Edgar Filing: VENTAS INC

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016
OR
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission file number: 1-10989

Ventas, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Delaware (State or Other Jurisdiction of Incorporation or Organization)		61-1055020 (I.R.S. Employer Identification No.)

353 N. Clark Street, Suite 3300

Chicago, Illinois

(Address of Principal Executive Offices)

60654

(Zip Code)

(877) 483-6827

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

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



Class of Common Stock:		Outstanding at April 27, 2016:
Common Stock, $0.25 par value		338,132,079

VENTAS, INC.

FORM 10-Q

INDEX




		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	1
	Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015	2
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015	3
	Consolidated Statements of Equity for the Three Months Ended March 31, 2016 and the Year Ended December 31, 2015	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	58
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 6.	Exhibits	60

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)



	March 31, 2016			December 31, 2015
Assets
Real estate investments:
Land and improvements	$	2,060,247		$	2,056,428
Buildings and improvements	20,395,386			20,309,599
Construction in progress	119,215			92,005
Acquired lease intangibles	1,343,187			1,344,422
	23,918,035			23,802,454
Accumulated depreciation and amortization	(4,409,554		)	(4,177,234		)
Net real estate property	19,508,481			19,625,220
Secured loans receivable and investments, net	1,002,598			857,112
Investments in unconsolidated real estate entities	98,120			95,707
Net real estate investments	20,609,199			20,578,039
Cash and cash equivalents	51,701			53,023
Escrow deposits and restricted cash	76,710			77,896
Goodwill	1,044,983			1,047,497
Assets held for sale	54,263			93,060
Other assets	424,436			412,403
Total assets	$	22,261,292		$	22,261,918
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	11,247,730		$	11,206,996
Accrued interest	66,988			80,864
Accounts payable and other liabilities	738,327			779,380
Liabilities related to assets held for sale	12,625			34,340
Deferred income taxes	333,354			338,382
Total liabilities	12,399,024			12,439,962
Redeemable OP unitholder and noncontrolling interests	191,739			196,529
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued	—			—
Common stock, $0.25 par value; 600,000 shares authorized, 337,486 and 334,386 shares issued at March 31, 2016 and December 31, 2015, respectively	84,354			83,579
Capital in excess of par value	11,758,306			11,602,838
Accumulated other comprehensive loss	(19,932		)	(7,565		)
Retained earnings (deficit)	(2,208,474		)	(2,111,958		)
Treasury stock, 1 and 44 shares at March 31, 2016 and December 31, 2015, respectively	(59		)	(2,567		)
Total Ventas stockholders’ equity	9,614,195			9,564,327
Noncontrolling interest	56,334			61,100
Total equity	9,670,529			9,625,427
Total liabilities and equity	$	22,261,292		$	22,261,918

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)



	For the Three Months Ended March 31,
	2016			2015
Revenues:
Rental income:
Triple-net leased	$	214,487		$	188,557
Medical office buildings	144,136			137,060
	358,623			325,617
Resident fees and services	463,976			446,914
Medical office building and other services revenue	7,185			10,543
Income from loans and investments	22,386			22,053
Interest and other income	119			471
Total revenues	852,289			805,598
Expenses:
Interest	103,273			82,328
Depreciation and amortization	236,387			216,219
Property-level operating expenses:
Senior living	312,541			298,362
Medical office buildings	43,681			42,437
	356,222			340,799
Medical office building services costs	3,451			6,918
General, administrative and professional fees	31,726			34,326
Loss on extinguishment of debt, net	314			21
Merger-related expenses and deal costs	1,632			30,613
Other	4,168			4,874
Total expenses	737,173			716,098
Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest	115,116			89,500
Loss from unconsolidated entities	(198		)	(251		)
Income tax benefit	8,421			7,250
Income from continuing operations	123,339			96,499
Discontinued operations	(489		)	17,574
Gain on real estate dispositions	26,184			6,686
Net income	149,034			120,759
Net income attributable to noncontrolling interest	54			317
Net income attributable to common stockholders	$	148,980		$	120,442
Earnings per common share:
Basic:
Income from continuing operations attributable to common stockholders, including real estate dispositions	$	0.44		$	0.32
Discontinued operations	(0.00		)	0.05
Net income attributable to common stockholders	$	0.44		$	0.37
Diluted:
Income from continuing operations attributable to common stockholders, including real estate dispositions	$	0.44		$	0.32
Discontinued operations	(0.00		)	0.05
Net income attributable to common stockholders	$	0.44		$	0.37
Weighted average shares used in computing earnings per common share:
Basic	335,559			325,454
Diluted	339,202			329,203
Dividends declared per common share	$	0.73		$	0.79

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)



	For the Three Months Ended March 31,
	2016			2015
Net income	$	149,034		$	120,759
Other comprehensive loss:
Foreign currency translation	(10,668		)	(10,872		)
Change in unrealized gain on marketable securities	181			1,349
Other	(1,880		)	759
Total other comprehensive loss	(12,367		)	(8,764		)
Comprehensive income	136,667			111,995
Comprehensive income attributable to noncontrolling interest	54			317
Comprehensive income attributable to common stockholders	$	136,613		$	111,678

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended March 31, 2016 and the Year Ended December 31, 2015

(Unaudited)

(In thousands, except per share amounts)



	Common Stock Par Value		Capital in Excess of Par Value			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Treasury Stock			Total Ventas Stockholders’ Equity			Noncontrolling Interest			Total Equity
Balance at January 1, 2015	$	74,656	$	10,119,306		$	13,121		$	(1,526,388	)	$	(511	)	$	8,680,184		$	74,213		$	8,754,397
Net income	—		—			—			417,843			—			417,843			1,379			419,222
Other comprehensive loss	—		—			(20,686		)	—			—			(20,686		)	—			(20,686		)
Acquisition-related activity	7,103		2,209,202			—			—			—			2,216,305			853			2,217,158
Impact of CCP Spin-Off	—		(1,247,356		)	—			—			—			(1,247,356		)	(4,717		)	(1,252,073		)
Net change in noncontrolling interest	—		—			—			—			—			—			(12,530		)	(12,530		)
Dividends to common stockholders—$3.04 per share	—		—			—			(1,003,413		)	—			(1,003,413		)	—			(1,003,413		)
Issuance of common stock	1,797		489,227			—			—			—			491,024			—			491,024
Issuance of common stock for stock plans	23		6,068			—			—			5,945			12,036			—			12,036
Change in redeemable noncontrolling interest	—		(374		)	—			—			—			(374		)	1,902			1,528
Adjust redeemable OP unitholder interests to current fair value	—		7,831			—			—			—			7,831			—			7,831
Purchase of OP units	—		1,719			—			—			—			1,719			—			1,719
Grant of restricted stock, net of forfeitures	—		17,215			—			—			(8,001		)	9,214			—			9,214
Balance at December 31, 2015	83,579		11,602,838			(7,565		)	(2,111,958		)	(2,567		)	9,564,327			61,100			9,625,427
Net income	—		—			—			148,980			—			148,980			54			149,034
Other comprehensive loss	—		—			(12,367		)	—			—			(12,367		)	—			(12,367		)
Impact of CCP Spin-Off	—		271			—			—			—			271			—			271
Net change in noncontrolling interest	—		—			—			—			—			—			(5,033		)	(5,033		)
Dividends to common stockholders—$0.73 per share	—		—			—			(245,496		)	—			(245,496		)	—			(245,496		)
Issuance of common stock	655		148,976			—			—			—			149,631			—			149,631
Issuance of common stock for stock plans	17		5,652			—			—			1,810			7,479			—			7,479
Change in redeemable noncontrolling interest	—		(311		)	—			—			—			(311		)	213			(98		)
Adjust redeemable OP unitholder interests to current fair value	—		(18,230		)	—			—			—			(18,230		)	—			(18,230		)
Purchase of OP units	76		19,989			—			—			729			20,794			—			20,794
Grant of restricted stock, net of forfeitures	27		(879		)	—			—			(31		)	(883		)	—			(883		)
Balance at March 31, 2016	$	84,354	$	11,758,306		$	(19,932	)	$	(2,208,474	)	$	(59	)	$	9,614,195		$	56,334		$	9,670,529

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



	For the Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	149,034		$	120,759
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amounts in discontinued operations)	236,387			247,453
Amortization of deferred revenue and lease intangibles, net	(5,037		)	(6,603		)
Other non-cash amortization	2,446			(519		)
Stock-based compensation	5,029			6,307
Straight-lining of rental income, net	(9,845		)	(8,679		)
Loss on extinguishment of debt, net	314			21
Gain on real estate dispositions	(26,184		)	(6,686		)
Income tax benefit	(9,156		)	(7,850		)
Loss from unconsolidated entities	198			251
Distributions from unconsolidated entities	1,989			649
Other	1,099			2,259
Changes in operating assets and liabilities:
(Increase) decrease in other assets	(4,835		)	4,615
(Decrease) increase in accrued interest	(14,311		)	15,792
Decrease in accounts payable and other liabilities	(54,237		)	(23,600		)
Net cash provided by operating activities	272,891			344,169
Cash flows from investing activities:
Net investment in real estate property	(13,620		)	(1,072,539		)
Investment in loans receivable and other	(146,214		)	(39,573		)
Proceeds from real estate disposals	54,211			166,341
Proceeds from loans receivable	1,625			92,056
Funds held in escrow for future development expenditures	—			4,003
Development project expenditures	(34,767		)	(33,467		)
Capital expenditures	(23,721		)	(21,171		)
Other	(4,265		)	(4,180		)
Net cash used in investing activities	(166,751		)	(908,530		)
Cash flows from financing activities:
Net change in borrowings under credit facility	137,440			(452,897		)
Proceeds from debt	145			1,092,833
Repayment of debt	(151,309		)	(24,647		)
Purchase of noncontrolling interest	—			(2,660		)
Payment of deferred financing costs	(76		)	(14,435		)
Issuance of common stock, net	149,631			285,327
Cash distribution to common stockholders	(245,496		)	(254,910		)
Cash distribution to redeemable OP unitholders	(2,323		)	(2,365		)
Purchases of redeemable OP units	—			(569		)
Distributions to noncontrolling interest	(1,743		)	(1,822		)
Other	6,151			5,690
Net cash (used in) provided by financing activities	(107,580		)	629,545
Net (decrease) increase in cash and cash equivalents	(1,440		)	65,184
Effect of foreign currency translation on cash and cash equivalents	118			(307		)
Cash and cash equivalents at beginning of period	53,023			55,348
Cash and cash equivalents at end of period	$	51,701		$	120,225

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(In thousands)



	For the Three Months Ended March 31,
	2016			2015
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments	$	2,558		$	2,542,829
Other assets acquired	(66		)	16,711
Debt assumed	—			177,857
Other liabilities	2,558			45,736
Deferred income tax liability	(66		)	44,117
Redeemable OP unitholder interests assumed	—			87,245
Equity issued	—			2,204,585

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 March 31, 2016, we owned approximately 1,300 properties (including properties classified as held for sale), consisting of seniors housing communities, medical office buildings (“MOBs”), skilled nursing facilities, specialty hospitals and general acute care hospitals, and we had four properties under development, including two properties that are owned by an unconsolidated real estate entity. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois. In August 2015 we completed the spin off of most of our post-acute/skilled nursing facility portfolio into an independent, publicly traded REIT named Care Capital Properties, Inc. (“CCP”) (the “CCP Spin-Off”). The historical results of operations of the CCP properties as well as the related assets and liabilities are presented as discontinued operations in the accompanying consolidated financial statements.

We primarily invest in seniors housing and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. As of March 31, 2016, we leased a total of 575 properties (excluding MOBs and 34 properties owned through investments in unconsolidated entities, and including one property classified as held for sale) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 304 seniors housing communities for us pursuant to long-term management agreements. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) and Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) leased from us 140 properties (excluding six properties owned through investments in unconsolidated entities and one property managed by Brookdale Senior Living pursuant to a long-term management agreement), 69 properties (excluding one MOB and including one property classified as held for sale) and ten properties, respectively, as of March 31, 2016.

Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary and our ownership interest in PMB Real Estate Services LLC (“PMBRES”), we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and other loans and investments relating to seniors housing and healthcare operators or properties.

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 months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 12, 2016. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

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

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk

lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

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

As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner(s). We assess limited partners’ rights and their impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We also apply this guidance to managing member interests in limited liability companies.

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

•VIEs in the legal form of a limited partnership (“LP”) or Limited Liability Company (“LLC”);

•The VIEs were designed to own and manage their underlying real estate investments;

•Ventas (or a subsidiary thereof) is the general partner or managing member of the VIE;

•Ventas (or a subsidiary thereof) also owns a majority of the voting interests in the VIE;

•A minority of voting interests in the VIE are owned by external third parties, unrelated to us;

•The minority owners do not have substantive kick-out or participating rights in the VIEs; and

•Ventas (or a subsidiary thereof) is the primary beneficiary of the VIE

In general, the assets of the consolidated VIEs are available only for the settlement of the obligations of the respective entities. Unless otherwise required by the LP or LLC agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets.



	March 31, 2016				December 31, 2015
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In thousands)

NHP/PMB L.P.	$	635,018	$	199,169	$	645,109	$	203,235
Ventas Realty Capital Healthcare Trust Operating Partnership, L.P.	2,330,221		226,190		2,367,296		233,600
Other identified VIEs	1,547,758		399,844		1,582,430		431,582

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 March 31, 2016, third party investors owned 2,797,349 Class A limited partnership units in NHP/PMB (“OP Units”), which represented 28.8% of the total units then outstanding, and we owned 6,931,978 Class B limited partnership units in NHP/PMB, representing the remaining 71.2%. At any time following the first anniversary of the date of their issuance, the OP Units may be redeemed at the election of the holder for cash or, at our option, 0.9051 shares of our common stock per unit, subject to further adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the OP Units that requires us, subject to the terms and

conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of OP Units.

We own a majority interest in Ventas Realty Capital Healthcare Trust Operating Partnership, L.P. (“Ventas Realty OP”) and we consolidate this entity, as our wholly owned subsidiary is the general partner, who is the primary beneficiary of this VIE. The limited partnership units (“Class C Units”) may be redeemed at the election of the holder for one share of our common stock per unit or, at our option, an equivalent amount in cash, subject to adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the Class C Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of Class C Units. As of March 31, 2016, third party investors owned 672,984 Class C Units, which represented 2.3% of the total units then outstanding, and we owned 28,550,812 Class C Units and 176,374 OP units in Ventas Realty OP, representing the remaining 97.7%.

In March 2016, third party investors redeemed 305,047 Class C Units for 305,047 shares of Ventas common stock, valued at $18.6 million.

As redemption rights are outside of our control, the redeemable OP unitholder interests are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP unitholder interests at the greater of cost or fair value. As of March 31, 2016 and December 31, 2015, the fair value of the redeemable OP unitholder interests was $183.7 million and $188.5 million, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Units or Class C Units. Our diluted earnings per share (“EPS”) includes the effect of any potential shares outstanding from redemption of the OP Units or Class C Units.

Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at March 31, 2016 and December 31, 2015. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interest’s share of net income or loss and distributions) or the redemption value. Our joint venture partners have certain redemption rights with respect to their noncontrolling interests in these joint ventures that are outside of our control, and the redeemable noncontrolling interests are classified outside of permanent equity on our Consolidated Balance Sheets. We recognize changes in the carrying value of redeemable noncontrolling interests through capital in excess of par value.

Noncontrolling Interests

Excluding the redeemable noncontrolling interests described above, we present the portion of any equity that we do not own in entities that we control (and thus consolidate) as noncontrolling interests and classify those interests as a component of consolidated equity, separate from total Ventas stockholders’ equity, on our Consolidated Balance Sheets. For consolidated joint ventures with pro rata distribution allocations, net income or loss is allocated between the joint venture partners based on their respective stated ownership percentages. In other cases, net income or loss is allocated between the joint venture partners based on the hypothetical liquidation at book value method. We account for purchases or sales of equity interests that do not result in a change of control as equity transactions, through capital in excess of par value. In addition, we include net income attributable to the noncontrolling interests in net income in our Consolidated Statements of Income.

Assets Held for Sale and Discontinued Operations

We sell properties from time to time for various reasons, including favorable market conditions or the exercise of purchase options by tenants. We classify certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell and are no longer depreciated. We report discontinued operations when the following criteria are met: (1) a component of an entity or group of components that has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results; or (2) an acquired business that is classified as held for sale on the acquisition date. The results of operations for assets meeting the definition of discontinued operations are reflected in our Consolidated Statements of Income as discontinued operations for all periods presented. We allocate estimated interest expense to discontinued operations based on property values and our weighted average interest rate or the property’s actual mortgage interest.

Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of leased

properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination.

Fair Values of Financial Instruments

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

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

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


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


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


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

•

Marketable debt securities - We estimate the fair value of corporate bonds, if any, using level two inputs: we observe quoted prices for similar assets or liabilities in active markets that we have the ability to access. We estimate the fair value of certain government-sponsored pooled loan investments using level three inputs: we consider credit spreads, underlying asset performance and credit quality, default rates and any other applicable criteria.

•

Derivative instruments - With the assistance of a third party, we estimate the fair value of derivative instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, using level two inputs: for interest rate caps, we observe forward yield curves and other relevant information; for interest rate swaps, we observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates; and for foreign currency forward contracts, we estimate the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculate a present value of the net amount using a discount factor based on observable traded interest rates.


•	Senior notes payable and other debt - We estimate the fair value of senior notes payable and other debt using level two inputs: we discount the future cash flows using current interest rates at which we could obtain similar borrowings. For mortgage debt, we may estimate fair value using level three inputs.


•	Redeemable OP unitholder interests - We estimate the fair value of our redeemable OP unitholder interests using level one inputs: we base fair value on the closing price of our common stock, as OP units and Class C Units may be redeemed at the election of the holder for cash or, at our option, shares of our common stock, subject to adjustment in certain circumstances.

Revenue Recognition

Triple-Net Leased Properties and MOB Operations

Certain of our triple-net leases and most of our MOB leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the applicable lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our Consolidated Balance Sheets. At March 31, 2016 and December 31, 2015, this cumulative excess totaled $228.6 million (net of allowances of $99.9 million) and $219.1 million (net of allowances of $101.4 million), respectively (excluding properties classified as held for sale).

Certain of our leases provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term.

Senior Living Operations

We recognize resident fees and services, other than move-in fees, monthly as services are provided. We recognize move-in fees on a straight-line basis over the average resident stay. Our lease agreements with residents generally have terms of 12 to 18 months and are cancelable by the resident upon 30 days’ notice.

Other

We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectibility is reasonably assured. We apply the effective interest method on a loan-by-loan basis and recognize discounts and premiums as yield adjustments over the related loan term. We recognize interest income on an impaired loan to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loan, other receivables and all related accrued interest. When the balance of the loan, other receivables and all related accrued interest is equal to or less than our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide a reserve against an impaired loan to the extent our total investment in the loan exceeds our estimate of the fair value of the loan collateral.

We recognize income from rent, lease termination fees, development services, management advisory services, and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Allowances

We assess the collectibility of our rent receivables, including straight-line rent receivables. We base our assessment of the collectibility of rent receivables (other than straight-line rent receivables) on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, if any, and current economic conditions. If our evaluation of these factors indicates it is probable that we will be unable to recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. We also base our assessment of the collectibility of straight-line rent receivables on several factors, including, among other things, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant and the type of property. If our evaluation of these factors indicates it is probable that we will be unable to receive the rent payments due in the future, we provide a reserve against the recognized straight-line rent receivable asset for the portion, up to its full value, that we estimate may not be recovered. If we change our assumptions or estimates regarding the collectibility of future rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized in the period we make such change in our assumptions or estimates.

Recently Issued or Adopted Accounting Standards

On January 1, 2016 we adopted ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) to simplify the accounting for business combinations, specifically as it relates to measurement-period adjustments. Acquiring entities in a business combination must recognize measurement-period adjustments in the reporting period in which the adjustment amounts are determined. Also, ASU 2015-16 requires entities to present separately on the face of the income statement (or disclose in the notes to the financial statements) the portion of the amount recorded in the current period earnings, by line item, that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. Adoption of this ASU did not have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”), which introduces a lessee model that brings most leases on the balance sheet and amongst other changes, eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. The amendments in ASU 2016-02 do not significantly change the current lessor accounting model. ASU 2016-02 is not effective for the Company until January 1, 2019 with early adoption permitted. We are continuing to evaluate this guidance and the impact to us, as both lessor and lessee, on our consolidated financial statements.

In 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. In 2015, the FASB provided for a one-year deferral of the effective date for ASU 2014-09 which is now effective for us beginning January 1, 2018. We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements, as a substantial portion of our revenue consists of rental income from leasing arrangements, which are specifically excluded from ASU 2014-09.

NOTE 3—CONCENTRATION OF CREDIT RISK

As of March 31, 2016, Atria, Sunrise, Brookdale Senior Living, Kindred and Ardent managed or operated approximately 22.6%, 11.7%, 8.4%, 2.1% and 5.3% , respectively, of our real estate investments based on gross book value (excluding properties classified as held for sale as of March 31, 2016). Because Atria and Sunrise manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants.

Seniors housing communities constituted approximately 65.0% of our real estate investments based on gross book value (excluding properties classified as held for sale as of March 31, 2016), while MOBs, skilled nursing facilities, specialty hospitals and general acute care hospitals collectively comprised the remaining 35.0%. Our properties were located in 46 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of March 31, 2016, with properties in one state (California) accounting for more than 10% of our total revenues and total net operating income (“NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and medical office building services costs) (in each case excluding amounts in discontinued operations) for the three months then ended.

Triple-Net Leased Properties

For the three months ended March 31, 2016 and 2015, approximately 4.8% and 6.1%, respectively, of our total revenues and 8.3% and 10.7%, respectively, of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Brookdale Senior Living. For the same periods, approximately 5.3% and 5.7%, respectively, of our total revenues and 9.2% and 10.1%, respectively, of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Kindred (“Kindred Master Leases”). For the three months ended March 31, 2016, approximately 3.1% of our total revenues and 5.3% of our total NOI (in each case excluding amounts in discontinued operations) were derived from our lease agreements with Ardent. Each of our leases with Brookdale Senior Living, Kindred and Ardent is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Kindred and Ardent leases has a corporate guaranty. Brookdale Senior Living and Kindred have multiple leases with us and those leases contain cross-default provisions tied to each other, as well as bundled lease renewals.

The properties we lease to Brookdale Senior Living, Kindred and Ardent accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended March 31, 2016 and 2015. If either Brookdale Senior Living, Kindred or Ardent becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline and our ability to service our indebtedness and to make distributions to our stockholders could be impaired. We cannot assure you that Brookdale Senior Living, Kindred and Ardent will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by Brookdale Senior Living, Kindred or Ardent to do so could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Brookdale Senior Living, Kindred and Ardent will elect to renew their respective leases with us upon expiration of the leases or that we will be able to reposition any non-renewed properties on a timely basis or on the same or better economic terms, if at all.

On April 3, 2016, we entered into several agreements with Kindred to improve the quality and productivity of the long term acute care hospital (“LTAC”) portfolio leased by Ventas to Kindred. Certain of the agreements consist of lease amendments to the Kindred Master Leases. Under these lease amendments, annual rent on seven identified LTACs (“7 LTACs”), which is currently approximately $8 million, has been immediately re-allocated to other more productive post-acute assets subject to the Kindred Master Leases. Total annual rent under the Kindred Master Leases will remain the same as its current level. Separately, Ventas has agreed to sell the 7 LTACs to an unrelated third party, subject to conditions to closing. As a result of this pending disposition, we recognized an impairment of $10.3 million during the three months ended March 31, 2016, which is reported in depreciation and amortization in our Consolidated Statements of Income. In April, we received $3.5 million from Kindred in connection with the lease amendments, which is being amortized over the lease term of certain assets remaining in the Kindred Master Leases.

In December 2014, we entered into favorable agreements with Kindred to transition or sell the operations of nine licensed healthcare assets, make modifications to the master leases governing 34 leased assets, and reimburse us for certain deferred capital expenditures at skilled nursing facilities previously transferred to new operators. In January 2015, Kindred paid us $37 million in connection with these agreements, which is being amortized over the remaining lease term for the 34 assets governed by the Kindred Master Leases. The nine licensed healthcare assets were all disposed of as of April 1, 2016.

Senior Living Operations

As of March 31, 2016, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 268 of our 304 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 five members on the Atria Board of Directors.

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

Each of Brookdale Senior Living and Kindred is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale Senior Living and Kindred contained or referred to in this Quarterly Report on Form 10-Q has been derived from SEC filings made by Brookdale Senior Living or Kindred, as the case may be, or other publicly available information, or was provided to us by Brookdale Senior Living or Kindred, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy. We are providing this data for informational purposes only, and you are encouraged to obtain Brookdale Senior Living’s and Kindred’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

Atria, Sunrise and Ardent are not currently subject to the reporting requirements of the SEC. The information related to Atria, Sunrise and Ardent contained or referred to in this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Atria, Sunrise or Ardent, as the case may be, and we have not verified this 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

2016 Activity

During the three months ended March 31, 2016, we sold two triple-net leased properties, one seniors housing community included in our senior living operations reportable business segment and one MOB for aggregate consideration of $54.5 million. We recognized a gain on the sales of these assets of $26.2 million. In April 2016, we sold one triple-net leased

property for aggregate consideration of $8.0 million and we estimate recognizing a gain on sale of real estate of $4.5 million during the second quarter of 2016.

2015 Activity

During the three months ended March 31, 2015, we sold 21 triple-net leased properties and 22 MOBs for aggregate consideration of $337.2 million, including $5.5 million of lease termination fees (included within triple-net leased rental income in our Consolidated Statements of Income). For three months ended March 31, 2015, we recognized a gain on the sales of these assets of $28.2 million (net of taxes), of which $21.4 million is being deferred due to an unsecured loan we made to the buyer in connection with the sale of certain assets. The gain will be deferred and subsequently recognized into income as principal payments are made on the loan over its five-year term.

Real Estate Impairment

We recognized impairments of $10.3 million and $19.2 million for the three months ended March 31, 2016 and 2015, respectively, which are recorded in depreciation and amortization. Of these impairments, $0 and $5.2 million for the three months ended March 31, 2016 and 2015, respectively, were reported in discontinued operations in our Consolidated Statements of Income.

Discontinued Operations and Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale as of March 31, 2016 and December 31, 2015, including the amounts reported on our Consolidated Balance Sheets.



	March 31, 2016					December 31, 2015
	Number of Properties Held for Sale	Assets Held for Sale		Liabilities Held for Sale		Number of Properties Held for Sale	Assets Held for Sale		Liabilities Held for Sale
	(Dollars in thousands)
Triple-net leased properties	1	$	2,393	$	—	2	$	4,488	$	44
MOB operations	7	51,870		12,625		8	68,619		24,759
Senior Living Operations	—	$	—	$	—	1	$	19,953	$	9,537
Total	8	$	54,263	$	12,625	11	$	93,060	$	34,340

Set forth below is a summary of our results of operations for properties within discontinued operations for the three months ended March 31, 2016 and 2015.



	For the Three Months Ended March 31,
	2016			2015
	(In thousands)
Revenues:
Rental income	$	—		$	77,651
Income from loans and investments	—			846
Interest and other income	—			1
	—			78,498
Expenses:
Interest	—			24,514
Depreciation and amortization	—			31,234
Property-level operating expenses	—			—
General, administrative and professional fees	—			4
Merger-related expenses and deal costs	489			4,559
Other	—			565
	489			60,876
(Loss) income before real estate dispositions and noncontrolling interest	(489		)	17,622
Gain (loss) on real estate dispositions	—			—
Net (loss) income from discontinued operations	(489		)	17,622
Net income attributable to noncontrolling interest	—			48
Net (loss) income from discontinued operations attributable to common stockholders	$	(489	)	$	17,574

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

Transition Services Agreement

We and CCP entered into a transition services agreement prior to the CCP Spin-Off pursuant to which we and our subsidiaries provide to CCP, on an interim, transitional basis, various services. The services provided include information technology, accounting and tax services. The overall fee charged by us for such services (the "Service Fee") is $2.5 million for one year. For the three months ended March 31, 2016, we recognized income of $0.6 million relating to the Service Fee, which is payable in four quarterly installments. The transition services agreement will terminate on the expiration of the term of the last service provided under the agreement, which will be on or prior to August 31, 2016.

NOTE 5—LOANS RECEIVABLE AND INVESTMENTS

As of March 31, 2016 and December 31, 2015, we had $1.0 billion and $895.0 million, respectively, of net loans receivable and investments relating to seniors housing and healthcare operators or properties. The following is a summary of our net loans receivable and investments as of March 31, 2016 and December 31, 2015, including amortized cost, fair value and unrealized gains or losses on available-for-sale investments:



	March 31, 2016
	Carrying Amount		Amortized Cost		Fair Value		Unrealized Gain
	(In thousands)

Secured mortgage loans and other	$	938,516	$	938,516	$	967,776	$	—
Government-sponsored pooled loan investments (1)	64,082		62,352		64,082		1,730
Total investments reported as Secured loans receivable and investments, net	1,002,598		1,000,868		1,031,858		1,730

Non-mortgage loans receivable	38,096		38,096		39,289		—
Total investments reported as Other assets	38,096		38,096		39,289		—
Total net loans receivable and investments	$	1,040,694	$	1,038,964	$	1,071,147	$	1,730

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



	December 31, 2015
	Carrying Amount		Amortized Cost		Fair Value		Unrealized Gain
	(In thousands)

Secured mortgage loans and other	$	793,433	$	793,433	$	816,849	$	—
Government-sponsored pooled loan investments	63,679		62,130		63,679		1,549
Total investments reported as Secured loans receivable and investments, net	857,112		855,563		880,528		1,549

Non-mortgage loans receivable	37,926		37,926		38,806		—
Total investments reported as Other assets	37,926		37,926		38,806		—
Total net loans receivable and investments	$	895,038	$	893,489	$	919,334	$	1,549

2016 Activity

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

2015 Activity

We issued one non-mortgage loan ($20.0 million) and one secured loan ($78.4 million) to buyers in connection with the sales of certain assets in February and October, respectively. In June 2015 we sold our $71.0 million investment in senior unsecured corporate bonds for $76.8 million. We recognized a gain of $5.8 million that is included within income from loans and investments in our Consolidated Statements of Income for the year ended December 31, 2015. This gain includes $5.0 million that was previously unrealized within accumulated other comprehensive income on our Consolidated Balance Sheets as of December 31, 2014.

During the year ended December 31, 2015, we received aggregate proceeds of $97.0 million in final repayment of three secured and one non-mortgage loans receivable. We recognized gains aggregating $1.9 million on the repayment of these loans receivable that are recorded in income from loans and investments in our Consolidated Statements of Income for the year ended December 31, 2015.

NOTE 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 March 31, 2016 and December 31, 2015, we had ownership interests (ranging from 5% to 25%) in joint ventures that owned 39 properties. 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 $2.3 million and $1.9 million for the three months ended March 31, 2016 and 2015, respectively (which is included in medical office building and other services revenue in our Consolidated Statements of Income).

NOTE 7—INTANGIBLES

The following is a summary of our intangibles as of March 31, 2016 and December 31, 2015:



	March 31, 2016				December 31, 2015
	Balance			Remaining Weighted Average Amortization Period in Years	Balance			Remaining Weighted Average Amortization Period in Years
	(Dollars in thousands)
Intangible assets:
Above market lease intangibles	$	155,008		6.8	$	155,161		7.0
In-place and other lease intangibles	1,188,179			21.6	1,189,261			20.9
Goodwill	1,044,983			N/A	1,047,497			N/A
Other intangibles	35,863			9.0	35,792			8.6
Accumulated amortization	(695,365		)	N/A	(655,176		)	N/A
Net intangible assets	$	1,728,668		19.8	$	1,772,535		19.2
Intangible liabilities:
Below market lease intangibles	$	256,121		14.2	$	256,034		14.2
Other lease intangibles	35,925			30.6	35,925			30.1
Accumulated amortization	(119,216		)	N/A	(113,647		)	N/A
Purchase option intangibles	3,568			N/A	3,568			N/A
Net intangible liabilities	$	176,398		15.6	$	181,880		15.6

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 8—OTHER ASSETS

The following is a summary of our other assets as of March 31, 2016 and December 31, 2015:



	March 31, 2016		December 31, 2015
	(In thousands)
Straight-line rent receivables, net	$	228,621	$	219,064
Non-mortgage loans receivable, net	38,096		37,926
Other intangibles, net	12,011		13,224
Other	145,708		142,189
Total other assets	$	424,436	$	412,403

NOTE 9—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of March 31, 2016 and December 31, 2015:



	March 31, 2016			December 31, 2015
	(In thousands)
Unsecured revolving credit facility (1)	$	324,488		$	180,683
1.55% Senior Notes due 2016	550,000			550,000
1.250% Senior Notes due 2017	300,000			300,000
2.00% Senior Notes due 2018	700,000			700,000
Unsecured term loan due 2018 (2)	200,000			200,000
Unsecured term loan due 2019 (2)	474,249			468,477
4.00% Senior Notes due 2019	600,000			600,000
3.00% Senior Notes, Series A due 2019 (3)	307,598			289,038
2.700% Senior Notes due 2020	500,000			500,000
Unsecured term loan due 2020	900,000			900,000
4.750% Senior Notes due 2021	700,000			700,000
4.25% Senior Notes due 2022	600,000			600,000
3.25% Senior Notes due 2022	500,000			500,000
3.300% Senior Notes due 2022 (3)	192,249			180,649
3.750% Senior Notes due 2024	400,000			400,000
4.125% Senior Notes, Series B due 2024 (3)	192,249			180,649
3.500% Senior Notes due 2025	600,000			600,000
4.125% Senior Notes due 2026	500,000			500,000
6.90% Senior Notes due 2037	52,400			52,400
6.59% Senior Notes due 2038	22,973			22,973
5.45% Senior Notes due 2043	258,750			258,750
5.70% Senior Notes due 2043	300,000			300,000
4.375% Senior Notes due 2045	300,000			300,000
Mortgage loans and other (4)	1,835,070			1,987,401
Total	11,310,026			11,271,020
Deferred financing costs, net	(65,555		)	(69,121		)
Unamortized fair value adjustment	30,751			33,570
Unamortized discounts	(27,492		)	(28,473		)
Senior notes payable and other debt	$	11,247,730		$	11,206,996


(1)	$163.5 million and $9.7 million of aggregate borrowings are denominated in Canadian dollars as of March 31, 2016 and December 31, 2015, respectively.


(2)	These amounts represent in aggregate the $674.2 million of unsecured term loan borrowings under our unsecured credit facility, of which $95.7 million included in the 2019 tranche is in the form of Canadian dollars.


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


(4)	2016 and 2015 exclude $11.1 million and $22.9 million, respectively, of mortgage debt related to real estate assets classified as held for sale that is included in liabilities related to assets held for sale on our Consolidated Balance Sheet.

As of March 31, 2016, our indebtedness had the following maturities:



	Principal Amount Due at Maturity		Unsecured Revolving Credit Facility (1)		Scheduled Periodic Amortization		Total Maturities
	(In thousands)
2016 (2)	$	586,002	$	—	$	21,777	$	607,779
2017	746,458		—		25,739		772,197
2018	1,101,879		324,488		20,621		1,446,988
2019	1,806,428		—		14,126		1,820,554
2020	1,416,913		—		11,122		1,428,035
Thereafter (3)	5,108,858		—		125,615		5,234,473
Total maturities	$	10,766,538	$	324,488	$	219,000	$	11,310,026


(1)	As of March 31, 2016, we had $51.7 million of unrestricted cash and cash equivalents, for $272.8 million of net borrowings outstanding under our unsecured revolving credit facility.


(2)	Excludes $11.1 million of mortgage debt related to real estate assets classified as held for sale as of March 31, 2016 that is scheduled to mature in 2016.


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

Unsecured Revolving Credit Facility and Unsecured Term Loans

Our unsecured credit facility is comprised of a $2.0 billion revolving credit facility priced at LIBOR plus 1.0% as of March 31, 2016, and a $200.0 million four-year term loan and an $800.0 million five-year term loan, each priced at LIBOR plus 1.05% as of March 31, 2016. The revolving credit facility matures in January 2018, but may be extended, at our option subject to the satisfaction of certain conditions, for an additional period of one year. The $200.0 million and $800.0 million term loans mature in January 2018 and January 2019, respectively. The unsecured credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.5 billion.

As of March 31, 2016, we had $324.5 million of borrowings outstanding, $14.9 million of letters of credit outstanding and $1.7 billion of unused borrowing capacity available under our unsecured revolving credit facility.

Mortgages

During the three months ended March 31, 2016, we repaid in full mortgage loans outstanding in the aggregate principal amount of $143.9 million at maturity of 3.1 years and recognized a loss on extinguishment of debt of $0.3 million in connection with these repayments.

Derivatives and Hedging

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

NOTE 10—FAIR VALUES OF FINANCIAL INSTRUMENTS

As of March 31, 2016 and December 31, 2015, the carrying amounts and fair values of our financial instruments were as follows:



	March 31, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Assets:
Cash and cash equivalents	$	51,701	$	51,701	$	53,023	$	53,023
Secured loans receivable, net	938,516		967,776		793,433		816,849
Non-mortgage loans receivable, net	38,096		39,289		37,926		38,806
Government-sponsored pooled loan investments	64,082		64,082		63,679		63,679
Liabilities:
Senior notes payable and other debt, gross	11,310,026		11,608,231		11,271,020		11,384,880
Derivative instruments and other liabilities	4,194		4,194		2,696		2,696
Redeemable OP unitholder interests	183,658		183,658		188,546		188,546

Fair value estimates are subjective in nature and based upon several important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. 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 11—LITIGATION

Litigation Relating to the HCT Acquisition

In the weeks following the announcement on June 2, 2014 of our agreement to acquire American Realty Capital Healthcare Trust, Inc. (“HCT”), a total of 13 putative class actions were filed by purported HCT stockholders challenging the transaction. Certain of the actions also purport to bring derivative claims on behalf of HCT. Among other things, the lawsuits allege that the directors of HCT breached their fiduciary duties by approving the transaction and that we and our subsidiaries, Stripe Sub, LLC and Stripe OP, LP, aided and abetted this purported breach of fiduciary duty. The complaints seek injunctive relief and damages.

Ten of these actions were filed in the Circuit Court for Baltimore City, Maryland and consolidated under the caption In re: American Realty Capital, Healthcare Trust, Inc. Shareholder & Derivative Litigation, Case No. 24-C-14-003534. A settlement and release were approved by the Court and on March 22, 2016 judgment was entered. The time for appeal has expired. The settlement terms required HCT to make certain additional disclosures related to the merger, which were set forth in HCT's Current Report on Form 8-K dated January 2, 2015 and no financial payment other than attorneys’ fees will be made to the plaintiffs. This settlement and release also covers two actions that were filed in the Supreme Court of the State of New York, County of New York, and one action was filed in the United States District Court of Maryland.

On August 24, 2015, the plaintiffs in the Maryland state court action submitted a stipulation of settlement to the court executed by the parties and moved for preliminary approval of the settlement. The plaintiffs in the Maryland federal action agreed to allow the settlement to proceed through the state court and did not submit an additional stipulation to the federal court. On December 10, 2015, the Circuit Court for Baltimore City, Maryland entered a preliminary approval order that, among other things, directed notice be sent to members of the class of HCT stockholders and scheduled a settlement hearing for March 15, 2016. At the March 15, 2016 hearing, the Circuit Court determined that the terms of the settlement were fair, reasonable, adequate, and in the best interests of the class, and entered an order and judgment releasing all claims that could be brought by or on behalf of any HCT stockholder related to the HCT acquisition. On March 22, 2016, the judgment was entered and the time for appeal has expired.

Proceedings against Tenants, Operators and Managers

From time to time, Brookdale Senior Living, Kindred, Atria, Sunrise 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 MOB 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 MOB operations or otherwise in the course of our business. In limited circumstances, the manager of the applicable seniors housing community or MOB may be contractually obligated to indemnify, defend and hold us harmless against such actions, investigations and claims. It is the opinion of management that, except as otherwise set forth in this Note 11, 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 12—INCOME TAXES

We have elected to be taxed as a REIT under the applicable provisions of the Code 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 12. 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 three months ended March 31, 2016, 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 March 31, 2016 and 2015 was a benefit of $8.4 million and $7.3 million, respectively. The income tax benefit for the three months ended March 31, 2016 and for the three months ended March 31, 2015 were each due primarily to operating losses at our taxable REIT subsidiaries.

Realization of a deferred tax benefit related to NOLs depends in part upon generating sufficient taxable income in future periods. Our NOL carryforwards begin to expire in 2024 with respect to our TRS entities and in 2019 for the REIT.

Each TRS and foreign entity is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities with respect to our TRS and foreign entities totaled $333.4 million and $338.4 million as of March 31, 2016 and December 31, 2015, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets and to loss carryforwards.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2012 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31,

2011 and subsequent years. We are subject to audit by the Canada Revenue Agency and provincial authorities with respect to entities acquired or formed in connection with our 2007 acquisition of Sunrise Senior Living Real Estate Investment Trust generally for periods subsequent to the acquisition. 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.

NOTE 13—STOCKHOLDERS’ EQUITY

Capital Stock

During the three months ended March 31, 2016, we issued and sold 2,621,729 shares of common stock under our “at-the-market” (“ATM”) equity offering program for aggregate net proceeds of $149.9 million, after sales agent commissions of $2.3 million. As of March 31, 2016, approximately $638.5 million of our common stock remained available for sale under our ATM equity offering program. Subsequent to March 31, 2016, we issued and sold a total of 641,466 shares of our common stock under our ATM equity offering program for aggregate net proceeds of $39.9 million, after sales agent commissions of $0.6 million.

In March 2016, third party investors redeemed 305,047 Class C Units for 305,047 shares of Ventas common stock, valued at $18.6 million.

Accumulated Other Comprehensive Loss

The following is a summary of our accumulated other comprehensive loss as of March 31, 2016 and December 31, 2015:



	March 31, 2016			December 31, 2015
	(In thousands)
Foreign currency translation	$	(24,594	)	$	(13,926	)
Unrealized gain on marketable securities	1,730			1,549
Other	2,932			4,812
Total accumulated other comprehensive loss	$	(19,932	)	$	(7,565	)

NOTE 14—EARNINGS PER COMMON SHARE

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



	For the Three Months Ended March 31,
	2016			2015
	(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Income from continuing operations attributable to common stockholders, including real estate dispositions	$	149,469		$	102,868
Discontinued operations	(489		)	17,574
Net income attributable to common stockholders	$	148,980		$	120,442
Denominator:
Denominator for basic earnings per share—weighted average shares	335,559			325,454
Effect of dilutive securities:
Stock options	311			531
Restricted stock awards	149			70
OP units	3,183			3,148
Denominator for diluted earnings per share—adjusted weighted average shares	339,202			329,203
Basic earnings per share:
Income from continuing operations attributable to common stockholders, including real estate dispositions	$	0.44		$	0.32
Discontinued operations	(0.00		)	0.05
Net income attributable to common stockholders	$	0.44		$	0.37
Diluted earnings per share:
Income from continuing operations attributable to common stockholders, including real estate dispositions	$	0.44		$	0.32
Discontinued operations	(0.00		)	0.05
Net income attributable to common stockholders	$	0.44		$	0.37

NOTE 15—SEGMENT INFORMATION

As of March 31, 2016, we operated through three reportable business segments: triple-net leased properties, senior living operations and MOB 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 MOB operations segment, we primarily acquire, own, develop, lease and manage MOBs 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, deferred financing costs, loans receivable and investments, and miscellaneous accounts receivable.

We evaluate performance of the combined properties in each reportable business segment based on segment profit, which we define as NOI adjusted for income/loss from unconsolidated entities. We define NOI as total revenues, less interest and other income, property-level operating expenses and medical office building services costs. We consider segment profit 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 profit should be examined in

conjunction with net income 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, discontinued operations 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 March 31, 2016:



	Triple-Net Leased Properties			Senior Living Operations		MOB Operations			All Other		Total
	(In thousands)
Revenues:
Rental income	$	214,487		$	—	$	144,136		$	—	$	358,623
Resident fees and services	—			463,976		—			—		463,976
Medical office building and other services revenue	1,199			—		4,976			1,010		7,185
Income from loans and investments	—			—		—			22,386		22,386
Interest and other income	—			—		—			119		119
Total revenues	$	215,686		$	463,976	$	149,112		$	23,515	$	852,289
Total revenues	$	215,686		$	463,976	$	149,112		$	23,515	$	852,289
Less:
Interest and other income	—			—		—			119		119
Property-level operating expenses	—			312,541		43,681			—		356,222
Medical office building services costs	—			—		3,451			—		3,451
Segment NOI	215,686			151,435		101,980			23,396		492,497
(Loss) income from unconsolidated entities	(671		)	337		(126		)	262		(198		)
Segment profit	$	215,015		$	151,772	$	101,854		$	23,658	492,299
Interest and other income											119
Interest expense											(103,273		)
Depreciation and amortization											(236,387		)
General, administrative and professional fees											(31,726		)
Loss on extinguishment of debt, net											(314		)
Merger-related expenses and deal costs											(1,632		)
Other											(4,168		)
Income tax benefit											8,421
Discontinued operations											(489		)
Gain on real estate dispositions											26,184
Net income											$	149,034

For the three months ended March 31, 2015:



	Triple-Net Leased Properties		Senior Living Operations			MOB Operations			All Other			Total
	(In thousands)
Revenues:
Rental income	$	188,557	$	—		$	137,060		$	—		$	325,617
Resident fees and services	—		446,914			—			—			446,914
Medical office building and other services revenue	1,136		—			8,858			549			10,543
Income from loans and investments	—		—			—			22,053			22,053
Interest and other income	—		—			—			471			471
Total revenues	$	189,693	$	446,914		$	145,918		$	23,073		$	805,598
Total revenues	$	189,693	$	446,914		$	145,918		$	23,073		$	805,598
Less:
Interest and other income	—		—			—			471			471
Property-level operating expenses	—		298,362			42,437			—			340,799
Medical office building services costs	—		—			6,918			—			6,918
Segment NOI	189,693		148,552			96,563			22,602			457,410
Income (loss) from unconsolidated entities	425		(422		)	(25		)	(229		)	(251		)
Segment profit	$	190,118	$	148,130		$	96,538		$	22,373		457,159
Interest and other income												471
Interest expense												(82,328		)
Depreciation and amortization												(216,219		)
General, administrative and professional fees												(34,326		)
Loss on extinguishment of debt, net												(21		)
Merger-related expenses and deal costs												(30,613		)
Other												(4,874		)
Income tax benefit												7,250
Discontinued operations												17,574
Gain on real estate dispositions												6,686
Net income												$	120,759

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



	For the Three Months Ended March 31,
	2016		2015
	(In thousands)
Capital expenditures:
Triple-net leased properties	$	40,701	$	457,018
Senior living operations	18,994		282,432
MOB operations	12,413		387,727
Total capital expenditures	$	72,108	$	1,127,177

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: