Welltower Inc. (HCN)

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Health Care REIT (HCN)

Q3 2011 Earnings Call

November 03, 2011 10:00 am ET


Stephanie Anderson - Chief Acquisitions Officer of Senior Housing

Jeffrey H. Miller - Executive Vice President of Operations and General Counsel

John T. Thomas - Executive Vice President of Medical Facilities

Scott A. Estes - Chief Financial Officer and Executive Vice President

Charles J. Herman - Chief Investment Officer and Executive Vice President

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


Bryan Sekino - Barclays Capital, Research Division

Derek Bower - UBS Investment Bank, Research Division

Ross T. Nussbaum - UBS Investment Bank, Research Division

Jana Galan - BofA Merrill Lynch, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Michael Odell - Medlife

Richard C. Anderson - BMO Capital Markets U.S.

Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division

Robert M. Mains - Morgan Keegan & Company, Inc., Research Division

Todd Stender - Wells Fargo Securities, LLC, Research Division

Nicholas Yulico - Macquarie Research

Karin A. Ford - KeyBanc Capital Markets Inc., Research Division

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

Jeff Theiler - Green Street Advisors, Inc., Research Division

Unknown Analyst -



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

Jeffrey H. Miller

Thank you, Brooke. Good morning, everyone, and thank you for joining us today for Health Care REIT's Third 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 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 release and from time to time in the company's filings with the SEC.

I would like to now turn the call over to George Chapman, Chairman, CEO and President of Health Care REIT, George?

George L. Chapman

Thank you, Jeff, and good morning. Health Care REIT's relationship investing strategy continues to produce strong financial results. In the third quarter, we generated year-over-year FFO and FAD per share growth of 13% and 7%, respectively. We have increased our 2011 FFO guidance and now expect growth of 10% to 11% this year. We believe that this earnings growth together with the acknowledged high quality of our portfolio have both contributed significantly to share-value creation.

The portfolio continued its strong performance generating same-store NOI growth this quarter of over 4% and our relationship investing strategy resulted in investments of $650 million in the third quarter and a record $4.8 billion year-to-date.

We continue to see a healthy pipeline of private-pay senior housing assets concentrated in global -- in coastal markets and larger MSAs, as well as MOB investments affiliated with leading health care systems. Nearly all of these investment opportunities are derived from our long-standing industry relationships.

The third quarter data released by the National Investment Center, NIC, last week affirms the positive trends and resiliency of our industry. The reports showed that industry fundamentals in senior housing occupancy and pricing are strong despite a volatile economic climate.

Overall, improvement was particularly notable in key metropolitan markets. Markets that represent a substantial part of our senior housing portfolio. These encouraging industry trends aligned with a overall positive performance of Health Care REIT's senior housing portfolio again this quarter.

The Health Care REIT sector generally has been a very steady performer during the current challenging macroeconomic conditions. Historically, Health Care REITs have produced stable growth and steady cash flows even in highly volatile markets. Current demographic trends, limited supply and favorable access to capital are contributing to a positive outlook for the industry. The consistency of cash flows, portfolio diversification and excellent liquidity are providing an opportunity for long-term value creation with less risk than other asset types, an appealing option for many investors.

Our company has demonstrated this consistent growth and value creation through its relationship network. We define our unique relationship investing strategy with the words relationships, results and returns. These words make an important point. Specifically, they connect the dots and explain how our company's relationships create meaningful portfolio results and, ultimately, generate shareholder returns.

Now I'll walk you through the success of this quarter using that strategy.

First, relationships. The nearly $650 million in gross investments we closed this quarter are reflective of that relationship investing strategy. The majority of investments for the third quarter are acquisitions, at an average yield of 7.3%, in primarily high-end, private-pay seniors housing and medical office building investments. These premier investments are the result of existing industry relationships and further strengthen our industry-leading portfolio. And I should add that, I believe this quarter's investment volume, in a particularly difficult overall environment, speaks to the consistency and predictability of the HCN relationship-based approach to investing.

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