Welltower Inc. (HCN)

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Health Care REIT (HCN)

Q2 2011 Earnings Call

August 04, 2011 10:00 am ET


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

Stephanie Anderson - Chief Acquisitions Officer of Senior Housing

Jeffrey Miller - Executive Vice President of Operations and General Counsel


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

Jana Galan - BofA Merrill Lynch

Karin Ford - KeyBanc Capital Markets Inc.

Omotayo Okusanya - Jefferies & Company, Inc.

Jason Ren - Morningstar Inc.

Robert Mains - Morgan Keegan & Company, Inc.

Philip Martin - Cantor Fitzgerald

Richard Anderson - BMO Capital Markets U.S.

James Milam - Sandler O'Neill + Partners, L.P.

Jeff Theiler - Green Street Advisors, Inc.

Ross Nussbaum - UBS Investment Bank

Michael Mueller - JP Morgan Chase & Co

Unknown Analyst -



Good morning, ladies and gentlemen, and welcome to the Second Quarter 2011 Health Care REIT Earnings Conference Call. My name is Tamika, and I will be your operator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. Now I would like to turn the conference over to Jeff Miller, Executive Vice President, Operations and General Counsel. Please go ahead, sir.

Jeffrey Miller

Thank you, Tamika. Good morning, everyone, and thank you for joining us today for Health Care REIT's Second Quarter 2011 Conference Call. If you did not receive a copy of the news release distributed this morning, you may access it via the company's website at hcreit.com. We are holding a live webcast of today's call, which may be accessed through the company's website as well.

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 presented 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 release 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 for his opening remarks. George?

George Chapman

Thanks very much, Jeff. The second quarter of 2011 continues to demonstrate that Health Care REIT's relationship investment strategy has created a growth vehicle with increasing momentum. Thus far in 2011, we have completed $4.2 billion of gross investments, and during this last quarter, we invested an unprecedented $2.8 billion in transactions, including the Genesis HealthCare and Capital Senior Living portfolios.

This period of significant investment volume has created a solid foundation for future embedded growth opportunities and importantly, meaningful earnings and dividend growth. The investment volume, coupled with portfolio of performance, has resulted in a 13% FFO and 10% FAD growth per share for the quarter and positions us well to generate 8% to 10% FFO and 68% FAD growth per share for the full year 2011.

Our business model embodies the relationship investing philosophy, and it clearly differentiates our company. Our history of long-term relationships with over 60 senior housing operators and nearly 50 health systems has established Health Care REIT as a partner of choice. The investment growth I just referenced is evidence of that.

Based upon the quality and diversification of these relationships, we are seeing a steady future flow of investment opportunities. In fact, even without the addition of any new partners, we anticipate a robust and reliable pipeline of investments at accretive rates of return, resulting in earnings and dividend growth for our shareholders.

We expect a sizable run rate, a regular run rate of approximately $1.5 billion of organic annual investments just from our existing relationships. This growth vehicle is a key industry differentiator for Health Care REIT.

The successful execution of our relationship investment strategy has resulted in a portfolio quality that is best in sector. Our portfolio includes operators and health systems that are highly regarded in the industry for strong financial performance and excellent clinical outcomes. We are not relying upon 1 or 2 quality operators, but have partnered with a number of best-in-industry players.

The physical quality of our assets is compelling. We have an industry-leading portfolio in terms of age, tenant diversification and geographic concentration. Our portfolio of quality, combined with our embedded growth, is generating excellent performance and earnings growth this quarter.

Our aggregate portfolio same-store NOI growth was 5%, and our RIDEA same-store NOI growth was 12.6% for the quarter. Our RIDEA investments are proving to be favorable additions to our portfolio diversification. They're in line with budget through the second quarter and remain on target to produce strong annual NOI growth over the long term.

The integration of our RIDEA investments is complete. Our relationship teams are in place. Data is smoothly flowing into our accounting systems. Our communications with our partners are robust, and our operating partners are working together to identify synergies and share best practices.

In May of this quarter, we convened our portfolio partners to develop a strategic plan for sharing best practices and developing collaborative strategies. Our partner CEOs and other executives, representing the industry's best senior housing operators and health systems, committed to convene regularly to discuss topics ranging from purchasing to information technology to marketing. This forum will enable them to evaluate and implement best practices, among the leading operators in the industry.

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