As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/01/11  Ventas Inc                        POSASR      8/01/11    7:595K                                   Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: POSASR      Pos Am                                              HTML    305K 
 2: EX-23.1     Consent of Experts or Counsel                       HTML      7K 
 3: EX-23.2     Consent of Experts or Counsel                       HTML      7K 
 4: EX-23.3     Consent of Experts or Counsel                       HTML      7K 
 5: EX-23.4     Consent of Experts or Counsel                       HTML      7K 
 6: EX-99.5     Miscellaneous Exhibit                               HTML     21K 
 7: EX-99.6     Miscellaneous Exhibit                               HTML    112K 

Table of Contents

 

Registration Statement No. 333-173434

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

POST-EFFECTIVE AMENDMENT NO. 2

TO FORM S-4 ON FORM S-3

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

VENTAS, INC.

(Exact name of registrant as specified in its charter)

 

 

111 S. Wacker Drive, Suite 4800

Chicago, Illinois  60606

(877) 483-6827

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

T. Richard Riney, Esq.

General Counsel

Ventas, Inc.

10350 Ormsby Park Place, Suite 300

Louisville, Kentucky  40223

(502) 357-9000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Robin Panovka, Esq.
Trevor S. Norwitz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019
(212) 403-1000

 

Approximate date of commencement of proposed sale to the public:  From time to time after the effective date of this registration statement.

 

If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:  x

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  x

 

If this form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o

 

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

 

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registered		Amount to be registered (1)(2)		Proposed maximum offering price per share		Proposed maximum aggregate offering price		Amount of registration fee
Common Stock, par value $0.25 per share		2,103,086		(1)		(1)		(1)

 

(1)   This Post-Effective Amendment No. 2 relates to the offer and sale, from time to time, of up to 2,103,086 shares of common stock, par value $0.25 per share, that may be issued by the Registrant upon redemption of Class A Partnership Units of NHP/PMB L.P., which shares were originally registered on the Registrant’s Registration Statement on Form S-4 (Registration No. 333-173434), as amended (the “Registration Statement”), initially filed with the Securities and Exchange Commission on April 11, 2011.  The registration fee for these shares was previously paid in connection with the filing of the Registration Statement.

 

(2)   Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, this Post-Effective Amendment No. 2 shall be deemed to cover an indeterminate number of additional shares of common stock that may become issuable as a result of stock splits, stock dividends or similar transactions pursuant to the provisions of the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., as amended.

 

 

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Explanatory Note

 

Ventas, Inc., a Delaware corporation (“Ventas”), hereby amends its Registration Statement on Form S-4, as amended (Registration No. 333-173434), by filing this Post-Effective Amendment No. 2 on Form S-3.

 

On July 1, 2011, pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger dated as of February 27, 2011, by and among the Company, Needles Acquisition LLC, a wholly owned subsidiary of the Company (“Merger Sub”), and Nationwide Health Properties, Inc., a Maryland corporation (“NHP”), NHP merged with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity with the name “Nationwide Health Properties, LLC.”  By virtue of the Merger, each outstanding share of NHP common stock, par value $0.10 per share (“NHP Common Stock”) (other than shares owned by any wholly owned subsidiary of NHP, the Company or any subsidiary of the Company, which shares were cancelled), was converted into the right to receive 0.7866 shares (the “Exchange Ratio”) of Company common stock, par value $0.25 per share (“Company Common Stock”).  In connection with the Merger, the Company assumed NHP’s rights and obligations under the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., as amended, including the right to issue shares of NHP Common Stock, in its sole discretion, upon redemption of Class A Partnership Units of NHP/PMB L.P. (subject to adjustment for the Exchange Ratio).

 

This Post-Effective Amendment No. 2 relates to the offer and sale, from time to time, of up to 2,103,086 shares of Company Common Stock that may be issued by the Company upon redemption of the Class A Partnership Units described above.

 

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TABLE OF CONTENTS

 

ABOUT VENTAS, INC.	1
RISK FACTORS	1
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS	2
USE OF PROCEEDS	4
REDEMPTION OF CLASS A UNITS IN EXCHANGE FOR COMMON STOCK	4
DESCRIPTION OF COMMON STOCK	6
DESCRIPTION OF CLASS A UNITS	6
COMPARISON OF CLASS A UNITS AND COMMON STOCK	16
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES	19
VALIDITY OF THE OFFERED SECURITIES	22
EXPERTS	22
WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION BY REFERENCE	22

 

You should read this prospectus and any accompanying prospectus supplement together with the additional information described under the heading “Where You Can Find More Information and Incorporation by Reference.”  You should rely only on the information incorporated by reference or provided in this prospectus or such prospectus supplement.  We have not authorized anyone to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not making an offer to sell or soliciting an offer to buy these securities in any jurisdiction where it is unlawful.  You should assume that the information in this prospectus or any accompanying prospectus supplement, as well as the information we file with the Securities and Exchange Commission (the “Commission”) and incorporated by reference in this prospectus, is accurate only as of the respective dates of the documents containing the information.

 

Statements contained or deemed to be incorporated by reference in this prospectus or any accompanying prospectus supplement as to the contents of any contract or other document are not necessarily complete, and in each instance we refer you to the copy of the contract or other document filed as an exhibit to a document incorporated or deemed to be incorporated by reference in this prospectus or such prospectus supplement, each such statement being qualified in all respects by such reference.

 

Unless the context otherwise requires, references in this prospectus to the following terms will have the meanings below:

 

·      the terms “we,” “us,” “our” or similar terms and “Ventas” refer to Ventas, Inc., a Delaware corporation, together with its subsidiaries;

 

·      the term “Atria” refers to, collectively, Atria Senior Living Group, Inc., a Delaware corporation, One Lantern Senior Living Inc, a Delaware corporation, and LSHP Coinvestment I Inc, a Delaware corporation;

 

·      the term “Lillibridge” refers to our wholly owned subsidiary, Lillibridge Healthcare Services, Inc., an Illinois corporation;

 

·      the term “Sunrise” refers to Sunrise Senior Living, Inc., a Delaware corporation, together with its subsidiaries; and

 

·      the term “NHP” refers to Nationwide Health Properties, LLC, a Delaware limited liability company (as successor to Nationwide Health Properties, Inc. a Maryland corporation), together with its subsidiaries.

 

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ABOUT VENTAS, INC.

 

We are a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada.  As of July 1, 2011, our portfolio consisted of 1,361 assets:  673 seniors housing communities, 399 skilled nursing facilities, 47 hospitals and 242 medical office buildings (“MOBs”) and other properties in 46 U.S. states, the District of Columbia and two Canadian provinces.  With the exception of our seniors housing communities that are managed by independent third parties, such as Sunrise, pursuant to long-term management agreements and certain of our MOBs, including those acquired in connection with our Lillibridge acquisition, we lease our properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses.  We also had real estate loan and other investments relating to seniors housing and healthcare companies as of July 1, 2011.

 

Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third-party managers.  Through our Lillibridge subsidiary, we also provide management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States.

 

We were incorporated in Kentucky in 1983, commenced operations in 1985 and reorganized as a Delaware corporation in 1987.  We operate through three reportable business segments:  triple-net leased properties, senior living operations and MOB operations.  For additional information, see our Consolidated Financial Statements and the related notes, including “Note 2—Accounting Policies,” included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).

 

Our business strategy is comprised of three principal objectives:  (1) generating consistent, reliable and growing cash flows; (2) maintaining a well-diversified portfolio; and (3) preserving our investment grade balance sheet and liquidity.

 

Our principal executive offices are located at 111 South Wacker Drive, Suite 4800, Chicago, Illinois, 60606, and our telephone number is (877) 483-6827.  We maintain a website on the Internet at http://www.ventasreit.com.  Information on our website is not incorporated by reference herein and our web address is included in this prospectus as an inactive textual reference only.

 

Recent Developments

 

On July 1, 2011, pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of February 27, 2011 (the “Merger Agreement”), by and among us, our wholly owned subsidiary Needles Acquisition LLC (“Merger Sub”), and NHP, NHP merged with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity with the name “Nationwide Health Properties, LLC.”  By virtue of the Merger, each outstanding share of NHP common stock, par value $0.10 per share (other than shares owned by any wholly owned subsidiary of NHP, us or any of our subsidiaries, which shares were cancelled), was converted into the right to receive 0.7866 shares (the “Exchange Ratio”) of our common stock, par value $0.25 per share.

 

RISK FACTORS

 

Before you invest in shares of our common stock, you should carefully consider the risks involved.  These risks include, but are not limited to:

 

·      the risks described below;

 

·      the risks described in our 2010 Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, which are incorporated by reference in this prospectus; and

 

·      any risks that may be described in other filings we make with the Commission.

 

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Risks Relating to Our Common Stock

 

If our stock price is volatile, purchasers of our common stock could incur substantial losses.

 

Although our common stock is listed on the New York Stock Exchange, such listing does not provide any assurance that an active public market for the common stock will be sustained.  We cannot predict the effect, if any, that future sales of our common stock or the availability of our common stock for sale will have on the prevailing market price of the common stock.  In addition, the stock market has experienced, and could experience in the future, price and volume fluctuations that are unrelated or disproportionate to the operating performance of companies.  These fluctuations, as well as general economic and market conditions, may adversely affect the market price of our common stock.

 

If there are sales of substantial amounts of our common stock in the future, the price of our common stock could decline.

 

As of July 1, 2011, immediately after giving effect to the transactions contemplated by the Merger Agreement, we had approximately 288 million shares of our common stock outstanding.  In connection with the acquisition of substantially all of Atria’s real estate assets, we entered into a Lockup Agreement, dated as of May 12, 2011 (the “Lockup Agreement”), which, among other things, limits certain stockholders’ ability to transfer 3,697,541 shares of our common stock until November 12, 2012.  Except for the 3,697,541 shares of our common stock that are subject to the Lockup Agreement and shares held by our affiliates, all of our outstanding shares of common stock are available for immediate sale.  Sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices of the common stock.

 

Additional issuances of equity securities by us would dilute the ownership of our existing stockholders.

 

We may issue additional equity securities in the future in connection with acquisitions or strategic transactions, to adjust our ratio of debt to equity, including through repayment of outstanding debt, to fund expansion of our operations or for other purposes.  We may issue shares of our common stock at prices or for consideration that is greater or less than the price at which the shares of common stock are being offered by this prospectus.  To the extent we issue additional equity securities, your percentage ownership of our common stock would be reduced.

 

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

·      The ability and willingness of our tenants, operators, borrowers, managers and other third parties to meet and/or perform their obligations under their respective contractual arrangements with us,

 

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including, in some cases, their obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

 

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

 

·      Our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions or investments, including the NHP transaction and those in different asset types and outside the United States;

 

·      The nature and extent of future competition;

 

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

 

·      Increases in our cost of borrowing as a result of changes in interest rates and other factors;

 

·      The ability of our operators and managers, as applicable, to deliver high quality services, to attract and retain qualified personnel and to attract residents and patients;

 

·      Changes in general economic conditions and/or economic conditions in the markets in which we may, from time to time, compete, and the effect of those changes on our revenues and our ability to access the capital markets or other sources of funds;

 

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

 

·      Our ability and willingness to maintain our qualification as a REIT due to economic, market, legal, tax or other considerations;

 

·      Final determination of our taxable net income for the year ended December 31, 2010 and for the year ending December 31, 2011;

 

·      The ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to reposition our properties on the same or better terms in the event such leases expire and are not renewed by our tenants or in the event we exercise our right to replace an existing tenant upon a default;

 

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

 

·      The movement of U.S. and Canadian exchange rates;

 

·      Year-over-year changes in the Consumer Price Index and the effect of those changes on the rent escalators in our leases, including the rent escalator for Master Lease 2 with Kindred Healthcare, Inc., and our earnings;

 

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

 

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

 

·      Risks associated with our MOB portfolio and operations, including our ability to successfully design, develop and manage MOBs, to accurately estimate our costs in fixed fee-for-service projects and to retain key personnel;

 

·      The ability of the hospitals on or near whose campuses our MOBs are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups;

 

·      Our ability to maintain or expand our relationships with our existing and future hospital and health system clients;

 

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

 

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

 

·      The impact of any financial, accounting, legal or regulatory issues or litigation that may affect us or our major tenants, operators, and managers.

 

We describe some of these risks and uncertainties in greater detail above under “Risk Factors” and in the risk factors that are incorporated or deemed to be incorporated by reference in this prospectus.

 

USE OF PROCEEDS

 

We will not receive any cash proceeds from the issuance of shares of our common stock in exchange for Class A Units tendered for redemption, or upon the subsequent sale of such shares of common stock by the recipients thereof.  The exchange of shares of our common stock for Class A Units will increase our equity ownership in the Partnership.

 

REDEMPTION OF CLASS A UNITS IN EXCHANGE FOR COMMON STOCK

 

Terms of the Exchange

 

Under the Partnership Agreement, each holder of Class A Units has the right, commencing on the first anniversary of the issuance of such Class A Units, to require the Partnership to redeem such Class A Units for cash within ten business days following written notice to the general partner of the Partnership.  Upon receipt of such notice, the general partner, in its sole and absolute discretion, may elect to assume the Partnership’s obligation with respect to the redemption and satisfy the redemption by paying the redemption price in cash, by delivering shares of our common stock, or by any combination thereof, in any case within ten business days following receipt of written notice by the holder.  For more information regarding the terms of redemption, see “Description of Class A Units — Redemption Rights.”  For a discussion of certain U.S. federal income tax consequences in connection with the redemption of Class A Units in exchange for shares of our common stock, see “Certain United States Federal Income Tax Consequences.”

 

Each holder of Class A Units tendered for redemption will continue to own all such Class A Units subject to redemption, and will be treated as a limited partner or assignee, as the case may be, with respect to all such Class A Units, until the earlier of (1) the date such holder receives shares of our common stock in exchange for the Class A Units and (2) ten business days following written notice to the general partner of the exercise of the redemption

 

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right.  Until a holder of Class A Units receives shares of our common stock in exchange for his or her Class A Units, the holder will have no rights as one of our stockholders with respect to the shares issuable under this prospectus.

 

Conditions to the Exchange

 

To effect a redemption, a holder of Class A Units must give the general partner of the Partnership written notice of redemption, along with (i) such information or certification as the general partner may reasonably require in connection with the ownership limitation and other restrictions in our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), that may apply to such holder’s acquisition of shares of our common stock and (ii) such written representations, legal opinions, investment letters, or other similar instruments reasonably necessary, in the general partner’s opinion, to comply with the Securities Act.  A redemption may be effected only if each of the following conditions is satisfied or waived:

 

·      the redemption is for at least 500 Class A Units or, if less than 500 Class A Units, all of the Class A Units held by the person effecting such redemption;

 

·      the person effecting such redemption has not effected any previous redemptions in the same fiscal quarter; and

 

·      any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired or been terminated.

 

We will not issue shares of our common stock in exchange for Class A Units if the exchange would cause the person effecting such redemption or any other person to violate the ownership limitations or any other provision set forth in our Charter.

 

Registration Agreement

 

The shares of our common stock offered by this prospectus are being registered in accordance with the terms of a registration rights agreement with the holders of the Class A Units.  However, we cannot assure you that any of the holders of Class A Units will redeem their units or that, upon any such redemption, we will elect to exchange some or all of the Class A Units for shares of our common stock rather than cash.  We will not receive any cash proceeds from any issuance of the shares of our common stock covered by this prospectus, or upon the subsequent sale of such shares of common stock by the recipients thereof.

 

We have agreed to pay the following expenses in connection with the registration of shares of our common stock that we may elect to issue upon redemption of Class A Units:

 

·      all registration, filing and listing fees;

 

·      fees and disbursements of our counsel and our independent public accountants;

 

·      fees and expenses for complying with federal and state securities or real estate syndication laws;

 

·      fees and expenses incurred in connection with the listing of the shares of our common stock on the New York Stock Exchange;

 

·      fees and expenses associated with any Financial Industry Regulatory Authority filing required to be made in connection with the registration statement relating to shares of our common stock issuable upon redemption of Class A Units;

 

·      fees and expenses of other persons reasonably necessary in connection with the registration of the shares of our common stock, including any experts, retained by us; and

 

·      printing, messenger, telephone, shipping and delivery expenses.

 

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General

 

The Partnership is a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act.  NHP/PMB GP LLC, a Delaware limited liability company and our wholly owned indirect subsidiary, is the sole general partner of the Partnership.  The term of the Partnership commenced on February 29, 2008, and will continue in perpetuity, unless the Partnership is dissolved sooner under the provisions of the Partnership Agreement or as otherwise provided by law.  Interests in the Partnership are represented as either Class A Units or Class B Partnership Units (“Class B Units”).  Class B Units are interests in the Partnership held by the general partner and the limited partners who are affiliated with the general partner, including our subsidiary, NHP Operating Partnership L.P., a Delaware limited partnership.  Class A Units are interests in the Partnership held by all other limited partners.  As of July 1, 2011, 2,383,838 Class A Units were issued and outstanding, and 4,922,485 Class B Units were issued and outstanding, all of which Class B Units were owned by our subsidiaries.

 

Purpose and Business

 

The Partnership was formed in connection with the entry of NHP into certain agreements with Pacific Medical Buildings LLC and its affiliates (collectively, the “Pacific Agreements”).  The sole purpose and nature of the business to be conducted by the Partnership is: (i) to acquire, own, manage, operate, repair, renovate, maintain, improve, expand, redevelop, finance, encumber, sell, lease, hold for appreciation, or otherwise dispose of, in accordance with the terms of the Partnership Agreement, the properties to be acquired pursuant to the Pacific Agreements and any other properties acquired by the Partnership, and to invest and ultimately distribute funds, including, without limitation, funds obtained from owning or otherwise operating properties and the proceeds from the sale or other disposition of properties, all in the manner permitted by the Partnership Agreement; (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or to own interests in any entity engaged in any of the foregoing, all in the manner permitted by the Partnership Agreement; and (iii) to do anything necessary or incidental to the foregoing.

 

Management by the General Partner

 

Authority of the General Partner.  Except as expressly provided in the Partnership Agreement, all management powers over the business and affairs of the Partnership are exclusively vested in the general partner.  No limited partner has any right to participate in or exercise control or management power over the business and affairs of the Partnership, and no limited partner has any right, power or authority to act for or on behalf of, or otherwise bind or obligate, the Partnership.  Except as expressly provided for in the Partnership Agreement or required by any non-waivable provisions of applicable law, no limited partner, in its capacity as a limited partner, has any right to vote on or consent to any matter, act, decision or document involving the Partnership and its business.  The general partner may not be removed by the limited partners with or without cause.

 

Restrictions on the General Partner’s Authority.  The general partner may not take any action in contravention of the Partnership Agreement.  The general partner also may not, without the prior consent or approval of limited partners holding a majority of the outstanding Class A Units held by all limited partners (the “Consent of Class A Limited Partners”), undertake, on behalf of the Partnership, any of the following actions or enter into any transaction that would have the effect of such transactions:

 

·                  subject to certain exceptions, amend, modify or terminate the Partnership Agreement other than to reflect the admission, substitution, termination or withdrawal of partners;

 

·                  make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of the Partnership;

 

·                  institute any proceeding for bankruptcy on behalf of the Partnership;

 

·                  subject to certain exceptions, admit into the Partnership any additional partners;

 

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·                  subject to certain exceptions, approve or acquiesce to the transfer of the Partnership interest of the general partner, or admit into the Partnership any additional or successor general partners;

 

·                  acquire any properties other than the properties to be acquired pursuant to the Pacific Agreements or any property acquired in a tax-free disposition of another property, and any assets or other properties that are related to or incidental to such properties; or

 

·                  incur any debt or transfer, sell, assign or otherwise dispose of any property, whether directly or indirectly, if, after giving effect to such incurrence or transfer, sale, assignment or other disposition certain financial ratios would not be satisfied.

 

Additional Limited Partners.  The general partner is authorized to admit additional limited partners to the Partnership from time to time, in accordance with and subject to the terms of the Partnership Agreement, on terms and conditions and for such capital contributions as may be established by the general partner in its reasonable discretion.  No person will be admitted as an additional limited partner without the consent of the general partner (which consent has been given to those persons to whom Class A Units may be issued pursuant to the Pacific Agreements) and the Consent of Class A Limited Partners, which consent may be given or withheld by each limited partner and the general partner in its sole and absolute discretion; provided, however, that the general partner may, without the Consent of Class A Limited Partners, admit one or more additional limited partners and issue Class A Units to such person (s) in connection with the closing of any transactions contemplated by the Pacific Agreements, or consummated in connection therewith.

 

Additional Partnership Units

 

Subject to the terms and conditions of the Partnership Agreement, the general partner is authorized to cause the Partnership from time to time to issue to the partners (including the general partner) or other persons (i) Class A Units or Class B Units, or (ii) additional Partnership units in one or more new classes or series, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including, rights, powers and duties senior to the holders of Class A Units, approved by the Consent of Class A Limited Partners.  No person, including, without limitation, any partner or assignee, has any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Partnership units.  Without the Consent of Class A Limited Partners, except in connection with a closing under the Pacific Agreements, no additional Partnership units may be issued to the general partner, or to an affiliate of the general partner, unless (x) such units are Class B Units, and (y) the additional units are issued for a fair economic consideration.

 

Distributions

 

Distributions of Available Cash.  On each date established by the general partner for distributions of Available Cash (as defined below), which date shall be the same as the date established by us for the payment of ordinary dividends to holders of our common stock, the general partner will cause the Partnership to distribute to the persons who were partners on the relevant record date an amount equal to the Available Cash, if any, generated by the Partnership during the calendar quarter that ended immediately prior to such record date, as follows: (i) first, to the holders of Class A Units in accordance with each such holder’s Preferred Return Per Unit (as defined below) with respect to all Class A Units held by such holder, less the aggregate amount of Available Cash previously distributed with respect to such holder’s Class A Units pursuant to this clause (i); and (ii) second, 1% to the holders of Class A Units and 99% to the holders of Class B Units, in each case, allocated among the holders of such Partnership units in accordance with the weighted average number of Partnership units held by them during the calendar quarter that ended immediately prior to the record date.

 

Distributions of Disposition Proceeds and Financing Proceeds.  In the event of either (i) a taxable disposition of any of the Partnership’s properties other than as part of a sale, transfer or other disposition of all or substantially all of the Partnership’s assets or a related series of transactions that, taken together, result in the sale or disposition of all or substantially all of the assets of the Partnership, or (ii) an incurrence of debt, the general partner will cause the Partnership to reinvest the proceeds therefrom (including loaning such proceeds to us or one of our affiliates at an interest rate that is the same as the interest rate then in effect under our then existing credit facility

 

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and on market terms), to the extent the general partner elects to do so and in the amount determined by the general partner to be appropriate, and to distribute the balance of such net proceeds (after deducting all costs and expenses of the Partnership in connection therewith) as follows: (x) first, to the holders of Class A Units in accordance with their relative Preferred Return Shortfalls (as defined below) until the Preferred Return Shortfall for each such holder is zero; (y) second, to the holders of Class B Units in accordance with their Preferred Return Shortfalls until the Preferred Return Shortfall for each such holder is zero; and (z) third, 1% to the holders of Class A Units and 99% to the holders of the Class B Units, in each case, in proportion to the number of Partnership units held by them.

 

Distributions in Kind.  No partner has any right to demand or receive property other than cash.  The general partner may determine, with the Consent of Class A Limited Partners, to make a distribution in kind of Partnership assets to the holders of Partnership units.

 

Allocations of Net Income and Net Loss

 

Net income and net loss of the Partnership will be determined and allocated with respect to each taxable year or other period of the Partnership as of the end of such year or period.  Net income for a particular period will be allocated as follows: (i) first, to holders of Class A Units and Class B Units in proportion to, and to the extent that, the amount of cumulative net loss previously allocated to such partners exceeds the cumulative amount of net income previously allocated to such partners pursuant to this clause (i); (ii) second, to the holders of Class A Units and Class B Units in an amount that will cause such allocation, together with the amount of all previous allocations of net income pursuant to this clause (ii) to be in proportion to, and to the extent of, cumulative distributions received by such partners of Available Cash and disposition and financing proceeds for the current and all prior taxable years; and (iii) third, (a) 100% to the holders of Class B Units to the extent such net income relates to or is generated by a taxable disposition of any property and (b) with respect to all other net income, 99% to the holders of Class B Units, and 1% to the holders of Class A Units, on a pari passu basis.  Net loss for a particular period will be allocated 99% to the holders of Class B Units and 1% to the holders of Class A Units, on a pari passu basis.

 

If a Liquidating Event (as defined below under “— Dissolution and Winding Up — Dissolution”) occurs in a Partnership taxable year, net income or net loss (or, if necessary, separate items of income, gain, loss and deduction) for such taxable year and any prior taxable years (to the extent permitted under the Internal Revenue Code of 1986, as amended (the “Code”)) will be allocated among the partners in such amounts as will cause, to the greatest extent possible, the distributions to the partners pursuant to the Partnership Agreement to be made in accordance with the following liquidating distribution priority:

 

·                  first, to the holders of Class A Units in accordance with their relative Preferred Return Shortfalls until the Preferred Return Shortfall for each such holder is zero;

 

·                  second, to the holders of Class A Units in an amount equal to the number of Class A Units held by such holders multiplied by the fair market value of a share of our common stock as of the applicable valuation date, multiplied by the Adjustment Factor (as defined below);

 

·                  third, to the holders of Class B Units in accordance with their relative Preferred Return Shortfalls until the Preferred Return Shortfall for each such holder is zero;

 

·                  fourth, to the holders of Class B Units in an amount equal to the number of Class B Units held by such holders multiplied by the fair market value of a share of our common stock as of the applicable valuation date, multiplied by the Adjustment Factor; and

 

·                  fifth, (i) 1% to the holders of Class A Units, and (ii) 99% to the holders of Class B Units, in each case, in proportion to the total number of Partnership units held by them.

 

Return of Capital

 

Except pursuant to the rights of redemption set forth in the Partnership Agreement, no limited partner will be entitled to the withdrawal or return of its capital contribution, except to the extent of distributions made pursuant

 

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to the Partnership Agreement or upon termination of the Partnership, as provided in the Partnership Agreement.  Except to the extent otherwise expressly provided in the Partnership Agreement, no limited partner or assignee will have priority over any other limited partner or assignee either as to the return of capital contributions or as to profits, losses or distributions.

 

Redemption Rights

 

At any time following the first anniversary of the issuance of a Class A Unit, the limited partner or its assignee holding such Class A Unit will have the right to require the Partnership to redeem the Class A Unit for the Cash Amount (as defined below), payable within ten business days following written notice to the general partner of the exercise of the redemption right.  Upon receipt of such notice, the general partner, in its sole and absolute discretion, may elect to assume the Partnership’s obligation with respect to the redemption and satisfy the redemption by paying the redemption price in cash equal to the Cash Amount,  by delivering a number of shares of our common stock equal to the REIT Shares Amount (as defined below), or by any combination thereof, in any case within ten business days following receipt of written notice by the holder.  As of July 1, 2011, the REIT Shares Amount was equal to 0.7866 shares of our common stock per Class A Unit.  No holder of any Class A Units may effect a redemption for less than 500 Class A Units or, if such holder holds less than 500 Class A Units, all of the Class A Units held by such holder.  Furthermore, each holder of Class A Units may effect a redemption only once in each fiscal quarter.

 

If (i) we engage in any merger, consolidation or other combination with another entity, a sale of all or substantially all of our assets or stock, or any conversion into another form of entity, and the shares of our common stock are converted into or exchanged for stock or other securities of another entity, or cash or other property, (ii) we fail to qualify as a REIT, or (iii) shares of our common stock cease to be listed on any national securities exchange (any event described in clauses (i), (ii) or (iii) being a “Fundamental Event”), then, from and after the occurrence of such Fundamental Event and, in the case of a Fundamental Event described in (ii) or (iii) above, only for so long as we fail to qualify as a REIT or the shares of our common stock cease to be listed on a national securities exchange, respectively:

 

·                  if the shares of our common stock are converted into, or exchanged for, only common equity securities of a REIT that are listed on a national securities exchange and cash paid in lieu of fractional shares, the Class A Units will thereafter become redeemable for such new REIT shares, or cash equal to their market value; and

 

·                  in all other cases:

 

·                  upon a subsequent redemption of a Class A Unit, the holder will be entitled to receive, for each Class A Unit, in lieu of the Cash Amount or the REIT Shares Amount, cash in an amount equal to (a) if we fail to qualify as a REIT, the fair market value of a share of our common stock as of the date of such failure, (b) if the shares of our common stock cease to be listed on any national securities exchange, the fair market value of a share of our common stock, or (c) in the case of any other Fundamental Event, the fair market value of the cash, securities or other property into which shares of our common stock were converted, or for which shares of our common stock were exchanged, in each case, subject to adjustment based on changes in the value of an index of publicly-traded health care REITs; and

 

·                  the Preferred Return Per Unit will be subsequently calculated with a cumulative increase occurring on the 10th day of each of February, May, August and November of each year in an amount equal to the regular quarterly cash dividend most recently paid by us prior to such Fundamental Event, subject to adjustment based on changes in the regular quarterly dividend paid by a group of publicly-traded health care REITs.

 

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Partnership Right to Call Class A Units

 

On and after the date on which the aggregate Class A Units outstanding represent less than 5% of all outstanding Partnership units, the Partnership will have the right, but not the obligation, from time to time and at any time, to redeem some or all of the outstanding Class A Units by treating the holder thereof as having exercised a redemption right for the amount of Class A Units specified by the general partner, in its sole and absolute discretion.  In addition, the Partnership has the right, but not the obligation, from time to time and at any time, to redeem all outstanding Class A Units by treating all holders thereof as having exercised their redemption rights for all of their Class A Units, provided that, in addition to the redemption price, the Partnership pays a make whole payment to the extent required by the Pacific Agreements.

 

Transfers and Withdrawals

 

Restrictions on Transfer.  The Partnership Agreement restricts the transferability of Class A Units.  Any transfer or purported transfer of an interest in the Partnership not made in accordance with the Partnership Agreement will be null and void ab initio.  Under the Partnership Agreement, subject to certain exceptions, a limited partner cannot transfer or pledge any portion of its Partnership interest or any of its economic rights as a limited partner without the prior written consent of the general partner, which may be withheld in the general partner’s sole discretion.  A limited partner or assignee may, subject to the provisions of the Partnership Agreement, but without first obtaining the consent of the general partner, transfer any portion of its Partnership interest or any of its economic rights as a limited partner:

 

·                  to a partner in such limited partner or assignee in liquidation of such partner’s interest in such limited partner or assignee;

 

·                  to an immediate family member;

 

·                  to a family planning trust, a corporation, general or limited partnership, limited liability company or other legal entity in which the limited partner or assignee (together with their immediate family members) has a 50% or greater economic interest; or

 

·                  to certain charitable organizations.

 

In addition, a limited partner may, subject to the provisions of the Partnership Agreement, but without first obtaining the consent of the general partner, pledge all or any portion of its Class A Units to a qualifying lending institution as collateral or security for a bona fide loan or other extension of credit and transfer such pledged Partnership interest to such lending institution in connection with the exercise of remedies under such loan or extension of credit.

 

No transfer or assignment of an interest in the Partnership may be made:

 

·                  to any person or entity who lacks the legal right, power or capacity to own a Partnership interest;

 

·                  if such transfer or assignment would require registration under the Securities Act or would otherwise violate any applicable laws or regulations;

 

·                  of any component portion of an interest in the Partnership, such as the capital account, or rights to distributions, separate and apart from all other components of an interest in the Partnership;

 

·                  if such transfer would adversely affect our ability to continue to qualify as a REIT or to comply with the requirements of the Code and Internal Revenue Service (“IRS”) regulations applicable to REITs or subject the general partner or us to additional taxes;

 

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·                  if such transfer would cause a termination of the Partnership for federal or state income tax purposes (except as a result of the redemption (or acquisition by the general partner) of all Class A Units held by all limited partners);

 

·                  if such transfer would cause the Partnership to cease to be classified as a Partnership for federal income tax purposes (except as a result of the redemption (or acquisition by the general partner) of all Class A Units held by all limited partners);

 

·                  if such transfer would cause the Partnership to become, with respect to any employee benefit plan subject to Title I the Employee Retirement Income Security Act (“ERISA”), a “party-in-interest” or a “disqualified person”;

 

·                  if such transfer would cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan;

 

·                  if such transfer requires the registration of such Partnership interest pursuant to any applicable federal or state securities laws;

 

·                  if such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code, or causes the Partnership to become a “publicly traded partnership,” unless certain conditions specified in the Partnership Agreement are satisfied; or

 

·                  if such transfer subjects the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended.

 

Substituted Limited Partners.  Except for a transferee permitted pursuant to the Partnership Agreement, no limited partner will have the right to substitute a transferee as a limited partner in its place.  Any transferee permitted pursuant to the Partnership Agreement will be admitted to the Partnership as a substituted limited partner.  In addition, the general partner will have the right to consent to the admission of any other transferee of the interest of a limited partner as a substituted limited partner, which consent may be given or withheld by the general partner in its sole and absolute discretion.  A transferee who has been admitted as a substituted limited partner in accordance with the Partnership Agreement will have all the rights and powers and be subject to all the restrictions and liabilities of a limited partner under the Partnership Agreement.

 

Assignees.  An assignee of a Partnership interest who is not admitted as a substitute limited partner will be entitled to all the rights of an assignee of a limited partnership interest under Delaware law, including the right to receive distributions from the Partnership and the share of net income, net losses, recapture income and any other items of gain, loss, deduction and credit of the Partnership attributable to the Partnership interest assigned to such assignee, the rights to transfer its interest in accordance with the Partnership Agreement, and the right of redemption provided in the Partnership Agreement, but will not be deemed to be a limited partner for any purpose under the Partnership Agreement, and will not be entitled to vote any Partnership units on any matter presented to the limited partners for a vote (such units will be deemed to have been voted on such matters in the same proportion as all other units held by limited partners are voted).

 

Withdrawals.  No limited partner may withdraw from the Partnership other than: (i) as a result of a permitted transfer of all of such limited partner’s Partnership units in accordance with the Partnership Agreement; (ii) as a result of a redemption of all of such limited partner’s Partnership units in accordance with the Partnership Agreement; or (iii) pursuant to any agreement consented to by the Partnership pursuant to which the limited partner’s interests in the Partnership are conveyed and the limited partner’s withdrawal is provided for.

 

Restrictions on the General Partner.  The general partner may not transfer any of its general partner interest or withdraw from the Partnership except for a withdrawal or transfer effected with the Consent of Class A Limited Partners, or a transfer of all of the general partner’s interest to an affiliate of ours so long as Merger Sub remains obligated pursuant to its guarantee obligations under the Partnership Agreement.

 

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Amendments of the Partnership Agreement

 

Amendments to the Partnership Agreement may be proposed by the general partner or by limited partners holding a majority of the outstanding Class A Units.

 

Generally, the Partnership Agreement may be amended, modified or terminated only with the approval of the general partner and the Consent of Class A Limited Partners.  However, the general partner has the power to amend the Partnership Agreement without obtaining the Consent of Class A Limited Partners to:

 

·                  add to the obligations of the general partner or surrender any right or power granted to the general partner for the benefit of the limited partners;

 

·                  reflect the admission, substitution, or withdrawal of partners or the termination of the Partnership in accordance with the terms of the Partnership Agreement;

 

·                  reflect a change of an inconsequential nature that does not adversely affect the limited partners in any material respect;

 

·                  cure any ambiguity, correct or supplement any provision in the Partnership Agreement not inconsistent with law or with other provisions of the Partnership Agreement, or make other changes concerning matters under the Partnership Agreement that will not otherwise be inconsistent with the Partnership Agreement or law;

 

·                  satisfy any requirements, conditions or guidelines of any federal or state agency or contained in any federal or state law;

 

·                  reflect changes that are reasonably necessary for us to maintain our status as a REIT;

 

·                  modify the manner in which capital accounts are computed to the extent set forth in the Partnership Agreement, the Code or IRS regulations; or

 

·                  issue additional Partnership units in accordance with the Partnership Agreement.

 

Amendments that would convert a limited partner’s interest into a general partner’s interest, adversely affect the limited liability of a limited partner, alter a partner’s right to receive any distributions or allocations of profits or losses (other than a change that is expressly permitted by the Partnership Agreement), or alter or modify the redemption rights described above must be approved by each limited partner that would be adversely affected by such amendment; provided that the unanimous consent of all the partners who are adversely affected is not required for any amendment that affects all partners holding the same class or series of Partnership units on a uniform or pro rata basis.

 

Tax Matters

 

The general partner is the tax matters partner of the Partnership.  As such, the general partner has authority to take certain actions on behalf of the Partnership with respect to tax matters and is responsible for the preparation and filing of Partnership tax returns.

 

Indemnification and Exculpation

 

To the extent permitted by applicable law, the Partnership Agreement provides that the Partnership will indemnify the general partner, its officers, directors, members, managers, employees, representatives and affiliates, and other persons the general partner may designate from and against losses and liabilities arising from claims, suits and proceedings relating to the operations of the Partnership.  Similarly, the Partnership Agreement provides that neither the general partner nor any of its partners, members, officers or directors shall be liable for damages to the Partnership for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or

 

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mistakes of fact or law, or any act or omissions if the general partner or such partner, member, officer or director acted in good faith.

 

Dissolution and Winding Up

 

Dissolution.  The Partnership will not be dissolved by the admission of substituted limited partners or additional limited partners or by the admission of a successor general partner in accordance with the terms of the Partnership Agreement.  The Partnership will dissolve, and its affairs will be wound up, only upon the first to occur of any of the following (each a “Liquidating Event”):

 

·                  other than an event of bankruptcy, the incapacity of the general partner or an event of withdrawal of the general partner unless, within 90 days after such incapacity or event of withdrawal, the remaining partners holding a majority in interest of the issued and outstanding Partnership units agree in writing to continue the business of the Partnership and to the appointment of a substitute general partner;

 

·                  entry of a decree of judicial dissolution of the Partnership under the provisions of Delaware law;

 

·                  any sale, transfer or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership; or

 

·                  a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the general partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the general partner, in each case, under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to the entry of such order or judgment, the remaining partners holding a majority in interest of the issued and outstanding Partnership units agree in writing to continue the business of the Partnership and to the appointment of a substitute general partner.

 

Winding Up.  Upon the occurrence of a Liquidating Event, the Partnership will continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and partners.  After the occurrence of a Liquidating Event, no partner will take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs.  The general partner or, in the event that there is no remaining general partner, any person elected by a majority in interest of the limited partners will be responsible for overseeing the winding up and dissolution of the Partnership and will take full account of the Partnership’s liabilities and property, and the Partnership property will be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom will be applied and distributed in the following order: (i) first, to the satisfaction of all of the Partnership’s debts and liabilities to creditors other than the partners and their affiliates (whether by payment or the making of reasonable provision for payment thereof); (ii) second, pari passu to the satisfaction of all of the Partnership’s debts and liabilities to the partners and their affiliates (whether by payment or the reasonable provision for payment thereof); and (iii) the balance, if any, to the general partner, the limited partners and their assignees in accordance with and in proportion to their positive capital account balances, after giving effect to all contributions, distributions and allocations for all periods.

 

Certain Defined Terms

 

“Adjustment Factor” means 0.7866, subject to adjustment, in certain cases, if: (i) we declare or pay a stock dividend on our outstanding common stock or make a distribution of common stock to all holders of our outstanding common stock; (ii) we split or subdivide our outstanding common stock; (iii) we effect a reverse stock split or otherwise combine our outstanding common stock into a smaller number of shares of common stock; (iv) we distribute any rights, options or warrants to all holders of our common stock to subscribe for or to purchase or to otherwise acquire shares of our common stock (or other securities or rights convertible into, exchangeable for or exercisable for our common stock) at a price per share less than the fair market value of a share of our common stock on the record date for such distribution; or (v) by dividend or otherwise, we distribute to all holders of our

 

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common stock evidences of our indebtedness or assets (including securities, but excluding cash and excluding any dividend or distribution referred to in clause (i) above), other than evidences of indebtedness or assets we receive, directly or indirectly, pursuant to a distribution by the Partnership.

 

“Applicable Percentage” means a percentage specified in the Partnership Agreement that varies depending on the percentage of all outstanding Partnership units that are represented by Class A Units.  The Applicable Percentage ranges from 98.7% (if the Class A Units represent 57.5% or more of all Partnership units) to 89.6% (if Class A Units represent 12.4% or less of all Partnership units).

 

“Available Cash” means, with respect to any period for which such calculation is being made:

 

(a)           the sum, without duplication, of:

 

(i)                                     net income, if any, determined in accordance with generally accepted accounting principles;

 

(ii)                                  depreciation and all other non-cash charges deducted in determining net income or net loss for such period;

 

(iii)                               the amount of any reduction in the reserves or other cash or similar balances referred to in clause (b)(vi) below; and

 

(iv)                              all other cash received by the Partnership for such period that was not included in determining net income or net loss for such period;

 

(b)           less the sum, without duplication, of:

 

(i)                                     net loss, if any, determined in accordance with generally accepted accounting principles;

 

(ii)                                  all regularly scheduled principal debt payments made by the Partnership during such period (excluding balloon payments);

 

(iii)                               capital expenditures made by the Partnership during such period for maintenance, repairs and tenant improvements but not for development or expansion;

 

(iv)                              all other expenditures and payments not deducted in determining net income or net loss for such period (excluding balloon payments on indebtedness and capital expenditures for development or expansion);

 

(v)                                 any amount included in determining net income or net loss for such period that does not correspond to a cash amount actually received by the Partnership during such period; and

 

(vi)                              the amount of any reserves or other cash or similar balances (including, but not limited to, working capital reserves, debt reserve funds, and capital improvements reserves) established during such period (or if previously established, the amount of any increase therein), which the general partner determines in good faith to be necessary or appropriate for a legitimate business purpose of the Partnership, and not for the purpose of depriving limited partners of distributions of Available Cash.

 

Notwithstanding the foregoing, “Available Cash” does not include (i) any cash received or reductions in reserves, or take into account any disbursements made, or reserves established, after dissolution and the commencement of the liquidation and winding up of the Partnership, (ii) any capital contributions, whenever received, (iii) any proceeds from the disposition of a property or (iv) any proceeds from a financing.

 

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CLASS A UNITS		COMMON STOCK
redemption price in cash equal to the Cash Amount, by delivering a number of shares of our common stock equal to the REIT Shares Amount, or by any combination thereof. See “Description of Class A Units — Redemption Rights.”

 

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

 

The following general discussion sets forth certain U.S. federal income tax consequences to a holder of Class A Units that exercises its option to have all or a portion of its Class A Units redeemed.  This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to income tax nor does it address tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.  This discussion is based upon the Code, the regulations promulgated under the Code (which we refer to as Treasury regulations) and court and administrative rulings and decisions, all as in effect on the date hereof.  These laws may change, possibly retroactively, and any change could affect the accuracy of the statements and conclusions set forth in this discussion.

 

This discussion addresses only those holders that hold their Class A Units as a capital asset under Section 1221 of the Code (generally, property held for investment).  Furthermore, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or that may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:

 

·                  a financial institution;

 

·                  a tax-exempt organization;

 

·                  an S corporation or other pass-through entity (or an investor in an S corporation or other

 

·                  pass-through entity);

 

·                  an insurance company;

 

·                  a mutual fund;

 

·                  a dealer or broker in stocks and securities, or currencies;

 

·                  a trader in securities that elects mark-to-market treatment;

 

·                  a person that is subject to the alternative minimum tax provisions of the Code;

 

·                  a person that is not a U.S. holder (as defined below);

 

·                  a person that has a functional currency other than the U.S. dollar;

 

·                  a holder of Class A Units that holds the Class A Units as part of a hedge, straddle, constructive sale, conversion or other integrated transaction; or

 

·                  a United States expatriate.

 

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Determining the actual federal income tax consequences to you may be complex.  They will depend on your specific situation.  You should consult with your tax advisor as to the tax consequences of an exchange or redemption of Class A Units in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.

 

For purposes of this discussion, the term ‘‘U.S. holder’’ means a beneficial owner of Class A Units that is for U.S. federal income tax purposes (i) an individual citizen or resident of the United States, (ii) a corporation, or entity treated as a corporation, organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes or (iv) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.  A “non-U.S. holder” means a beneficial owner of Class A Units that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes.

 

The U.S. federal income tax consequences to a partner in an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes and that holds Class A Units generally will depend on the status of the partner and the activities of the partnership.  Partners in a partnership holding Class A Units should consult their tax advisors.

 

Exchange or Redemption of Class A Units

 

If we acquire a Class A Unit tendered for redemption in exchange for shares of common stock or cash, a tendering holder will recognize gain or loss in an amount equal to the difference between (i) the amount realized in the transaction (i.e., the sum of the cash and the fair market value of any shares of common stock plus the amount of the partnership liabilities allocable to such tendered Class A Unit at such time) and (ii) the holder’s tax basis in the Class A Unit disposed of, which tax basis will be adjusted for the Class A Unit’s allocable share of the Partnership’s income, gain or loss for the taxable year of disposition. The tax liability resulting from the gain recognized on the disposition of a tendered unit could exceed the amount of cash and the fair market value of any shares of common stock received in exchange therefor.

 

If the Partnership redeems a tendered Class A Unit for cash (which is not contributed by us to effect the redemption), the tax consequences generally would be the same as described in the preceding paragraph, except that if the Partnership redeems less than all of a holder’s Class A Units, the holder would recognize no taxable loss and would recognize taxable gain only to the extent that the cash, plus the amount of the Partnership liabilities allocable to the redeemed Class A Units, exceeded the holder’s adjusted tax basis in all of such holder’s Class A Units immediately before the redemption.

 

Disguised Sales.  Under the Code, a transfer of property by a partner to a partnership followed by a related transfer by the partnership of money or other property to the partner is treated as a disguised sale if (i) the second transfer would not have occurred but for the first transfer and (ii) the second transfer is not dependent on the entrepreneurial risks of the partnership’s operations. In a disguised sale, the partner is treated as if it sold the contributed property to the partnership as of the date the property was contributed to the partnership.  Transfers of money or other property between a partnership and a partner that are made within two years of each other, including redemptions of Class A Units made within two years of a holder’s contribution of property to the Partnership, must be reported to the IRS and are presumed to be a disguised sale unless the facts and circumstances clearly establish that the transfers do not constitute a sale.

 

A redemption of Class A Units by the Partnership within two years of the date of a holder’s contribution of property to the Partnership may be treated as a disguised sale.  If this treatment were to apply, such holder would be treated for U.S. federal income tax purposes as if, on the date of its contribution of property to the Partnership, the Partnership issued to it an obligation to pay it the redemption proceeds.  In that case, the holder may be required to recognize gain on the disguised sale in such earlier year.

 

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Character of Gain or Loss Recognized.  Generally, gain or loss recognized by a holder on the sale, exchange, or redemption of a Class A Unit will be taxable as capital gain or loss, and will be long-term gain or loss if, at the time of the sale, exchange, or redemption, the holder’s holding period in the Class A Units is more than one year.  Long-term capital gain realized by a non-corporate holder will generally be subject to a reduced rate of taxation.  Deductions for capital losses are subject to limitations.

 

However, to the extent that the amount realized upon the sale, exchange, or redemption of a Class A Unit attributable to a holder’s share of “unrealized receivables” of the Partnership exceeds the basis attributable to those assets, such excess will be treated as ordinary income.  Among other things, “unrealized receivables” include amounts attributable to previously claimed depreciation deductions on certain types of property.  In addition, the maximum U.S. federal income tax rate for net capital gains attributable to the sale of depreciable real property (which may be determined to include an interest in a partnership such as the Partnership) held for more than one year is currently 25% (rather than 15%) to the extent of previously claimed depreciation deductions that would not be treated as “unrealized receivables.”

 

Passive Activity Losses.  The passive activity loss rules of the Code limit the use of losses derived from passive activities, which generally include investments in limited partnership interests such as the Class A Units.  If the Partnership were characterized as a “publicly traded partnership” that is taxed as a partnership and not as a corporation, each holder would be required to treat any loss derived from the Partnership separately from any income or loss derived from any other publicly traded partnership, as well as from income or loss derived from other passive activities.  In such case, any net losses or credits attributable to the Partnership which are carried forward may only be offset against future income of the Partnership.  We believe and intend to take the position that the Partnership should not be classified as a publicly traded partnership.  However, we cannot assure you that the IRS will not assert that the Partnership is a publicly traded partnership, or that facts and circumstances will not develop which could cause the Partnership to become a publicly traded partnership.  The following discussion assumes that the Partnership will be classified and taxed as a partnership (and not as a publicly traded partnership) for U.S. federal income tax purposes.

 

If a holder tenders all or a portion of its Class A Units and recognizes a gain on the sale, exchange or redemption, it may be entitled to use its current and suspended passive activity losses (if any) from the Partnership and other passive sources to offset that gain.  If a holder tenders all or a portion of its Class A Units and recognizes a loss on such sale, it may be entitled to deduct that loss currently (subject to other applicable limitations) against the sum of its passive activity income from the Partnership for that year (if any) plus any passive activity income from other sources for that year.  In addition, if a holder tenders all of its Class A Units, the balance of any suspended losses from the Partnership that were not otherwise utilized against passive activity income as described in the two preceding sentences will no longer be suspended and will therefore be deductible (subject to any other applicable limitations) against any other income of such holder for that year, regardless of the character of that income.  You are urged to consult your tax advisor concerning whether, and the extent to which, you have available suspended passive activity losses from the Partnership or other investments that may be used to offset gain from the sale, exchange or redemption of your Class A Units tendered for redemption.

 

Foreign Unitholders.  Gain recognized by a non-U.S. holder on a sale, exchange or redemption of a Class A Unit tendered for redemption will be subject to U.S. federal income tax under the Foreign Investment in Real Property Tax Act of 1980 ( “FIRPTA”).  If you are a non-U.S. holder, we or the Partnership will be required, under the FIRPTA provisions of the Code, to deduct and withhold 10% of the amount realized by you on the disposition. The amount withheld would be creditable against your U.S. federal income tax liability and, if the amount withheld exceeds your actual tax liability, you could claim a refund from the IRS by filing a Federal income tax return.

 

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YOU ARE URGED TO CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES APPLICABLE TO YOU AS A RESULT OF A SALE, EXCHANGE OR REDEMPTION OF CLASS A UNITS TENDERED FOR REDEMPTION.

 

VALIDITY OF THE OFFERED SECURITIES

 

The validity of the shares of our common stock to be offered by this prospectus has been passed upon for us by Wachtell, Lipton, Rosen & Katz.

 

EXPERTS

 

Our consolidated financial statements appearing in our Annual Report (Form 10-K) for the year ended December 31, 2010 (including the financial statement schedule appearing therein), and the effectiveness of our internal control over financial reporting as of December 31, 2010 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference.  Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

 

The consolidated financial statements of Atria Senior Living Group, Inc. and subsidiaries and One Lantern Senior Living Inc and subsidiaries as of and for the years ended December 31, 2010 and 2009, incorporated herein by reference to our Current Report on Form 8-K, filed on April 11, 2011, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are incorporated herein by reference.  Such financial statements have been incorporated by reference herein in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

The consolidated financial statements of NHP appearing in our Current Report on Form 8-K filed on April 11, 2011 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference.  Such consolidated financial statements are incorporated herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION BY REFERENCE

 

We file annual, quarterly and current reports, proxy statements and other information with the Commission.  You may read and copy the reports, proxy statements and other information that we file with the Commission at the public reference room maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549.  Please call the Commission at 1-800-SEC-0330 for further information about the Commission’s public reference room, including copy charges.  In addition, the Commission maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding us.  Our common stock is traded on the New York Stock Exchange under the symbol “VTR.”  Reports and information that we file with the Commission can be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.  Information about us is also available on our website at http://www.ventasreit.com.  Information on our website is not incorporated by reference herein and our web address is included in this prospectus as an inactive textual reference only.

 

We are incorporating by reference in this prospectus the information we file with the Commission.  This means that we can disclose important information to you by referring you to those documents.  The information incorporated by reference is an important part of this prospectus, and information that we file later with the Commission will automatically update and supersede this information.  We are incorporating by reference the documents listed below and any future filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus until all of the shares of our common stock offered by this prospectus are sold:

 

·      our Annual Report on Form 10-K for the year ended December 31, 2010, as amended by our Annual Report on Form 10-K/A;

 

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·      our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011;

 

·      our Current Reports on Form 8-K filed on February 3, 2011, February 17, 2011 (however, we do not incorporate by reference any information under Item 2.02, Results of Operations and Financial Condition), February 28, 2011 (however, we do not incorporate by reference any information under Item 7.01, Regulation FD Disclosure), March 24, 2011, April 11, 2011, May 9, 2011, May 12, 2011, May 17, 2011, May 18, 2011, May 20, 2011, June 20, 2011, July 1, 2011, and July 11, 2011;

 

·      our Proxy Statement filed on March 28, 2011 for our 2011 Annual Meeting of Stockholders; and

 

·      the description of our common stock set forth in our Registration Statement on Form 8-A, filed with the Commission on January 23, 1992, as amended.

 

You may request a copy of these filings at no cost, by writing or telephoning us at the following address:

 

General Counsel
Ventas, Inc.
10350 Ormsby Park Place
Suite 300
Louisville, Kentucky  40223
(502) 357-9000

 

We have not authorized anyone to give any information or make any representation about our company that is different from, or in addition to, that contained in this document or in any of the materials that have been incorporated by reference into this document.  Therefore, if anyone gives you information of this sort, you should not rely on it.  If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you.  The information contained in this document speaks only as of the date of this document unless the information specifically indicates that another date applies.

 

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99.1		Form of Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., filed as Exhibit T to the Formation and Contribution Agreement and Joint Escrow Instructions dated as of February 25, 2008, by and among Nationwide Health Properties, Inc., Pacific Medical Buildings LLC (“PMB”), and certain of PMB’s affiliates (incorporated by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q of Nationwide Health Properties, Inc. (File No. 001-09028) for the quarter ended March 31, 2008).
99.2		First Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of May 12, 2008 (incorporated by reference to Exhibit 10.29(b) to the Annual Report on Form 10-K of Nationwide Health Properties, Inc. (File No. 001-09028) for the year ended December 31, 2008).
99.3		Second Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 9, 2009 (incorporated by reference to Exhibit 10.29(c) to the Annual Report on Form 10-K of Nationwide Health Properties, Inc. (File No. 001-09028) for the year ended December 31, 2008).
99.4		Third Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 1, 2010 (incorporated by reference to Exhibit 10.23(d) to the Annual Report on Form 10-K of Nationwide Health Properties, Inc. (File No. 001-09028) for the year ended December 31, 2010).
99.5**		Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of April 1, 2011.
99.6**		Memorandum of Understanding, dated as of April 15, 2011, amending the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P.

 

*  Previously filed.

 

** Filed herewith.

 

Item 17.  Undertakings

 

(a)                                  The undersigned Registrant hereby undertakes:

 

(1)                                  to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i)                                     to include any prospectus required by Section 10(a)(3) of the Securities Act;

 

(ii)                                  to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission (the “Commission”) pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii)                               to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

 

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provided, however, that the undertakings set forth in paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement;

 

(2)                                  that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

 

(3)                                  to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

 

(4)                                  that, for the purpose of determining liability under the Securities Act to any purchaser:

 

(i)                                     each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(ii)                                  each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus.  As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; and

 

(5)                                  that, for the purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(b)                                 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

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