Health Care REIT, Inc. (HCN)

HCN 
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Industry: Consumer Services
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Health Care REIT (HCN)

Q4 2010 Earnings Call

February 16, 2011 10:00 am ET

Executives

John Thomas - Executive Vice President of Medical Facilities

Scott Estes - Chief Financial Officer and Executive Vice President

George Chapman - Chairman, Chief Executive Officer, President, Member of Planning Committee, Member of Executive Committee and Member of Investment Committee

Charles Herman - Chief Investment Officer and Executive Vice President

Jeffrey Miller - Executive Vice President of Operations and General Counsel

Analysts

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

Jonathan Habermann - Goldman Sachs Group Inc.

Omotayo Okusanya - Jefferies & Company, Inc.

Robert Mains - Morgan Keegan & Company, Inc.

Richard Anderson - BMO Capital Markets U.S.

Ross Nussbaum - UBS Investment Bank

Michael Mueller - JP Morgan Chase & Co

Presentation

Operator

Good morning, ladies and gentlemen and welcome to the Fourth Quarter 2010 Health Care REIT Earnings Conference Call. My name is Christie and I'll be your operator today. [Operator Instructions] Now, I would like to turn the call over to Jeff Miller, Executive Vice President, Operations and General Counsel. Please go ahead, sir.

Jeffrey Miller

Thank you, Christie. Good morning, everyone and thank you for joining us today for Health Care REIT's fourth quarter 2010 conference call. If you did not receive a copy of the news release that was distributed last evening and this morning, you may access them via the company's website at www.hcreit.com. We are also holding a live webcast of today's call, which may be accessed through the company's website.

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 will now turn the call over to George Chapman, Chairman, CEO and President of Health Care REIT. George?

George Chapman

Thanks very much, Jeff. Good morning. It is a particular pleasure to report to you today. In 2010, our well-positioned platform, driven by our relationship investment strategy, generated a record year of investments. It only seems appropriate that in our 40th year, we invested an unprecedented $3.2 billion with leading senior housing operators and health systems. And year-to-date, in 2011, we have announced an additional $1.3 billion of high-quality investments.

Relationships with best-in-class operators differentiate our company. This strategy has produced excellent portfolio results and in turn will drive strong and accelerated FFO and FAD growth for 2011 and into the future. Although we faced challenging economic conditions in the last several years, we remain steady and disciplined by preserving liquidity and completing all committed investments. During the same period, we focused on deepening existing relationships and developing new ones with senior housing operators and health systems. Our capabilities were strengthened by adding strategic, knowledgeable and experienced employees to our team. We also enhanced the full-service capabilities that make us a value-added partner. And as we've entered into RIDEA partnerships that will enhance our organic growth potential, we have added key personnel to help us in managing those relationships and adding value to the partnerships.

During the last 40 years, Health Care REIT has created a foundation of relationship and trust with senior housing operators and health systems. Year after year, a large percentage of our investments are with existing relationships. In 2010, over 90% of our investments were off-market, providing Health Care REIT and our partners an opportunity to negotiate win-win capital structures.

In our press release distributed yesterday, we announced four major investments with Benchmark Senior Living, Brandywine Senior Living, Senior Star Living and Silverado Senior living. These new investments included an expansion of our relationships with key portfolio companies, Senior Star and Silverado. We also formed new and important relationships with Brandywine and Benchmark, two highly regarded operators in the Northeast. The Senior Star, Silverado and Benchmark investments have joined Merrill Gardens as partnership structures formed under RIDEA. The Brandywine investment can be converted into a RIDEA structure after the first three years of the lease, subject to specified performance measures. All of these partnerships offer potential future external growth, with the right of first refusal on future investments. It is also important to note that all of these partnerships offer internal growth opportunity through occupancy, particularly the Silverado and Senior Star portfolios, with properties currently in lease up. In aggregate, the occupancy of these four new partnerships is 86%, leaving significant room for upside. These best-in-industry partnerships result in a portfolio of extremely high quality of assets in high barrier to entry markets.

Additional information about these new structures and partnerships is included in our February 15 press release and on our website. The partnerships extend the company's strategy of capitalizing on favorable fundamentals in the senior housing industry by investing with innovative operators who have a track record of quality care, profitability and growth. The company anticipates earnings accretion in the short run and growth in the long run. We are quite enthusiastic about these investments and relationships and look forward to being a value-added partner.

During this period of new partnership development, we also continue to grow existing relationships with our highly valued, long-standing operator partners, including Emeritus, Brookdale, Capital Senior Living, Life Care Centers of America and a numerous and notable regional operator partners. In fact, we now have 63 senior housing and care operators in our portfolio, a reliable and high-quality platform for investment and FFO growth.

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