Health Care REIT, Inc. (HCN)

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Health Care REIT Inc. (HCN)

Q3 2010 Earnings Call Transcript

November 4, 2010 10:00 am ET

Executives

Jeff Miller – EVP, Operations & General Counsel

George Chapman – Chairman, CEO & President

Scott Estes – EVP & CFO

John Thomas – EVP, Medical Facilities

Analysts

Rich Anderson – BMO Capital Markets

Dustin Pizzo – UBS

Jerry Doctrow – Stifel Nicolaus

Todd Stender – Wells Fargo Securities

Bob Mains – Morgan Keegan

Tayo Okusanya – Jefferies & Company

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2010 Health Care REIT Earnings Conference Call. My name is Tina, and I will be your conference operator today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. As a reminder, this conference is being recorded for replay purposes.

Now, I would like to turn the call over to Mr. Jeff Miller, Executive Vice President, Operations, and General Counsel. Please go ahead, sir.

Jeff Miller

Thank you, Tina. Good morning, everyone, and thanks for joining us today for Health Care REIT’s third quarter 2010 conference call. If you did not receive a copy of the news releases distributed late yesterday afternoon, you may access it via the company’s Web site at hcreit.com. I would like to remind everyone that we are holding a live webcast of today’s call, which may be accessed through the company’s Web site.

Certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although, Health Care REIT believes results projected in any forward-looking statements are based on reasonable assumptions, the company can give no assurance that its projected results will be attained. Factors and risks that could cause actual results to differ materially from those in the forward-looking statements are detailed in the news releases and from time to time in the company’s filings with the SEC.

I’d like to turn this call over to George Chapman, Chairman, CEO and President of Health Care REIT for his opening remarks. George?

George Chapman

Thank you, Jeff. Good morning. I can report this morning that our strategy and execution during the economic downturn has now taken us to a very important inflection point. We have the opportunity and ability to drive significant organic and external FFO and FAD growth. That in turn should provide an opportunity for accelerating dividend growth.

I would also point out to the group that our enterprise value now exceeds $10 billion which is quite an achievement for our company. As many of you know, we used the time during the last few years to reposition our portfolio, dispose of non-strategic facilities, and deepen current and develop new operator and health system relationships.

Specifically, we repositioned the portfolio to focus on combination facilities in senior housing, as well as newer, state-of-the-art medical facilities. And those two categories together should exceed 80% of our portfolio by year end.

Secondly, we disposed of facilities that we believed did not align with our target portfolio mix. Including standalone skilled nursing facilities, especially those with a significant Medicaid component, and for that matter other standalone senior housing projects. In total we disposed of $600 million of assets during the last three years, generating gains of over $200 million.

We also deepened relationships with existing operators and health systems and developed some very promising and productive new ones. We added 19 new senior housing operators and health systems to our portfolio.

And as most of you know, our commitment to relationship based investing is critical to our strategy, because historically 80% of our new investments have come from existing operators and systems. Thus by increasing the number of relationships, we are better positioned for future growth.

We also spent the past few years strengthening our team. We made multiple key hires to enhance our capabilities in all areas of the business. That process has continued into 2010.

We recently hired Stephanie Anderson formerly a Managing Director at GE Capital to complement our marketing and management team, and simultaneously elevated Mercedes Kerr to Senior Vice President to reflect her broader responsibilities.

During the last three years we have hired 74 new employees and we are clearly committed to continuous improvement of this company.

In order to fund our quality investments during this period, we raised $2 billion of capital in 2010 through the end of the third quarter. This allows us complete access to our $1.15 billion line of credit for future transactions. Our debt maturities have been extended from 4.4 years at the end of 2009 to 6.5 years today.

Health Care REIT has successfully differentiated itself from the competition. Through our relationship based strategy we have already invested $1.6 billion in 2010 in attractive properties with strong operators and systems.

Including the additional $500 million added to our investment guidance today, we are on track to meet or exceed a record $2.5 billion of investments for the year.

All of our investments are focused on our disciplined investment strategy. Moreover with our $5.5 billion shadow pipeline, we believe we should be able to drive future high quality investments through off-market opportunities.

You should note that 90% of our shadow pipeline are comprised of off-market opportunities. And we believe these off-market opportunities and investments provide more certainty and dramatically better returns than competitive bids situations.

We continue to have the sector leading coverages at the facility level, currently 2.1 to 1. At the end of the third quarter, our portfolio is more diversified than ever, a result of our full spectrum investment platform.

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