Healthpeak Properties (DOC) 10-Q 27 Apr 10 2010 Q1 Quarterly report Financial data

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Real estate:
Buildings and improvements	$7,991,118	$7,802,979
Development costs and construction in progress	96,991	272,542
Land	1,546,068	1,544,004
Accumulated depreciation and amortization	(1,091,615)	(1,047,641)
Net real estate	8,542,562	8,571,884
Net investment in direct financing leases	612,991	600,077
Loans receivable, net	1,687,415	1,672,938
Investments in and advances to unconsolidated joint ventures	266,365	267,978
Accounts receivable, net of allowance of $8,661 and $10,772, respectively	39,461	43,726
Cash and cash equivalents	44,604	112,259
Restricted cash	37,953	33,000
Intangible assets, net	373,001	389,698
Real estate held for sale, net	12,638	13,461
Other assets, net	522,580	504,714
Total assets	12,139,570	12,209,735
LIABILITIES AND EQUITY
Bank line of credit	210,000
Term loan		200,000
Senior unsecured notes	3,523,339	3,521,325
Mortgage and other secured debt	1,828,637	1,834,935
Other debt	97,023	99,883
Intangible liabilities, net	193,153	200,260
Accounts payable and accrued liabilities	293,932	309,596
Deferred revenue	85,315	85,127
Total liabilities	6,231,399	6,251,126
Commitments and contingencies
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25.00 per share	285,173	285,173
Common stock, $1.00 par value: 750,000,000 shares authorized; 293,966,405 and 293,548,162 shares issued and outstanding, respectively	293,966	293,548
Additional paid-in capital	5,722,827	5,719,400
Cumulative dividends in excess of earnings	(577,006)	(515,450)
Accumulated other comprehensive loss	(406)	(2,134)
Total stockholders' equity	5,724,554	5,780,537
Joint venture partners	14,969	7,529
Non-managing member unitholders	168,648	170,543
Total noncontrolling interests	183,617	178,072
Total equity	5,908,171	5,958,609
Total liabilities and equity	$12,139,570	$12,209,735

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Dec. 31, 2009
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance (in dollars)	$8,661	$10,772
Preferred stock, par value (in dollars per share)	$1	$1
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	11,820,000	11,820,000
Preferred stock, shares outstanding	11,820,000	11,820,000
Preferred stock, liquidation preference (in dollars per share)	$25	$25
Common stock, par value (in dollars per share)	$1	$1
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	293,966,405	293,548,162
Common stock, shares outstanding	293,966,405	293,548,162

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues:
Rental and related revenues	$225,339	$212,226
Tenant recoveries	21,786	23,650
Income from direct financing leases	12,215	12,925
Interest income	35,266	26,771
Investment management fee income	1,308	1,438
Total revenues	295,914	277,010
Costs and expenses:
Depreciation and amortization	78,147	80,223
Operating	46,117	47,953
General and administrative	24,924	18,531
Impairment recoveries	(11,900)
Total costs and expenses	137,288	146,707
Other income (expense):
Other income, net	356	(2,438)
Interest expense	(75,956)	(76,674)
Total other income (expense)	(75,600)	(79,112)
Income before income taxes and equity income (loss) from unconsolidated joint ventures	83,026	51,191
Income taxes	(387)	(888)
Equity income (loss) from unconsolidated joint ventures	1,383	(462)
Income from continuing operations	84,022	49,841
Discontinued operations:
Income before gain on sales of real estate, net of income taxes	79	1,511
Gain on sales of real estate, net of income taxes		1,357
Total discontinued operations	79	2,868
Net income	84,101	52,709
Noncontrolling interests' share in earnings	(3,065)	(3,826)
Net income attributable to HCP, Inc.	81,036	48,883
Preferred stock dividends	(5,283)	(5,283)
Participating securities' share in earnings	(917)	(315)
Net income applicable to common shares	$74,836	$43,285
Basic earnings per common share:
Continuing operations (in dollars per share)	0.26	0.16
Discontinued operations (in dollars per share)		0.01
Net income applicable to common shares (in dollars per share)	0.26	0.17
Diluted earnings per common share:
Continuing operations (in dollars per share)	0.25	0.16
Discontinued operations (in dollars per share)		0.01
Net income applicable to common shares (in dollars per share)	0.25	0.17
Weighted average shares used to calculate earnings per common share:
Basic (in shares)	293,223	253,335
Diluted (in shares)	294,087	253,423
Dividends declared per common share (in dollars per share)	0.465	0.46

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)
In Thousands	Total Stockholders' Equity	Preferred Stock	Common Stock	Additional Paid-In Capital	Cumulative Dividends In Excess Of Earnings	Accumulated Other Comprehensive Income (Loss)	Total Noncontrolling Interests	Total
Balance at Dec. 31, 2009	$5,780,537	$285,173	$293,548	$5,719,400	($515,450)	($2,134)	$178,072	$5,958,609
Balance (in shares) at Dec. 31, 2009		11,820	293,548
Comprehensive income:
Net income	81,036				81,036		3,065	84,101
Change in net unrealized gains (losses) on securities:
Unrealized gains (losses)	43					43		43
Less reclassification adjustment realized in net income	(22)					(22)		(22)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	1,217					1,217		1,217
Less reclassification adjustment realized in net income	436					436		436
Change in Supplemental Executive Retirement Plan obligation	32					32		32
Foreign currency translation adjustment	22					22		22
Total comprehensive income	82,764						3,065	85,829
Issuance of common stock, net	4,276		554	3,722			(1,885)	2,391
Issuance of common stock, net (in shares)			554
Repurchase of common stock	(4,003)		(139)	(3,864)				(4,003)
Repurchase of common stock (in shares)			(139)
Exercise of stock options	66		3	63				66
Exercise of stock options (in shares)			3
Amortization of deferred compensation	3,506			3,506				3,506
Preferred dividends	(5,283)				(5,283)			(5,283)
Common dividends ($0.465 per share)	(137,309)				(137,309)			(137,309)
Distributions to noncontrolling interests							(4,739)	(4,739)
Sale of noncontrolling interests							8,395	8,395
Other							709	709
Balance at Mar. 31, 2010	$5,724,554	$285,173	$293,966	$5,722,827	($577,006)	($406)	$183,617	$5,908,171
Balance (in shares) at Mar. 31, 2010		11,820	293,966

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $)
	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
Common dividends, per share	0.465	0.46

4_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net income	$84,101	$52,709
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	78,147	80,223
Discontinued operations	824	375
Amortization of above and below market lease intangibles, net	(1,904)	(2,660)
Stock-based compensation	3,506	3,546
Amortization of debt premiums, discounts and issuance costs, net	3,468	2,201
Straight-line rents	(13,276)	(11,422)
Interest accretion	(15,077)	(6,121)
Deferred rental revenue	574	6,914
Equity (income) loss from unconsolidated joint ventures	(1,383)	462
Distributions of earnings from unconsolidated joint ventures	1,420	1,468
Gain on sales of real estate		(1,357)
Marketable securities (gains) losses, net	(35)	309
Derivative losses, net	533	439
Impairment recoveries	(11,900)
Changes in:
Accounts receivable	4,265	5,165
Other assets	(7,463)	(483)
Accounts payable and accrued liabilities	(16,341)	(14,756)
Net cash provided by operating activities	109,459	117,012
Cash flows from investing activities:
Acquisitions and development of real estate	(31,041)	(20,269)
Lease commissions and tenant and capital improvements	(4,620)	(9,642)
Proceeds from sales of real estate, net		5,764
Contributions to unconsolidated joint ventures	(151)
Distributions in excess of earnings from unconsolidated joint ventures	804	1,714
Proceeds from the sale of securities	242
Principal repayments on loans receivable and direct financing leases	1,009	2,485
Investments in loans receivable		(16)
(Increase) decrease in restricted cash	(4,953)	2,105
Net cash used in investing activities	(38,710)	(17,859)
Cash flows from financing activities:
Net borrowings under bank line of credit facility	210,000	85,000
Repayment of term loan	(200,000)
Repayments of mortgage debt	(8,842)	(38,463)
Net proceeds from the issuance (repurchase) of common stock and exercise of options	(1,546)	(1,478)
Dividends paid on common and preferred stock	(142,592)	(122,174)
Sale of noncontrolling interest	8,395
Purchase of noncontrolling interests		(9,097)
Distributions to noncontrolling interests	(3,819)	(4,127)
Net cash used in financing activities	(138,404)	(90,339)
Net increase (decrease) in cash and cash equivalents	(67,655)	8,814
Cash and cash equivalents, beginning of period	112,259	57,562
Cash and cash equivalents, end of period	$44,604	$66,376

Business

Business
	3 Months Ended Mar. 31, 2010
Business
Business	(1) Business HCP,Inc., an SP 500 company, which, together with its consolidated entities (collectively, HCP or the Company), invests primarily in real estate serving the healthcare industry in the United States (U.S). The Company is a self-administered, Maryland real estate investment trust (REIT) organized in 1985. The Company is headquartered in Long Beach, California, with offices in Nashville, Tennessee and San Francisco, California. The Company acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. The Companys portfolio is comprised of investments in the following five healthcare segments: (i)senior housing, (ii)life science, (iii)medical office, (iv)hospital and (v)skilled nursing. The Company makes investments within its healthcare segments using the following five investment products: (i)properties under lease, (ii)debt investments, (iii)developments and redevelopments, (iv)investment management and (v)DownREITs.

Summary of Significant Accounti

Summary of Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2) Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The condensed consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures that it controls through voting rights or other means. All material intercompany transactions and balances have been eliminated upon consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Companys financial position, the results of operations and the cash flows have been included. Operating results for the three months ended March31, 2010 are not necessarily indicative of the results that may be expected for the year ending December31, 2010. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December31, 2009 included in the Companys Annual Report on Form10-K filed with the U.S. Securities and Exchange Commission (SEC). Certain amounts in the Companys condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and operating results reclassified from continuing to discontinued operations (see Note4). All prior period interest earned on loans receivable and other interest bearing investments have been reclassified to interest income as a component of revenues from other income, net as a result of a significant increase in the Companys investments in loans receivable. Accounting Change Effective January1, 2010, the Company implemented the requirements of Accounting Standards Update No.2009-17, Consolidations (Topic810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (Update No.2009-17). Update No.2009-17 requires enterprises to perform a qualitative approach to determining whether or not a variable interest entity (VIE) will need to be consolidated on a continuous basis. This evaluation is based on an enterprises ability to direct and influence the activities of a variable interest entity that most significantly impact that entitys economic performance. As a result from its implementation analysis, the Company concluded that it had additional variable interests in various VIEs. The Company has determined that it is not the primary beneficiary of these additional VIEs (see Note 1

Real Estate Property Investment

Real Estate Property Investments
	3 Months Ended Mar. 31, 2010
Real Estate Property Investments
Real Estate Property Investments	(3) Real Estate Property Investments During the three months ended March31, 2010, the Company purchased a senior housing facility for $9 million and funded an aggregate of $27 million for construction, tenant and other capital improvement projects, primarily in the life science segment. During the three months ended March31, 2010, three of the Companys life science facilities located in South San Francisco were placed into service representing 329,000 square feet. During the three months ended March31, 2009, the Company purchased the remaining noncontrolling interests in three senior housing joint ventures for $14 million and funded an aggregate of $25million for construction, tenant and other capital improvement projects, primarily in our life science segment.

Dispositions of Real Estate and

Dispositions of Real Estate and Discontinued Operations
	3 Months Ended Mar. 31, 2010
Dispositions of Real Estate and Discontinued Operations
Dispositions of Real Estate and Discontinued Operations	(4) Dispositions of Real Estate and Discontinued Operations Dispositions of Real Estate During the three months ended March31, 2009, the Company sold properties with an aggregate value of $6 million primarily from our medical office segment. Results from Discontinued Operations The following table summarizes operating income from discontinued operations and gain on sales of real estate included in discontinued operations (dollars in thousands): ThreeMonthsEnded March31, 2010 2009 Rental and related revenues $ 885 $ 2,159 Depreciation and amortization expenses 824 375 Operating expenses 173 Other (income) expenses (18 ) 100 Income before gain on sales of real estate, netofincome taxes $ 79 $ 1,511 Gain on sales of real estate $ $ 1,357 Number of properties held for sale 1 8 Number of properties sold 7 Number of properties included in discontinued operations 1 15

Net Investment in Direct Financ

Net Investment in Direct Financing Leases
	3 Months Ended Mar. 31, 2010
Net Investment in Direct Financing Leases
Net Investment in Direct Financing Leases	(5) Net Investment in Direct Financing Leases The components of net investment in direct financing leases (DFLs) consist of the following (dollars in thousands): March31, December31, 2010 2009 Minimum lease payments receivable $ 1,317,557 $ 1,338,634 Estimated residual values 467,248 467,248 Allowance for DFL losses (43,857 ) (54,957 ) Less unearned income (1,127,957 ) (1,150,848 ) Net investment in direct financing leases $ 612,991 $ 600,077 Properties subject to direct financing leases 30 30 Lease payments due to the Company relating to three land-only DFLs, along with the land, are subordinate to and serve as collateral for first mortgage construction loans entered into by Erickson Retirement Communities and its affiliate entities (Erickson) to fund development costs related to the properties. During the three months ended December31, 2008, the Company determined that two of these DFLs were impaired and began recognizing income on a cost-recovery basis. As a result of Ericksons October19, 2009 bankruptcy filing, the Company recorded a provision for DFL losses (impairment charges) of $15.1 million for the three months ending September30, 2009 related to the two DFLs above, which was based on the Companys estimate of the present value of future cash flows that would result from what was then viewed as the probable outcome of Ericksons reorganization plan. At that time, the Company determined that an impairment charge would not be required for the third DFL since that asset was performing, nor would an impairment charge be required for a $10 million participation in a senior construction loan, for which Erickson is the borrower, since the estimated fair value of the underlying collateral supporting the loan was sufficient for the Company to recover its investment. On December23, 2009, an auction was concluded with respect to Ericksons assets, and on December30, 2009, Erickson filed an amended plan of reorganization providing additional detail about the results of the auction and the allocation of auction proceeds. The amended plan proposed that the Company would not be entitled to any of the proceeds with respect to the three DFLs and would receive only a nominal recovery with respect to the Companys participation in the senior construction loan. Additionally, on January4, 2010, Erickson served the Company with adversary complaints claiming, among other things, that the Companys interest as a landlord under the DFLs should be treated as if it were instead the interest of a lender with a security interest in the properties. Even though Ericksons amended plan of reorganization had not been confirmed in the bankruptcy proceedings, the Company concluded that, as a result of the auction, the subsequent allocation of the auction proceeds and managements evaluation of Ericksons pursuit of remedies consistent with the extinguishment of the Companys DFL interests, it was appropriate to reduce the carrying value of these assets to a nominal amount associated with the expected partial recovery of the participation interest in the senior cons

Loans Receivable

Loans Receivable
	3 Months Ended Mar. 31, 2010
Loans Receivable
Loans Receivable	(6) Loans Receivable The following table summarizes the Companys loans receivable (in thousands): March31,2010 December31,2009 RealEstate Secured Other Total RealEstate Secured Other Secured Total Mezzanine $ $ 999,118 $ 999,118 $ $ 999,118 $ 999,118 Other 782,822 85,468 868,290 783,798 84,079 867,877 Unamortized discounts, fees andcosts (106,952 ) (61,402 ) (168,354 ) (115,422 ) (66,196 ) (181,618 ) Allowance for loan losses (7,348 ) (4,291 ) (11,639 ) (8,148 ) (4,291 ) (12,439 ) $ 668,522 $ 1,018,893 $ 1,687,415 $ 660,228 $ 1,012,710 $ 1,672,938 On October5, 2006, the Company acquired an interest-only, senior secured term loan made to an affiliate of the Cirrus Group,LLC (Cirrus). The loan had a maturity date of December31, 2008, with a one-year extension period at the option of the borrower, subject to certain conditions, under which amounts were borrowed to finance the acquisition, development, syndication and operation of new and existing surgical partnerships. The loan accrues interest at a rate of 14.0%, of which 9.5% is payable monthly and 4.5% is deferred until maturity. The loan is collateralized by all of the assets of the borrower (comprised primarily of interests in partnerships operating surgical facilities, some of which are on the premises of properties owned by HCP VenturesIV or the Company) and is supported in part by limited guarantees made by certain principals of Cirrus. Recourse under certain of these guarantees is limited to the guarantors respective interests in certain entities owning real estate that are pledged to secure such guarantees. At December31, 2008, the borrower did not meet the conditions necessary to exercise its extension option and did not repay the loan upon maturity. On April22, 2009, new terms for extending the maturity date of the loan were agreed to, including the payment of a $1.1million extension fee, and the maturity date was extended to December31, 2010. In July2009, the Company issued a notice of default for the borrowers failure to make interest payments. In December2009, the Company determined the loan was impaired and recognized a provision for loan loss of $4.3million. This provision for loan loss resulted from discussions that began in Decemberof 2009 to restructure the loan. The proposed terms of the loan restructure include an extension of the maturity date and a reduction of the contractual interest rate for a portion of the outstanding principal balance. Beginning January2010, the borrower has made the required payments under the proposed terms of the restructure. At March31, 2010 and December31, 2009, the carrying value of this loan, including accrued interest of $5.7million and $5.2million, respectively, was $85.8million and $83.5million, respectively. During the three months ended March31, 2010, the Company recognized interest income from this loan of $2.9million and received cash payments from the borrower of $0.7million. On December21, 2007, the Company ma

Investments in and Advances to

Investments in and Advances to Unconsolidated Joint Ventures
	3 Months Ended Mar. 31, 2010
Investments in and Advances to Unconsolidated Joint Ventures
Investments in and Advances to Unconsolidated Joint Ventures	(7) Investments in and Advances to Unconsolidated Joint Ventures The Company owns interests in the following entities which are accounted for under the equity method at March31, 2010 (dollars in thousands): Entity(1) Properties Investment(2) Ownership% HCP VenturesII 25 senior housing facilities $ 138,834 35 HCP VenturesIII,LLC 13 medical office buildings (MOBs) 10,791 30 HCP VenturesIV,LLC 54 MOBs and 4 hospitals 39,264 20 HCP Life Science(3) 4 life science facilities 64,371 50-63 Horizon Bay Hyde Park,LLC 1 senior housing development 8,078 75 Suburban Properties,LLC 1 MOB 3,255 67 Advances to unconsolidated joint ventures, net 1,772 $ 266,365 Edgewood Assisted Living Center, LLC(4)(5) 1 senior housing facility $ (326 ) 45 Seminole Shores Living Center, LLC(4)(5) 1 senior housing facility (911 ) 50 $ 265,128 (1) These joint ventures are not consolidated since the Company does not control, through voting rights or other means, the joint ventures. See Note 2 to the Consolidated Financial Statements for the year ended December31, 2009 in the Companys Annual Report on Form10-K filed with the SEC regarding the Companys policy on consolidation. (2) Represents the carrying value of the Companys investment in the unconsolidated joint venture. See Note 2 to the Consolidated Financial Statements for the year ended December31, 2009 in the Companys Annual Report on Form10-K filed with the SEC regarding the Companys policy for accounting for joint venture interests. (3) Includes three unconsolidated joint ventures between the Company and an institutional capital partner for which the Company is the managing member. HCP Life Science includes the following partnerships: (i)Torrey Pines Science Center, LP (50%); (ii)Britannia Biotech Gateway, LP (55%); and (iii)LASDK, LP (63%). (4) As of March31, 2010, the Company has guaranteed in the aggregate $4 million of a total of $8 million of notes payable for these joint ventures. No amounts have been recorded related to these guarantees at March31, 2010. (5) Negative investment amounts are included in accounts payable and accrued liabilities in the Companys condensed consolidated financial statements. Summarized combined financial information for the Companys unconsolidated joint ventures follows (in thousands): March31, December31, 2010 2009 Real estate, net $ 1,644,815 $ 1,655,754 Other assets, net 193,327 189,841 Total assets $ 1,838,142 $ 1,845,595 Mortgage debt $ 1,155,925 $ 1,159,589 Accounts payable 37,846 38,255 Other partners capital 459,508 462,243 HCPs capital(1) 184,863 185,508 Total liabilities and partners capital $ 1,838,142 $ 1,845,595 (1) Aggregate basis difference of the Companys investments in these joint ventures of $78 million, as of March31, 2010, is primarily attributable to real estate and related intangible assets. ThreeMonthsEndedMarch31, 2010 2009 Total reven

Intangibles

Intangibles
	3 Months Ended Mar. 31, 2010
Intangibles
Intangibles	(8) Intangibles At March31, 2010 and December31, 2009, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles, below market ground lease intangibles and intangible assets related to non-compete agreements, were $576.8 million and $592.1 million, respectively. At March31, 2010 and December31, 2009, the accumulated amortization of intangible assets was $203.8 million and $202.4 million, respectively. At March31, 2010 and December31, 2009, below market lease and above market ground lease intangible liabilities were $278.3 million and $284.2 million, respectively. At March31, 2010 and December31, 2009, the accumulated amortization of intangible liabilities was $85.1 million and $83.9 million, respectively.

Other Assets

Other Assets
	3 Months Ended Mar. 31, 2010
Other Assets
Other Assets	(9) Other Assets The Companys other assets consisted of the following (in thousands): March31, December31, 2010 2009 Marketable debt securities $ 171,764 $ 172,799 Marketable equity securities 4,537 3,521 Straight-line rent assets, net of allowance of $51,112 and $48,681, respectively 172,178 158,674 Deferred debt issuance costs, net 16,059 18,607 Goodwill 50,346 50,346 Other 107,696 100,767 Total other assets $ 522,580 $ 504,714 The cost or amortized cost, estimated fair value and gross unrealized gains and losses on marketable securities follows (in thousands): GrossUnrealized CostBasis(1) FairValue Gains Losses March31, 2010: Debt securities $ 160,830 $ 171,764 $ 10,934 $ Equity securities 3,645 4,537 892 Total investments $ 164,475 $ 176,301 $ 11,826 $ December31, 2009: Debt securities $ 160,830 $ 172,799 $ 11,969 $ Equity securities 3,685 3,521 236 (400 ) Total investments $ 164,515 $ 176,320 $ 12,205 $ (400 ) (1) Represents the original cost basis of the marketable securities adjusted for discount accretion and other-than-temporary impairments recorded through earnings, if any. At March31, 2010, $141 million (par value) of the Companys marketable debt securities accrue interest at 9.625% and mature in November2016 and $20 million (par value) accrue interest at 9.25% and mature in May2017. The issuers of these notes may elect to pay interest in cash or by issuing additional notes for all or a portion of the interest payments.

Debt

Debt
	3 Months Ended Mar. 31, 2010
Debt
Debt	(10)Debt Bank Line of Credit and Term Loan The Companys revolving line of credit facility with a syndicate of banks provides for an aggregate borrowing capacity of $1.5 billion and matures on August1, 2011. This revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon the Companys debt ratings. The Company pays a facility fee on the entire revolving commitment that depends upon its debt ratings. Based on the Companys debt ratings at March31, 2010, the margin on the revolving line of credit facility was 0.55% and the facility fee was 0.15%. At March31, 2010, the Company had $210 million outstanding under this revolving line of credit facility with a weighted-average effective interest rate of 1.24%. At March31, 2010, a $103million letter of credit is outstanding against its revolving line of credit facility as a result of the Ventas,Inc. (Ventas) litigation. For further information regarding the Ventas litigation, see Note11. The Companys revolving line of credit facility contains certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreement (i)limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii)limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 65%, (iii)require a Fixed Charge Coverage ratio of 1.75 times, and (iv)require a formula-determined Minimum Consolidated Tangible Net Worth of $4.9 billion at March31, 2010. At March31, 2010, the Company was in compliance with each of these restrictions and requirements of the revolving line of credit facility. On March10, 2010, the Company repaid the total outstanding indebtedness of $200 million under its term loan. The term loan, with an original maturity of August1, 2011, was repaid primarily with funds available under the Companys revolving line of credit facility. As a result of the early repayment of the term loan, the Company recognized a charge of $1.3 million related to unamortized issuance costs. At the time the term loan was paid off, it accrued interest at a rate per annum equal to LIBOR plus 2.00%. Senior Unsecured Notes At March31, 2010, the Company had $3.5 billion in aggregate principal amount of senior unsecured notes outstanding. Interest rates on the notes ranged from 1.16% to 7.07%. The weighted-average effective interest rate on the senior unsecured notes at March31, 2010 was 6.12%. Discounts and premiums are amortized to interest expense over the term of the related notes. The senior unsecured notes contain certain covenants including limitations on debt, cross-acceleration provisions and other customary terms. At March31, 2010, the Company believes it was in compliance with these covenants. Mortgage and Other Secured Debt At March31, 2010, the Company had $1.8 billion in mortgage debt secured by 165 healthcare facilities with a carrying value of $2.3 billion and a participation in a first mortgage loan with a carrying value of $612 million. Interest rates on the mortgage notes ranged from

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Mar. 31, 2010
Commitments and Contingencies
Commitments and Contingencies	(11) Commitments and Contingencies Legal Proceedings From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Companys business. Regardless of their merits, these matters may force the Company to expend significant financial resources. Except as described herein, the Company is not aware of any other legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Companys business, prospects, financial condition or results of operations. The Companys policy is to accrue legal expenses as they are incurred. On May3, 2007, Ventas filed a complaint against the Company in the United States District Court for the Western District of Kentucky asserting claims of tortious interference with contract and tortious interference with prospective business advantage. The complaint alleged, among other things, that the Company interfered with Ventas purchase agreement with Sunrise Senior Living Real Estate Investment Trust (Sunrise REIT that the Company interfered with Ventas prospective business advantage in connection with the Sunrise REIT transaction; and that the Companys actions caused Ventas to suffer damages. As part of the same litigation, the Company filed counterclaims against Ventas as successor to Sunrise REIT. On March25, 2009, the District Court issued an order dismissing the Companys counterclaims. On April8, 2009, the Company filed a motion for leave to file amended counterclaims. On May26, 2009, the District Court denied the Companys motion. Ventas sought approximately $300million in compensatory damages plus punitive damages. On July16, 2009, the District Court dismissed Ventass claim that HCP interfered with Ventass purchase agreement with Sunrise REIT, dismissed claims for compensatory damages based on alleged financing and other costs, and allowed Ventass claim of interference with prospective advantage to proceed to trial. Ventass claim was tried before a jury between August18, 2009 and September4, 2009. During the trial, the District Court dismissed Ventass claim for punitive damages. On September4, 2009, the jury returned a verdict in favor of Ventas in the amount of approximately $102million in compensatory damages. The District Court entered a judgment against the Company in that amount on September8, 2009, which the Company recognized as a provision for litigation expense during the three months ended September30, 2009. On September22, 2009, the Company filed a motion for judgment as a matter of law or for a new trial. Also on September22, 2009, Ventas filed a motion seeking approximately $20million in prejudgment interest and approximately $4million in additional damages to account for changes in currency exchange rates. The District Court denied both parties post-trial motions on November17, 2009. The Company filed a notice of appeal in the United States Court of Appeals for the Sixth Circuit on November17, 2009; Ventas filed a notice of appeal on November25, 2009. The court of appeals has set a briefing schedule for the appeal; the court of appeals has not yet set a date for oral a

Equity

Equity
	3 Months Ended Mar. 31, 2010
Equity
Equity	(12) Equity Preferred Stock At March31, 2010, the Company had two series of preferred stock outstanding, SeriesE and SeriesF preferred stock. The SeriesE and SeriesF preferred stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and are not convertible into any other securities of the Company. Holders of each series of preferred stock generally have no voting rights, except under limited conditions, and all holders are entitled to receive cumulative preferential dividends based upon each series respective liquidation preference. To preserve the Companys status as a REIT, each series of preferred stock is subject to certain restrictions on ownership and transfer. Dividends are payable quarterly in arrears on the last day of March, June, Septemberand December. The SeriesE and SeriesF preferred stock are currently redeemable at the Companys option. On February1, 2010, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its SeriesE cumulative redeemable preferred stock and $0.44375 per share on its SeriesF cumulative redeemable preferred stock. These dividends were paid on March31, 2010 to stockholders of record as of the close of business on March15, 2010. On April22, 2010, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its SeriesE cumulative redeemable preferred stock and $0.44375 per share on its SeriesF cumulative redeemable preferred stock. These dividends will be paid on June30, 2010 to stockholders of record as of the close of business on June15, 2010. Common Stock The following is a summary of the Companys common stock issuances: ThreeMonthsEndedMarch31, 2010 2009 (inthousands) Dividend Reinvestment and Stock Purchase Plan (DRIP) 82 34 Conversion of DownREIT units 46 9 Exercise of stock options 3 Restricted stock awards (RSAs)(1) 177 249 Restricted stock units (RSUs)(1) 255 182 (1) Issued under the Companys 2006 Performance Incentive Plan. On February1, 2010, the Company announced that its Board declared a quarterly cash dividend of $0.465 per share. The common stock cash dividend was paid on February23, 2010 to stockholders of record as of the close of business on February11, 2010. On April22, 2010, the Company announced that its Board declared a quarterly cash dividend of $0.465 per share. The common stock cash dividend will be paid on May18, 2010 to stockholders of record as of the close of business on May3, 2010. Accumulated Other Comprehensive Income (Loss) (AOCI) The following is a summary of the Companys accumulated other comprehensive income (loss): March31, December31, 2010 2009 (inthousands) AOCIunrealized gains on available-for-sale securities, net $ 11,826 $ 11,805 AOCIunrealized losses on cash flow hedges, net (9,116 ) (10,769 ) Supplemental Executive Retirement Plan minimum liability (2,310 ) (2,342 ) Cumulative foreign currency translation adjustment (806 ) (828 ) Total accumulated other comprehensive loss

Segment Disclosures

Segment Disclosures
	3 Months Ended Mar. 31, 2010
Segment Disclosures
Segment Disclosures	(13) Segment Disclosures The Company evaluates its business and makes resource allocations based on its five business segments: (i)senior housing, (ii)life science, (iii)medical office, (iv)hospital and (v)skilled nursing. Under the senior housing, life science, hospital and skilled nursing segments, the Company invests primarily in single operator or tenant properties, through the acquisition and development of real estate or through investment in debt issued by operators in these sectors. Under the medical office segment, the Company invests through the acquisition of MOBs that are primarily leased under gross or modified gross leases, which are generally to multiple tenants and require a greater level of property management. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements for the year ended December31, 2009 in the Companys Annual Report on Form10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March31, 2010 and 2009. The Company evaluates performance based upon property net operating income from continuing operations (NOI) and interest income of the combined investments in each segment. Non-segment assets consist primarily of real estate held for sale and corporate assets including cash, restricted cash, accounts receivable, net and deferred financing costs. Interest expense, depreciation and amortization and non-property specific revenues and expenses are not allocated to individual segments in determining the Companys performance measure. See Note 11 for other information regarding concentrations of credit risk. Summary information for the reportable segments follows (in thousands): For the three months ended March31, 2010: Segments Rentaland Related Revenues Tenant Recoveries Income From DFLs Interest Income Investment Management Fees Total Revenues NOI(1) Senior housing $ 73,004 $ $ 12,215 $ 126 $ 700 $ 86,045 $ 84,289 Life science 58,624 9,650 1 68,275 56,692 Medical office 65,256 11,618 607 77,481 45,527 Hospital 18,845 518 7,533 26,896 17,154 Skilled nursing 9,610 27,607 37,217 9,561 Total $ 225,339 $ 21,786 $ 12,215 $ 35,266 $ 1,308 $ 295,914 $ 213,223 For the three months ended March31, 2009: Segments Rentaland Related Revenues Tenant Recoveries Income From DFLs Interest Income Investment Management Fees Total Revenues NOI(1) Senior housing $ 68,741 $ $ 12,925 $ 326 $ 783 $ 82,775 $ 78,805 Life science 52,044 11,094 1 63,139 51,696 Medical office 65,071 12,023 654 77,748 44,305 Hospital 17,468 533 10,783 28,784 17,202 Skilled nursing 8,902 15,662 24,564 8,840 Total $ 212,226 $ 23,650 $ 12,925 $ 26,771 $ 1,438 $ 277,010 $ 200,848 (1) NOI is a

Earnings Per Common Share

Earnings Per Common Share
	3 Months Ended Mar. 31, 2010
Earnings Per Common Share
Earnings Per Common Share	(14) Earnings Per Common Share The following table illustrates the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts): ThreeMonthsEndedMarch31, 2010 2009 Numerator Income from continuing operations $ 84,022 $ 49,841 Noncontrolling interests share incontinuing operations (3,065 ) (3,826 ) Income from continuing operations applicable to HCP,Inc. 80,957 46,015 Preferred stock dividends (5,283 ) (5,283 ) Participating securities share in continuing operations (917 ) (315 ) Income from continuing operations applicable to common shares 74,757 40,417 Discontinued operations 79 2,868 Net income applicable to common shares $ 74,836 $ 43,285 Denominator Basic weighted average common shares 293,223 253,335 Dilutive stock options and restricted stock 864 88 Diluted weighted average common shares 294,087 253,423 Basic earnings per common share Income from continuing operations $ 0.26 $ 0.16 Discontinued operations 0.01 Net income applicable to common stockholders $ 0.26 $ 0.17 Diluted earnings per common share Income from continuing operations $ 0.25 $ 0.16 Discontinued operations 0.01 Net income applicable to common shares $ 0.25 $ 0.17 Restricted stock and certain of the Companys performance restricted stock units are considered participating securities which require the use of the two-class method when computing basic and diluted earnings per share. For the three months ended March31, 2010 and 2009, earnings representing nonforfeitable dividends of $0.9 million and $0.3 million, respectively, were allocated to the participating securities. Options to purchase approximately 2.6 million and 6.2 million shares of common stock that had an exercise price in excess of the average market price of the common stock during the three months ended March31, 2010 and 2009, respectively, were not included because they are anti-dilutive. Restricted stock and performance restricted stock units representing 86,000 and 0.6 million shares of common stock during the three months ended March31, 2010 and 2009, respectively, were not included because they are anti-dilutive. Additionally, 5.8 million shares issuable upon conversion of 4.2 million DownREIT units during the three months ended March31, 2010 were not included since they are anti-dilutive. During the three months ended March31, 2009, 6.4 million shares issuable upon conversion of 4.8 million DownREIT units were not included since they were anti-dilutive.

Supplemental Cash Flow Informat

Supplemental Cash Flow Information
	3 Months Ended Mar. 31, 2010
Supplemental Cash Flow Information
Supplemental Cash Flow Information	(15) Supplemental Cash Flow Information ThreeMonthsEndedMarch31, 2010 2009 (inthousands) Supplemental cash flow information: Interest paid, net of capitalized interest $ 89,965 $ 94,252 Taxes paid 526 360 Supplemental schedule of non-cash investing activities: Capitalized interest 5,050 6,020 Increase (decrease) in accrued construction costs 1,412 (1,820 ) Loan received upon real estate disposition 251 Supplemental schedule of non-cash financing activities: Restricted stock issued 177 249 Vesting of restricted stock units 255 182 Cancellation of restricted stock (6 ) (12 ) Conversion of non-managing member units into common stock 1,885 246 Unrealized gains on available-for-sale securities and derivatives designated as cashflow hedges, net 1,260 3,748

Variable Interest Entities

Variable Interest Entities
	3 Months Ended Mar. 31, 2010
Variable Interest Entities
Variable Interest Entities	(16) Variable Interest Entities At March31, 2010, the Company leased 75 properties to a total of 11 tenants (VIE tenants) and had a loan to a borrower where each tenant and borrower has been identified as a VIE. On December21, 2007, the Company made an investment of approximately $900 million in mezzanine loans where each mezzanine borrower has been identified as a VIE. The Company has determined that it is not the primary beneficiary of these VIEs. The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Companys involvement with VIEs are presented below (in thousands): VIEType MaximumLoss Exposure(1) Asset/LiabilityType Carrying Amount VIE tenantsoperating leases $ 647,470 Lease intangibles, net and straight-line rent receivables $ 10,624 VIE tenantsDFLs 1,268,253 Net investment in DFLs 574,241 Senior secured loans 85,776 Loans receivable, net 85,776 Mezzanine loans 938,862 Loans receivable, net 938,862 (1) The Companys maximum loss exposure related to the VIE tenants represents the future minimum lease payments over the remaining term of the respective leases, which may be mitigated by re-leasing the properties to new tenants. The Companys maximum loss exposure related to loans to VIEs represents their current aggregate carrying value. See Notes 5, 6 and 11 for additional description of the nature, purpose and activities of the Companys VIEs and interests therein.

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Fair Value Measurements
Fair Value Measurements	(17) Fair Value Measurements The following table illustrates the Companys fair value measurements of its financial assets and liabilities measured at fair value in the Companys condensed consolidated financial statements. Recognized gains and losses are recorded in other income, net on the Companys condensed consolidated statements of income. During the three months ended March, 31, 2010, there were no transfers of financial assets or liabilities between levels. The following is a summary of fair value measurements of financial assets and liabilities at March31, 2010 (in thousands): FinancialInstrument FairValue Level1 Level2 Level3 Marketable debt securities $ 171,764 $ 150,864 $ 20,900 $ Marketable equity securities 4,537 4,537 Interest-rate swap assets(1) 6,026 6,026 Interest-rate swap liabilities(1) (3,722 ) (3,722 ) Warrants(1) 1,539 1,539 $ 180,144 $ 155,401 $ 23,204 $ 1,539 (1) Interest-rate swaps and common stock warrants are valued using observable and unobservable market assumptions, as well as standardized derivative pricing models.

Disclosures About Fair Value of

Disclosures About Fair Value of Financial Instruments
	3 Months Ended Mar. 31, 2010
Disclosures About Fair Value of Financial Instruments
Disclosures About Fair Value of Financial Instruments	(18) Disclosures About Fair Value of Financial Instruments The carrying values of cash and cash equivalents, restricted cash, receivables, payables, and accrued liabilities are reasonable estimates of fair value because of the short-term maturities of these instruments. Fair values for loans receivable, bank line of credit, term loan, mortgage and other secured debt, and other debt are estimates based on rates currently prevailing for similar instruments of similar maturities. The estimated fair values of the interest-rate swaps and warrants were determined based on observable market assumptions and standardized derivative pricing models. The fair values of the senior unsecured notes and marketable equity and debt securities were determined based on market quotes. March31,2010 December31,2009 Carrying Value FairValue Carrying Value FairValue (inthousands) Loans receivable, net $ 1,687,415 $ 1,739,083 $ 1,672,938 $ 1,728,599 Marketable debt securities 171,764 171,764 172,799 172,799 Marketable equity securities 4,537 4,537 3,521 3,521 Warrants 1,539 1,539 1,732 1,732 Bank line of credit 210,000 210,000 Term loan 200,000 200,000 Senior unsecured notes 3,523,339 3,650,667 3,521,325 3,548,926 Mortgage and other secured debt 1,828,637 1,802,277 1,834,935 1,789,992 Other debt 97,023 97,023 99,883 99,883 Interest-rate swap assets 6,026 6,026 3,523 3,523 Interest-rate swap liabilities 3,722 3,722 3,438 3,438

Derivative Instruments

Derivative Instruments
	3 Months Ended Mar. 31, 2010
Derivative Instruments
Derivative Instruments	(19) Derivative Instruments The following table summarizes the Companys outstanding interest-rate swap contracts as of March31, 2010 (dollars in thousands): DateEntered MaturityDate Hedge Designation Fixed Rate Floating RateIndex Notional Amount FairValue(1) July2005(2) July2020 Cash Flow 3.82 % BMA Swap Index $ 45,600 $ (3,423 ) June2009(3) September2011 Fair Value 5.95 % 1 Month LIBOR+4.21% 250,000 3,233 July2009(4) July2013 Cash Flow 6.13 % 1 Month LIBOR+3.65% 14,400 (299 ) August2009(5) February2011 Cash Flow 0.87 % 1 Month LIBOR 250,000 955 August2009(5) August2011 Cash Flow 1.24 % 1 Month LIBOR 250,000 1,838 (1) Interest-rate swap assets are recorded in other assets, net and interest-rate swap liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets. (2) Represents three interest-rate swap contracts with an aggregate notional amount of $45.6 million, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows. (3) Hedges the changes in fair value of the Companys outstanding senior unsecured fixed-rate notes (approximately 86% of the notes maturing in September2011) due to fluctuations in the underlying benchmark interest rate. (4) Hedges fluctuations in interest payments on variable-rate secured debt due to fluctuations in the underlying benchmark interest rate. (5) Hedges fluctuations in interest receipts on a participation interest in a floating-rate secured mortgage note due to fluctuations in the underlying benchmark interest rate. The Company uses derivative instruments to mitigate the effects of interest rate fluctuations on specific forecasted transactions as well as recognized obligations or assets. The Company does not use derivative instruments for speculative or trading purposes. The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of a derivative instrument due to adverse changes in market prices (interest rates). Utilizing derivative instruments allows the Company to effectively manage the risk of fluctuations in interest rates with respect to the potential effects these changes could have on future earnings, forecasted cash flows and the fair value of recognized obligations. Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. The Company does not obtain collateral associated with its derivative instruments, but monitors the credit standing of its counterparties on a regular basis. Should a counterparty fail to perform, the Company would incur a financial loss to the extent that the associated derivative contract was in an asset position. At March31, 2010, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts. During Octoberand November2007, the Company entere

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 22, 2010
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		293,960,511
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1