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MarketScreener Homepage  >  Equities  >  Nyse  >  Healthpeak Properties, Inc.    PEAK

HEALTHPEAK PROPERTIES, INC.

(PEAK)
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HEALTHPEAK PROPERTIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/05/2020 | 04:29pm EST
All references in this report to "Healthpeak," the "Company," "we," "us" or
"our" mean Healthpeak Properties, Inc., together with its consolidated
subsidiaries. Unless the context suggests otherwise, references to "Healthpeak
Properties, Inc." mean the parent company without its subsidiaries.
Cautionary Language Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q that are not historical factual
statements are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking
statements include, among other things, statements regarding our and our
officers' intent, belief or expectation as identified by the use of words such
as "may," "will," "project," "expect," "believe," "intend," "anticipate,"
"seek," "target," "forecast," "plan," "potential," "estimate," "could," "would,"
"should" and other comparable and derivative terms or the negatives thereof.
Forward-looking statements reflect our current expectations and views about
future events and are subject to risks and uncertainties that could
significantly affect our future financial condition and results of operations.
While forward-looking statements reflect our good faith belief and assumptions
we believe to be reasonable based upon current information, we can give no
assurance that our expectations or forecasts will be attained. As more fully set
forth under Part II, Item 1A. "Risk Factors" in this report and in our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020, risks and
uncertainties that may cause our actual results to differ materially from the
expectations contained in the forward-looking statements include, among other
things:
• the severity and duration of the COVID-19 pandemic;


• actions that have been taken and may continue to be taken by governmental

       authorities to contain the COVID-19 outbreak or to treat its impact;


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

• operational risks associated with third party management contracts,

       including the additional regulation and liabilities of our RIDEA lease
       structures;

• the ability of our existing and future tenants, operators and borrowers to

conduct their respective businesses in a manner sufficient to maintain or

increase their revenues and manage their expenses in order to generate

sufficient income to make rent and loan payments to us and our ability to

recover investments made, if applicable, in their operations;

• the imposition of laws or regulations prohibiting eviction of our tenants

or operators, including new governmental efforts in response to COVID-19;

• the financial condition of our existing and future tenants, operators and

borrowers, including potential bankruptcies and downturns in their

businesses, and their legal and regulatory proceedings, which may result

in uncertainties regarding our ability to continue to realize the full

benefit of such tenants' and operators' leases and borrowers' loans;

• our concentration in the healthcare property sector, particularly in

senior housing, life sciences and medical office buildings, which makes

our profitability more vulnerable to a downturn in a specific sector than

if we were investing in multiple industries;

• the effect on us and our tenants and operators of legislation, executive

orders and other legal requirements, including compliance with the

Americans with Disabilities Act, fire, safety and health regulations,

environmental laws, the Affordable Care Act, licensure, certification and

       inspection requirements, and laws addressing entitlement programs and
       related services, including Medicare and Medicaid, which may result in
       future reductions in reimbursements or fines for noncompliance;


•      our ability to identify replacement tenants and operators and the

potential renovation costs and regulatory approvals associated therewith;


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

• the potential impact of uninsured or underinsured losses, including as a

result of hurricanes, earthquakes and other natural disasters, pandemics

       such as COVID-19, acts of war and/or terrorism and other events that may
       cause such losses and/or performance declines by us or our tenants and
       operators;


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



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• competition for the acquisition and financing of suitable healthcare

properties as well as competition for tenants and operators, including

       with respect to new leases and mortgages and the renewal or rollover of
       existing leases;


•      our, or our counterparties', ability to fulfill obligations, such as

financing conditions and/or regulatory approval requirements, required to

       successfully consummate acquisitions, dispositions, transitions,
       developments, redevelopments, joint venture transactions or other
       transactions;

• our ability to achieve the benefits of acquisitions or other investments

       within expected time frames or at all, or within expected cost
       projections;

• the potential impact on us and our tenants, operators and borrowers from

current and future litigation matters, including the possibility of larger

than expected litigation costs, adverse results and related developments;

• changes in federal, state or local laws and regulations, including those

affecting the healthcare industry that affect our costs of compliance or

increase the costs, or otherwise affect the operations, of our tenants and

operators;

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

• volatility or uncertainty in the capital markets, the availability and

cost of capital as impacted by interest rates, changes in our credit

ratings, and the value of our common stock, and other conditions that may

       adversely impact our ability to fund our obligations or consummate
       transactions, or reduce the earnings from potential transactions;

• changes in global, national and local economic and other conditions,

       including the ongoing economic downturn, volatility in the financial
       markets and high unemployment rates;

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

such indebtedness;

• competition for skilled management and other key personnel;

• our reliance on information technology systems and the potential impact of

system failures, disruptions or breaches; and

• our ability to maintain our qualification as a real estate investment

trust ("REIT").



Except as required by law, we do not undertake, and hereby disclaim, any
obligation to update any forward-looking statements, which speak only as of the
date on which they are made.
COVID-19 Infection Information
Information related to the number of our senior housing facilities with
confirmed resident COVID-19 cases was provided to us by our operators, but has
not been independently verified by us. We have no reason to believe that this
information is inaccurate in any material respect, but cannot assure you it is
accurate.
The information set forth in this Item 2 is intended to provide readers with an
understanding of our financial condition, changes in financial condition and
results of operations. We will discuss and provide our analysis in the following
order:
• Executive Summary


• COVID-19 Update

• 2020 Transaction Overview


• Dividends


• Results of Operations

• Liquidity and Capital Resources

• Contractual Obligations and Off-Balance Sheet Arrangements

• Non-GAAP Financial Measures Reconciliations

• Critical Accounting Policies and Recent Accounting Pronouncements

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Executive Summary
Healthpeak Properties, Inc. is a Standard & Poor's ("S&P") 500 company that
acquires, develops, owns, leases and manages healthcare real estate across the
United States ("U.S."). We are a Maryland corporation and qualify as a
self-administered REIT. We are headquartered in Irvine, California, with
additional offices in Nashville and San Francisco.
We invest in a diversified portfolio of high-quality healthcare properties
across our three core asset classes of senior housing, life science, and medical
office real estate. Our senior housing properties are either operated under
triple-net leases in our senior housing triple-net segment or through RIDEA
structures in our senior housing operating portfolio ("SHOP") and continuing
care retirement community ("CCRC") segments. Under the life science and medical
office segments, we invest through the acquisition, development and management
of life science buildings and medical office buildings ("MOBs"). We have other
non-reportable segments that are comprised primarily of hospital properties and
debt investments.
At June 30, 2020, our portfolio of investments, including properties in our
unconsolidated joint ventures, consisted of interests in 633 properties. The
following table summarizes information for our reportable segments for the three
months ended June 30, 2020 (dollars in thousands):
                                                        Percentage of Total
                                   Total Portfolio      Portfolio Adjusted
           Segment                 Adjusted NOI(1)            NOI(1)           Number of Properties
Senior housing triple-net       $            24,104                   9 %                       62
SHOP                                         26,288                   9 %                      139
CCRC                                         32,056                  11 %                       17
Life science                                101,473                  36 %                      135
Medical office                               85,911                  31 %                      269
Other non-reportable                         10,749                   4 %                       11
Totals                          $           280,581                 100 %                      633

_______________________________________

(1) Total Portfolio metrics include results of operations from disposed
properties and properties that transferred segments through the disposition or
transfer date. See Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations-Non-GAAP Financial Measures for additional
information regarding Adjusted NOI and see Note 13 to the Consolidated Financial
Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
For a description of our significant activities during 2020, see "Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations-2020 Transaction Overview" in this report.
We invest in and manage our real estate portfolio for the long-term to maximize
benefit to our stockholders and support the growth of our dividends. Our
strategy consists of four core elements:
(i)       Our real estate: Our portfolio is grounded in high-quality properties

in desirable locations. We focus on three purposely selected private

pay asset classes, senior housing, life science and medical office, to

          provide stability through inevitable market cycles.


(ii)      Our financials: We maintain a strong investment-grade balance sheet

with ample liquidity as well as long-term fixed-rate debt financing

          with staggered maturities to reduce our exposure to interest-rate
          volatility and refinancing risk.

(iii) Our partnerships: We work with leading healthcare companies, operators

          and service providers and are responsive to their space and capital
          needs. We provide high-quality management services to encourage tenants
          to renew, expand and relocate into our properties, which drives
          increased occupancy, rental rates, and property values.

(iv) Our platform: We have a people-first culture that we believe attracts,

          develops and retains top talent. We continually strive to create and
          maintain an industry-leading platform, with systems and tools that
          allow us to effectively and efficiently manage our assets and
          investment activity.



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COVID-19 Update
Beginning in late 2019, a novel strain of Coronavirus ("COVID-19") began to
spread throughout the world, including the United States, ultimately being
declared a pandemic by the World Health Organization. Global health concerns and
increased efforts to reduce the spread of the COVID-19 pandemic have prompted
federal, state, and local governments to restrict normal daily activities, and
have resulted in travel bans, quarantines, school closings, "shelter-in-place"
orders requiring individuals to remain in their homes other than to conduct
essential services or activities, as well as business limitations and shutdowns,
which resulted in closure of many businesses deemed to be non-essential.
Although some of these restrictions have since been lifted or scaled back, a
recent surge of COVID-19 has resulted in the re-imposition of certain
restrictions and may lead to other restrictions being re-implemented in response
to efforts to reduce the spread of COVID-19. In addition, our tenants, operators
and borrowers are facing significant cost increases as a result of increased
health and safety measures, including increased staffing demands for patient
care and sanitation, as well as increased usage and inventory of critical
medical supplies and personal protective equipment. These health and safety
measures, which may remain in place for a significant amount of time, are
placing a substantial strain on the business operations of many of our tenants,
operators, and borrowers.
SHOP, CCRC, and Senior Housing Triple-Net
Within our SHOP and CCRC properties, occupancy rates have declined
quarter-over-quarter and we expect that trend to continue during the pandemic as
a result of a reduction in, or in some cases prohibitions on, new tenant
move-ins due to stricter move-in criteria, lower inquiry volumes, and reduced
in-person tours, as well as incidences of COVID-19 outbreaks at our facilities
or the perception that outbreaks may occur. Outbreaks, which directly affect our
residents and the employees at our senior housing facilities, have and could
continue to materially and adversely disrupt operations, as well as cause
significant reputational harm to us, our operators, and our tenants. As of July
31, 2020, we had confirmed resident COVID-19 cases at 111 of our 218 senior
housing properties. Our senior housing property operators are also facing
significant cost increases as a result of higher staffing hours and
compensation, the implementation of increased health and safety measures and
protocols, and increased usage and inventory of critical medical supplies and
personal protective equipment. At our SHOP and CCRC facilities, we bear these
significant cost increases.
We also temporarily suspended development and redevelopment projects in the
greater San Francisco and Boston areas as a result of "shelter-in-place" orders
and local, state, and federal directives. Our operators also temporarily
suspended development and redevelopment across our senior housing portfolio for
the same reasons, except for certain life safety and essential projects.
Although some of these development and redevelopment projects have been allowed
to restart with infection control protocols in place, future local, state, or
federal orders could cause us to re-suspend the work. Other projects remain
suspended and we do not know when we will be able to restart construction. In
locations where construction continues, construction workers are following
applicable guidelines, including appropriate social distancing, limitations on
large group gatherings in close proximity, and increased sanitation efforts,
which has slowed the pace of construction. These protective actions do not,
however, eliminate the risk that outbreaks caused or spread by such activities
may occur and impact our tenants, operators and residents. In addition, our
planned dispositions may not occur within the expected time or at all because of
buyer terminations or withdrawals related to the pandemic, capital constraints,
inability to tour properties, or other factors relating to the pandemic.
Medical Office Portfolio
Within our medical office portfolio, many physician practices have delayed or
discontinued nonessential surgeries and procedures due to "shelter-in-place"
orders and other health and safety measures, which has negatively impacted their
cash flows. However, we experienced a slight increase in new leases and lease
renewal requests in the second quarter of 2020, and we expect that planned
move-outs will be delayed during the COVID-19 pandemic, which is expected to
slightly increase short-term retention in this portfolio.
We implemented a deferred rent program for May and June 2020 that was limited to
certain non-health system and non-hospital tenants in good standing, which has
reduced our cash collections during those months, although we are requiring that
the deferred rent be repaid ratably by the end of 2020. Under this program, we
agreed to defer approximately $6 million of rent through June 30, 2020. We may
also determine to implement a deferred rent program for future periods.
Life Science Portfolio
Within our life science portfolio, we have numerous tenants that are working
tirelessly to address critical research and testing needs in the fight against
COVID-19. We are focused on providing our tenants with the necessary space to
complete their critical work and are in continuous contact with our tenants
regarding how we can help them meet their needs. Through June 30, 2020, we had
provided approximately $1 million of rent deferrals to our life science tenants,
all of which is required to be repaid by the end of 2020.

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However, within our life science portfolio, we may experience a decline in
leasing activity at certain points during the COVID-19 pandemic. As a result of
governmental restrictions on business activities in the greater San Francisco
and Boston areas, we temporarily suspended development, redevelopment, and
tenant improvement projects at many of our life science properties, resulting in
delayed deliveries and project completions. Though we have been able to continue
or re-start these projects, we remain subject to future governmental
restrictions that may again suspend these projects. Even when these projects
continue, we have been experiencing losses in efficiency as a result of the
implementation of health and safety protocols related to social distancing and
proper hygiene and sanitization.
Liquidity
We believe that we are well positioned to manage the COVID-19 pandemic and
measures to slow its spread while working closely with our tenants, operators,
and borrowers as they navigate the pandemic. We had approximately $2.85 billion
of liquidity available, including $2.5 billion borrowing capacity under our
unsecured revolving line of credit facility and $350 million of cash and cash
equivalents, as of July 31, 2020. Additionally, after completing the July 2020
redemption of $300 million of senior unsecured notes due in 2022, we have no
significant debt maturities until 2023. While a future downgrade in our credit
ratings would adversely impact our cost of borrowing, we believe we continue to
have access to the unsecured debt markets. We could also seek to enter into one
or more secured debt financings, issue additional securities, including under
our 2020 ATM Program (as defined below), or dispose of certain assets to fund
future operating costs, capital expenditures, or acquisitions, although no
assurances can be made in this regard.
Future Rent Collections
The impact of COVID-19 on the ability of our tenants to pay rent in the future
is currently unknown. We have, and will continue to monitor the credit quality
of each of our tenants and write-off straight-line rent and accounts receivable,
as necessary. In the event we conclude that substantially all of a tenant's
straight-line rent or accounts receivable is not probable of collection in the
future, such amounts will be written off, which could have a material impact on
our future results of operations.
Employee Update
We have taken, and will continue to take, proactive measures to provide for the
well-being of our workforce. We have maximized our systems infrastructure as
well as virtual and remote working technologies for our employees, including our
executive team, to ensure productivity and connectivity internally, as well as
with key third-party relationships.
The extent of the impact of the COVID-19 pandemic on our business and financial
results will depend on future developments, including the duration, severity,
and spread of COVID-19, health and safety actions taken to contain its spread,
any possible resurgence of COVID-19 that may occur after the initial outbreak
subsides, and how quickly and to what extent normal economic and operating
conditions can resume within the markets in which we operate, each of which are
highly uncertain at this time and outside of our control.
2020 Transaction Overview
The Post Acquisition
In January 2020, we entered into definitive agreements to acquire a life science
campus in Waltham, Massachusetts for $320 million. We closed the acquisition in
April 2020.
Master Transaction and Cooperation Agreement with Brookdale
In January 2020, Healthpeak and Brookdale Senior Living Inc. ("Brookdale")
completed certain of the transactions governed by the previously announced
Master Transactions and Cooperation Agreement (the "2019 MTCA"), which includes
a series of transactions related to the previously jointly owned 15-campus CCRC
portfolio (the "CCRC JV") and the portfolio of senior housing properties that
were triple-net leased to Brookdale. Specifically, the following transactions
were completed on January 31, 2020:
•      We acquired Brookdale's 51% interest in 13 of the 15 communities in the

CCRC JV based on a valuation of $1.06 billion (the "CCRC Acquisition") and

       transitioned management (under new management agreements) of those 13
       communities to Life Care Services LLC ("LCS");

• We paid Brookdale $100 million to terminate the previous management

agreements related to those 13 communities;

• Brookdale acquired 18 of the triple-net lease properties (the "Brookdale

       Acquisition Assets") from us for cash proceeds of $385 million;



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• The remaining 24 triple-net lease properties were restructured into a

single master lease with 2.4% annual rent escalators and a maturity date

of December 31, 2027 (the "2019 Amended Master Lease");

• A portion of annual rent (amount in excess of 6.5% of sales proceeds)

       related to 14 of the 18 Brookdale Acquisition Assets was reallocated to
       the remaining properties under the 2019 Amended Master Lease; and

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

Master Lease.



Other Real Estate Transactions
•      During the first quarter of 2020, we sold seven SHOP assets for $36
       million and a hospital under a direct financing lease ("DFL") for $82
       million.

• During the second quarter of 2020, we sold two SHOP assets for $28 million

and three MOBs in San Diego, California for $106 million (through exercise

of a purchase option by one of our tenants).

• During the first half of 2020, we converted: (i) six senior housing

triple-net assets with Capital Senior Living Corporation ("CSL") into a

RIDEA structure, with CSL remaining as the manager, (ii) one senior

housing triple-net asset with CSL into a RIDEA structure with Discovery

Senior Living, LLC as the operator, and (iii) two senior housing

triple-net assets with HRA Senior Living ("HRA") into a RIDEA structure,

with HRA remaining as the manager.



Financing Activities
•      During the six months ended June 30, 2020, we utilized the forward

provisions under the at-the-market equity offering program established in

February 2019 (the "2019 ATM Program") to allow for the sale of up to an

aggregate of 2 million shares of our common stock at an initial weighted

average net price of $35.23 per share, after commissions.

• During the six months ended June 30, 2020, we settled all 32.5 million

shares previously outstanding under (i) ATM forward contracts and (ii) a

2019 forward equity sales agreement at a weighted average net price of

$32.73 per share, after commissions, resulting in net proceeds of $1.06

billion.

• In June 2020, we completed a public offering of $600 million aggregate

       principal amount of 2.875% senior unsecured notes due 2031 (the "2031
       Notes").


•      In June 2020, using a portion of the net proceeds from the 2031 Notes
       offering, we repurchased $250 million aggregate principal amount of our
       4.250% senior unsecured notes due in 2023.


•      In July 2020, using an additional portion of the net proceeds from the

2031 Notes offering, we redeemed all $300 million aggregate principal

amount of our 3.150% senior unsecured notes due in 2022.

Development Activities • As part of the development program with HCA Healthcare Inc., at June 30,

2020, we had seven MOB developments under contract, six of which will be

on-campus, with an aggregate total estimated cost of $184 million.

• At June 30, 2020, we had six life science development projects in process

with an aggregate total estimated cost of approximately $855 million.

Dividends

The following table summarizes our common stock cash dividends declared in 2020:
                                    Amount        Dividend
Declaration Date   Record Date    Per Share     Payment Date
January 30         February 18   $      0.37    February 28
April 30              May 8             0.37       May 19
August 4            August 14           0.37     August 25



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Results of Operations
We evaluate our business and allocate resources among our reportable business
segments: (i) senior housing triple-net, (ii) SHOP, (iii) CCRC, (iv) life
science, and (v) medical office. Our senior housing facilities, including CCRCs,
are managed utilizing triple-net leases and RIDEA structures. Under the life
science and medical office segments, we invest through the acquisition and
development of life science facilities and MOBs, which generally require a
greater level of property management. We have other non-reportable segments that
are comprised primarily of our debt investments and hospital properties. We
evaluate performance based upon property adjusted net operating income
("Adjusted NOI" or "Cash NOI") in each segment. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies in Note 2 to the Consolidated Financial Statements in our
Annual Report on Form 10-K for the year ended December 31, 2019 filed with the
U.S. Securities and Exchange Commission ("SEC"), as updated by Note 2 to the
Consolidated Financial Statements herein.
Non-GAAP Financial Measures
Net Operating Income
NOI and Adjusted NOI are non-U.S. generally accepted accounting principles
("GAAP") supplemental financial measures used to evaluate the operating
performance of real estate. NOI is defined as real estate revenues (inclusive of
rental and related revenues, resident fees and services, income from direct
financing leases, and government grant income and exclusive of interest income),
less property level operating expenses (which exclude transition costs); NOI
excludes all other financial statement amounts included in net income (loss) as
presented in Note 13 to the Consolidated Financial Statements. Adjusted NOI is
calculated as NOI after eliminating the effects of straight-line rents, DFL
non-cash interest, amortization of market lease intangibles, termination fees,
actuarial reserves for insurance claims that have been incurred but not
reported, and the impact of deferred community fee income and expense. NOI and
Adjusted NOI include our share of income (loss) generated by unconsolidated
joint ventures and exclude noncontrolling interests' share of income (loss)
generated by consolidated joint ventures. Adjusted NOI is oftentimes referred to
as "Cash NOI." Management believes NOI and Adjusted NOI are important
supplemental measures because they provide relevant and useful information by
reflecting only income and operating expense items that are incurred at the
property level and present them on an unlevered basis. We use NOI and Adjusted
NOI to make decisions about resource allocations, to assess and compare property
level performance, and to evaluate our Same-Store ("SS") performance, as
described below. We believe that net income (loss) is the most directly
comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not
be viewed as alternative measures of operating performance to net income (loss)
as defined by GAAP since they do not reflect various excluded items. Further,
our definitions of NOI and Adjusted NOI may not be comparable to the definitions
used by other REITs or real estate companies, as they may use different
methodologies for calculating NOI and Adjusted NOI. For a reconciliation of NOI
and Adjusted NOI to net income (loss) by segment, refer to Note 13 to the
Consolidated Financial Statements.
Operating expenses generally relate to leased medical office and life science
properties, as well as SHOP and CCRC facilities. We generally recover all or a
portion of our leased medical office and life science property expenses through
tenant recoveries. We present expenses as operating or general and
administrative based on the underlying nature of the expense.
Same-Store
Same-Store NOI and Adjusted (Cash) NOI information allows us to evaluate the
performance of our property portfolio under a consistent population by
eliminating changes in the composition of our consolidated portfolio of
properties. Same-Store Adjusted NOI excludes amortization of deferred revenue
from tenant-funded improvements and certain non-property specific operating
expenses that are allocated to each operating segment on a consolidated basis.
Properties are included in Same-Store once they are stabilized for the full
period in both comparison periods. Newly acquired operating assets are generally
considered stabilized at the earlier of lease-up (typically when the tenant(s)
control(s) the physical use of at least 80% of the space) or 12 months from the
acquisition date. Newly completed developments and redevelopments are considered
stabilized at the earlier of lease-up or 24 months from the date the property is
placed in service. Properties that experience a change in reporting structure,
such as a conversion from a triple-net lease to a RIDEA reporting structure, are
considered stabilized after 12 months in operations under a consistent reporting
structure. A property is removed from Same-Store when it is classified as held
for sale, sold, placed into redevelopment, experiences a casualty event that
significantly impacts operations, a change in reporting structure (such as
triple-net to SHOP) or operator transition has been agreed to, or a significant
tenant relocates from a Same-Store property to a non Same-Store property and
that change results in a corresponding increase in revenue. For a reconciliation
of Same-Store to total portfolio Adjusted NOI and other relevant disclosures by
segment, refer to our Segment Analysis below.

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Funds From Operations ("FFO")
FFO encompasses NAREIT FFO and FFO as Adjusted, each of which is described in
detail below. We believe FFO applicable to common shares, diluted FFO applicable
to common shares, and diluted FFO per common share are important supplemental
non-GAAP measures of operating performance for a REIT. Because the historical
cost accounting convention used for real estate assets utilizes straight-line
depreciation (except on land), such accounting presentation implies that the
value of real estate assets diminishes predictably over time. Since real estate
values instead have historically risen and fallen with market conditions,
presentations of operating results for a REIT that use historical cost
accounting for depreciation could be less informative. The term FFO was designed
by the REIT industry to address this issue.
NAREIT FFO. FFO, as defined by the National Association of Real Estate
Investment Trusts ("NAREIT"), is net income (loss) applicable to common shares
(computed in accordance with GAAP), excluding gains or losses from sales of
depreciable property, including any current and deferred taxes directly
associated with sales of depreciable property, impairments of, or related to,
depreciable real estate, plus real estate and other real estate-related
depreciation and amortization, and adjustments to compute our share of NAREIT
FFO and FFO as Adjusted (see below) from joint ventures. Adjustments for joint
ventures are calculated to reflect our pro-rata share of both our consolidated
and unconsolidated joint ventures. We reflect our share of NAREIT FFO for
unconsolidated joint ventures by applying our actual ownership percentage for
the period to the applicable reconciling items on an entity by entity basis. For
consolidated joint ventures in which we do not own 100%, we reflect our share of
the equity by adjusting our NAREIT FFO to remove the third party ownership share
of the applicable reconciling items based on actual ownership percentage for the
applicable periods. Our pro-rata share information is prepared on a basis
consistent with the comparable consolidated amounts, is intended to reflect our
proportionate economic interest in the operating results of properties in our
portfolio and is calculated by applying our actual ownership percentage for the
period. We do not control the unconsolidated joint ventures, and the pro-rata
presentations of reconciling items included in NAREIT FFO do not represent our
legal claim to such items. The joint venture members or partners are entitled to
profit or loss allocations and distributions of cash flows according to the
joint venture agreements, which provide for such allocations generally according
to their invested capital.
The presentation of pro-rata information has limitations, which include, but are
not limited to, the following: (i) the amounts shown on the individual line
items were derived by applying our overall economic ownership interest
percentage determined when applying the equity method of accounting and do not
necessarily represent our legal claim to the assets and liabilities, or the
revenues and expenses and (ii) other companies in our industry may calculate
their pro-rata interest differently, limiting the usefulness as a comparative
measure. Because of these limitations, the pro-rata financial information should
not be considered independently or as a substitute for our financial statements
as reported under GAAP. We compensate for these limitations by relying primarily
on our GAAP financial statements, using the pro-rata financial information as a
supplement.
NAREIT FFO does not represent cash generated from operating activities in
accordance with GAAP, is not necessarily indicative of cash available to fund
cash needs and should not be considered an alternative to net income (loss). We
compute NAREIT FFO in accordance with the current NAREIT definition; however,
other REITs may report NAREIT FFO differently or have a different interpretation
of the current NAREIT definition from ours.

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FFO as Adjusted. In addition, we present NAREIT FFO on an adjusted basis before
the impact of non-comparable items including, but not limited to,
transaction-related items, impairments (recoveries) of non-depreciable assets,
losses (gains) from the sale of non-depreciable assets, severance and related
charges, prepayment costs (benefits) associated with early retirement or payment
of debt, litigation costs (recoveries), casualty-related charges (recoveries),
foreign currency remeasurement losses (gains), and changes in tax legislation
("FFO as Adjusted"). Transaction-related items include transaction expenses and
gains/charges incurred as a result of mergers and acquisitions and lease
amendment or termination activities. Prepayment costs (benefits) associated with
early retirement of debt include the write-off of unamortized deferred financing
fees, or additional costs, expenses, discounts, make-whole payments, penalties
or premiums incurred as a result of early retirement or payment of debt.
Management believes that FFO as Adjusted provides a meaningful supplemental
measurement of our FFO run-rate and is frequently used by analysts, investors,
and other interested parties in the evaluation of our performance as a REIT. At
the same time that NAREIT created and defined its FFO measure for the REIT
industry, it also recognized that "management of each of its member companies
has the responsibility and authority to publish financial information that it
regards as useful to the financial community." We believe stockholders,
potential investors, and financial analysts who review our operating performance
are best served by an FFO run-rate earnings measure that includes certain other
adjustments to net income (loss), in addition to adjustments made to arrive at
the NAREIT defined measure of FFO. FFO as Adjusted is used by management in
analyzing our business and the performance of our properties and we believe it
is important that stockholders, potential investors, and financial analysts
understand this measure used by management. We use FFO as Adjusted to: (i)
evaluate our performance in comparison with expected results and results of
previous periods, relative to resource allocation decisions, (ii) evaluate the
performance of our management, (iii) budget and forecast future results to
assist in the allocation of resources, (iv) assess our performance as compared
with similar real estate companies and the industry in general, and (v) evaluate
how a specific potential investment will impact our future results. Other REITs
or real estate companies may use different methodologies for calculating an
adjusted FFO measure, and accordingly, our FFO as Adjusted may not be comparable
to those reported by other REITs. For a reconciliation of net income (loss) to
NAREIT FFO and FFO as Adjusted and other relevant disclosure, refer to "Non-GAAP
Financial Measures Reconciliations" below.
Adjusted FFO ("AFFO")
AFFO is defined as FFO as Adjusted after excluding the impact of the following:
(i) amortization of deferred compensation expense, (ii) amortization of deferred
financing costs, net, (iii) straight-line rents, (iv) deferred income taxes, (v)
amortization of acquired market lease intangibles, net, (vi) non-cash interest
related to DFLs and lease incentive amortization (reduction of straight-line
rents), (vii) actuarial reserves for insurance claims that have been incurred
but not reported, and (viii) deferred revenues, excluding amounts amortized into
rental income that are associated with tenant funded improvements
owned/recognized by us and up-front cash payments made by tenants to reduce
their contractual rents. Also, AFFO: (i) is computed after deducting recurring
capital expenditures, including second generation leasing costs and second
generation tenant and capital improvements and (ii) includes lease restructure
payments and adjustments to compute our share of AFFO from our unconsolidated
joint ventures. Certain prior period amounts in the "Non-GAAP Financial Measures
Reconciliation" below for AFFO have been reclassified to conform to the current
period presentation. More specifically, recurring capital expenditures,
including second generation leasing costs and second generation tenant and
capital improvements ("AFFO capital expenditures") excludes our share from
unconsolidated joint ventures (reported in "other AFFO adjustments").
Adjustments for joint ventures are calculated to reflect our pro-rata share of
both our consolidated and unconsolidated joint ventures. We reflect our share of
AFFO for unconsolidated joint ventures by applying our actual ownership
percentage for the period to the applicable reconciling items on an entity by
entity basis. We reflect our share for consolidated joint ventures in which we
do not own 100% of the equity by adjusting our AFFO to remove the third party
ownership share of the applicable reconciling items based on actual ownership
percentage for the applicable periods (reported in "other AFFO adjustments").
See FFO for further disclosure regarding our use of pro-rata share information
and its limitations. Other REITs or real estate companies may use different
methodologies for calculating AFFO, and accordingly, our AFFO may not be
comparable to those reported by other REITs. Although our AFFO computation may
not be comparable to that of other REITs, management believes AFFO provides a
meaningful supplemental measure of our performance and is frequently used by
analysts, investors, and other interested parties in the evaluation of our
performance as a REIT. We believe AFFO is an alternative run-rate earnings
measure that improves the understanding of our operating results among investors
and makes comparisons with: (i) expected results, (ii) results of previous
periods, and (iii) results among REITs more meaningful. AFFO does not represent
cash generated from operating activities determined in accordance with GAAP and
is not necessarily indicative of cash available to fund cash needs as it
excludes the following items which generally flow through our cash flows from
operating activities: (i) adjustments for changes in working capital or the
actual timing of the payment of income or expense items that are accrued in the
period, (ii) transaction-related costs, (iii) litigation settlement expenses,
(iv) severance-related expenses, and (v) actual cash receipts from interest
income recognized on loans receivable (in contrast to our AFFO adjustment to
exclude non-cash interest and depreciation related to our investments in direct
financing leases). Furthermore, AFFO is adjusted for recurring capital
expenditures, which are generally not considered when determining cash flows
from operations or liquidity. AFFO is a non-GAAP supplemental financial measure
and should not be considered as an alternative to net income (loss) determined
in accordance with GAAP. For a reconciliation of net income (loss) to AFFO and
other relevant disclosure, refer to "Non-GAAP Financial Measures
Reconciliations" below.

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Comparison of the Three and Six Months Ended June 30, 2020 to the Three and Six
Months Ended June 30, 2019
Overview
--------------------------------------------------------------------------------
Three Months Ended June 30, 2020 and 2019
The following table summarizes results for the three months ended June 30, 2020
and 2019 (dollars in thousands):
                                                  Three Months Ended June 

30,

                                                      2020             2019 

Change

Net income (loss) applicable to common shares    $      51,131$  (13,991 )$   65,122
NAREIT FFO                                             182,367        198,422        (16,055 )
FFO as Adjusted                                        214,713        212,939          1,774
AFFO                                                   191,926        195,067         (3,141 )


Net income (loss) applicable to common shares increased primarily as a result of
the following:
•      an increase in net gain on sales of real estate during the second quarter

of 2020;

• a reduction in impairment charges related to depreciable real estate and

       assets underlying DFLs during the second quarter of 2020;


•      government grant income received under the Coronavirus Aid, Relief and

Economic Security Act ("CARES Act") during the second quarter of 2020; and

• NOI generated from: (i) 2019 and 2020 acquisitions of real estate, (ii)

development and redevelopment projects placed in service during 2019 and

2020, and (iii) new leasing activity during 2019 and 2020.

The increase in net income (loss) applicable to common shares was partially offset by: • a reduction in income related to assets sold during 2019 and 2020;

• an increase in loss on debt extinguishment, resulting from the repurchase

       of senior unsecured notes in the second quarter of 2020;


•      a reduction in other income, net as a result of a gain upon change of

control related to the acquisition of the outstanding equity interests in

a senior housing joint venture in the second quarter of 2019;

• additional expenses and decreased occupancy in our SHOP and CCRC segments

related to COVID-19;

• increased depreciation and amortization expense as a result of: (i) assets

acquired during 2019 and 2020, (ii) the acquisition of Brookdale's

interest in and consolidation of 13 CCRCs during the first quarter of

2020, and (iii) development and redevelopment projects placed into service

during 2019 and 2020, partially offset by dispositions of real estate

throughout 2019 and 2020 and intangible assets that were fully depreciated

in 2019 and 2020; and

• increased credit losses related to loans receivable as a result of: (i)

adopting the current expected credit losses model required under

Accounting Standards Update No. 2016-13, Measurement of Credit Losses on

       Financial Instruments ("ASU 2016-13"), (ii) new loans funded during the
       second quarter of 2020, and (iii) the impact of COVID-19 on expected
       credit losses.

NAREIT FFO decreased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from NAREIT FFO: • impairments of depreciable real estate;

• net gain on sales depreciable of real estate;


•      the gain upon change of control related to the acquisition of the
       outstanding equity interests in a senior housing joint venture in the
       second quarter of 2019; and

• depreciation and amortization expense.

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FFO as Adjusted increased primarily as a result of the aforementioned events
impacting NAREIT FFO, except for the following, which are excluded from FFO as
Adjusted:
•      net gain on sales of assets underlying DFLs and non-depreciable assets,

such as land;

• the loss on debt extinguishment; and

• the increase in credit losses.



AFFO decreased primarily as a result of the aforementioned events impacting FFO
as Adjusted, except for the impact of straight-line rents, which is excluded
from AFFO. The decrease in AFFO was partially offset by decreased capital
expenditures during the period that are not otherwise deducted from AFFO and the
increase in deferred tax benefit.
Six Months Ended June 30, 2020 and 2019
The following table summarizes results for the six months ended June 30, 2020
and 2019 (dollars in thousands):
                                                    Six Months Ended June 

30,

                                                       2020             2019          Change
Net income (loss) applicable to common shares    $      328,786$   47,036$  281,750
NAREIT FFO                                              353,917        404,455        (50,538 )
FFO as Adjusted                                         441,727        424,961         16,766
AFFO                                                    399,528        386,536         12,992


Net income (loss) applicable to common shares increased primarily as a result of
the following:
•      an increase in other income, net as a result of (i) a gain upon change of

control related to the acquisition of the outstanding equity interests in

13 CCRCs from Brookdale during the first quarter of 2020, (ii) a gain on

sale related to the sale of a hospital underlying a DFL during the first

quarter of 2020, and (iii) government grant income received under the

CARES Act during the second quarter of 2020;

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

• a reduction in impairment charges related to depreciable real estate and

assets underlying DFLs during the first half of 2020;

• an increase in income tax benefit as a result of (i) the above-mentioned

acquisition of Brookdale's interest in 13 CCRCs and related management

termination fee expense paid to Brookdale in connection with transitioning

management to LCS during the first quarter of 2020 and (ii) the extension

of the net operating loss carryback period provided by the CARES Act; and


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

The increase in net income (loss) applicable to common shares was partially offset by: • a reduction in income related to assets sold during 2019 and 2020;

• an increase in loss on debt extinguishment, resulting from repurchase of

senior unsecured notes in the second quarter of 2020;

• increased depreciation and amortization expense as a result of: (i) assets

acquired during 2019 and 2020, (ii) the acquisition of Brookdale's

interest in and consolidation of 13 CCRCs during the first quarter of

2020, and (iii) development and redevelopment projects placed into service

during 2019 and 2020, partially offset by dispositions of real estate

throughout 2019 and 2020;

• increased interest expense as a result of senior unsecured notes issuances

and assumed mortgage debt in conjunction with real estate acquisitions,

       partially offset by senior unsecured notes redemptions, repurchases, and
       repayments; and

• increased credit losses related to loans receivable as a result of: (i)

       adopting the current expected credit losses model required under ASU
       2016-13, (ii) new loans funded during 2020, and (iii) the impact of
       COVID-19 on expected credit losses.



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NAREIT FFO decreased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from NAREIT FFO: • impairments of depreciable real estate;

• net gain on sales of depreciable real estate;

• the gain upon change of control related to the acquisition of Brookdale's

interest in 13 CCRCs; and

• depreciation and amortization expense.



FFO as Adjusted increased primarily as a result of the aforementioned events
impacting NAREIT FFO, except for the following, which are excluded from FFO as
Adjusted:
•      net gain on sales of assets underlying DFLs and non-depreciable assets,

such as land;

• the loss on debt extinguishment; and

• the increase in credit losses.



AFFO increased primarily as a result of the aforementioned events impacting FFO
as Adjusted, except for the impact of straight-line rents and the increase in
deferred tax benefit, which are excluded from AFFO. The increase in AFFO was
partially offset by increased capital expenditures during the period that are
not otherwise deducted from AFFO.
Segment Analysis
The following tables provide selected operating information for our Same-Store
and total property portfolio for each of our reportable segments. For the three
months ended June 30, 2020, our Same-Store consists of 468 properties
representing properties acquired or placed in service and stabilized on or prior
to April 1, 2019 and that remained in operations under a consistent reporting
structure through June 30, 2020. For the six months ended June 30, 2020, our
Same-Store consists of 442 properties representing properties acquired or placed
in service and stabilized on or prior to January 1, 2019 and that remained in
operations under a consistent reporting structure through June 30, 2020. Our
total property portfolio consisted of 633 and 676 properties at June 30, 2020
and 2019, respectively.

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Senior Housing Triple-Net -------------------------------------------------------------------------------- The following table summarizes results at and for the three months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                      SS                                    

Total Portfolio(1)

                          Three Months Ended June 30,                  

Three Months Ended June 30,

                      2020            2019          Change          2020           2019          Change
Rental and
related revenues  $    20,590$   19,254$    1,336$   24,589$   43,792$  (19,203 )
Income from
direct financing
leases                      -              -              -              -          6,013         (6,013 )
Noncontrolling
interests' share
of consolidated
joint venture
total revenues              -              -              -              -              1             (1 )
Operating
expenses                  (49 )          (44 )           (5 )         (526 )         (866 )          340
Adjustments to
NOI                      (260 )          433           (693 )           41          4,806         (4,765 )
Adjusted NOI      $    20,281$   19,643$      638         24,104         53,746        (29,642 )
Less: non-SS
adjusted NOI                                                        (3,823 )      (34,103 )       30,280
SS adjusted NOI                                                 $   20,281$   19,643$      638
Adjusted NOI %
change                                                  3.2 %
Property count(2)          47             47                            62            104
Average capacity
(units)(3)              4,364          4,366                         5,906         12,474
Average annual
rent per unit     $    18,634$   18,037$   16,681$   17,512

_______________________________________

(1) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(2) From our 2019 presentation of Same-Store, we removed 31 senior housing

triple-net properties that were sold, 12 senior housing triple-net properties

that were converted, or we agreed to convert, to SHOP, 12 senior housing

triple-net properties that were classified as held for sale, and 1 senior

housing triple-net property that was transferred to other non-reportable.

(3) Represents average capacity as reported by the respective tenants or

operators for the three-month period.



Same-Store Adjusted NOI increased primarily as a result of annual rent
escalations.
Total Portfolio Adjusted NOI decreased primarily as a result of the following
Non-Same-Store impacts:
•      the transfer of nine senior housing triple-net facilities to our SHOP
       segment during 2020;


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

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

The decrease in Total Portfolio Adjusted NOI is partially offset by the aforementioned increase to Same-Store.

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The following table summarizes results at and for the six months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                      SS                                   

Total Portfolio(1)

                          Six Months Ended June 30,                    Six 

Months Ended June 30,

                      2020           2019          Change          2020           2019          Change
Rental and
related revenues  $   41,118$   38,053$    3,065$   57,724$   93,232$  (35,508 )
Income from
direct financing
leases                     -              -              -              -         15,405        (15,405 )
Noncontrolling
interests' share
of consolidated
joint venture
total revenues             -              -              -              -             (1 )            1
Operating
expenses                 (98 )          (88 )          (10 )       (1,032 )       (1,860 )          828
Adjustments to
NOI                     (830 )        1,069         (1,899 )       (3,333 )        5,371         (8,704 )
Adjusted NOI      $   40,190$   39,034$    1,156         53,359        112,147        (58,788 )
Less: non-SS
adjusted NOI                                                      (13,169 )      (73,113 )       59,944
SS adjusted NOI                                                $   40,190$   39,034$    1,156
Adjusted NOI %
change                                                 3.0 %
Property count(2)         47             47                            62            104
Average capacity
(units)(3)             4,365          4,366                         6,442         13,543
Average annual
rent per unit     $   18,457$   17,921$   16,886$   16,836

_______________________________________

(1) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(2) From our 2019 presentation of Same-Store, we removed 31 senior housing

triple-net properties that were sold, 12 senior housing triple-net properties

that were converted, or we agreed to convert, to SHOP, 12 senior housing

triple-net properties that were classified as held for sale, and 1 senior

housing triple-net property that was transferred to other non-reportable.

(3) Represents average capacity as reported by the respective tenants or

operators for the six-month period.



Same-Store Adjusted NOI increased primarily as a result of annual rent
escalations.
Total Portfolio Adjusted NOI decreased primarily as a result of the following
Non-Same-Store impacts:
•      the transfer of 39 and 9 senior housing triple-net facilities to our SHOP
       segment during 2019 and 2020, respectively;


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

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

The decrease in Total Portfolio Adjusted NOI is partially offset by the aforementioned increase to Same-Store.

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Senior Housing Operating Portfolio -------------------------------------------------------------------------------- The following table summarizes results at and for the three months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                      SS                                    

Total Portfolio(1)

                          Three Months Ended June 30,                  

Three Months Ended June 30,

                      2020           2019          Change           2020           2019          Change
Resident fees and
services          $   73,086$   79,751$   (6,665 )$  155,293$  177,001$  (21,708 )
Government grant
income(2)              1,889              -          1,889           2,209              -          2,209
Healthpeak's
share of
unconsolidated
joint venture
total revenues        19,099         20,128         (1,029 )        24,684          5,922         18,762
Healthpeak's
share of
unconsolidated
joint venture
government grant
income                     -              -              -             270              -            270
Noncontrolling
interests' share
of consolidated
joint venture
total revenues          (151 )         (160 )            9            (504 )         (523 )           19
Operating
expenses             (64,226 )      (60,685 )       (3,541 )      (137,507 )     (137,460 )          (47 )
Healthpeak's
share of
unconsolidated
joint venture
operating
expenses             (13,319 )      (12,408 )         (911 )       (18,686 )       (4,430 )      (14,256 )
Noncontrolling
interests' share
of consolidated
joint venture
operating
expenses                 113            106              7             411            320             91
Adjustments to
NOI                      (66 )          205           (271 )           118            898           (780 )
Adjusted NOI      $   16,425$   26,937$  (10,512 )        26,288         41,728        (15,440 )
Less: non-SS
adjusted NOI                                                        (9,863 )      (14,791 )        4,928
SS adjusted NOI                                                 $   16,425$   26,937$  (10,512 )
Adjusted NOI %
change                                               (39.0 )%
Property count(3)         71             71                            139            144
Average occupancy       79.1 %         86.9 %                         79.8 %         82.1 %
Average capacity
(units)(4)             9,363          9,368                         16,386         15,638
Average annual
rent per unit     $   47,724$   51,863$   49,647$   48,179

_______________________________________

(1) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(2) Represents government grant income received under the CARES Act, which is

recorded in other income (expense), net in the consolidated statements of

operations.

(3) From our 2019 presentation of Same-Store, we removed four SHOP properties

that were classified as held for sale and one SHOP property that was placed

in redevelopment.

(4) Represents average capacity as reported by the respective tenants or

operators for the three-month period.

Same Store Adjusted NOI decreased primarily as a result of the following: • additional expenses and decreased occupancy related to COVID-19; partially

offset by

• government grant income received under the CARES Act.

Total Portfolio Adjusted NOI decreased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts: • decreased NOI from assets sold in 2019 and 2020; partially offset by

• increased NOI from (i) 2019 acquisitions and (ii) the transfer of 21 and 9

senior housing triple-net assets to our SHOP segment during 2019 and 2020,

       respectively.



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The following table summarizes results at and for the six months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                      SS                                    

Total Portfolio(1)

                           Six Months Ended June 30,                    Six 

Months Ended June 30,

                      2020           2019          Change           2020           2019          Change
Resident fees and
services          $   73,689$   75,607$   (1,918 )$  326,254$  303,182$   23,072
Government grant
income(2)                437              -            437           2,209              -          2,209
Healthpeak's
share of
unconsolidated
joint venture
total revenues        39,200         40,348         (1,148 )        50,449         11,571         38,878
Healthpeak's
share of
unconsolidated
joint venture
government grant
income                     -              -              -             270              -            270
Noncontrolling
interests' share
of consolidated
joint venture
total revenues          (190 )         (200 )           10          (1,042 )         (995 )          (47 )
Operating
expenses             (56,767 )      (55,568 )       (1,199 )      (275,637 )     (234,407 )      (41,230 )
Healthpeak's
share of
unconsolidated
joint venture
operating
expenses             (25,978 )      (24,677 )       (1,301 )       (36,642 )       (8,591 )      (28,051 )
Noncontrolling
interests' share
of consolidated
joint venture
operating
expenses                 130            130              -             788            670            118
Adjustments to
NOI                     (176 )          505           (681 )           649          2,080         (1,431 )
Adjusted NOI      $   30,345$   36,145$   (5,800 )        67,298         73,510         (6,212 )
Less: non-SS
adjusted NOI                                                       (36,953 )      (37,365 )          412
SS adjusted NOI                                                 $   30,345$   36,145$   (5,800 )
Adjusted NOI %
change                                               (16.0 )%
Property count(3)         48             48                            139            144
Average occupancy       83.2 %         87.0 %                         83.4 %         82.4 %
Average capacity
(units)(4)             6,466          6,468                         16,340         14,714
Average annual
rent per unit     $   46,740$   48,345$   51,701$   44,233

_______________________________________

(1) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(2) Represents government grant income received under the CARES Act, which is

recorded in other income (expense), net in the consolidated statements of

operations.

(3) From our 2019 presentation of Same-Store, we removed three SHOP properties

that were classified as held for sale and one SHOP property that was placed

in redevelopment.

(4) Represents average capacity as reported by the respective tenants or

operators for the six-month period.

Same Store Adjusted NOI decreased primarily as a result of the following: • additional expenses and decreased occupancy related to COVID-19; partially

offset by

• government grant income received under the CARES Act.

Total Portfolio Adjusted NOI decreased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts: • decreased NOI from assets sold in 2019 and 2020; partially offset by

• increased NOI from (i) 2019 acquisitions and (ii) the transfer of 39 and 9

senior housing triple-net assets to our SHOP segment during 2019 and 2020,

       respectively.



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Continuing Care Retirement Community -------------------------------------------------------------------------------- The following table summarizes results at and for the three months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                           SS(1)                                         Total Portfolio(2)
                                Three Months Ended June 30,                         Three Months Ended June 30,
                        2020                 2019               Change           2020           2019          Change
Resident fees and
services          $          -         $          -         $         -      $  113,926     $        -     $  113,926
Government grant
income(3)                    -                    -                   -          11,871              -         11,871
Healthpeak's
share of
unconsolidated
joint venture
total revenues               -                    -                   -           4,781         52,835        (48,054 )
Healthpeak's
share of
unconsolidated
joint venture
government grant
income                       -                    -                   -             534              -            534
Operating
expenses                     -                    -                   -         (94,248 )            -        (94,248 )
Healthpeak's
share of
unconsolidated
joint venture
operating
expenses                     -                    -                   -          (4,826 )      (42,456 )       37,630
Adjustments to
NOI                          -                    -                   -              18          4,745         (4,727 )
Adjusted NOI      $          -         $          -         $         -          32,056         15,124         16,932
Less: non-SS
adjusted NOI                                                                    (32,056 )      (15,124 )      (16,932 )
SS adjusted NOI                                                              $        -     $        -     $        -
Adjusted NOI %
change                                                                - %
Property count               -                    -                                  17             15
Average Occupancy            - %                  - %                              80.4 %         85.7 %
Average capacity
(units)(4)                   -                    -                               8,321          7,269
Average annual
rent per unit     $          -         $          -                          $   65,682$   64,797

_______________________________________

(1) All CCRC properties have been removed from the Same-Store population as they

experienced a change in reporting structure, underwent an operator transition

during the periods presented, or are classified as held for sale. As such, no

Same-Store results are presented in the table above.

(2) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(3) Represents government grant income received under the CARES Act, which is

recorded in other income (expense), net in the consolidated statements of

operations.

(4) Represents average capacity as reported by the respective tenants or

operators for the three-month period.

Total Portfolio Adjusted NOI increased primarily as a result of the following: • the acquisition of the remaining 51% interest in 13 communities previously

held in a joint venture during the first quarter of 2020; and

• the transfer of two CCRC properties that converted from senior housing

       triple-net to RIDEA structures during the fourth quarter of 2019.









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The following table summarizes results at and for the six months ended June 30, 2020 and 2019 (dollars in thousands, except per unit data):

                                          SS(1)                                        Total Portfolio(2)
                                Six Months Ended June 30,                          Six Months Ended June 30,
                        2020                 2019             Change           2020           2019          Change
Resident fees and
services          $          -         $          -       $         -      $  205,706     $        -     $  205,706
Government grant
income(3)                    -                    -                 -          11,871              -         11,871
Healthpeak's
share of
unconsolidated
joint venture
total revenues               -                    -                 -          26,428        105,073        (78,645 )
Healthpeak's
share of
unconsolidated
joint venture
government grant
income                       -                    -                 -             534              -            534
Operating
expenses                     -                    -                 -        (250,730 )            -       (250,730 )
Healthpeak's
share of
unconsolidated
joint venture
operating
expenses                     -                    -                 -         (22,863 )      (83,833 )       60,970
Adjustments to
NOI                          -                    -                 -          91,579          8,197         83,382
Adjusted NOI      $          -         $          -       $         -          62,525         29,437         33,088
Less: non-SS
adjusted NOI                                                                  (62,525 )      (29,437 )      (33,088 )
SS adjusted NOI                                                            $        -     $        -     $        -
Adjusted NOI %
change                                                              - %
Property count               -                    -                                17             15
Average Occupancy            - %                  - %                            83.2 %         85.7 %
Average capacity
(units)(4)                   -                    -                             8,321          7,269
Average annual
rent per unit     $          -         $          -                        $   65,430$   63,698

_______________________________________

(1) All CCRC properties have been removed from the Same-Store population as they

experienced a change in reporting structure, underwent an operator transition

during the periods presented, or are classified as held for sale. As such, no

Same-Store results are presented in the table above.

(2) Total Portfolio includes results of operations from disposed properties and

properties that transferred segments through the disposition or transfer

date.

(3) Represents government grant income received under the CARES Act, which is

recorded in other income (expense), net in the consolidated statements of

operations.

(4) Represents average capacity as reported by the respective tenants or

operators for the six-month period.

Total Portfolio Adjusted NOI increased primarily as a result of the following: • the acquisition of the remaining 51% interest in 13 communities previously

held in a joint venture during the first quarter of 2020; and

• the transfer of two CCRC properties that converted from senior housing

       triple-net to RIDEA structures during the fourth quarter of 2019.



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