Pending Kindred Dispositions

In November 2016, we entered into agreements with Kindred providing that Kindred will either acquire all 36 SNFs owned by us and operated by Kindred (the “Ventas SNFs”) for $700 million, in connection with Kindred’s previously announced plan to exit its SNF business; or, renew the current lease on all unpurchased Ventas SNFs not purchased by Kindred by April 30, 2018 until 2025 at the current rent level plus annual escalations. On June 30, 2017, Kindred announced that it had signed definitive agreements to sell its entire SNF business to an affiliate of Blue Mountain Capital Management, LLC and that, as Kindred closes on the sale of its SNFs, Kindred will pay to us its allocable portion of the sale proceeds for a total $700 million aggregate purchase price for the Ventas SNFs and we will convey the applicable Ventas SNFs to the ultimate buyer. We expect to record a gain exceeding $600 million upon the sale of the Ventas SNFs, which are classified as held for sale on our Consolidated Balance Sheets as of June 30, 2017. Kindred expects the closings of the sale of the Ventas SNFs to occur in phases, beginning in the third quarter of 2017 and completed by year end 2017. However, there can be no assurance that the closings will occur or the timing of any such closings.

Real Estate Impairment

We recognized impairments of $15.6 million and $14.5 million, respectively, for the six months ended June 30, 2017 and 2016, which are recorded in depreciation and amortization in our Consolidated Statements of Income.

Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale as of June 30, 2017 and December 31, 2016, including the amounts reported on our Consolidated Balance Sheets.



	June 30, 2017					December 31, 2016
	Number of Properties Held for Sale	Assets Held for Sale		Liabilities Related to Assets Held for Sale		Number of Properties Held for Sale	Assets Held for Sale		Liabilities Related to Assets Held for Sale
	(Dollars in thousands)
Triple-net Leased Properties	37	$	36,500	$	8,547	—	$	—	$	—
Office Operations	7	53,069		1,265		7	53,151		1,462
Senior Living Operations*	—	—		—		—	1,810		—
Total	44	$	89,569	$	9,812	7	$	54,961	$	1,462

* Includes one vacant land parcel classified as held for sale as of December 31, 2016 and sold in June 2017.

NOTE 6—LOANS RECEIVABLE AND INVESTMENTS

As of June 30, 2017 and December 31, 2016, we had $1.4 billion and $754.6 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 June 30, 2017 and December 31, 2016, including amortized cost, fair value and unrealized gains or losses on available-for-sale investments:



	Carrying Amount		Amortized Cost		Fair Value		Unrealized Gain
	(In thousands)
As of June 30, 2017:
Secured/mortgage loans and other	$	1,339,886	$	1,339,886	$	1,359,831	$	—
Government-sponsored pooled loan investments ⁽¹⁾	55,518		54,464		55,518		1,054
Total investments reported as Secured loans receivable and investments, net	1,395,404		1,394,350		1,415,349		1,054

Non-mortgage loans receivable, net	53,724		53,724		54,587		—
Total investments reported as Other assets	53,724		53,724		54,587		—
Total loans receivable and investments, net	$	1,449,128	$	1,448,074	$	1,469,936	$	1,054

As of December 31, 2016:
Secured/mortgage loans and other	$	646,972	$	646,972	$	655,981	$	—
Government-sponsored pooled loan investments ⁽¹⁾	55,049		53,810		55,049		1,239
Total investments reported as Secured loans receivable and investments, net	702,021		700,782		711,030		1,239

Non-mortgage loans receivable, net	52,544		52,544		53,626		—
Total investments reported as Other assets	52,544		52,544		53,626		—
Total loans receivable and investments, net	$	754,565	$	753,326	$	764,656	$	1,239

⁽¹⁾ Investments in government-sponsored pool loans have contractual maturity dates in 2023.

2017 Activity

In March 2017, we provided secured debt financing to a subsidiary of Ardent to facilitate Ardent’s acquisition of LHP Hospital Group, Inc., which included a $700.0 million term loan and a $60.0 million revolving line of credit feature (of which $27.5 million was outstanding at June 30, 2017). The LIBOR-based debt financing has a five-year term with a weighted average interest rate of approximately 9.0% as of June 30, 2017 and is guaranteed by Ardent’s parent company.

During the six months ended June 30, 2017, we received $13.7 million for the partial prepayment of secured and unsecured loans receivable and $6.0 million for the full repayment of one secured loan receivable that was due to mature on July 5, 2017.

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 June 30, 2017, we had ownership interests (ranging from 5% to 25%) in joint ventures that owned 31 properties, excluding properties under development and properties classified as held for sale. 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 $1.4 million and $1.6 million for the three months ended June 30, 2017 and 2016, respectively, and $3.0 million and $3.2 million for the six months ended June 30, 2017 and 2016, respectively, which is included in office building and other services revenue in our Consolidated Statements of Income.

In February 2017, we acquired the controlling interest in six triple-net leased seniors housing communities for a purchase price of $100.0 million. In connection with this acquisition, we re-measured the fair value of our previously held equity interest, resulting in a gain on re-measurement of $3.0 million, which is included in income (loss) from unconsolidated entities in our Consolidated Statements of Income.

NOTE 8—INTANGIBLES

The following is a summary of our intangibles as of June 30, 2017 and December 31, 2016:



	June 30, 2017				December 31, 2016
	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	$	186,323		7.2	$	184,993		6.9
In-place and other lease intangibles	1,347,850			23.6	1,325,636			23.6
Goodwill	1,034,054			N/A	1,033,225			N/A
Other intangibles	35,840			12.0	35,783			11.3
Accumulated amortization	(818,055		)	N/A	(769,558		)	N/A
Net intangible assets	$	1,786,012		21.5	$	1,810,079		21.5
Intangible liabilities:
Below market lease intangibles	$	361,009		13.8	$	345,103		14.1
Other lease intangibles	40,343			39.5	40,843			38.5
Accumulated amortization	(148,110		)	N/A	(133,468		)	N/A
Purchase option intangibles	3,568			N/A	3,568			N/A
Net intangible liabilities	$	256,810		15.6	$	256,046		15.9

N/A—Not Applicable.

Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.

NOTE 9—OTHER ASSETS

The following is a summary of our other assets as of June 30, 2017 and December 31, 2016:



	June 30, 2017		December 31, 2016
	(In thousands)
Straight-line rent receivables, net	$	256,160	$	244,580
Non-mortgage loans receivable, net	53,724		52,544
Other intangibles, net	7,138		8,190
Investments in unconsolidated operating entities	43,668		28,431
Other	144,785		184,619
Total other assets	$	505,475	$	518,364

NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of June 30, 2017 and December 31, 2016:



	June 30, 2017			December 31, 2016
	(In thousands)
Unsecured revolving credit facility ⁽¹⁾	$	516,455		$	146,538
1.250% Senior Notes due 2017	—			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⁾	278,586			371,215
4.00% Senior Notes due 2019	600,000			600,000
3.00% Senior Notes, Series A due 2019 ⁽³⁾	308,595			297,841
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⁾	192,871			186,150
3.125% Senior Notes due 2023	400,000			400,000
3.100% Senior Notes due 2023	400,000			—
2.55% Senior Notes, Series D due 2023 ⁽³⁾	212,159			—
3.750% Senior Notes due 2024	400,000			400,000
4.125% Senior Notes, Series B due 2024 ⁽³⁾	192,872			186,150
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			450,000
3.850% Senior Notes due 2027	400,000			—
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	1,506,572			1,718,897
Total	11,992,233			11,190,914
Deferred financing costs, net	(73,679		)	(61,304		)
Unamortized fair value adjustment	20,696			25,224
Unamortized discounts	(31,253		)	(27,508		)
Senior notes payable and other debt	$	11,907,997		$	11,127,326


⁽¹⁾	As of June 30, 2017 and December 31, 2016, respectively, $33.1 million and $146.5 million of aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $30.4 million were denominated in British pounds as of June 30, 2017. There were no aggregate borrowings denominated in British pounds as of December 31, 2016.


⁽²⁾	These amounts represent in aggregate the $478.6 million and $571.2 million of unsecured term loan borrowings under our unsecured credit facility as of June 30, 2017 and December 31, 2016, respectively. As of December 31, 2016, $92.6 million due 2019 was in the form of Canadian dollars, which was repaid in full during the six months ended June 30, 2017.


⁽³⁾	These borrowings are in the form of Canadian dollars.

As of June 30, 2017, our indebtedness had the following maturities:



	Principal Amount Due at Maturity		Unsecured Revolving Credit Facility ⁽¹⁾		Scheduled Periodic Amortization		Total Maturities
	(In thousands)
2017	$	103,561	$	—	$	11,611	$	115,172
2018	1,101,879		—		20,559		1,122,438
2019	1,599,713		—		14,596		1,614,309
2020	1,422,547		—		11,697		1,434,244
2021	772,838		516,455		10,228		1,299,521
Thereafter ⁽²⁾	6,291,984		—		114,565		6,406,549
Total maturities	$	11,292,522	$	516,455	$	183,256	$	11,992,233


⁽¹⁾	As of June 30, 2017, we had $103.4 million of unrestricted cash and cash equivalents, for $413.1 million of net borrowings outstanding under our unsecured revolving credit facility.


⁽²⁾	Includes $52.4 million aggregate principal amount of our 6.90% senior notes due 2037 that is subject to repurchase, at the option of the holders, on October 1 in each of 2017 and 2027, and $23.0 million aggregate principal amount of 6.59% senior notes due 2038 that is subject to repurchase, at the option of the holders, on July 7 in each of 2018, 2023 and 2028.

Unsecured Revolving Credit Facility and Unsecured Term Loans

In April 2017, we entered into a new unsecured credit facility comprised of a $3.0 billion unsecured revolving credit facility, initially priced at LIBOR plus 0.875%, that replaced our previous $2.0 billion unsecured revolving credit facility priced at LIBOR plus 1.0%. The new unsecured credit facility is also comprised of our $200.0 million term loan that is scheduled to mature in 2018 and our $278.6 million term loan that is scheduled to mature in 2019. The 2018 and 2019 term loans remain priced at LIBOR plus 1.05%.

The new revolving credit facility matures in 2021, but may be extended at our option subject to the satisfaction of certain conditions for two additional periods of six months each. The new revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion.

As of June 30, 2017, we had $516.5 million of borrowings outstanding, $14.5 million of letters of credit outstanding and $2.5 billion of unused borrowing capacity available under our new revolving credit facility.

As of June 30, 2017, we also had a $900.0 million term loan due 2020 priced at LIBOR plus 0.975%.

Senior Notes

In March 2017, Ventas Realty, Limited Partnership (“Ventas Realty”) issued and sold $400.0 million aggregate principal amount of 3.100% senior notes due 2023 at a public offering price equal to 99.280% of par, for total proceeds of $397.1 million before the underwriting discount and expenses, and $400.0 million aggregate principal amount of 3.850% senior notes due 2027 at a public offering price equal to 99.196% of par, for total proceeds of $396.8 million before the underwriting discount and expenses.

In April 2017, we repaid in full, at par, $300.0 million aggregate principal amount then outstanding of our 1.250% senior notes due 2017 upon maturity.

In June 2017, Ventas Canada Finance Limited issued and sold C$275.0 million aggregate principal amount of 2.55% senior notes, Series D due 2023 at a price equal to 99.954% of par, for total proceeds of C$274.9 million before the agent fees and expenses. The notes were offered on a private placement basis in Canada. We used part of the proceeds to repay C$124.4 million on our unsecured term loan due 2019.

Mortgage Loan Obligations

During the six months ended June 30, 2017, we repaid in full mortgage loans outstanding in the aggregate principal amount of $237.0 million with a weighted average maturity of 1.7 years and recognized a gain on extinguishment of debt of $0.4 million in connection with these repayments.

Derivatives and Hedging

In January and February 2017, we entered into a total of $275 million of notional forward starting swaps with an effective date of April 3, 2017, that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of 2.33%. In March 2017, these swaps were terminated in conjunction with our issuance of the 3.850% senior notes due 2027, which resulted in a $0.8 million gain which will be recognized over the life of the notes using the effective interest method.

In March 2017, we entered into interest rate swaps totaling a notional amount of $400 million with a maturity of January 15, 2023, effectively converting fixed rate debt to three month LIBOR-based floating rate debt. As a result, we will receive a fixed rate on the swap of 3.10% and will pay a floating rate equal to three month LIBOR plus a weighted average swap spread of 0.98%.

In June 2017, we entered into a total of $125 million of notional forward starting swaps with an effective date of January 15, 2018 and a maturity of January 15, 2028, that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of 2.1832%.

NOTE 11—FAIR VALUES OF FINANCIAL INSTRUMENTS

As of June 30, 2017 and December 31, 2016, the carrying amounts and fair values of our financial instruments were as follows:



	June 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Assets:
Cash and cash equivalents	$	103,353	$	103,353	$	286,707	$	286,707
Secured mortgage loans and other, net	1,339,886		1,359,831		646,972		655,981
Non-mortgage loans receivable, net	53,724		54,587		52,544		53,626
Government-sponsored pooled loan investments	55,518		55,518		55,049		55,049
Derivative instruments	6,716		6,716		3,302		3,302
Liabilities:
Senior notes payable and other debt, gross	11,992,233		12,234,725		11,190,914		11,369,440
Derivative instruments	2,358		2,358		2,316		2,316
Redeemable OP unitholder interests	171,114		171,114		177,177		177,177

For a discussion of the assumptions considered, refer to “NOTE 2—ACCOUNTING POLICIES.” The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

NOTE 12—LITIGATION

Proceedings against Tenants, Operators and Managers

From time to time, Atria, Sunrise, Brookdale Senior Living, Kindred, Ardent and our other tenants, operators and managers are parties to certain legal actions, regulatory investigations and claims arising in the conduct of their business and operations. Even though we generally are not party to these proceedings, the unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.

Proceedings Indemnified and Defended by Third Parties

From time to time, we are party to certain legal actions, regulatory investigations and claims for which third parties are contractually obligated to indemnify, defend and hold us harmless. The tenants of our triple-net leased properties and, in some

cases, their affiliates are required by the terms of their leases and other agreements with us to indemnify, defend and hold us harmless against certain actions, investigations and claims arising in the course of their business and related to the operations of our triple-net leased properties. In addition, third parties from whom we acquired certain of our assets and, in some cases, their affiliates are required by the terms of the related conveyance documents to indemnify, defend and hold us harmless against certain actions, investigations and claims related to the acquired assets and arising prior to our ownership or related to excluded assets and liabilities. In some cases, a portion of the purchase price consideration is held in escrow for a specified period of time as collateral for these indemnification obligations. We are presently being defended by certain tenants and other obligated third parties in these types of matters. We cannot assure you that our tenants, their affiliates or other obligated third parties will continue to defend us in these matters, that our tenants, their affiliates or other obligated third parties will have sufficient assets, income and access to financing to enable them to satisfy their defense and indemnification obligations to us or that any purchase price consideration held in escrow will be sufficient to satisfy claims for which we are entitled to indemnification. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect our tenants’ or other obligated third parties’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.

Proceedings Arising in Connection with Senior Living and Office Operations; Other Litigation

From time to time, we are party to various legal actions, regulatory investigations and claims (some of which may not be insured and some of which may allege large damage amounts) arising in connection with our senior living and office operations or otherwise in the course of our business. In limited circumstances, the manager of the applicable seniors housing community, MOB or life science and innovation center may be contractually obligated to indemnify, defend and hold us harmless against such actions, investigations and claims. It is the opinion of management, except as otherwise set forth in this Note 12, that the disposition of any such actions, investigations and claims that are currently pending will not, individually or in the aggregate, have a Material Adverse Effect on us. However, regardless of their merits, we may be forced to expend significant financial resources to defend and resolve these matters. We are unable to predict the ultimate outcome of these actions, investigations and claims, and if management’s assessment of our liability with respect thereto is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.

NOTE 13—INCOME TAXES

We have elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this Note 13. Certain REIT entities are subject to foreign income tax.

Although the TRS entities and certain other foreign entities have paid minimal cash federal, state and foreign income taxes for the six months ended June 30, 2017, their income tax liabilities may increase in future periods as we exhaust net operating loss (“NOL”) carryforwards and as our senior living and other operations grow. Such increases could be significant.

Our consolidated provision for income taxes for the three months ended June 30, 2017 and 2016 was a benefit of $2.2 million and $11.5 million, respectively. Our consolidated provision for income taxes for the six months ended June 30, 2017 and 2016 was a benefit of $5.3 million and $20.0 million, respectively. The income tax benefits for the three months and six months ended June 30, 2017 and 2016 were each due primarily to operating losses at our taxable REIT subsidiaries; however, $0.8 million and $5.9 million of the income tax benefit for the three and six months ended June 30, 2017 and 2016, respectively, were due to the reversal of a net deferred tax liability at a TRS entity.

Realization of a deferred tax benefit related to NOLs depends in part upon generating sufficient taxable income in future periods. The NOL carryforwards have begun to expire annually for the REIT and begin to expire in 2024 with respect to the TRS entities.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities with respect to our TRS entities totaled $296.8 million and $316.6 million as of June 30, 2017 and December 31, 2016, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets, net of loss carryforwards.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2013 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2012 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for years ended December 31, 2012 and subsequent years. We are also subject to audit in Canada for periods subsequent to the acquisition, and certain prior periods, with respect to the

entities acquired in 2014 from Holiday Retirement. We are subject to audit in the United Kingdom generally for periods ended in and subsequent to 2015.

NOTE 14—STOCKHOLDERS' EQUITY

Capital Stock

During the six months ended June 30, 2017, we sold 1.1 million shares of common stock under our “at-the-market” (“ATM”) equity offering program for aggregate net proceeds of $73.9 million, after sales agent commissions. As of June 30, 2017, approximately $155.6 million of our common stock remained available for sale under our ATM equity offering program.

Accumulated Other Comprehensive Loss

The following is a summary of our accumulated other comprehensive loss as of June 30, 2017 and December 31, 2016:



	June 30, 2017			December 31, 2016
	(In thousands)
Foreign currency translation	$	(53,824	)	$	(66,192	)
Unrealized gain on marketable securities	1,054			1,239
Other	7,735			7,419
Total accumulated other comprehensive loss	$	(45,035	)	$	(57,534	)

NOTE 15—EARNINGS PER SHARE

The following table shows the amounts used in computing our basic and diluted earnings per share:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Income from continuing operations	$	152,272		$	137,849		$	308,184		$	261,188
Discontinued operations	(23		)	(148		)	(76		)	(637		)
Gain on real estate dispositions	719			5,739			44,008			31,923
Net income	152,968			143,440			352,116			292,474
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Net income attributable to common stockholders	$	151,831		$	143,162		$	349,958		$	292,142
Denominator:
Denominator for basic earnings per share—weighted average shares	355,024			338,901			354,719			337,230
Effect of dilutive securities:
Stock options	596			630			501			475
Restricted stock awards	225			154			193			153
OP Unitholder interests	2,466			2,886			2,506			2,993
Denominator for diluted earnings per share—adjusted weighted average shares	358,311			342,571			357,919			340,851
Basic earnings per share:
Income from continuing operations	$	0.43		$	0.41		$	0.87		$	0.77
Net income attributable to common stockholders	0.43			0.42			0.99			0.87
Diluted earnings per share:
Income from continuing operations	$	0.42		$	0.40		$	0.86		$	0.77
Net income attributable to common stockholders	0.42			0.42			0.98			0.86

NOTE 16—SEGMENT INFORMATION

As of June 30, 2017, we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. Under our triple-net leased properties segment, we invest in and own seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and life science and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable.

Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment net operating income (“NOI”) and related measures. We define segment NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. We consider segment NOI useful because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies between periods on a consistent basis. In order to facilitate a clear understanding of our historical consolidated operating results, segment NOI should be examined in conjunction with income from continuing operations as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense, depreciation and amortization, general, administrative and professional fees, income tax expense and other non-property specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.

Summary information by reportable business segment is as follows:



	For the Three Months Ended June 30, 2017
	Triple-Net Leased Properties		Senior Living Operations			Office Operations		All Other			Total
	(In thousands)
Revenues:
Rental income	$	213,258	$	—		$	186,240	$	—		$	399,498
Resident fees and services	—		460,243			—		—			460,243
Office building and other services revenue	1,125		—			1,848		206			3,179
Income from loans and investments	—		—			—		32,368			32,368
Interest and other income	—		—			—		202			202
Total revenues	$	214,383	$	460,243		$	188,088	$	32,776		$	895,490
Total revenues	$	214,383	$	460,243		$	188,088	$	32,776		$	895,490
Less:
Interest and other income	—		—			—		202			202
Property-level operating expenses	—		308,625			57,205		—			365,830
Office building services costs	—		—			552		—			552
Segment NOI	214,383		151,618			130,331		32,574			528,906
Income (loss) from unconsolidated entities	377		(381		)	298		(400		)	(106		)
Segment profit	$	214,760	$	151,237		$	130,629	$	32,174		528,800
Interest and other income											202
Interest expense											(113,572		)
Depreciation and amortization											(224,108		)
General, administrative and professional fees											(33,282		)
Loss on extinguishment of debt, net											(36		)
Merger-related expenses and deal costs											(6,043		)
Other											(1,848		)
Income tax benefit											2,159
Income from continuing operations											$	152,272



	For the Three Months Ended June 30, 2016
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	210,119	$	—	$	144,087	$	—	$	354,206
Resident fees and services	—		464,437		—		—		464,437
Office building and other services revenue	1,231		—		3,369		904		5,504
Income from loans and investments	—		—		—		24,146		24,146
Interest and other income	—		—		—		111		111
Total revenues	$	211,350	$	464,437	$	147,456	$	25,161	$	848,404
Total revenues	$	211,350	$	464,437	$	147,456	$	25,161	$	848,404
Less:
Interest and other income	—		—		—		111		111
Property-level operating expenses	—		307,989		43,966		—		351,955
Office building services costs	—		—		1,852		—		1,852
Segment NOI	211,350		156,448		101,638		25,050		494,486
Income from unconsolidated entities	825		336		173		84		1,418
Segment profit	$	212,175	$	156,784	$	101,811	$	25,134	495,904
Interest and other income									111
Interest expense									(103,665		)
Depreciation and amortization									(221,961		)
General, administrative and professional fees									(32,094		)
Loss on extinguishment of debt, net									(2,468		)
Merger-related expenses and deal costs									(7,224		)
Other									(2,303		)
Income tax benefit									11,549
Income from continuing operations									$	137,849



	For the Six Months Ended June 30, 2017
	Triple-Net Leased Properties		Senior Living Operations			Office Operations		All Other			Total
	(In thousands)
Revenues:
Rental income	$	422,585	$	—		$	372,135	$	—		$	794,720
Resident fees and services	—		924,431			—		—			924,431
Office building and other services revenue	2,330		—			3,779		476			6,585
Income from loans and investments	—		—			—		52,514			52,514
Interest and other income	—		—			—		683			683
Total revenues	$	424,915	$	924,431		$	375,914	$	53,673		$	1,778,933
Total revenues	$	424,915	$	924,431		$	375,914	$	53,673		$	1,778,933
Less:
Interest and other income	—		—			—		683			683
Property-level operating expenses	—		620,698			114,119		—			734,817
Office building services costs	—		—			1,290		—			1,290
Segment NOI	424,915		303,733			260,505		52,990			1,042,143
Income (loss) from unconsolidated entities	3,646		(457		)	633		(778		)	3,044
Segment profit	$	428,561	$	303,276		$	261,138	$	52,212		1,045,187
Interest and other income											683
Interest expense											(222,376		)
Depreciation and amortization											(441,891		)
General, administrative and professional fees											(67,243		)
Loss on extinguishment of debt, net											(345		)
Merger-related expenses and deal costs											(8,099		)
Other											(3,036		)
Income tax benefit											5,304
Income from continuing operations											$	308,184



	For the Six Months Ended June 30, 2016
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	424,606	$	—	$	288,223	$	—	$	712,829
Resident fees and services	—		928,413		—		—		928,413
Office building and other services revenue	2,430		—		8,345		1,914		12,689
Income from loans and investments	—		—		—		46,532		46,532
Interest and other income	—		—		—		230		230
Total revenues	$	427,036	$	928,413	$	296,568	$	48,676	$	1,700,693
Total revenues	$	427,036	$	928,413	$	296,568	$	48,676	$	1,700,693
Less:
Interest and other income	—		—		—		230		230
Property-level operating expenses	—		620,530		87,647		—		708,177
Office building services costs	—		—		5,303		—		5,303
Segment NOI	427,036		307,883		203,618		48,446		986,983
Income from unconsolidated entities	154		673		47		346		1,220
Segment profit	$	427,190	$	308,556	$	203,665	$	48,792	988,203
Interest and other income									230
Interest expense									(206,938		)
Depreciation and amortization									(458,348		)
General, administrative and professional fees									(63,820		)
Loss on extinguishment of debt, net									(2,782		)
Merger-related expenses and deal costs									(8,856		)
Other									(6,471		)
Income tax benefit									19,970
Income from continuing operations									$	261,188

Capital expenditures, including investments in real estate property and development project expenditures, by reportable business segment are as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	(In thousands)
Capital expenditures:
Triple-net leased properties	$	48,143	$	15,949	$	141,952	$	56,650
Senior living operations	30,056		24,808		51,381		43,802
Office operations	51,390		38,192		245,386		50,605
Total capital expenditures	$	129,589	$	78,949	$	438,719	$	151,057

Our portfolio of properties and mortgage loan and other investments are located in the United States, Canada and the United Kingdom. Revenues are attributed to an individual country based on the location of each property. Geographic information regarding our operations is as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	(In thousands)
Revenues:
United States	$	844,623	$	797,394	$	1,677,443	$	1,601,595
Canada	44,412		44,045		89,008		85,174
United Kingdom	6,455		6,965		12,482		13,924
Total revenues	$	895,490	$	848,404	$	1,778,933	$	1,700,693



	As of June 30, 2017		As of December 31, 2016
	(In thousands)
Net real estate property:
United States	$	19,190,206	$	19,105,939
Canada	1,056,233		1,037,105
United Kingdom	293,327		251,710
Total net real estate property	$	20,539,766	20,394,754

NOTE 17—CONDENSED CONSOLIDATING INFORMATION (Unaudited)

Ventas, Inc. has fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary, Ventas Realty, including the senior notes that were jointly issued with Ventas Capital Corporation. Ventas Capital Corporation is a direct 100% owned subsidiary of Ventas Realty that has no assets or operations, but was formed in 2002 solely to facilitate offerings of senior notes by a limited partnership. None of our other subsidiaries (such subsidiaries, excluding Ventas Realty and Ventas Capital Corporation, the “Ventas Subsidiaries”) is obligated with respect to Ventas Realty’s outstanding senior notes. Certain of Ventas Realty’s outstanding senior notes reflected in our condensed consolidating information were issued jointly with Ventas Capital Corporation.

Ventas, Inc. has also fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary, Ventas Canada Finance Limited. None of our other subsidiaries is obligated with respect to Ventas Canada Finance Limited’s outstanding senior notes, all of which were issued on a private placement basis in Canada.

In connection with the acquisition of Nationwide Health Properties, Inc. (“NHP”), our 100% owned subsidiary, Nationwide Health Properties, LLC (“NHP LLC”), as successor to NHP, assumed the obligation to pay principal and interest with respect to the outstanding senior notes issued by NHP. Neither we nor any of our subsidiaries (other than NHP LLC) is obligated with respect to any of NHP LLC’s outstanding senior notes.

Under certain circumstances, contractual and legal restrictions, including those contained in the instruments governing our subsidiaries’ outstanding mortgage indebtedness, may restrict our ability to obtain cash from our subsidiaries for the purpose of meeting our debt service obligations, including our payment guarantees with respect to Ventas Realty’s and Ventas Canada Finance Limited’s senior notes.

The following pages summarize our condensed consolidating information as of June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016.

CONDENSED CONSOLIDATING BALANCE SHEET



	As of June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Assets
Net real estate investments	$	1,917		$	122,140		$	21,930,907		$	—		$	22,054,964
Cash and cash equivalents	16,910			—			86,443			—			103,353
Escrow deposits and restricted cash	197			1,581			66,565			—			68,343
Investment in and advances to affiliates	14,716,005			2,938,442			—			(17,654,447		)	—
Goodwill	—			—			1,034,054			—			1,034,054
Assets held for sale	—			35,688			53,881			—			89,569
Other assets	42,103			9,360			454,012			—			505,475
Total assets	$	14,777,132		$	3,107,211		$	23,625,862		$	(17,654,447	)	$	23,855,758
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	—		$	9,346,233		$	2,561,764		$	—		$	11,907,997
Intercompany loans	7,720,779			(7,102,600		)	(618,179		)	—			—
Accrued interest	(4,896		)	71,831			20,313			—			87,248
Accounts payable and other liabilities	133,472			22,618			773,483			—			929,573
Liabilities related to assets held for sale	—			8,517			1,295			—			9,812
Deferred income taxes	296,822			—			—			—			296,822
Total liabilities	8,146,177			2,346,599			2,738,676			—			13,231,452
Redeemable OP unitholder and noncontrolling interests	—			—			182,154			—			182,154
Total equity	6,630,955			760,612			20,705,032			(17,654,447		)	10,442,152
Total liabilities and equity	$	14,777,132		$	3,107,211		$	23,625,862		$	(17,654,447	)	$	23,855,758

CONDENSED CONSOLIDATING BALANCE SHEET



	As of December 31, 2016
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Assets
Net real estate investments	$	2,007		$	173,259		$	21,017,430		$	—		$	21,192,696
Cash and cash equivalents	210,303			—			76,404			—			286,707
Escrow deposits and restricted cash	198			1,504			78,945			—			80,647
Investment in and advances to affiliates	14,258,931			2,938,441			—			(17,197,372		)	—
Goodwill	—			—			1,033,225			—			1,033,225
Assets held for sale	—			—			54,961			—			54,961
Other assets	35,468			6,792			476,104			—			518,364
Total assets	$	14,506,907		$	3,119,996		$	22,737,069		$	(17,197,372	)	$	23,166,600
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	—		$	8,406,979		$	2,720,347		$	—		$	11,127,326
Intercompany loans	7,088,838			(6,209,707		)	(879,131		)	—			—
Accrued interest	(1,753		)	67,156			18,359			—			83,762
Accounts payable and other liabilities	89,115			35,587			783,226			—			907,928
Liabilities related to assets held for sale	—			(1		)	1,463			—			1,462
Deferred income taxes	316,641			—			—			—			316,641
Total liabilities	7,492,841			2,300,014			2,644,264			—			12,437,119
Redeemable OP unitholder and noncontrolling interests	—			—			200,728			—			200,728
Total equity	7,014,066			819,982			19,892,077			(17,197,372		)	10,528,753
Total liabilities and equity	$	14,506,907		$	3,119,996		$	22,737,069		$	(17,197,372	)	$	23,166,600

CONDENSED CONSOLIDATING STATEMENT OF INCOME



	For the Three Months Ended June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Revenues
Rental income	$	596		$	48,451		$	350,451		$	—		$	399,498
Resident fees and services	—			—			460,243			—			460,243
Office building and other services revenue	—			—			3,179			—			3,179
Income from loans and investments	319			—			32,049			—			32,368
Equity earnings in affiliates	128,196			—			(405		)	(127,791		)	—
Interest and other income	28			—			174			—			202
Total revenues	129,139			48,451			845,691			(127,791		)	895,490
Expenses
Interest	(27,694		)	81,516			59,750			—			113,572
Depreciation and amortization	1,419			2,239			220,450			—			224,108
Property-level operating expenses	—			83			365,747			—			365,830
Office building services costs	—			—			552			—			552
General, administrative and professional fees	189			4,630			28,463			—			33,282
Loss (gain) on extinguishment of debt, net	—			418			(382		)	—			36
Merger-related expenses and deal costs	5,783			—			260			—			6,043
Other	466			—			1,382			—			1,848
Total expenses	(19,837		)	88,886			676,222			—			745,271
Income (loss) before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	148,976			(40,435		)	169,469			(127,791		)	150,219
Loss from unconsolidated entities	—			(16		)	(90		)	—			(106		)
Income tax benefit	2,159			—			—			—			2,159
Income (loss) from continuing operations	151,135			(40,451		)	169,379			(127,791		)	152,272
Discontinued operations	(23		)										(23		)
Gain on real estate dispositions	719												719
Net income (loss)	151,831			(40,451		)	169,379			(127,791		)	152,968
Net income attributable to noncontrolling interests	—			—			1,137			—			1,137
Net income (loss) attributable to common stockholders	$	151,831		$	(40,451	)	$	168,242		$	(127,791	)	$	151,831

CONDENSED CONSOLIDATING STATEMENT OF INCOME



	For the Three Months Ended June 30, 2016
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Revenues
Rental income	$	583		$	49,418		$	304,205		$	—		$	354,206
Resident fees and services	—			—			464,437			—			464,437
Office building and other services revenue	602			—			4,902			—			5,504
Income from loans and investments	—			—			24,146			—			24,146
Equity earnings in affiliates	124,028			—			(288		)	(123,740		)	—
Interest and other income	41			—			70			—			111
Total revenues	125,254			49,418			797,472			(123,740		)	848,404
Expenses
Interest	(11,094		)	69,011			45,748			—			103,665
Depreciation and amortization	1,203			2,867			217,891			—			221,961
Property-level operating expenses	—			77			351,878			—			351,955
Office building services costs	—			—			1,852			—			1,852
General, administrative and professional fees	2,246			4,213			25,635			—			32,094
Loss (gain) on extinguishment of debt, net	58			2,432			(22		)	—			2,468
Merger-related expenses and deal costs	6,743			—			481			—			7,224
Other	76			4			2,223			—			2,303
Total expenses	(768		)	78,604			645,686			—			723,522
Income (loss) before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	126,022			(29,186		)	151,786			(123,740		)	124,882
Income from unconsolidated entities	—			344			1,074			—			1,418
Income tax benefit	11,549			—			—			—			11,549
Income (loss) from continuing operations	137,571			(28,842		)	152,860			(123,740		)	137,849
Discontinued operations	(148		)	—			—			—			(148		)
Gain on real estate dispositions	5,739			—			—			—			5,739
Net income (loss)	143,162			(28,842		)	152,860			(123,740		)	143,440
Net income attributable to noncontrolling interests	—			—			278			—			278
Net income (loss) attributable to common stockholders	$	143,162		$	(28,842	)	$	152,582		$	(123,740	)	$	143,162

CONDENSED CONSOLIDATING STATEMENT OF INCOME



	For the Six Months Ended June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Revenues
Rental income	$	1,181		$	96,270		$	697,269		$	—		$	794,720
Resident fees and services	—			—			924,431			—			924,431
Office building and other services revenue	—			—			6,585			—			6,585
Income from loans and investments	599			—			51,915			—			52,514
Equity earnings in affiliates	265,188			—			(713		)	(264,475		)	—
Interest and other income	371			—			312			—			683
Total revenues	267,339			96,270			1,679,799			(264,475		)	1,778,933
Expenses
Interest	(44,293		)	156,303			110,366			—			222,376
Depreciation and amortization	2,826			4,608			434,457			—			441,891
Property-level operating expenses	—			165			734,652			—			734,817
Office building services costs	—			—			1,290			—			1,290
General, administrative and professional fees	319			9,330			57,594			—			67,243
Loss (gain) on extinguishment of debt, net	—			439			(94		)	—			345
Merger-related expenses and deal costs	7,646			—			453			—			8,099
Other	119			—			2,917			—			3,036
Total expenses	(33,383		)	170,845			1,341,635			—			1,479,097
Income (loss) before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	300,722			(74,575		)	338,164			(264,475		)	299,836
Income (loss) from unconsolidated entities	—			3,305			(261		)	—			3,044
Income tax benefit	5,304			—			—			—			5,304
Income (loss) from continuing operations	306,026			(71,270		)	337,903			(264,475		)	308,184
Discontinued operations	(76		)	—			—			—			(76		)
Gain on real estate dispositions	44,008			—			—			—			44,008
Net income (loss)	349,958			(71,270		)	337,903			(264,475		)	352,116
Net income attributable to noncontrolling interests	—			—			2,158			—			2,158
Net income (loss) attributable to common stockholders	$	349,958		$	(71,270	)	$	335,745		$	(264,475	)	$	349,958

CONDENSED CONSOLIDATING STATEMENT OF INCOME



	For the Six Months Ended June 30, 2016
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Revenues
Rental income	$	1,499		$	98,143		$	613,187		$	—		$	712,829
Resident fees and services	—			—			928,413			—			928,413
Office building and other services revenue	1,204			—			11,485			—			12,689
Income from loans and investments	—			—			46,532			—			46,532
Equity earnings in affiliates	232,790			—			(631		)	(232,159		)	—
Interest and other income	70			—			160			—			230
Total revenues	235,563			98,143			1,599,146			(232,159		)	1,700,693
Expenses
Interest	(21,889		)	137,590			91,237			—			206,938
Depreciation and amortization	6,135			12,781			439,432			—			458,348
Property-level operating expenses	—			156			708,021			—			708,177
Office building services costs	—			—			5,303			—			5,303
General, administrative and professional fees	2,231			8,717			52,872			—			63,820
Loss on extinguishment of debt, net	58			2,432			292			—			2,782
Merger-related expenses and deal costs	8,115			—			741			—			8,856
Other	27			4			6,440			—			6,471
Total expenses	(5,323		)	161,680			1,304,338			—			1,460,695
Income (loss) before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	240,886			(63,537		)	294,808			(232,159		)	239,998
Income from unconsolidated entities	—			447			773			—			1,220
Income tax benefit	19,970			—			—			—			19,970
Income (loss) from continuing operations	260,856			(63,090		)	295,581			(232,159		)	261,188
Discontinued operations	(637		)	—			—			—			(637		)
Gain on real estate dispositions	31,923			—			—			—			31,923
Net income (loss)	292,142			(63,090		)	295,581			(232,159		)	292,474
Net income attributable to noncontrolling interests	—			—			332			—			332
Net income (loss) attributable to common stockholders	$	292,142		$	(63,090	)	$	295,249		$	(232,159	)	$	292,142

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME



	For the Three Months Ended June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries		Consolidated Elimination			Consolidated
	(In thousands)
Net income (loss)	$	151,831		$	(40,451	)	$	169,379	$	(127,791	)	152,968
Other comprehensive (loss) income:
Foreign currency translation	—			—			8,286		—			8,286
Change in unrealized gain on marketable securities	(62		)	—			—		—			(62		)
Other	—			—			398		—			398
Total other comprehensive (loss) income	(62		)	—			8,684		—			8,622
Comprehensive income (loss)	151,769			(40,451		)	178,063		(127,791		)	161,590
Comprehensive income attributable to noncontrolling interests	—			—			1,137		—			1,137
Comprehensive income (loss) attributable to common stockholders	$	151,769		$	(40,451	)	$	176,926	$	(127,791	)	$	160,453



	For the Three Months Ended June 30, 2016
	Ventas, Inc.		Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Net income (loss)	$	143,162	$	(28,842	)	$	152,860		$	(123,740	)	$	143,440
Other comprehensive income (loss):
Foreign currency translation	—		—			(22,715		)	—			(22,715		)
Change in unrealized gain on marketable securities	69		—			—			—			69
Other	—		—			(1,617		)	—			(1,617		)
Total other comprehensive income (loss)	69		—			(24,332		)	—			(24,263		)
Comprehensive income (loss)	143,231		(28,842		)	128,528			(123,740		)	119,177
Comprehensive income attributable to noncontrolling interests	—		—			278			—			278
Comprehensive income (loss) attributable to common stockholders	$	143,231	$	(28,842	)	$	128,250		$	(123,740	)	$	118,899

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME



	For the Six Months Ended June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries		Consolidated Elimination			Consolidated
	(In thousands)
Net income (loss)	$	349,958		$	(71,270	)	$	337,903	$	(264,475	)	$	352,116
Other comprehensive (loss) income:
Foreign currency translation	—			—			12,368		—			12,368
Change in unrealized gain on marketable securities	(185		)	—			—		—			(185		)
Other	—			—			316		—			316
Total other comprehensive (loss) income	(185		)	—			12,684		—			12,499
Comprehensive income (loss)	349,773			(71,270		)	350,587		(264,475		)	364,615
Comprehensive income attributable to noncontrolling interests	—			—			2,158		—			2,158
Comprehensive income (loss) attributable to common stockholders	$	349,773		$	(71,270	)	$	348,429	$	(264,475	)	$	362,457



	For the Six Months Ended June 30, 2016
	Ventas, Inc.		Ventas Realty			Ventas Subsidiaries			Consolidated Elimination			Consolidated
	(In thousands)
Net income (loss)	$	292,142	$	(63,090	)	$	295,581		$	(232,159	)	$	292,474
Other comprehensive income (loss):
Foreign currency translation	—		—			(33,383		)	—			(33,383		)
Change in unrealized gain on marketable securities	250		—			—			—			250
Other	—		—			(3,497		)	—			(3,497		)
Total other comprehensive income (loss)	250		—			(36,880		)	—			(36,630		)
Comprehensive income (loss)	292,392		(63,090		)	258,701			(232,159		)	255,844
Comprehensive income attributable to noncontrolling interests	—		—			332			—			332
Comprehensive income (loss) attributable to common stockholders	$	292,392	$	(63,090	)	$	258,369		$	(232,159	)	$	255,512

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



	For the Six Months Ended June 30, 2017
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	41,514		$	(61,787	)	$	757,529		$	—	$	737,256

Cash flows from investing activities:
Net investment in real estate property	(210,120		)	—			(29,378		)	—		(239,498		)
Investment in loans receivable and other	(2,575		)	—			(715,658		)	—		(718,233		)
Proceeds from real estate disposals	19,570			—			—			—		19,570
Proceeds from loans receivable	21			—			25,046			—		25,067
Development project expenditures	—			—			(143,269		)	—		(143,269		)
Capital expenditures	—			(15		)	(55,937		)	—		(55,952		)
Investment in unconsolidated entities	—			—			(39,048		)	—		(39,048		)
Net cash used in investing activities	(193,104		)	(15		)	(958,244		)	—		(1,151,363		)

Cash flows from financing activities:
Net change in borrowings under revolving credit facility	—			453,000			(88,544		)	—		364,456
Proceeds from debt	—			793,904			234,605			—		1,028,509
Repayment of debt	—			(300,019		)	(356,517		)	—		(656,536		)
Purchase of noncontrolling interests	(15,809		)	—			—			—		(15,809		)
Net change in intercompany debt	795,695			(892,893		)	97,198			—		—
Payment of deferred financing costs	—			(18,262		)	(1,425		)	—		(19,687		)
Issuance of common stock, net	73,596			—			—			—		73,596
Cash distribution (to) from affiliates	(370,551		)	26,072			344,479			—		—
Cash distribution to common stockholders	(550,965		)	—			—			—		(550,965		)
Cash distribution to redeemable OP unitholders	—			—			(3,720		)	—		(3,720		)
Contributions from noncontrolling interests	—			—			2,227			—		2,227
Distributions to noncontrolling interests	—			—			(4,156		)	—		(4,156		)
Other	9,702			—			—			—		9,702
Net cash (used in) provided by financing activities	(58,332		)	61,802			224,147			—		227,617
Net (decrease) increase in cash and cash equivalents	(209,922		)	—			23,432			—		(186,490		)
Effect of foreign currency translation on cash and cash equivalents	16,529			—			(13,393		)	—		3,136
Cash and cash equivalents at beginning of period	210,303			—			76,404			—		286,707
Cash and cash equivalents at end of period	$	16,910		$	—		$	86,443		$	—	$	103,353

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



	For the Six Months Ended June 30, 2016
	Ventas, Inc.			Ventas Realty			Ventas Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	40,671		$	(45,313	)	$	665,378		$	—	$	660,736

Cash flows from investing activities:
Net investment in real estate property	(34,453		)	—			—			—		(34,453		)
Investment in loans receivable and other	—			—			(152,450		)	—		(152,450		)
Proceeds from real estate disposals	20,441			—			43,120			—		63,561
Proceeds from loans receivable	—			—			7,644			—		7,644
Development project expenditures	—			—			(69,679		)	—		(69,679		)
Capital expenditures	—			(18		)	(46,907		)	—		(46,925		)
Investment in unconsolidated entities	—			—			(4,265		)	—		(4,265		)
Net cash used in investing activities	(14,012		)	(18		)	(222,537		)	—		(236,567		)

Cash flows from financing activities:
Net change in borrowings under revolving credit facility	—			(114,000		)	138,304			—		24,304
Proceeds from debt	—			400,000			16,217			—		416,217
Repayment of debt	—			(555,470		)	(184,867		)	—		(740,337		)
Purchase of noncontrolling interests	—			—			(1,604		)	—		(1,604		)
Net change in intercompany debt	128,165			308,816			(436,981		)	—		—
Payment of deferred financing costs	—			(3,422		)	(422		)	—		(3,844		)
Issuance of common stock, net	377,739			—			—			—		377,739
Cash distribution (to) from affiliates	(8,096		)	9,407			(1,311		)	—		—
Cash distribution to common stockholders	(493,471		)	—			—			—		(493,471		)
Cash distribution to redeemable OP unitholders	—			—			(4,437		)	—		(4,437		)
Contributions from noncontrolling interest	—			—			5,680			—		5,680
Distributions to noncontrolling interests	—			—			(3,582		)	—		(3,582		)
Other	3,622			—			—			—		3,622
Net cash provided by (used in) financing activities	7,959			45,331			(473,003		)	—		(419,713		)
Net increase (decrease) in cash and cash equivalents	34,618			—			(30,162		)	—		4,456
Effect of foreign currency translation on cash and cash equivalents	(33,353		)	—			33,196			—		(157		)
Cash and cash equivalents at beginning of period	11,733			—			41,290			—		53,023
Cash and cash equivalents at end of period	$	12,998		$	—		$	44,324		$	—	$	57,322

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our or our tenants’, operators’, borrowers’ or managers’ expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger integration, growth opportunities, expected lease income, continued qualification as a real estate investment trust (“REIT”), plans and objectives of management for future operations, and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will,” and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the Securities and Exchange Commission (the “SEC”). These factors include without limitation:


•	The ability and willingness of our tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with us, including, in some cases, their obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;


•	The ability of our tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness;


•	Our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments;


•	Macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates;


•	The nature and extent of future competition, including new construction in the markets in which our seniors housing communities and office buildings are located;


•	The extent and effect of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates;


•	Increases in our borrowing costs as a result of changes in interest rates and other factors;


•	The ability of our tenants, operators and managers, as applicable, to comply with laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients;


•	Changes in general economic conditions or economic conditions in the markets in which we may, from time to time, compete, and the effect of those changes on our revenues, earnings and funding sources;


•	Our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due;


•	Our ability and willingness to maintain our qualification as a REIT in light of economic, market, legal, tax and other considerations;


•	Final determination of our taxable net income for the year ended December 31, 2016 and for the year ending December 31, 2017;


•	The ability and willingness of our tenants to renew their leases with us upon expiration of the leases, our ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to

replace an existing tenant, and obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant;

•

Risks associated with our senior living operating portfolio, such as factors that can cause volatility in our operating income and earnings generated by those properties, including without limitation national and regional economic conditions, development of new competing properties, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties;


•	Changes in exchange rates for any foreign currency in which we may, from time to time, conduct business;


•	Year-over-year changes in the Consumer Price Index or the U.K. Retail Price Index and the effect of those changes on the rent escalators contained in our leases and on our earnings;


•	Our ability and the ability of our tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers;


•	The impact of increased operating costs and uninsured professional liability claims on our liquidity, financial condition and results of operations or that of our tenants, operators, borrowers and managers and our ability and the ability of our tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims;


•	Risks associated with our office building portfolio and operations, including our ability to successfully design, develop and manage office buildings and to retain key personnel;


•	The ability of the hospitals on or near whose campuses our medical office buildings (“MOBs”) are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups;


•	Risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision-making authority and our reliance on our joint venture partners’ financial condition;


•	Our ability to obtain the financial results expected from our development and redevelopment projects, including projects undertaken through our joint ventures;


•	The impact of market or issuer events on the liquidity or value of our investments in marketable securities;


•	Consolidation in the seniors housing and healthcare industries resulting in a change of control of, or a competitor’s investment in, one or more of our tenants, operators, borrowers or managers or significant changes in the senior management of our tenants, operators, borrowers or managers;


•	The impact of litigation or any financial, accounting, legal or regulatory issues that may affect us or our tenants, operators, borrowers or managers; and


•	Changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could have an effect on our earnings.

Many of these factors are beyond our control and the control of our management.

Atria, Sunrise, Brookdale Senior Living, Ardent and Kindred Information

Each of Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”) and Kindred Healthcare, Inc. (together with its subsidiaries, “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 on the SEC’s website at www.sec.gov.

Atria Senior Living, Inc. (“Atria”), Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”) and Ardent Health Partners, LLC (together with its subsidiaries “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 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.

Company Overview

We are a REIT with a highly diversified portfolio of seniors housing and healthcare properties located throughout the United States, Canada and the United Kingdom. As of June 30, 2017, we owned approximately 1,300 properties (including properties owned through investments in unconsolidated entities and properties classified as held for sale), consisting of seniors housing communities, MOBs, life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, general acute care hospitals and skilled nursing facilities, and we had eight properties under development, including one property that is owned by an unconsolidated real estate entity. We are an S&P 500 company and headquartered in Chicago, Illinois.

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 June 30, 2017, we leased a total of 580 properties (excluding MOBs) 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 and Sunrise, to manage 301 seniors housing communities for us pursuant to long-term management agreements.

Our three largest tenants, Brookdale Senior Living, Ardent and Kindred leased from us 141 properties (excluding one property managed by Brookdale Senior Living pursuant to a long-term management agreement), 10 properties and 68 properties (excluding one office building included within our office operations reportable business segment), respectively, as of June 30, 2017.

We aim to enhance shareholder value by delivering consistent, superior total returns through a strategy of: (1) generating reliable and growing cash flows; (2) maintaining a balanced, diversified portfolio of high-quality assets; and (3) preserving our financial strength, flexibility and liquidity.

Our ability to access capital in a timely and cost effective manner is critical to the success of our business strategy because it affects our ability to satisfy existing obligations, including the repayment of maturing indebtedness, and to make future investments. Factors such as general market conditions, interest rates, credit ratings on our securities, expectations of our potential future earnings and cash distributions, and the trading price of our common stock that are beyond our control and fluctuate over time all impact our access to and cost of external capital. For that reason, we generally attempt to match the long-term duration of our investments in real property with long-term financing through the issuance of shares of our common stock or the incurrence of long-term fixed rate debt.

Operating Highlights and Key Performance Trends

2017 Highlights and Other Recent Developments

Investments and Dispositions

•


•	During the six months ended June 30, 2017, we acquired 14 triple-net leased properties (including six assets previously owned by an equity method investee) and one life science, research and medical campus (reported within our office operations reportable business segment) for an aggregate purchase price of $404.4 million.


•	During the six months ended June 30, 2017, we sold 10 triple-net leased properties, two MOBs, and two vacant land parcels for aggregate consideration of $104.6 million and we recognized a gain on the sale of these assets of $44.0 million.


•	During the six months ended June 30, 2017, we received $13.7 million for the partial prepayment of secured and unsecured loans receivable and $6.0 million for the full repayment of one secured loan receivable that was due to mature on July 5, 2017.

Liquidity, Capital and Dividends


•	We paid the first two quarterly installments of our 2017 dividend of $0.775 per share.

•

In March 2017, we issued and sold $400.0 million aggregate principal amount of 3.100% senior notes due 2023 at a public offering price equal to 99.280% of par, for total proceeds of $397.1 million before the underwriting discount and expenses, and $400.0 million aggregate principal amount of 3.850% senior notes due 2027 at a public offering price equal to 99.196% of par, for total proceeds of $396.8 million before the underwriting discount and expenses.


•	In April 2017, we entered into a new unsecured credit facility comprised of a $3.0 billion unsecured revolving credit facility, initially priced at LIBOR plus 0.875%, that replaced our previous $2.0 billion unsecured revolving credit facility priced at LIBOR plus 1.0%.


•	In April 2017, we repaid in full, at par, $300.0 million aggregate principal amount then outstanding of our 1.250% senior notes due 2017 upon maturity.


•	In June 2017, we issued and sold C$275.0 million aggregate principal amount of 2.55% senior notes, Series D due 2023 on a private placement basis at a price equal to 99.954% of par, for total proceeds of C$274.9 million before agent fees and expenses. We used part of the proceeds to repay C$124.4 million on our unsecured term loan due 2019.

Concentration Risk

We use concentration ratios to identify, understand and evaluate the potential impact of economic downturns and other adverse events that may affect our asset types, geographic locations, business models, and tenants, operators and managers. We evaluate concentration risk in terms of investment mix and operations mix. Investment mix measures the percentage of our investments that is concentrated in a specific asset type or that is operated or managed by a particular tenant, operator or manager. Operations mix measures the percentage of our operating results that is attributed to a particular tenant, operator or manager, geographic location or business model. The following tables reflect our concentration risk as of the dates and for the periods presented:



	As of June 30, 2017		As of December 31, 2016
Investment mix by asset type⁽¹⁾:
Seniors housing communities	60.4	%	61.8	%
MOBs	20.0		20.7
Life science and innovation centers	6.6		6.1
General acute care hospitals	5.4		5.6
Inpatient rehabilitation and long-term acute care facilities	1.7		1.7
Skilled nursing facilities	0.8		1.4
Secured loans receivable and investments, net	5.1		2.7
Investment mix by tenant, operator and manager⁽¹⁾:
Atria	21.9	%	22.6	%
Sunrise	10.9		11.3
Brookdale Senior Living	7.7		8.1
Ardent	4.9		5.1
Kindred	1.1		1.8
All other	53.5		51.1


(1)	Ratios are based on the gross book value of real estate investments (excluding properties classified as held for sale and properties owned through investments in unconsolidated entities) as of each reporting date.



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
Operations mix by tenant and operator and business model:
Revenues⁽¹⁾:
Senior living operations	51.6	%	54.7	%	52.1	%	54.6	%
Kindred	5.1		5.4		5.0		5.4
Brookdale Senior Living⁽²⁾	4.7		4.9		4.7		4.8
Ardent	3.1		3.1		3.1		3.1
All others	35.5		31.9		35.1		32.1
Adjusted EBITDA⁽³⁾:
Senior living operations	29.6	%	32.6	%	30.1	%	32.1	%
Kindred	8.3		9.0		8.4		9.0
Brookdale Senior Living⁽²⁾	7.6		8.1		7.7		8.1
Ardent	5.0		5.2		5.0		5.2
All others	49.5		45.1		48.8		45.6
NOI⁽⁴⁾:
Senior living operations	28.7	%	31.6	%	29.1	%	31.1	%
Kindred	8.6		9.3		8.6		9.2
Brookdale Senior Living⁽²⁾	7.9		8.3		8.0		8.3
Ardent	5.2		5.4		5.3		5.4
All others	49.6		45.4		49.0		46.0
Operations mix by geographic location⁽⁵⁾:
California	15.3	%	15.5	%	15.4	%	15.4	%
New York	8.6		8.9		8.7		8.9
Texas	5.8		6.4		5.8		6.4
Illinois	4.8		4.9		4.9		4.8
Florida	4.4		4.5		4.4		4.5
All others	61.1		59.8		60.8		60.0


(1)	Total revenues include office building and other services revenue, revenue from loans and investments and interest and other income (excluding amounts in discontinued operations and including amounts related to assets classified as held for sale).


(2)	Excludes one seniors housing community included in senior living operations.

(3)

“Adjusted EBITDA” is defined as consolidated earnings, which includes amounts in discontinued operations, before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, our consolidated joint venture partners’ share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of our historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments and unrealized foreign currency gains or losses, and including our share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items.


(4)	“NOI” represents net operating income, which is defined as total revenues, less interest and other income, property-level operating expenses and office building services costs (excluding amounts in discontinued operations).


(5)	Ratios are based on total revenues (excluding amounts in discontinued operations) for each period presented.

See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosures regarding Adjusted EBITDA and NOI and reconciliations to our income from continuing operations, as computed in accordance with GAAP.

Triple-Net Lease Expirations

If our tenants are not able or willing to renew our triple-net leases upon expiration, we may be unable to reposition the applicable properties on a timely basis or on the same or better economic terms, if at all. Although our lease expirations are staggered, the non-renewal of some or all of our triple-net leases that expire in any given year 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”). During the six months ended June 30, 2017, we had no triple-net lease renewals or expirations without renewal that, in the aggregate, had a material impact on our financial condition or results of operations for that period.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q 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”). GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 14, 2017, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Principles of Consolidation

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.

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.

Accounting for Real Estate Acquisitions

basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recognition of goodwill at the acquisition date and expense recognition for transaction costs as incurred. We are applying ASU 2017-01 prospectively for acquisitions after January 1, 2017.

The fair value of acquired lease-related intangibles, if any, reflects: (i) the estimated value of any above and/or below market leases, determined by discounting the difference between the estimated market rent and in-place lease rent; and (ii) the estimated value of in-place leases related to the cost to obtain tenants, including leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant. We amortize any acquired lease-related intangibles to revenue or amortization expense over the remaining life of the associated lease plus any assumed bargain renewal periods. If a lease is terminated prior to its stated expiration or not renewed upon expiration, we recognize all unamortized amounts of lease-related intangibles associated with that lease in operations at that time.

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.

Impairment of Long-Lived and Intangible Assets

We test goodwill for impairment at least annually, and more frequently if indicators arise. We first assess qualitative factors, such as current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed with the two-step approach to evaluating impairment. First, we estimate the fair value of the reporting unit and compare it to the reporting unit’s carrying value. If the carrying value exceeds fair value, we proceed with the second step, which requires us to assign the fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment. We recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value in the current period.

Revenue Recognition

Triple-Net Leased Properties and Office Operations

Senior Living Operations

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.

Allowances

Recently Issued or Adopted Accounting Standards

to residents of our seniors housing communities that are ancillary to the residents’ contractual rights to occupy living and common-area space at the communities, such as care, meals, transportation and activities. While these revenue streams are subject to the application of ASC 606, we believe that the recognition of income will be consistent with the current accounting model because currently the revenues associated with these services are generally recognized on a monthly basis, the period in which the related services are performed. We will not apply the principles of ASC 606 to our common area maintenance revenues until January 1, 2019, when we adopt ASU 2016-02, Leases (“ASU 2016-02”).

In 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”), which provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires an entity to show the changes in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-15 and ASU 2016-18 are effective for us beginning January 1, 2018 and will be applied by using a retrospective transition method. Adoption of these standards is not expected to have a significant impact on our Consolidated Financial Statements.

In 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which requires a company to recognize the tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for us beginning January 1, 2018 with early adoption permitted. ASU 2016-16 will be applied by us using a modified retrospective method. Adoption of this standard is not expected to have a significant impact on our Consolidated Financial Statements.

Results of Operations

As of June 30, 2017, we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. In our triple-net leased properties segment, we invest in and own seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and life science and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable. We evaluate performance of the combined properties in each reportable business segment based on segment NOI and related measures. For further information regarding our reportable business segments and a discussion of our definition of segment NOI, see “NOTE 16—SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Three Months Ended June 30, 2017 and 2016

The table below shows our results of operations for the three months ended June 30, 2017 and 2016 and the effect of changes in those results from period to period on our net income attributable to common stockholders.



	For the Three Months Ended June 30,						Increase (Decrease) to Net Income
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI:
Triple-net leased properties	$	214,383		$	211,350		$	3,033		1.4	%
Senior living operations	151,618			156,448			(4,830		)	(3.1	)
Office operations	130,331			101,638			28,693			28.2
All other	32,574			25,050			7,524			30.0
Total segment NOI	528,906			494,486			34,420			7.0
Interest and other income	202			111			91			82.0
Interest expense	(113,572		)	(103,665		)	(9,907		)	(9.6	)
Depreciation and amortization	(224,108		)	(221,961		)	(2,147		)	(1.0	)
General, administrative and professional fees	(33,282		)	(32,094		)	(1,188		)	(3.7	)
Loss on extinguishment of debt, net	(36		)	(2,468		)	2,432			98.5
Merger-related expenses and deal costs	(6,043		)	(7,224		)	1,181			16.3
Other	(1,848		)	(2,303		)	455			19.8
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	150,219			124,882			25,337			20.3
(Loss) income from unconsolidated entities	(106		)	1,418			(1,524		)	nm
Income tax benefit	2,159			11,549			(9,390		)	(81.3	)
Income from continuing operations	152,272			137,849			14,423			10.5
Discontinued operations	(23		)	(148		)	125			84.5
Gain on real estate dispositions	719			5,739			(5,020		)	(87.5	)
Net income	152,968			143,440			9,528			6.6
Net income attributable to noncontrolling interests	1,137			278			(859		)	nm
Net income attributable to common stockholders	$	151,831		$	143,162		8,669			6.1

nm - not meaningful

Segment NOI—Triple-Net Leased Properties

NOI for our triple-net leased properties reportable business segment equals the rental income and other services revenue earned from our triple-net assets. We incur no direct operating expenses for this segment.

The following table summarizes results of operations in our triple-net leased properties reportable business segment, including assets sold or classified as held for sale as of June 30, 2017, but excluding assets whose operations were classified as discontinued operations:



	For the Three Months Ended June 30,				Increase (Decrease) to Segment NOI
	2017		2016		$			%
	(Dollars in thousands)
Segment NOI—Triple-Net Leased Properties:
Rental income	$	213,258	$	210,119	$	3,139		1.5	%
Other services revenue	1,125		1,231		(106		)	(8.6	)
Segment NOI	$	214,383	$	211,350	3,033			1.4

Triple-net leased properties segment NOI increased during the three months ended June 30, 2017 over the prior year primarily due to asset acquisitions, contractual escalations in rent pursuant to the terms of our leases and increases in base and other rent between comparison periods, partially offset by asset dispositions and foreign currency movements.

In our triple-net leased properties segment, our revenues generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms. However, occupancy rates may affect the profitability of our tenants’ operations. The following table sets forth average continuing occupancy rates related to the triple-net leased properties we owned at June 30, 2017 for the first quarter of 2017 (which is the most recent information available to us from our tenants) and average continuing occupancy rates related to the triple-net leased properties we owned at June 30, 2016 for the first quarter of 2016.



	Number of Properties Owned at June 30, 2017	Average Occupancy for the Three Months Ended March 31, 2017	Number of Properties Owned at June 30, 2016	Average Occupancy for the Three Months Ended March 31, 2016
Seniors housing communities ⁽¹⁾	434	86.6%	425	88.3%
Skilled nursing facilities⁽¹⁾	17	87.4	17	88.1
Inpatient rehabilitation and long-term acute care facilities⁽¹⁾	38	61.5	38	61.6

⁽¹⁾

Excludes properties included in discontinued operations and properties sold or classified as held for sale, non-stabilized properties, properties owned through investments in unconsolidated entities and certain properties for which we do not receive occupancy information. Also excludes properties acquired during the three months ended June 30, 2017 and 2016, respectively, and properties that transitioned operators for which we do not have five full quarters of results subsequent to the transition.

The following table compares results of operations for our 501 same-store triple-net leased properties, unadjusted for foreign currency movements between comparison periods. With regard to our triple-net leased properties segment, “same-store” refers to properties owned, consolidated, operational and reported under a consistent business model for the full period in both comparison periods, excluding assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Three Months Ended June 30,				Increase (Decrease) to Segment NOI
	2017		2016		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Triple-Net Leased Properties:
Rental income	$	193,764	$	191,450	$	2,314	1.2	%
Segment NOI	$	193,764	$	191,450	2,314		1.2

Segment NOI—Senior Living Operations

The following table summarizes results of operations in our senior living operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2017, but excluding assets whose operations were classified as discontinued operations:



	For the Three Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI—Senior Living Operations:
Resident fees and services	$	460,243		$	464,437		$	(4,194	)	(0.9	)%
Less:
Property-level operating expenses	(308,625		)	(307,989		)	(636		)	(0.2	)
Segment NOI	$	151,618		$	156,448		(4,830		)	(3.1	)



	Number of Properties at June 30,		Average Unit Occupancy For the Three Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Three Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Total communities	298	304	87.9	%	90.1	%	$	5,702	$	5,460

Resident fees and services include all amounts earned from residents at our seniors housing communities, such as rental fees related to resident leases, extended health care fees and other ancillary service income.

Property-level operating expenses related to our senior living operations segment include labor, food, utilities, marketing, management and other costs of operating the properties.

The following table compares results of operations for our 293 same-store senior living operating communities, unadjusted for foreign currency movements between periods. With regard to our senior living operations segment, “same-store” refers to properties owned, consolidated, operational and reported under a consistent business model for the full period in both comparison periods, excluding properties that transitioned operators since the start of the prior comparison period, assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Three Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Same-Store Segment NOI—Senior Living Operations:
Resident fees and services	$	451,851		$	447,744		$	4,107		0.9	%
Less:
Property-level operating expenses	(303,935		)	(296,177		)	(7,758		)	(2.6	)
Segment NOI	$	147,916		$	151,567		(3,651		)	(2.4	)



	Number of Properties at June 30,		Average Unit Occupancy For the Three Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Three Months Ended June 30,
	2017	2016	2017		2016		2017	2016
Same-store communities	293	293	87.9	%	90.2	%	5,710	5,513

Segment NOI—Office Operations

The following table summarizes results of operations in our office operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2017, but excluding assets whose operations were classified as discontinued operations:



	For the Three Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI—Office Operations:
Rental income	$	186,240		$	144,087		$	42,153		29.3	%
Office building services revenue	1,848			3,369			(1,521		)	(45.1	)
Total revenues	188,088			147,456			40,632			27.6
Less:
Property-level operating expenses	(57,205		)	(43,966		)	(13,239		)	(30.1	)
Office building services costs	(552		)	(1,852		)	1,300			70.2
Segment NOI	$	130,331		$	101,638		28,693			28.2



	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot for the Three Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Total office buildings	388	370	92.0	%	90.7	%	$	32	$	30

The increase in our office operations segment rental income in the second quarter of 2017 over the same period in 2016 is attributed primarily to the September 2016 acquisition of life science and innovation centers and in place lease escalations, partially offset by asset dispositions. The increase in our office building property-level operating expenses in the second quarter of 2017 over the same period in 2016 is attributed primarily to the above acquisitions and increases in real estate taxes and other operating expenses, partially offset by asset dispositions.

Office building services revenue, net of applicable costs, decreased year over year primarily due to decreased construction activity during the second quarter of 2017 over the same period in 2016.

The following table compares results of operations for our 354 same-store office buildings. With regard to our office operations segment, “same-store” refers to properties owned, consolidated, operational and reported under a consistent business model for the full period in both comparison periods, excluding assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Three Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Same-Store Segment NOI—Office Operations:
Rental income	$	140,844		$	139,628		$	1,216		0.9	%
Less:
Property-level operating expenses	(42,317		)	(41,691		)	(626		)	(1.5	)
Segment NOI	$	98,527		$	97,937		590			0.6



	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot for the Three Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Same-store office buildings	354	354	91.4	%	91.7	%	$	30	$	30

All Other

The $7.5 million increase in all other for the three months ended June 30, 2017 over the same period in 2016 is primarily due to interest income from new loans issued during the 2017, partially offset by decreased interest income attributable to loan repayments received during 2016.

Interest Expense

The $9.9 million increase in total interest expense for the three months ended June 30, 2017 compared to 2016, is attributed primarily to an increase of $6.9 million due to higher debt balances and an increase of $3.0 million due to a higher effective interest rate, including the amortization of any fair value adjustments. Our effective interest rate was 3.7% and 3.6% for the three months ended June 30, 2017 and 2016, respectively.

Depreciation and Amortization

Depreciation and amortization expense related to continuing operations increased during the three months ended June 30, 2017 compared to the same period in 2016 primarily due to the 2016 life science and innovation centers acquisition, partially offset by a decrease in amortization related to certain lease intangibles that were fully amortized during the third quarter of 2016.

Loss on Extinguishment of Debt, Net

Loss on extinguishment of debt, net for the three months ended June 30, 2016 was due primarily to our June 2016 redemption of $455.5 million aggregate principal amount then outstanding of our 1.55% senior notes due 2016 and term loan repayments. No similar activity occurred during the three months ended June 30, 2017.

Income (Loss) from Unconsolidated Entities

The $1.5 million decrease in income from unconsolidated entities for the three months ended June 30, 2017 over the same period in 2016 is primarily due to our share of net losses related to certain unconsolidated entities.

Income Tax Benefit

Income tax benefits related to continuing operations for the three months ended June 30, 2017 and 2016 were each due primarily to operating losses at our taxable REIT subsidiaries (“TRS entities”), and the reversal of a deferred tax liability at a TRS entity.

Gain on Real Estate Dispositions

The $5.0 million decrease in gain on real estate dispositions for the three months ended June 30, 2017 over the same period in 2016 is due primarily to a $4.5 million gain on the sale of one triple-net leased property in April 2016.

Six Months Ended June 30, 2017 and 2016

The table below shows our results of operations for the six months ended June 30, 2017 and 2016 and the effect of changes in those results from period to period on our net income attributable to common stockholders.



	For the Six Months Ended June 30,						Increase (Decrease) to Net Income
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI:
Triple-net leased properties	$	424,915		$	427,036		$	(2,121	)	(0.5	)%
Senior living operations	303,733			307,883			(4,150		)	(1.3	)
Office operations	260,505			203,618			56,887			27.9
All other	52,990			48,446			4,544			9.4
Total segment NOI	1,042,143			986,983			55,160			5.6
Interest and other income	683			230			453			nm
Interest expense	(222,376		)	(206,938		)	(15,438		)	(7.5	)
Depreciation and amortization	(441,891		)	(458,348		)	16,457			3.6
General, administrative and professional fees	(67,243		)	(63,820		)	(3,423		)	(5.4	)
Loss on extinguishment of debt, net	(345		)	(2,782		)	2,437			87.6
Merger-related expenses and deal costs	(8,099		)	(8,856		)	757			8.5
Other	(3,036		)	(6,471		)	3,435			53.1
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interests	299,836			239,998			59,838			24.9
Income from unconsolidated entities	3,044			1,220			1,824			nm
Income tax benefit	5,304			19,970			(14,666		)	(73.4	)
Income from continuing operations	308,184			261,188			46,996			18.0
Discontinued operations	(76		)	(637		)	561			88.1
Gain on real estate dispositions	44,008			31,923			12,085			37.9
Net income	352,116			292,474			59,642			20.4
Net income attributable to noncontrolling interests	2,158			332			(1,826		)	nm
Net income attributable to common stockholders	$	349,958		$	292,142		57,816			19.8

nm - not meaningful

Segment NOI—Triple-Net Leased Properties



	For the Six Months Ended June 30,				Increase (Decrease) to Segment NOI
	2017		2016		$			%
	(Dollars in thousands)
Segment NOI—Triple-Net Leased Properties:
Rental income	$	422,585	$	424,606	$	(2,021	)	(0.5	)%
Other services revenue	2,330		2,430		(100		)	(4.1	)
Segment NOI	$	424,915	$	427,036	(2,121		)	(0.5	)

Triple-net leased properties segment NOI decreased during the six months ended June 30, 2017 over the prior year primarily due to asset dispositions and foreign currency movements between comparison periods, partially offset by asset acquisitions and contractual escalations in rent pursuant to the terms of our leases and increases in base and other rent under certain of our leases.

The following table compares results of operations for our 500 same-store triple-net leased properties, unadjusted for foreign currency movements between comparison periods. With regard to our triple-net leased properties segment, “same-store” refers to properties that we owned for the full period in both comparison periods, excluding assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Six Months Ended June 30,				Increase (Decrease) to Segment NOI
	2017		2016		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Triple-Net Leased Properties:
Rental income	$	385,637	$	385,505	$	132	0.0	%
Segment NOI	$	385,637	$	385,505	132		0.0

Segment NOI—Senior Living Operations



	For the Six Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI—Senior Living Operations:
Resident fees and services	$	924,431		$	928,413		$	(3,982	)	(0.4	)%
Less:
Property-level operating expenses	(620,698		)	(620,530		)	(168		)	(0.0	)
Segment NOI	$	303,733		$	307,883		(4,150		)	(1.3	)



	Number of Properties at June 30,		Average Unit Occupancy For the Six Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Six Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Total communities	298	304	88.2	%	90.2	%	$	5,703	$	5,443

The following table compares results of operations for our 293 same-store senior living operating communities, unadjusted for foreign currency movements between periods. With regard to our senior living operations segment, “same-store” refers to properties that we owned and were operational for the full period in both comparison periods, excluding properties that transitioned operators since the start of the prior comparison period, assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Six Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Same-Store Segment NOI—Senior Living Operations:
Resident fees and services	$	907,605		$	893,970		$	13,635		1.5	%
Less:
Property-level operating expenses	(610,106		)	(597,016		)	(13,090		)	(2.2	)
Segment NOI	$	297,499		$	296,954		545			0.2



	Number of Properties at June 30,		Average Unit Occupancy For the Six Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Six Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Same-store communities	293	293	88.3	%	90.3	%	$	5,711	$	5,499

Segment NOI—Office Operations



	For the Six Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Segment NOI—Office Operations:
Rental income	$	372,135		$	288,223		$	83,912		29.1	%
Office building services revenue	3,779			8,345			(4,566		)	(54.7	)
Total revenues	375,914			296,568			79,346			26.8
Less:
Property-level operating expenses	(114,119		)	(87,647		)	(26,472		)	(30.2	)
Office building services costs	(1,290		)	(5,303		)	4,013			75.7
Segment NOI	$	260,505		$	203,618		56,887			27.9



	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot for the Six Months Ended June30,
	2017	2016	2017		2016		2017		2016
Total office buildings	388	370	92.0	%	90.7	%	$	32	$	30

The increase in our office operations segment rental income during the six months ended June 30, 2017 over the prior year is attributed primarily to the September 2016 acquisition of life science and innovation centers and in place lease escalations, partially offset by asset dispositions. The increase in our office building property-level operating expenses during the six months ended June 30, 2017 over the prior year is attributed primarily to the above acquisition and increases in real estate taxes and other operating expenses, partially offset by asset dispositions.

Office building services revenue, net of applicable costs, decreased year over year primarily due to decreased construction activity during the six months ended June 30, 2017 over the prior year.

The following table compares results of operations for our 354 same-store office buildings. With regard to our office operations segment, “same-store” refers to properties that we owned for the full period in both comparison periods, excluding assets sold or classified as held for sale as of June 30, 2017 and assets whose operations were classified as discontinued operations.



	For the Six Months Ended June 30,						Increase (Decrease) to Segment NOI
	2017			2016			$			%
	(Dollars in thousands)
Same-Store Segment NOI—Office Operations:
Rental income	$	283,871		$	279,673		$	4,198		1.5	%
Less:
Property-level operating expenses	(85,175		)	(83,246		)	(1,929		)	(2.3	)
Segment NOI	$	198,696		$	196,427		2,269			1.2



	Number of Properties at June 30,		Occupancy June 30,				Annualized Average Rent Per Occupied Square Foot for the Six Months Ended June 30,
	2017	2016	2017		2016		2017		2016
Same-store Office Buildings	354	354	91.4	%	91.7	%	$	31	$	30

All Other

The $4.5 million increase in all other for the six months ended June 30, 2017 over the same period in 2016 is primarily due to interest income from new loans issued during the 2017, partially offset by decreased interest income attributable to loan repayments received during 2016.

Interest Expense

The $15.4 million increase in total interest expense for the six months ended June 30, 2017 and 2016, respectively, is attributed primarily to an increase of $9.4 million in interest expense due to higher debt balances and an increase of $6.0 million due to a higher effective interest rate, including the amortization of any fair value adjustments. Our effective interest rate was approximately 3.7% and 3.6% for the six months ended June 30, 2017 and 2016, respectively.

Depreciation and Amortization

Depreciation and amortization expense related to continuing operations decreased during the six months ended June 30, 2017 compared to the same period in 2016 primarily due to a decrease in amortization related to certain lease intangibles that were fully amortized during the third quarter of 2016 partially offset by the 2016 life science and innovation centers acquisition.

Loss on Extinguishment of Debt, Net

Loss on extinguishment of debt, net for the six months ended June 30, 2017 was due primarily to our 2016 redemption and repayment of the $455.5 million aggregate principal amount then outstanding of our 1.55% senior notes due 2016 and term loan repayments. Loss on extinguishment of debt, net for the six months ended June 30, 2016 was due to various debt repayments.

Other

The $3.4 million decrease in other for the six months ended June 30, 2017 over the same period in 2016 is primarily due to the expiration of six operating leases during 2016.

Income from Unconsolidated Entities

The $1.8 million increase in income from unconsolidated entities for the six months ended June 30, 2017 over the same period in 2016 is primarily due to the fair value re-measurement of our previously held equity interest, resulting in a gain on re-measurement of $3.0 million, partially offset by our share of net losses related to certain unconsolidated entities. Refer to “NOTE 7—INVESTMENTS IN UNCONSOLIDATED ENTITIES” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Income Tax Benefit

Income tax benefit related to continuing operations for the six months ended June 30, 2017 and 2016 were each due primarily to operating losses at our taxable REIT subsidiaries (“TRS entities”), and the reversal of a deferred tax liability at a TRS entity.

Gain on Real Estate Dispositions

The $12.1 million increase in gain on real estate dispositions for the six months ended June 30, 2017 over the same period in 2016 primarily relates to the sale of five triple-net leased properties through June 30, 2017.

Net Income Attributable to Noncontrolling Interests

The increase in net income attributable to noncontrolling interests of $1.8 million over the same period in 2016 is primarily due to the September 2016 acquisition of life science and innovation centers and asset dispositions.

Non-GAAP Financial Measures

We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not so excluded from or included in the most directly comparable measure calculated and presented in accordance with GAAP. Described below are the non-GAAP financial measures used by management to evaluate our operating performance and that we consider most useful to investors, together with reconciliations of these measures to the most directly comparable GAAP measures.

The non-GAAP financial measures we present in this Quarterly Report on Form 10-Q may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. You should not consider these measures as alternatives to net income or income from continuing operations (both determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine these measures in conjunction with net income and income from continuing operations as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds From Operations and Normalized Funds From Operations

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, we consider Funds From Operations (“FFO”) and normalized FFO to be appropriate supplemental measures of operating performance of an equity REIT. In particular, we believe that normalized FFO is useful because it allows investors, analysts and our management to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by non-recurring items and other non-operational events such as transactions and litigation. In some cases, we provide information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and our management to assess the impact of those items on our financial results.

We use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as net income attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property, including gains or losses on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. We define normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of our debt; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to our executive equity compensation plan and derivative transactions that have non-cash mark-to-market impacts on our Consolidated Statements of Income; (d) the financial impact of contingent consideration, severance-related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; and (g) expenses related to the re-audit and re-review in 2014 of our historical financial statements and related matters. We believe that income from continuing operations is the most comparable GAAP measure because it provides insight into our continuing operations.

The following table summarizes our FFO and normalized FFO for the three and six months ended June 30, 2017 and 2016. The increase in normalized FFO for the six months ended June 30, 2017 over the same period in 2016 is due primarily to improved property performance and accretive investments.



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands)
Income from continuing operations	$	152,272		$	137,849		$	308,184		$	261,188
Discontinued operations	(23		)	(148		)	(76		)	(637		)
Gain on real estate dispositions	719			5,739			44,008			31,923
Net income	152,968			143,440			352,116			292,474
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Net income attributable to common stockholders	151,831			143,162			349,958			292,142
Adjustments:
Real estate depreciation and amortization	222,347			220,346			438,308			455,072
Real estate depreciation related to noncontrolling interests	(1,817		)	(1,814		)	(3,812		)	(3,889		)
Real estate depreciation related to unconsolidated entities	1,458			1,220			2,645			3,209
(Gain) loss on real estate dispositions related to unconsolidated entities	(82		)	41			(59		)	(495		)
Gain on re-measurement of equity interest upon acquisition, net	—			—			(3,027		)	—
Gain on real estate dispositions	(719		)	(5,739		)	(44,008		)	(31,923		)
Discontinued operations:
Loss on real estate dispositions	—			1			—			1
FFO attributable to common stockholders	373,018			357,217			740,005			714,117
Adjustments:
Change in fair value of financial instruments	(153		)	(7		)	(130		)	(86		)
Non-cash income tax benefit	(2,959		)	(12,286		)	(7,104		)	(21,443		)
Loss on extinguishment of debt, net	47			2,468			450			2,782
Gain on non-real estate dispositions related to unconsolidated entities	(16		)	(585		)	(12		)	(585		)
Merger-related expenses, deal costs and re-audit costs	7,036			8,550			10,165			11,804
Amortization of other intangibles	365			438			803			876
Unusual items related to unconsolidated entities	280			—			492			—
Non-cash impact of changes to equity plan	1,711			—			2,710			—
Normalized FFO attributable to common stockholders	$	379,329		$	355,795		$	747,379		$	707,465

Adjusted EBITDA

We consider Adjusted EBITDA an important supplemental measure because it provides another manner in which to evaluate our operating performance and serves as another indicator of our credit strength and our ability to service our debt obligations. We define Adjusted EBITDA as consolidated earnings, which includes amounts in discontinued operations, before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, our consolidated joint venture partners’ share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of our historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments and unrealized foreign currency gains or losses, and including our share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items. The following table sets forth a reconciliation of income from continuing operations to Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands)
Income from continuing operations	$	152,272		$	137,849		$	308,184		$	261,188
Discontinued operations	(23		)	(148		)	(76		)	(637		)
Gain on real estate dispositions	719			5,739			44,008			31,923
Net income	152,968			143,440			352,116			292,474
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Net income attributable to common stockholders	151,831			143,162			349,958			292,142
Adjustments:
Interest	113,572			103,665			222,376			206,938
Loss on extinguishment of debt, net	36			2,468			345			2,782
Taxes (including tax amounts in general, administrative and professional fees)	(1,272		)	(10,602		)	(3,500		)	(19,274		)
Depreciation and amortization	224,108			221,961			441,891			458,348
Non-cash stock-based compensation expense	6,695			5,008			13,396			10,037
Merger-related expenses, deal costs and re-audit costs	6,543			7,033			8,909			9,252
Net income (loss) attributable to noncontrolling interests, net of consolidated joint venture partners’ share of EBITDA	(3,144		)	(3,075		)	(6,510		)	(6,153		)
(Income) loss from unconsolidated entities, net of Ventas share of EBITDA from unconsolidated entities	7,685			6,070			14,137			15,352
Gain on real estate dispositions	(719		)	(5,738		)	(44,008		)	(31,922		)
Unrealized foreign currency gains	(297		)	(111		)	(1,109		)	(572		)
Change in fair value of financial instruments	(159		)	(16		)	(148		)	(114		)
Gain on re-measurement of equity interest upon acquisition, net	—			—			(3,027		)	—
Adjusted EBITDA	$	504,879		$	469,825		$	992,710		$	936,816

NOI

We also consider NOI an important supplemental measure because it allows investors, analysts and our management to assess our unlevered property-level operating results and to compare our operating results with those of other real estate companies and between periods on a consistent basis. We define NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. Cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. The following table sets forth a reconciliation of income from continuing operations to NOI for the three and six months ended June 30, 2017 and 2016:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands)
Income from continuing operations	$	152,272		$	137,849		$	308,184		$	261,188
Discontinued operations	(23		)	(148		)	(76		)	(637		)
Gain on real estate dispositions	719			5,739			44,008			31,923
Net income	152,968			143,440			352,116			292,474
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Net income attributable to common stockholders	151,831			143,162			349,958			292,142
Adjustments:
Interest and other income	(202		)	(111		)	(683		)	(230		)
Interest	113,572			103,665			222,376			206,938
Depreciation and amortization	224,108			221,961			441,891			458,348
General, administrative and professional fees	33,282			32,094			67,243			63,820
Loss on extinguishment of debt, net	36			2,468			345			2,782
Merger-related expenses and deal costs	6,066			7,371			8,175			9,492
Other	1,848			2,303			3,036			6,471
Net income attributable to noncontrolling interests	1,137			278			2,158			332
Loss (income) from unconsolidated entities	106			(1,418		)	(3,044		)	(1,220		)
Income tax benefit	(2,159		)	(11,549		)	(5,304		)	(19,970		)
Gain on real estate dispositions	(719		)	(5,738		)	(44,008		)	(31,922		)
NOI	$	528,906		$	494,486		$	1,042,143		$	986,983

Liquidity and Capital Resources

As of June 30, 2017, we had a total of $103.4 million of unrestricted cash and cash equivalents, operating cash and cash related to our senior living operations and office operations reportable business segments that is deposited and held in property-level accounts. Funds maintained in the property-level accounts are used primarily for the payment of property-level expenses, debt service payments and certain capital expenditures. As of June 30, 2017, we also had escrow deposits and restricted cash of $68.3 million and $2.5 billion of unused borrowing capacity available under our unsecured revolving credit facility.

During the six months ended June 30, 2017, our principal sources of liquidity were cash flows from operations, proceeds from the issuance of debt securities and cash on hand.

For the next 12 months, our principal liquidity needs are to: (i) fund operating expenses; (ii) meet our debt service requirements; (iii) repay maturing mortgage and other debt, including $700.0 million of senior notes; (iv) fund capital expenditures; (v) fund acquisitions, investments and commitments, including development and redevelopment activities; and (vi) make distributions to our stockholders and unitholders, as required for us to continue to qualify as a REIT. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our unsecured revolving credit facility. However, an inability to access liquidity through multiple capital sources concurrently could have a Material Adverse Effect on us.

Unsecured Credit Facility and Unsecured Term Loans

As of June 30, 2017, we also had a $900.0 million term loan due 2020 priced at LIBOR plus 0.975%.

Senior Notes

In April 2017, we repaid in full, at par, $300.0 million aggregate principal amount then outstanding of our 1.250% senior notes due 2017 upon maturity.

In June 2017, we issued and sold C$275.0 million aggregate principal amount of 2.55% senior notes due 2023 at a price equal to 99.954% of par, for total proceeds of C$274.9 million before the agent fees and expenses. The notes were offered on a private placement basis in Canada. We used part of the proceeds to repay C$124.4 million on our unsecured term loan due 2019.

Mortgage Loan Obligations

Cash Flows

The following table sets forth our sources and uses of cash flows for the six months ended June 30, 2017 and 2016:



	For the Six Months Ended June 30,						Increase (Decrease) to Cash
	2017			2016			$			%
	(Dollars in thousands)
Cash and cash equivalents at beginning of period	$	286,707		$	53,023		$	233,684		nm
Net cash provided by operating activities	737,256			660,736			76,520			11.6
Net cash used in investing activities	(1,151,363		)	(236,567		)	(914,796		)	nm
Net cash provided by (used in) financing activities	227,617			(419,713		)	647,330			nm
Effect of foreign currency translation on cash and cash equivalents	3,136			(157		)	3,293			nm
Cash and cash equivalents at end of period	$	103,353		$	57,322		46,031			80.3

nm - not meaningful

Cash Flows from Operating Activities

Cash flows from operating activities increased $76.5 million during the six months ended June 30, 2017 over the same period in 2016 due primarily to investments made subsequent to June 30, 2016.

Cash Flows from Investing Activities

Cash used in investing activities increased $914.8 million during the six months ended June 30, 2017 over the same period in 2016 primarily due to the $700.0 million term loan we provided in March 2017 to facilitate Ardent’s acquisition of LHP and 2017 increases in investment in real estate property and development project expenditures.

Cash Flows from Financing Activities

Cash flows from financing activities increased $647.3 million during the six months ended June 30, 2017 over the same period in 2016 primarily due to increased senior note issuances and unsecured revolving credit facility borrowings during 2017, partially offset by higher proceeds from the issuance of common stock during 2016.

Capital Expenditures

The terms of our triple-net leases generally obligate our tenants to pay all capital expenditures necessary to maintain and improve our triple-net leased properties. However, from time to time, we may fund the capital expenditures for our triple-net leased properties through loans or advances to the tenants, which may increase the amount of rent payable with respect to the properties in certain cases. We expect to fund any capital expenditures for which we may become responsible upon expiration of our triple-net leases or in the event that our tenants are unable or unwilling to meet their obligations under those leases with cash flows from operations or through additional borrowings.

We also expect to fund capital expenditures related to our senior living operations and office operations reportable business segments with the cash flows from the properties or through additional borrowings. To the extent that unanticipated capital expenditure needs arise or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow additional funds may be restricted in certain circumstances by the terms of the instruments governing our outstanding indebtedness.

We are party to certain agreements that obligate us to develop seniors housing or healthcare properties funded through capital that we and, in certain circumstances, our joint venture partners provide. As of June 30, 2017, we had eight properties under development pursuant to these agreements, including one property that is owned by an unconsolidated real estate entity. In addition, from time to time, we engage in redevelopment projects with respect to our existing seniors housing communities to maximize the value, increase NOI, maintain a market-competitive position, achieve property stabilization or change the primary use of the property.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of our exposure to various market risks contains forward-looking statements that involve risks and uncertainties. These projected results have been prepared utilizing certain assumptions considered reasonable in light of information currently available to us. Nevertheless, because of the inherent unpredictability of interest rates and other factors, actual results could differ materially from those projected in such forward-looking information.

We are exposed to market risk related to changes in interest rates with respect to borrowings under our unsecured revolving credit facility and our unsecured term loans, certain of our mortgage loans that are floating rate obligations, mortgage loans receivable that bear interest at floating rates and marketable debt securities. These market risks result primarily from changes in LIBOR rates or prime rates. To manage these risks, we continuously monitor our level of floating rate debt with respect to total debt and other factors, including our assessment of current and future economic conditions.

The fair value of our fixed and variable rate debt is based on current interest rates at which we could obtain similar borrowings. For fixed rate debt, interest rate fluctuations generally affect the fair value, but not our earnings or cash flows. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs.

To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points in interest rates as of June 30, 2017 and December 31, 2016:



	As of June 30, 2017		As of December 31, 2016
	(In thousands)
Gross book value	$	9,622,304	$	9,481,101
Fair value⁽¹⁾	9,828,102		9,600,621
Fair value reflecting change in interest rates⁽¹⁾:
-100 basis points	10,368,117		10,117,238
+100 basis points	9,340,419		9,133,292


⁽¹⁾	The change in fair value of our fixed rate debt from December 31, 2016 to June 30, 2017 was due primarily to senior note issuances in 2017, partially offset by 2017 senior note and fixed rate mortgage debt repayments.

The table below sets forth certain information with respect to our debt, excluding premiums and discounts.



	As of June 30, 2017			As of December 31, 2016			As of June 30, 2016
	(Dollars in thousands)
Balance:
Fixed rate:
Senior notes and other, unhedged portion	$	8,190,620		$	7,854,264		$	7,525,086
Floating to fixed rate swap on term loan	200,000			200,000			200,000
Mortgage loans and other ⁽¹⁾	1,231,684			1,426,837			1,468,539
Variable rate:
Fixed to floating rate swap on senior notes	400,000			—			—
Unsecured revolving credit facility	516,455			146,538			212,382
Unsecured term loans, unhedged portion	1,178,586			1,271,215			1,274,849
Mortgage loans and other ⁽¹⁾	274,888			292,060			287,415
Total	$	11,992,233		$	11,190,914		$	10,968,271
Percentage of total debt:
Fixed rate:
Senior notes and other, unhedged portion	68.3		%	70.2		%	68.6		%
Floating to fixed rate swap on term loan	1.7			1.8			1.8
Mortgage loans and other ⁽¹⁾	10.3			12.7			13.4
Variable rate:
Fixed to floating rate swap on senior notes	3.3			—			—
Unsecured revolving credit facility	4.3			1.3			2.0
Unsecured term loans, unhedged portion	9.8			11.4			11.6
Mortgage loans and other ⁽¹⁾	2.3			2.6			2.6
Total	100.0		%	100.0		%	100.0		%
Weighted average interest rate at end of period:
Fixed rate:
Senior notes and other, unhedged portion	3.7		%	3.6		%	3.6		%
Floating to fixed rate swap on term loan	2.2			2.2			2.1
Mortgage loans and other ⁽¹⁾	5.4			5.6			5.6
Variable rate:
Fixed to floating rate swap on senior notes	2.1			—			—
Unsecured revolving credit facility	2.0			1.9			1.8
Unsecured term loans, unhedged portion	2.2			1.7			1.5
Mortgage loans and other ⁽¹⁾	2.3			2.1			1.8
Total	3.6			3.6			3.5


⁽¹⁾	Excludes mortgage debt of $77.0 million related to real estate assets classified as held for sale as of June 30, 2016, which was included in liabilities related to assets held for sale on our Consolidated Balance Sheet as of June 30, 2016.

The variable rate debt in the table above reflects, in part, the effect of $150.6 million notional amount of interest rate swaps with a maturity of March 2018 that effectively convert fixed rate debt to variable rate debt. In addition, the fixed rate debt in the table above reflects, in part, the effect of $236.7 million notional amount of interest rate swaps with maturities ranging from October 2018 to June 2027, in each case that effectively convert variable rate debt to fixed rate debt.

In January and February 2017, we entered into a total of $275 million of notional forward starting swaps with an effective date of April 3, 2017 that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of 2.33%. In March 2017, these swaps were terminated in conjunction with the issuance of the 3.850%

senior notes due 2027, which resulted in a $0.8 million gain which will be recognized over the life of the notes using the effective interest method.

In March 2017, we entered into interest rate swaps totaling a notional amount of $400.0 million with a maturity of January 15, 2023, effectively converting fixed rate debt to three month LIBOR-based floating rate debt. As a result, we will receive a fixed rate on the swap of 3.10% and will pay a floating rate equal to three month LIBOR plus a weighted average swap spread of 0.98%.

In June 2017, we entered into a total of $125 million of notional forward starting swaps with an effective date of January 15, 2018 that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of 2.1832%.

The increase in our outstanding variable rate debt at June 30, 2017 compared to December 31, 2016 is primarily attributable to the $400.0 million notional amount interest rate swaps mentioned above and increased borrowings under our unsecured revolving credit facility, partially offset by term loan repayments.

Pursuant to the terms of certain leases with one of our tenants, if interest rates increase on certain variable rate debt that we have totaling $80.0 million as of June 30, 2017, our tenant is required to pay us additional rent (on a dollar-for-dollar basis) in an amount equal to the increase in interest expense resulting from the increased interest rates. Therefore, the increase in interest expense related to this debt is equally offset by an increase in additional rent due to us from the tenant. Assuming a 100 basis point increase in the weighted average interest rate related to our variable rate debt and assuming no change in our variable rate debt outstanding as of June 30, 2017, interest expense for 2017 would increase by approximately $19.0 million, or $0.05 per diluted common share.

As of June 30, 2017 and December 31, 2016, our joint venture partners’ aggregate share of total debt was $75.2 million and $80.9 million, respectively, with respect to certain properties we owned through consolidated joint ventures. Total debt does not include our portion of debt related to investments in unconsolidated entities, which was $89.6 million and $122.0 million as of June 30, 2017 and December 31, 2016, respectively.

As of June 30, 2017 and December 31, 2016, the fair value of our secured and non-mortgage loans receivable, based on our estimates of currently prevailing rates for comparable loans, was $1.4 billion and $709.6 million, respectively.

As a result of our Canadian and United Kingdom operations, we are subject to fluctuations in certain foreign currency exchange rates that may, from time to time, affect our financial condition and operating performance. Based solely on our results for the six months ended June 30, 2017 (including the impact of existing hedging arrangements), if the value of the U.S. dollar relative to the British pound and Canadian dollar were to increase or decrease by one standard deviation compared to the average exchange rate during the year, our normalized FFO per share for the first three and six months of 2017 would decrease or increase, as applicable, by less than $0.01 per share or 1%. We will continue to mitigate these risks through a layered approach to hedging looking out for the next year and continual assessment of our foreign operational capital structure. Nevertheless, we cannot assure you that any such fluctuations will not have an effect on our earnings.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, 2017, at the reasonable assurance level.

Internal Control Over Financial Reporting

During the second quarter of 2017, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information contained in NOTE 12. ''LITIGATION'' of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, there have been no new material legal proceedings and no material developments in the legal proceedings reported in our Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We do not have a publicly announced repurchase plan or program in effect. The table below summarizes other repurchases of our common stock made during the quarter ended June 30, 2017:

(1)

Repurchases represent shares withheld to pay taxes on the vesting of restricted stock granted to employees under our 2006 Incentive Plan or 2012 Incentive Plan or restricted stock units granted to employees under the Nationwide Health Properties, Inc. (“NHP”) 2005 Performance Incentive Plan and assumed by us in connection with our acquisition of NHP. The value of the shares withheld is the closing price of our common stock on the date the vesting or exercise occurred (or, if not a trading day, the immediately preceding trading day) or the fair market value of our common stock at the time of exercise, as the case may be.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-K which are filed with this report are listed in the Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 28, 2017



	VENTAS, INC.

	By:	/s/ DEBRA A. CAFARO
		Debra A. Cafaro Chairman and Chief Executive Officer

	By:	/s/ ROBERT F. PROBST
		Robert F. Probst Executive Vice President and Chief Financial Officer

EXHIBIT INDEX




Exhibit Number	Description of Document	Location of Document
4.1	Fourth Supplemental Indenture dated as of June 1, 2017 by and among Ventas Canada Finance Limited, as Issuer, Ventas, Inc., as Guarantor, and Computershare Trust Company of Canada, as Trustee, relating to the 2.55% Senior Notes, Series D due 2023.	Filed herewith.
12.1	Statement Regarding Computation of Ratios of Earnings to Fixed Charges.	Filed herewith.
31.1	Certification of Debra A. Cafaro, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
31.2	Certification of Robert F. Probst, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
32.1	Certification of Debra A. Cafaro, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.	Filed herewith.
32.2	Certification of Robert F. Probst, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.	Filed herewith.
101	Interactive Data File.	Filed herewith.