“Ventas had a highly productive second quarter as we delivered strong results, executed on our near term development pipeline in our exciting university-based research & innovation business, and captured accretive and attractive external investments, including with Le Groupe Maurice,” said Debra A. Cafaro, Ventas Chairman and CEO.

“Building on our strong momentum in 2019, we are increasing our guidance for the year. With our powerful combination of a large, diverse high quality portfolio, which is benefitting from strong demand; our best in class partners; and our collaborative, experienced and results-oriented team, we are well positioned to meet our objectives in 2019 and pivot to growth in 2020. We look forward to the positive impact of an upcycle in senior housing from the expected combination of increasing demographic demand and reduced community openings, the completion and lease-up of our promising R&I development assets, growth in our core portfolio and accretive investment activity,” Cafaro added.

Second Quarter 2019 Company Performance

Net income attributable to common stockholders per diluted share for second quarter 2019 was $0.58 compared to $0.46 in the same period in 2018. The year-over-year increase from 2018 was due principally to growth in second quarter 2019 property-level operating income and a non-cash income tax benefit in the quarter. The second quarter 2019 also benefitted from cash natural disaster recoveries, the recognition of cash profit on warrants held in the Company’s Research & Innovation (“R&I”) business, and a $21 million second quarter 2018 non-cash expense (the “2018 Non-Cash Brookdale Expense”) incurred in connection with a mutually beneficial Brookdale Senior Living, Inc. (“Brookdale”) lease extension. These benefits were partially offset by lower gains on real estate asset dispositions and lower interest income from loans and investments in the second quarter 2019 mainly due to the second quarter 2018 full payoff of the Ardent Health Services (“Ardent”) loans and related fee recognition.
Reported Funds from Operations per share, as defined by the National Association of Real Estate Investment Trusts (“Nareit FFO”) was $1.13 compared to $0.98 in the same period in 2018. The change from 2018 results was due to the factors described above, adjusted to exclude the impact of lower gains from the sale of real estate assets in the second quarter of 2019.
Normalized Funds from Operations (“FFO”) per share for second quarter 2019 was $0.97 compared to $1.08 in 2018. The change from 2018 was primarily the result of the second quarter 2018 full payoff of the Ardent loans and recognition of related fees as described above. The second quarter 2019 non-cash tax benefit, cash natural disaster recoveries and the 2018 Non-Cash Brookdale Expense are excluded from the Company’s normalized FFO results for their respective periods.

The following information was filed by Ventas Inc (VTR) on Friday, July 26, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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
	EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED	JUNE 30, 2019
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		61-1055020
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

353 N. Clark Street, Suite 3300

Chicago, Illinois

United States

(Address of Principal Executive Offices)

60654 (Zip Code)

Not Applicable (877) 483-6827



(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)		(Registrant’s Telephone Number, Including Area Code)

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 every Interactive Data File required to be submitted 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 such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer ¨	Non-accelerated filer	☐
Smaller reporting company	☐		Emerging growth company	☐

Securities registered pursuant to Section 12(b) of the Act:



Trading symbol:	Class of Common Stock:	Name of exchange on which registered:
VTR	Common Stock, $0.25 par value	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



			Outstanding at July 23, 2019:
			372,584,521

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

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, 2019 and December 31, 2018	1
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018	3
	Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 4.	Controls and Procedures	65
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 5.	Other Information	66
Item 6.	Exhibits	67

PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	As of June 30, 2019			As of December 31, 2018
	(In thousands, except per share amounts)
Assets
Real estate investments:
Land and improvements	$	2,128,409		$	2,114,406
Buildings and improvements	22,837,251			22,437,243
Construction in progress	386,550			422,334
Acquired lease intangibles	1,267,322			1,502,955
Operating lease assets	374,319			—
	26,993,851			26,476,938
Accumulated depreciation and amortization	(6,758,067		)	(6,383,281		)
Net real estate property	20,235,784			20,093,657
Secured loans receivable and investments, net	693,651			495,869
Investments in unconsolidated real estate entities	47,112			48,378
Net real estate investments	20,976,547			20,637,904
Cash and cash equivalents	81,987			72,277
Escrow deposits and restricted cash	56,309			59,187
Goodwill	1,050,470			1,050,548
Assets held for sale	1,754			5,454
Other assets	821,844			759,185
Total assets	$	22,988,911		$	22,584,555
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	10,256,092		$	10,733,699
Accrued interest	111,388			99,667
Operating lease liabilities	233,757			—
Accounts payable and other liabilities	1,137,980			1,086,030
Liabilities related to assets held for sale	1,216			205
Deferred income taxes	149,454			205,219
Total liabilities	11,889,887			12,124,820
Redeemable OP unitholder and noncontrolling interests	222,662			188,141
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, 371,478 and 356,572 shares issued at June 30, 2019 and December 31, 2018, respectively	92,852			89,125
Capital in excess of par value	13,940,117			13,076,528
Accumulated other comprehensive loss	(39,671		)	(19,582		)
Retained earnings (deficit)	(3,173,287		)	(2,930,214		)
Total Ventas stockholders’ equity	10,820,011			10,215,857
Noncontrolling interests	56,351			55,737
Total equity	10,876,362			10,271,594
Total liabilities and equity	$	22,988,911		$	22,584,555

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands, except per share amounts)
Revenues
Rental income:
Triple-net leased	$	196,382		$	167,870		$	396,450		$	358,511
Office	202,188			192,392			403,616			386,560
	398,570			360,262			800,066			745,071
Resident fees and services	520,725			518,989			1,042,172			1,033,742
Office building and other services revenue	2,691			4,289			5,209			7,617
Income from loans and investments	19,529			56,417			36,655			87,598
Interest and other income	9,202			2,347			9,489			11,981
Total revenues	950,717			942,304			1,893,591			1,886,009
Expenses
Interest	110,369			113,029			220,988			224,392
Depreciation and amortization	226,187			223,634			462,107			456,784
Property-level operating expenses:
Senior living	366,837			361,112			727,823			713,332
Office	62,743			60,301			124,828			120,994
Triple-net leased	6,321			—			13,754			—
	435,901			421,413			866,405			834,326
Office building services costs	515			534			1,148			649
General, administrative and professional fees	43,079			36,656			83,839			73,830
Loss (gain) on extinguishment of debt, net	4,022			(93		)	4,427			10,884
Merger-related expenses and deal costs	4,600			4,494			6,780			21,830
Other	(11,481		)	3,527			(11,458		)	6,647
Total expenses	813,192			803,194			1,634,236			1,629,342
Income before unconsolidated entities, real estate dispositions, income taxes, discontinued operations and noncontrolling interests	137,525			139,110			259,355			256,667
Loss from unconsolidated entities	(2,529		)	(6,371		)	(3,475		)	(47,110		)
Gain on real estate dispositions	19,150			35,827			24,597			35,875
Income tax benefit	57,752			734			59,009			3,976
Income from continuing operations	211,898			169,300			339,486			249,408
Discontinued operations	—			—			—			(10		)
Net income	211,898			169,300			339,486			249,398
Net income attributable to noncontrolling interests	1,369			2,781			3,172			4,176
Net income attributable to common stockholders	$	210,529		$	166,519		$	336,314		$	245,222
Earnings per common share
Basic:
Income from continuing operations	$	0.59		$	0.48		$	0.94		$	0.70
Net income attributable to common stockholders	0.58			0.47			0.94			0.69
Diluted:
Income from continuing operations	$	0.58		$	0.47		$	0.93		$	0.69
Net income attributable to common stockholders	0.58			0.46			0.93			0.68

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,
	2019			2018			2019			2018
	(In thousands)
Net income	$	211,898		$	169,300		$	339,486		$	249,398
Other comprehensive (loss) income:
Foreign currency translation	(8,586		)	(15,246		)	(4,759		)	(3,043		)
Unrealized (loss) gain on available for sale securities	(2,395		)	12,857			6,896			12,685
Derivative instruments	(16,625		)	6,002			(22,063		)	14,617
Total other comprehensive (loss) income	(27,606		)	3,613			(19,926		)	24,259
Comprehensive income	184,292			172,913			319,560			273,657
Comprehensive income attributable to noncontrolling interests	1,369			2,781			3,172			4,176
Comprehensive income attributable to common stockholders	$	182,923		$	170,132		$	316,388		$	269,481

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, 2019 and 2018

(Unaudited)



2019	Common Stock Par Value		Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Treasury Stock			Total Ventas Stockholders’ Equity			Noncontrolling Interests			Total Equity
2019	(In thousands, except per share amounts)
Balance at April 1, 2019	$	89,579	$	13,160,550		$	(12,065	)	$	(3,088,401	)	$	—		$	10,149,663		$	56,350		$	10,206,013
Net income	—		—			—			210,529			—			210,529			1,369			211,898
Other comprehensive loss	—		—			(27,606		)	—			—			(27,606		)	—			(27,606		)
Net change in noncontrolling interests	—		(408		)	—			—			—			(408		)	(1,368		)	(1,776		)
Dividends to common stockholders—$0.7925 per share	—		—			—			(295,415		)	—			(295,415		)	—			(295,415		)
Issuance of common stock	3,163		764,555			—			—			—			767,718			—			767,718
Issuance of common stock for stock plans	104		31,364			—			—			65			31,533			—			31,533
Adjust redeemable OP unitholder interests to current fair value	—		(15,941		)	—			—			—			(15,941		)	—			(15,941		)
Grant of restricted stock, net of forfeitures	6		(3		)	—			—			(65		)	(62		)	—			(62		)
Balance at June 30, 2019	$	92,852	$	13,940,117		$	(39,671	)	$	(3,173,287	)	$	—		$	10,820,011		$	56,351		$	10,876,362

Balance at April 1, 2018	$	89,062	$	13,080,220		$	(14,474	)	$	(2,413,440	)	$	(553	)	$	10,740,815		$	63,229		$	10,804,044
Net income	—		—			—			166,519			—			166,519			2,781			169,300
Other comprehensive income	—		—			3,613			—			—			3,613			—			3,613
Net change in noncontrolling interests	—		(2,235		)	—			—			—			(2,235		)	(5,389		)	(7,624		)
Dividends to common stockholders—$0.79 per share	—		—			—			(282,181		)	—			(282,181		)	—			(282,181		)
Issuance of common stock for stock plans and other	15		3,098			—			—			490			3,603			—			3,603
Adjust redeemable OP unitholder interests to current fair value	—		(19,251		)	—			—			—			(19,251		)	—			(19,251		)
Redemption of OP Units	—		(194		)	—			—			—			(194		)	—			(194		)
Grant of restricted stock, net of forfeitures	8		6,761			—			—			(510		)	6,259			—			6,259
Balance at June 30, 2018	$	89,085	$	13,068,399		$	(10,861	)	$	(2,529,102	)	$	(573	)	$	10,616,948		$	60,621		$	10,677,569

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2019 and 2018

(Unaudited)



2019	Common Stock Par Value		Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Treasury Stock			Total Ventas Stockholders’ Equity			Noncontrolling Interests			Total Equity
2019	(In thousands, except per share amounts)
January 1, 2019	$	89,125	$	13,076,528		$	(19,582	)	$	(2,930,214	)	$	—		$	10,215,857		$	55,737		$	10,271,594
Net income	—		—			—			336,314			—			336,314			3,172			339,486
Other comprehensive loss	—		—			(19,926		)	—			—			(19,926		)	—			(19,926		)
Net change in noncontrolling interests	—		(2,098		)	—			—			—			(2,098		)	(2,558		)	(4,656		)
Dividends to common stockholders—$1.585 per share	—		—			—			(580,188		)	—			(580,188		)	—			(580,188		)
Issuance of common stock	3,553		862,603			—			—			—			866,156			—			866,156
Issuance of common stock for stock plans	113		41,183			—			—			4,155			45,451			—			45,451
Adjust redeemable OP unitholder interests to current fair value	—		(35,009		)	—			—			—			(35,009		)	—			(35,009		)
Grant of restricted stock, net of forfeitures	61		(3,090		)	—			—			(4,155		)	(7,184		)	—			(7,184		)
Cumulative effect change in accounting principles	—		—			(163		)	801			—			638			—			638
Balance at June 30, 2019	$	92,852	$	13,940,117		$	(39,671	)	$	(3,173,287	)	$	—		$	10,820,011		$	56,351		$	10,876,362

Balance at January 1, 2018	$	89,029	$	13,053,057		$	(35,120	)	$	(2,240,698	)	$	(42	)	$	10,866,226		$	65,959		$	10,932,185
Net income	—		—			—			245,222			—			245,222			4,176			249,398
Other comprehensive income	—		—			24,259			—			—			24,259			—			24,259
Net change in noncontrolling interests	—		(1,465		)	—			—			—			(1,465		)	(9,514		)	(10,979		)
Dividends to common stockholders—$1.58 per share	—		—			—			(564,269		)	—			(564,269		)	—			(564,269		)
Issuance of common stock for stock plans and other	16		4,258			—			—			490			4,764			—			4,764
Adjust redeemable OP unitholder interests to current fair value	—		4,286			—			—			—			4,286			—			4,286
Redemption of OP Units	—		(555		)	—			—			234			(321		)	—			(321		)
Grant of restricted stock, net of forfeitures	40		8,818			—			—			(1,255		)	7,603			—			7,603
Cumulative effect change in accounting principles	—		—			—			30,643			—			30,643			—			30,643
Balance at June 30, 2018	$	89,085	$	13,068,399		$	(10,861	)	$	(2,529,102	)	$	(573	)	$	10,616,948		$	60,621		$	10,677,569

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	For the Six Months Ended June 30,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net income	$	339,486		$	249,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	462,107			456,784
Amortization of deferred revenue and lease intangibles, net	(6,145		)	(23,837		)
Other non-cash amortization	11,587			8,650
Stock-based compensation	18,475			14,273
Straight-lining of rental income	(17,000		)	28,085
Loss on extinguishment of debt, net	4,427			10,884
Gain on real estate dispositions	(24,597		)	(35,875		)
Gain on real estate loan investments	—			(13,202		)
Income tax benefit	(61,195		)	(5,317		)
Loss from unconsolidated entities	3,475			47,110
Distributions from unconsolidated entities	1,300			2,634
Other	5,091			1,124
Changes in operating assets and liabilities:
(Increase) decrease in other assets	(44,472		)	12,776
Increase (decrease) in accrued interest	11,398			(1,504		)
Increase (decrease) in accounts payable and other liabilities	25,282			(41,647		)
Net cash provided by operating activities	729,219			710,336
Cash flows from investing activities:
Net investment in real estate property	(208,039		)	(12,257		)
Investment in loans receivable	(507,148		)	(211,554		)
Proceeds from real estate disposals	74,405			312,243
Proceeds from loans receivable	289,657			866,097
Development project expenditures	(114,226		)	(155,682		)
Capital expenditures	(58,381		)	(42,029		)
Distributions from unconsolidated entities	—			6,792
Investment in unconsolidated entities	(934		)	(40,033		)
Insurance proceeds for property damage claims	16,939			2,329
Net cash (used in) provided by investing activities	(507,727		)	725,906
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities	(506,551		)	(197,726		)
Net change in borrowings under commercial paper program	269,810			—
Proceeds from debt	712,934			750,316
Repayment of debt	(997,061		)	(1,431,887		)
Purchase of noncontrolling interests	—			(2,429		)
Payment of deferred financing costs	(6,837		)	(6,348		)
Issuance of common stock, net	866,033			—
Cash distribution to common stockholders	(567,142		)	(563,395		)
Cash distribution to redeemable OP unitholders	(4,551		)	(3,744		)
Cash issued for redemption of OP Units	—			(975		)
Contributions from noncontrolling interests	3,594			—
Distributions to noncontrolling interests	(4,103		)	(7,808		)
Proceeds from stock option exercises	25,738			2,325
Other	(6,732		)	(4,320		)
Net cash used in financing activities	(214,868		)	(1,465,991		)
Net increase (decrease) in cash, cash equivalents and restricted cash	6,624			(29,749		)
Effect of foreign currency translation	208			(401		)
Cash, cash equivalents and restricted cash at beginning of period	131,464			188,253
Cash, cash equivalents and restricted cash at end of period	$	138,296		$	158,103

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)



	For the Six Months Ended June 30,
	2019		2018
	(In thousands)
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments	$	1,069	$	28,916
Other assets	183		4,112
Other liabilities	1,252		15,944
Equity issued for redemption of OP Units	—		266

See accompanying notes.

VENTAS, INC.

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, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of June 30, 2019, we owned approximately 1,200 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”), research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), and health systems. We had 17 properties under development, including four properties that are owned by unconsolidated real estate entities. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois.

We primarily invest in seniors housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. As of June 30, 2019, we leased a total of 424 properties (excluding properties within our office operations reportable business segment) 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.

As of June 30, 2019, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”), Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”) and Eclipse Senior Living (“ESL”), to manage 372 seniors housing communities for us.

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, LLC (formerly Kindred Healthcare, Inc., together with its subsidiaries, “Kindred”) leased from us 124 properties (excluding two properties managed by Brookdale Senior Living pursuant to a long-term management agreement), 11 properties and 32 properties, respectively, as of June 30, 2019.

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, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. 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, 2018, filed with the SEC on February 8, 2019. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

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

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner or partners. 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 research and innovation projects by tax credit investors (“TCIs”). We have determined that these special purpose entities are VIEs, we are a holder of variable interests 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, 2019				December 31, 2018
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In thousands)
NHP/PMB L.P.	$	676,556	$	246,265	$	673,467	$	238,147
Other identified VIEs	2,145,884		444,837		2,075,499		402,478
Tax credit VIEs	831,553		340,990		797,077		298,154

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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 (“PMB”). Given our wholly owned subsidiary is the general partner and the primary beneficiary of NHP/PMB, we consolidate it as a VIE. As of June 30, 2019, third party investors owned 3.3 million Class A limited partnership units in NHP/PMB (“OP Units”), which represented 31% of the total units then outstanding, and we owned 7.3 million Class B limited partnership units in NHP/PMB, representing the remaining 69%. 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.

As redemption rights are outside of our control, the redeemable OP Units are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP Units at the greater of cost or redemption value. As of June 30, 2019 and December 31, 2018, the fair value of the redeemable OP Units was $204.9 million and $174.6 million, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Units. Our diluted earnings per share includes the effect of any potential shares outstanding from redemption of the OP Units.

Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at June 30, 2019 and December 31, 2018. 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.

Accounting for Historic and New Markets Tax Credits

For certain of our research 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 markets tax credits (“NMTCs”). As of June 30, 2019, we owned ten properties, including one property in development, that had syndicated HTCs or NMTCs, or both, to TCIs.

In general, TCIs invest cash into special purpose entities that invest in entities that own the subject property and generate the tax credits. The TCIs receive substantially all of the tax credits and hold only a nominal 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 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 investment 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 investment 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Impairment of Long-Lived Assets

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

Fair Values of Financial Instruments

Fair value is a market-based measurement, not an entity-specific measurement, and we determine fair value based on the assumptions that we expect market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves. Level three inputs are unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. If the volume and level of market activity for an asset or liability has decreased significantly relative to the normal market activity for such asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that a transaction for an asset or liability is not orderly, little, if any, weight is placed on that transaction price as an indicator of fair value. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

We use the following methods and assumptions in estimating the fair value of our financial instruments.


•	Cash and cash equivalents - The carrying amount of unrestricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.


•	Escrow deposits and restricted cash - The carrying amount of escrow deposits and restricted cash reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.


•	Loans receivable - We estimate the fair value of loans receivable using level two and level three inputs. We discount future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings.

•

Available for sale securities - We estimate the fair value of marketable debt securities, including 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)


◦	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 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 research 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 collectability of substantially all rents is probable. 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, 2019 and December 31, 2018, this cumulative excess totaled $266.0 million and $250.0 million (net of allowances of $44.6 million, recorded under prior accounting guidance), 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.

We assess the probability of collecting substantially all rents under our leases based on several factors, including, among other things, payment history, 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, the type of property, the value of the underlying collateral, if any, expected future performance of the property and current economic conditions. If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income. If we change our conclusions regarding the probability of collecting rent payments required by a lease, we may recognize adjustments to rental income in the period we make such change in our conclusions.

Senior Living Operations

Our resident agreements are accounted for as leases and 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.

Other

We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectability 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Recently Issued or Adopted Accounting Standards

We adopted ASC Topic 842, Leases (“ASC 842”) on January 1, 2019, 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.

ASC 842 allows for several practical expedients which permit the following: no reassessment of lease classification or initial direct costs; use of the standard’s effective date as the date of initial application; and no separation of non-lease components from the related lease components and, instead, to account for those components as a single lease component if certain criteria are met. We elected these practical expedients using the effective date as our date of initial application. Therefore, financial information and disclosures under ASC 842 are not provided for periods prior to January 1, 2019.

Upon adoption, we recognized both right of use assets and lease liabilities for leases in which we lease land, real property or other equipment. We now also report revenues and expenses within our triple-net leased properties reportable business segment for real estate taxes and insurance that are escrowed and obligations of the tenants in accordance with their respective leases with us. This reporting will have no impact on our net income. Resident leases within our senior living operations reportable business segment and office leases also contain service elements. We elected the practical expedient to account for our resident and office leases as a single lease component. Also, we now expense certain leasing costs, other than leasing commissions, as they are incurred. Prior to the adoption of ASC 842, GAAP provided for the deferral and amortization of such costs over the applicable lease term. We are continuing to amortize any unamortized deferred lease costs as of December 31, 2018 over their respective lease terms.

As of January 1, 2019, we recognized operating lease assets of $361.7 million on our Consolidated Balance Sheets which includes the present value of minimum lease payments as well as certain existing above and/or below market lease intangible values associated with such leases. Also upon adoption, we recognized operating lease liabilities of $216.9 million on our Consolidated Balance Sheets. The present value of minimum lease payments was calculated on each lease using a discount rate that approximates our incremental borrowing rate primarily adjusted for the length of the individual lease terms. As of the January 1, 2019 adoption date, we utilized discount rates ranging from 6.15% to 7.60% for our ground leases.

Upon adoption, we recognized a cumulative effect adjustment to retained earnings of $0.6 million primarily relating to certain costs associated with unexecuted leases that were deferred as of December 31, 2018.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require an entity to evaluate a current estimate of all expected credit losses over the life of a financial instrument, which may result in earlier recognition of credit losses on loans and other financial instruments. Under existing guidance, an entity generally only considered past events and current conditions in measuring an incurred loss. ASU 2016-13 is effective for us beginning January 1, 2020 and we are still evaluating the impact of adoption. 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, 2019, Atria, Sunrise, Brookdale Senior Living, Ardent, ESL and Kindred managed or operated approximately 22.1%, 11.0%, 8.2%, 5.1%, 4.3% and 1.1%, respectively, of our consolidated real estate investments based on gross book value (excluding properties classified as held for sale as of June 30, 2019). Because Atria, Sunrise and ESL manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants.

Based on gross book value, approximately 39.8% and 21.1% of our consolidated real estate investments were seniors housing communities included in the senior living operations and triple-net leased properties reportable business segments, respectively (excluding properties classified as held for sale as of June 30, 2019). MOBs, research and innovation centers, IRFs and LTACs, health systems, skilled nursing facilities (“SNFs”) and secured loans receivable and investments collectively comprised the remaining 39.1%. Our consolidated properties were located in 45 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of June 30, 2019, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Triple-Net Leased Properties

The following table reflects the concentration risk related to our triple-net leased properties for the periods presented:



	For the Three Months Ended June 30,
	2019		2018
Revenues⁽¹⁾:
Brookdale Senior Living⁽²⁾	4.8	%	2.5	%
Ardent	3.1		3.0
Kindred	3.4		3.4
NOI:
Brookdale Senior Living⁽²⁾	8.9	%	4.3	%
Ardent	5.8		5.5
Kindred	6.4		6.3


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


⁽²⁾	2018 includes the impact of a net non-cash charge of $21.3 million related to April 2018 lease extensions.

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.

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, 2019 and 2018. If 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.

Our 9.8% ownership interest in Ardent entitles us to certain rights and minority protections, as well as the right to appoint one of 11 members on the Ardent Board of Directors.

Senior Living Operations

As of June 30, 2019, Atria, Sunrise and ESL, collectively, provided comprehensive property management and accounting services with respect to 347 of our 367 consolidated 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, Sunrise’s or ESL’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, Sunrise’s or ESL’s senior management or equity ownership or any adverse developments in their businesses or financial condition could have a Material Adverse Effect on us.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Our 34% ownership interest in Atria entitles us to customary rights and minority protections, including the right to appoint two of six members to the Atria Board of Directors.

Our 34% ownership interest in ESL entitles us to customary rights and minority protections, including the right to appoint two of six members to the ESL Board of Directors. ESL management owns the 66% controlling interest.

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

Brookdale Senior Living 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. Kindred is not currently subject to the reporting requirements of the SEC, but was subject to such reporting requirements prior to the closing of transactions in July 2018 pursuant to which Kindred was acquired by a consortium of TPG Capital, Welsh, Carson, Anderson & Stowe and Humana, Inc. 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.

Kindred, Atria, Sunrise, Ardent and ESL are not currently subject to the reporting requirements of the SEC. The information related to Kindred, Atria, Sunrise, Ardent and ESL 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 Kindred, Atria, Sunrise, Ardent or ESL, 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—DISPOSITIONS

2019 Activity

During the six months ended June 30, 2019, we sold seven triple-net leased properties, six MOBs and our leasehold interest in one vacant land parcel for aggregate consideration of $74.4 million, and we recognized a gain on the sale of these assets of $24.6 million.

Real Estate Impairment

We recognized impairments of $13.5 million and $10.7 million, respectively, for the six months ended June 30, 2019 and 2018, which are recorded in depreciation and amortization in our Consolidated Statements of Income, and relate primarily to our triple-net leased properties and office operations reportable business segments. Our recorded impairments were primarily the result of a change in our intent to hold the impaired assets. In most cases, we recognize an impairment in the periods in which our change in intent is made.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale, including the amounts reported on our Consolidated Balance Sheets.



	As of June 30, 2019					As of December 31, 2018
	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 ⁽¹⁾	—	$	—	$	12	1	$	5,482		$	40
Office Operations ⁽¹⁾	—	37		927		—	160			152
Senior Living Operations ⁽¹⁾	1	1,717		277		—	(188		)	13
Total	1	$	1,754	$	1,216	1	$	5,454		$	205

⁽¹⁾ Balances may include anticipated post-closing settlements of working capital for disposed properties.

NOTE 5—LOANS RECEIVABLE AND INVESTMENTS

As of June 30, 2019 and December 31, 2018, we had $983.8 million and $756.5 million, respectively, of net loans receivable and investments relating to seniors housing and healthcare operators or properties. The following is a summary of our loans receivable and investments, net, 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, 2019:
Secured/mortgage loans and other, net	$	637,860	$	637,860	$	638,072	$	—
Government-sponsored pooled loan investments, net ⁽¹⁾	55,791		50,831		55,791		4,960
Total investments reported as secured loans receivable and investments, net	693,651		688,691		693,863		4,960
Non-mortgage loans receivable, net	59,570		59,570		57,669		—
Marketable debt securities ⁽²⁾	230,618		212,936		230,618		17,682
Total loans receivable and investments, net	$	983,839	$	961,197	$	982,150	$	22,642

As of December 31, 2018:
Secured/mortgage loans and other, net	$	439,491	$	439,491	$	425,290	$	—
Government-sponsored pooled loan investments, net ⁽¹⁾	56,378		49,601		56,378		6,777
Total investments reported as secured loans receivable and investments, net	495,869		489,092		481,668		6,777
Non-mortgage loans receivable, net	54,164		54,164		54,081		—
Marketable debt securities ⁽³⁾	206,442		197,473		206,442		8,969
Total loans receivable and investments, net	$	756,475	$	740,729	$	742,191	$	15,746

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

⁽²⁾ As of June 30, 2019, investments in marketable debt securities have contractual maturity dates in 2024 and 2026.

⁽³⁾ As of December 31, 2018, investments in marketable debt securities have contractual maturity dates in 2026.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

2019 Activity

In April 2019, we purchased $5.0 million and $10.5 million of senior secured notes issued by a healthcare company which mature in 2024 and 2026, respectively. The 2024 and 2026 notes were purchased at a price of 102% and 98% of par, respectively, and have an effective interest rate of 8.1% and 8.3%, respectively. These investments are classified as available for sale and are reflected on our Consolidated Balance Sheets at fair value.

In June 2019, we provided new secured debt financing of $490 million to certain subsidiaries of Colony Capital, Inc. The London Inter-bank Offered Rate (“LIBOR”) based debt financing has a five-year term (inclusive of three one-year extension options) and an effective interest rate of 9.2% as of June 30, 2019. In connection with this transaction, our previous loan to certain subsidiaries of Colony Capital, Inc. of $282 million was paid in full and we recognized a gain of $0.5 million in income from loans and investments in our Consolidated Statement of Income.

NOTE 6—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, 2019, we had a 25% interest in a joint venture that has a 90% or more ownership in six properties, excluding properties under development. We account for our interests in real estate joint ventures, as well as our 34% interest in Atria, 34% interest in ESL and 9.8% 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, ESL and Ardent, we provide various services to unconsolidated entities in exchange for fees and reimbursements. Total management fees earned in connection with these entities were $0.8 million and $2.3 million for the three months ended June 30, 2019 and 2018, respectively, and $1.6 million and $4.0 million for the six months ended June 30, 2019 and 2018, respectively, which is included in office building and other services revenue in our Consolidated Statements of Income.

In March 2018, we recognized an impairment charge of $35.7 million relating to one of our equity investments in an unconsolidated real estate joint venture consisting principally of SNFs, which is recorded in loss from unconsolidated entities in our Consolidated Statements of Income. We completed the sale of our 25% interest to our joint venture partner in July 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 7—INTANGIBLES

The following is a summary of our intangibles:



	As of June 30, 2019				As of December 31, 2018
	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	$	167,979		6.6	$	181,393		6.7
In-place and other lease intangibles	1,099,343			11.8	1,321,562			24.7
Goodwill	1,050,470			N/A	1,050,548			N/A
Other intangibles	35,824			11.4	35,759			11.8
Accumulated amortization	(914,832		)	N/A	(921,107		)	N/A
Net intangible assets	$	1,438,784		11.1	$	1,668,155		22.9
Intangible liabilities:
Below market lease intangibles	$	352,377		14.6	$	356,771		14.4
Other lease intangibles	13,498			N/A	31,418			46.5
Accumulated amortization	(196,916		)	N/A	(191,909		)	N/A
Purchase option intangibles	3,568			N/A	3,568			N/A
Net intangible liabilities	$	172,527		14.6	$	199,848		17.2

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.

The change in other lease intangible assets and liabilities is due to the presentation of ground lease intangibles within operating lease assets on our Consolidated Balance Sheets beginning January 1, 2019. See “NOTE 2—ACCOUNTING POLICIES.”

NOTE 8—OTHER ASSETS

The following is a summary of our other assets:



	As of June 30, 2019		As of December 31, 2018
	(In thousands)
Straight-line rent receivables	$	265,977	$	250,023
Non-mortgage loans receivable, net	59,570		54,164
Marketable debt securities	230,618		206,442
Other intangibles, net	5,401		5,623
Investment in unconsolidated operating entities	54,118		56,820
Other	206,160		186,113
Total other assets	$	821,844	$	759,185

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 9—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt:



	As of June 30, 2019			As of December 31, 2018
	(In thousands)
Unsecured revolving credit facility ⁽¹⁾	$	227,323		$	765,919
Commercial paper notes	270,000			—
Secured revolving construction credit facility due 2022	123,223			90,488
3.00% Senior Notes, Series A due 2019 ⁽²⁾	305,577			293,319
2.70% Senior Notes due 2020	500,000			500,000
4.25% Senior Notes due 2022	600,000			600,000
3.25% Senior Notes due 2022	500,000			500,000
3.30% Senior Notes, Series C due 2022 ⁽²⁾	190,985			183,325
Unsecured term loan due 2023	200,000			300,000
3.125% Senior Notes due 2023	400,000			400,000
3.10% Senior Notes due 2023	400,000			400,000
2.55% Senior Notes, Series D due 2023 ⁽²⁾	210,084			201,657
Unsecured term loan due 2024	—			600,000
3.50% Senior Notes due 2024	400,000			—
3.75% Senior Notes due 2024	400,000			400,000
4.125% Senior Notes, Series B due 2024 ⁽²⁾	190,985			183,324
3.50% 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
3.85% Senior Notes due 2027	400,000			400,000
4.00% Senior Notes due 2028	650,000			650,000
4.40% Senior Notes due 2029	750,000			750,000
6.90% Senior Notes due 2037 ⁽³⁾	52,400			52,400
6.59% Senior Notes due 2038 ⁽³⁾	22,823			22,823
5.45% Senior Notes due 2043	—			258,750
5.70% Senior Notes due 2043	300,000			300,000
4.375% Senior Notes due 2045	300,000			300,000
4.875% Senior Notes due 2049	300,000			—
Mortgage loans and other	1,103,503			1,127,697
Total	10,346,903			10,829,702
Deferred financing costs, net	(75,564		)	(69,615		)
Unamortized fair value adjustment	9,213			(1,163		)
Unamortized discounts	(24,460		)	(25,225		)
Senior notes payable and other debt	$	10,256,092		$	10,733,699


⁽¹⁾	As of June 30, 2019 and December 31, 2018, respectively, $15.3 million and $23.1 million of aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $27.0 million and $27.8 million were denominated in British pounds as of June 30, 2019 and December 31, 2018, respectively.


⁽²⁾	Canadian Dollar debt obligations shown in US Dollars.


⁽³⁾	Our 6.90% senior notes due 2037 are subject to repurchase, at the option of the holders, on October 1, 2027, and our 6.59% senior notes due 2038 are subject to repurchase, at the option of the holders, on July 7 in each of 2023 and 2028.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

As of June 30, 2019, our indebtedness had the following maturities:



	Principal Amount Due at Maturity		Unsecured Revolving Credit Facility and Commercial Paper Notes ⁽¹⁾		Scheduled Periodic Amortization		Total Maturities
	(In thousands)
2019	$	372,495	$	270,000	$	8,120	$	650,615
2020	598,436		—		15,323		613,759
2021	71,813		227,323		14,232		313,368
2022	1,532,545		—		12,744		1,545,289
2023	1,450,721		—		9,105		1,459,826
Thereafter	5,683,902		—		80,144		5,764,046
Total maturities	$	9,709,912	$	497,323	$	139,668	$	10,346,903


⁽¹⁾	At June 30, 2019, we had $415.3 million of borrowings outstanding under our unsecured revolving credit facility and commercial paper program, net of $82.0 million of unrestricted cash and cash equivalents.

Credit Facilities, Commercial Paper and Unsecured Term Loans

Our unsecured credit facility is comprised of a $3.0 billion unsecured revolving credit facility, priced at LIBOR plus 0.875% as of June 30, 2019. The unsecured 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 unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion.

In January 2019, our wholly-owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), established an unsecured commercial paper program. Under the terms of the program, we may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the United States commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of June 30, 2019, $270.0 million was outstanding under our commercial paper program.

As of June 30, 2019, $227.3 million was outstanding under the unsecured revolving credit facility with an additional

$23.7 million restricted to support outstanding letters of credit. In addition, we limit our utilization of the unsecured revolving credit facility in order to maintain liquidity and to support our commercial paper program. Including these internal limits, we had $2.5 billion in available liquidity under the unsecured revolving credit facility as of June 30, 2019.

In June 2019, we repaid $100.0 million of the balance outstanding on the $300.0 million unsecured term loan that matures in 2023 and repaid in full the $600.0 million unsecured term loan that was set to mature in 2024 and, as a result, we recognized a non-cash charge to loss on extinguishment of debt of $3.2 million during the three months ended June 30, 2019.

As of June 30, 2019, we had a $200.0 million unsecured term loan priced at LIBOR plus 0.90% that matures in 2023. The term loan also includes an accordion feature that effectively permits us to increase our aggregate borrowings thereunder to up to $800.0 million.

As of June 30, 2019, we had a $400.0 million secured revolving construction credit facility with $123.2 million of borrowings outstanding. The secured revolving construction credit facility matures in 2022 and is primarily used to finance the development of research and innovation centers and other construction projects.

Senior Notes

In January 2019, we redeemed $258.8 million aggregate principal amount then outstanding of our 5.45% senior notes due 2043 at a public offering price at par, plus accrued and unpaid interest to the redemption date. Notice of the redemption was given in November 2018 and, as a result, we recognized a non-cash charge to loss on extinguishment of debt of $7.1 million during the year ended December 31, 2018 and $0.4 million during the first quarter of 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

In February 2019, Ventas Realty issued and sold $400.0 million aggregate principal amount of 3.50% senior notes due 2024 at a public offering price equal to 99.88% of par and $300.0 million aggregate principal amount of 4.875% senior notes due 2049 at a public offering price equal to 99.77% of par.

In June 2019, Ventas Realty issued $450.0 million aggregate principal amount of 2.65% senior notes due 2025 at a public offering price equal to 99.45% of par. The notes were settled and proceeds were received in July 2019.

In July 2019, in connection with an announced cash tender offer for such notes, we redeemed $397.1 million aggregate principal amount then outstanding of our 2.70% senior notes due 2020 for a tender offer consideration of 100.37% of par value, plus accrued and unpaid interest to the payment date. Notice of the redemption was given in June 2019 and, as a result, we recognized a non-cash charge to loss on extinguishment of debt of $0.8 million during the three months ended June 30, 2019.

NOTE 10—FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of our financial instruments were as follows:

As of June 30, 2019

As of December 31, 2018

Carrying

Amount

Fair Value

Carrying

Amount

Fair Value

(In thousands)

Assets:

Cash and cash equivalents

81,987

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