LETTER TO SHAREHOLDERS

“Good things may come to those who wait, but only the things left by those who hustle.”
– Abraham Lincoln

In 2010, HCP will celebrate its 25th anniversary as a publicly traded company. While the best days for your Company are undoubtedly still ahead, it is appropriate to reflect upon the milestones achieved by HCP, especially those accomplishments of the recently concluded decade. These successes are even more remarkable in the broader context of investor returns during this period:

In addition to the excellent performance HCP achieved in the past decade, the Company was the first healthcare REIT to be selected into the prestigious S&P 500 index, diversified its property and product platform by creating the Company's ”5 x 5“ business model, significantly reduced its exposure to state-based Medicaid reimbursement and ended the decade as the sixth largest U.S. REIT, in terms of equity market capitalization.

In spite of the ”Great Recession,“ HCP achieved a number of notable successes in 2009. These included 1) a strong 3.2% year-over-year increase in same property adjusted NOI from the Company's portfolio,¹ 2) capital raising activities that reduced the Company's leverage to its lowest level in five years, 3) the addition of highly acclaimed Executive Vice President — Chief Financial Officer Thomas M. Herzog to the Company's executive management team, and 4) the addition of a $720 million investment in the senior mortgage debt of healthcare leader HCR ManorCare, at an attractive, risk-adjusted return for HCP's shareholders. This year also brought a disappointing verdict in our litigation with Ventas. We are aggressively appealing this decision. While we believe HCP's total return to shareholders over the LAST decade was impressive, the far more significant graph for the Company is this one:

It will be THIS decade when we will finally realize the long-anticipated spike in demand for healthcare properties as aging baby boomers move into their ”Golden Years.“ A decade ago, we were essentially ”chasing“ the trend — today, we are positioned to ”catch“ the benefits of this demographic certainty. This has been made possible by the strategic portfolio repositioning that was completed during the latter half of the last decade. The benefits of our investment decisions are highlighted in the ten-year difference in these critical metrics for your Company:

HCP's 1) diversified operating platform, 2) balance sheet strength and liquidity, 3) existing partnerships with leading organizations, and 4) strength and depth of its management team and Board of Directors combine to ”perfectly position“ your Company to continue its record of out-performance in the period ahead.

Finally, we thank Robert R. Fanning, Jr., for his 25 years of dedicated service as a Director of HCP. We wish Bob all the best in the years to come.

James F. Flaherty III
Chairman and Chief Executive Officer
Long Beach, California
March 2010

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