Download - Ventas (VTR) Earnings Report: Q2 2015 Conference Call ...s.t.st/media/xtranscript/2015/Q3/13231476.pdf · this presentation and its most directly comparable GAAP measure, as well

CompanyName:VentasIncCompanyTicker:VT RSector:FinancialIndustry:RealEstate

EventDescription:Q22015EarningsCallMarketCapasofEventDate:21.16BPriceasofEventDate:63.6

©2014TheStreet,Inc.Al l R ightsReserved Page1of22

Ventas(VTR)EarningsReport:Q22015ConferenceCallTranscriptThefollowingVentasconferencecalltookplaceonJuly24,2015,10:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LoriWittman;Ventas;SVP-CapitalMarkets&IRDebraCafaro;Ventas;Chairman,CEORaymondLewis;Ventas;PresidentRobertProbst;Ventas;EVP,CFOToddLillibridge;Ventas;EVP-MedicalPropertyOperations

OtherPart icipants

NickYulico;UBS;AnalystSmedesRose;Citigroup;AnalystJordanSadler;KeyBancCapitalMarkets;AnalystKevinTyler;GreenStreetAdvisors;AnalystJohnKim;BMOCapital;AnalystToddLukasik;Morningstar;AnalystVincentChao;DeutscheBank;AnalystToddStender;WellsFargo;AnalystJuanSanabria;BankofAmerica;AnalystDerekBower;;AnalystRichAnderson;MizuhoSecurities;AnalystDanielBernstein;Stifel;AnalystMichaelCarroll;RBCCapitalMarkets;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Goodday,ladiesandgentlemen,andwelcometothesecond-quarter2015Ventasearningsconferencecall.MynameisDerekandIwillbeyouroperatorfortoday.Atthistimeallparticipantsareinalisten-onlymode.Weshallfacilitateaquestionandanswersessionattheendoftheconference.(OperatorInstructions).

Asareminderthisconferenceisbeingrecordedforreplaypurposes.IwouldnowliketoturntheconferenceovertoMs.LoriWittman,SeniorVicePresidentforCapitalMarketsandInvestorRelations.Pleaseproceed.

LoriWittman (SVP-CapitalMarkets&IR):

Thankyou,Derek.GoodmorningandwelcometotheVentanasconferencecalltoreviewtheCompany'sannouncementtodayregardingitsresultsforthequarterendedJune30,2015.Aswestart,letmeexpressthatallprojectionsandpredictionsandcertainotherstatementstobemadeduringthisconferencecallmaybeconsideredforward-lookingstatementswithinthemeaningsofthefederalsecuritieslaws.Theseprojections,predictions,andstatementsarebasedonmanagement'scurrentbeliefsaswellasona




numberofassumptionsconcerningfutureevents.

Theforward-lookingstatementsaresubjecttomanyrisks,uncertainties,andcontingencies,andstockholdersandothersshouldrecognizethatactualresultsmaydiffermateriallyfromtheCompany'sexpectations,whetherexpressedorimplied.WereferyoutotheCompany'sreportsfiledwiththeSecuritiesandExchangeCommission,includingtheCompany'sannualreportonForm10-KfortheyearendedDecember31,2014,andtheCompany'sotherreportsfiledperiodicallywiththeSECforadiscussionoftheseforward-lookingstatementsandotherfactorsthatcouldaffecttheseforward-lookingstatements.ManyofthesefactorsarebeyondthecontroloftheCompanyanditsmanagement.TheinformationbeingprovidedtodayisasofthisdateonlyandVentasexpresslydisclaimsanyobligationtoreleasepubliclyanyupdatesorrevisionstoanyforward-lookingstatementstoreflectanychangesinexpectations.

Pleasenotethatthequantitativereconciliationsbetweeneachnon-GAAPfinancialmeasurecontainedinthispresentationanditsmostdirectlycomparableGAAPmeasure,aswellastheCompany'ssupplementaldisclosureschedule,areavailableintheinvestorrelationssectionofourwebsiteatwww.VentasREIT.com.Iwillnow,forthelasttime,turnthecallovertoDebraA.Cafaro,ChairmanandCEOoftheCompany.

DebraCafaro (Chairman,CEO):

Thanks,Laurie,andgoodmorningtoallofourshareholdersandotherparticipantsandwelcometoVentas'ssecond-quarterearningscall.ThismorningwearehappytoshareourstrongQ2results,discussourpendingstrategictransactions,anddescribehowweexpecttofinishtheyearstrongasahigher-quality,faster-growingcompany.ThenRayLewiswillprovidehislastupdateasourPresident,givingyouareportonourportfolioperformanceandasneakpeekatCareCapitalProperties.BobProbstwillfinishbydescribingourseniorhousingoperatingandfinancialresultsandouroutlookforthebalanceoftheyear.

Followingourremarks,wewillbehappytoansweryourquestions.Itisobviousthatwehadanincrediblyproductivequarter.Wedrovefinancialresults,acceleratedprogressonourspinoff,tookmeaningfulstepsforwardonourArdentacquisition,andexpandedourinternationalprofile,allatthesametime.Itisalwaysfuntostartwithstrongresults.InthesecondquarterwegeneratednormalizedFFOpershareof$1.18,representing5%growthcomparedtothesameperiodlastyear.Cashflowfromoperationsincreased20%andoursecond-quarterdividendpersharegrew9%,inlinewithourlongtrackrecordofsustainable,recurringdividendgrowth.

Wearealsopleasedtoreportthatwe'veachievedmajormilestonesinourpendingstrategicmovetospinoffmostofourskillednursingportfoliointoCCPandentertheUShospitalspace.Webelievetheseinnovativedecisionswilldeliversignificantbenefitsforourinvestors,lenders,customers,andemployees.StartingwithourspinoffofCCP,apure-playskillednursingREIT,wearepoisedtocompletethetransactioninthecomingmonths,subjecttoapplicableapprovals.

WerecentlyfiledouramendedForm10withtheSECandbelieveitisclosetofinal.CCPiswellunderwaywithitsdebtfinancingandallofourinternalplanningisontrack.WeexpectVentasandCCPtobetwofaster-growingcompanieswithfocused,differentiatedstrategies.CCPwillbeanexcitingexternalgrowthvehiclewithagreatmanagementteam,diverseportfolio,andstrongbalancesheet.Uponcompletionofthisspinoff,Ventaswillhaveanoutstandingportfolio.

SpecificallyourNOIcontributionfromprivatepayaccesswillimprovetoamarket-leading83%,thetop20operatorsineachsectorwillaccountfor83%ofourNOI,andourpost-acutequalitymixwillimprovemateriallytoabest-in-class78%.Wewillalsoretainsignificantscale,diversification,financialstrength,ahigh-qualityseniorhousingoperatingportfolio,andbest-in-classMOB,ormedicalofficebuilding,




franchise.WehavealsomadesignificantstridesduringthequartertowardcompletionofourpendingArdentinvestment.Mostimportantly,weselectedapartnerfortheArdentopco,EquityGroupInvestments,whowillbethemajorityownerofArdentgoingforward.

Wearedelightedwiththeoutcomeofourprocessandournewpartner,andwelookforwardtoworkingtogetherwithEGIandArdent'smanagementteamtogrowtogether.Weexpecttoachieveapproximatelya7.5%going-incashunleveredyieldonourrealestateinvestmentinthesehigh-qualityhospitalassets.Wecontinuetotargetathird-quarterclosingforthisimportanttransaction.

Afterclosing,Ardentwillremainatop10UShospitaloperatorwithastrongfinancialandoperatingprofile.BothweandEGIareattractedbythemassive,fragmented,andrapidlyconsolidatinghospitalsector.Hospitalsarecurrentlybenefitingfrommajorpositivetrendssuchasdemographics,policytailwindssuchasMedicaidexpansion,andanimprovingeconomy.TherecentSupremeCourtdecisioninKingv.Burwelltovalidatefederalexchangesandsubsidieswasjusttheicingonthecakeintermsofourinvestmentthesisandvaluation.

Allofthosetrendsaredrivinggrowthinadmissionsandemergencyroomvisits.Infact,accordedtonotedhospitalanalysts[H.A.Rice],Q2hospitalvolumeswerethebestinyearswithindustryinpatientadmissionsup1.2%,ERvisitsup3.1%,andinpatientsurgeriesthestrongestsince2011.Insum,withArdent'sexperienced,well-respectedmanagementteamandscalableplatform,EGI'sparticipation,andourcapitalweareconfidentwecanbuildaformidablebusinessintheUShospitalspace.

DuringthequarterwealsoexpandedourfootprintintheUKwithafollow-oninvestmentwithourexistingoperatingpartner,CanfordHealthcare.Ournewinvestmenttotaling$87millionisinfivecarehomesintheLondonmarket,whoseoperationshavebeenassumedbythequalityteamatCanford.WeworkedtogetherwithCanfordfollowingourinitialinvestmentwiththeminJanuarytoidentify,underwrite,andacquirethesenewly-constructedhomes,whicharesubjecttoalong-termtriple-netleaseyieldingnearly6.5%onaninitialcashafter-taxbasis.Thisisjustanothergreatexampleofhowweprovidecapitaltohelpourcustomersgrow.

Ourinvestmentmarketremainsveryvibrantandourpipelinerobust.Wecontinuetoseeopportunitiestoinvestacrossassetclassesandgeographies.Weintendtocontinuetogrowexternally.Aswethinkaboutourinvestments,wewillstaydisciplined.Wewillfocusonvaluecreation,growth,andqualityforourshareholdersandcustomers.Wewillcarefullyunderwriteriskandupside.Wewillbeactivewherewehaveacompetitiveadvantageandwewillretainourportfoliobalanceandastrongfinancialprofile.

OuractionsdemonstrateVentas'sleadershipandcleardirectionwithourthoughtfulandefficientspinoffthatshouldcreatevalueandpositionusforhigherinternalandexternalgrowth,withourentryintothe$1trillionnewhospitalsectorwithqualitypartnersinrealestateandexcellentrisk-adjustedreturns,withourexpansionintonewattractivemarketssuchastheUK,andwithouracceleratedportfolioenhancementandcapitalrecycling.AllofthismomentumreinforceshowbullishIamonVentas.Wehavetremendousopportunitytocapturevalueforourshareholdersaswedemonstratethesuperiorqualityofourportfolio,focusonsustainablecashflowanddividendgrowth,andprovidethoughtfulcapitalsolutionstoourrosteroftop-tiercustomers.Onthatnote,IwillturnthecallovertoRay.

RaymondLewis (President):

Thanks,Debbie.Ourdiversifiedandproductiveportfolioof952seniorshousing,post-acute,andhospitaltriple-netleaseassetsaccountsforabouthalfofourNOIanddeliveredanotherquarterofstrongandstableperformance.CashNOIgrowthinthetriple-netsame-storepoolwas1.6%inthesecondquarterof2015and3.2%year-to-dateversusthecomparable2014periods.Cashflowcoverageinoursame-storetriple-netleaseportfolioforthefirstquarterof2015,thelatestavailableinformation,wasstrongand




stableat1.6times.Eachofourseniorshousing,skillednursing,andhospitalportfoliosreportedstabletrailing12months'coverageat1.3times,1.8times,and2.2times,respectively.Thereimbursementenvironmentremainsstable.InthefirstquarterwetoldyouthatCMShasrecommendedincreasesof1.4%forskillednursing,1.2%forLTACsand1.7%for[ERFs].TheserecommendationsaretypicallyfinalizedinAugustandweexpectincreasesalongtheselinestobeimplementedinOctoberforthe2016fiscalyear.Soourhigh-qualitytriple-netportfoliocontinuestodeliverreliableperformance.

Next,letmeturntoourmarket-leadingLillibridgeMOBbusiness.Forthesecondquarter2015,NOIinthetotalconsolidatedportfolioof359propertieswas$93.2million,anincreaseof35.8%overthesecondquarterof2014.Performancewasdrivenbysolidsame-storeresultsandtheadditionof83propertiesinJanuary.Occupancyinthetotalconsolidatedportfoliowasup80basispointsto92.5%andmarginsincreasedbyanexceptional320basispoints,reflectingthequalityofthepropertiesweacquired.Ofthe83newly-acquiredMOBs,37arelong-termtriple-netleased,andoftheremaining46multitenantbuildings,wehaveinsourcedmanagementon37assetssofarandexpecttoinsourcedfivemorebyyear-end.Soweareexcitedabouttheopportunitytoimplementouroperationalbestpracticesinthesebuildingstodriverevenueandreduceoperatingcosts.Turningtosame-store,the274propertiesinthesame-storeportfoliodeliveredyear-over-yearcashflowgrowthof2.3%.

Thiswasdrivenbyanincreaseinrentalrateof2.1%andstrongexpensecontrolsoffsetbyaslightdecreaseinoccupancy.Sequentially,occupancyinthe275-propertysame-storepoolwasup20basispointssincethefirstquarter.Lookingbehindtherevenuenumbers,weareseeingencouragingtrendsinthebusiness.Ournewleaseshavelongerterms,higherbaserentalrates,andlowertenantimprovementcommitmentsthanduringthelastfewyears.

SotheMOBportfoliocontinuestodeliverstableandreliableperformanceandgrowth.BeforeturningthecallovertoBob,IwouldliketoprovideanupdateonthespinoffofmostofVentas'sskillednursingportfoliotoCareCapitalProperties.Asareminder,CCPisgoingtohaveadiversifiedportfolioof355primarilyskillednursingpropertieswithstrongcoverage,limitednear-termmaturities,andrelationshipswithover40operators.Wewilldeliverexternalgrowthbyinvestingwithqualityregionalandlocalskillednursingoperatorstoconsolidatethishighly-fragmented$120billionmarketandgrowinternallythroughleaseescalationsandredevelopment.

Ourbalancesheetwillbestrongandwewillhavelowleveragetofacilitateourexternalgrowth.Sincewespoketoyoulastquarter,wehavemadesignificantprogressonthespinoff.First,I'mextremelypleasedtoreportthatwe'veassembledourindependentBoardofDirectorswithagroupofsixhighly-respectedleadersinthefieldsofrealestate,finance,andhealthcare.Second,wehavemadesignificantprogresswithourbankfinancingandexpecttohave$1.4billionintermloansand$500millionofrevolvercapacityinplaceatthetimeofspinoff.

Third,progresswithbuildingouttheteamandinfrastructurehasbeenprogressingrapidlyandIwouldliketothankmycolleaguesatVentas,manyofwhomarepullingdoubleduty,foralloftheirhardworktomakethespinoffofCCPasuccess.Fourth,theCCPteamishittingthegroundrunningandbuildingapipelineofattractiveskillednursinginvestmentopportunities.Wehavehiredanexperiencedandwell-regardedindustryinvestmentprofessionaltohelpussourcenewinvestmentopportunitiesandweareactivelybiddingondealsinourstrategicfootprint.Finally,weareontracktocompletethespininAugustsubjecttoapplicableapprovals.Thenewleadershipteamislookingforwardtogettingontheroad,meetingwithinvestors,andsharingtheexcitingCCPstory.Withthat,I'mhappytoturnthecallovertoBob.

RobertProbst (EVP,CFO):

Thankyou,Ray.Iwouldliketostartbyreviewingoursecond-quarterperformanceforourshopportfolio,




followedbyadiscussionofouroverallVentasQ2financialresults.Intermsofshop,Ireallyenjoyedmeetingwithouroperators,touringourfantasticassets,anddiggingintothisgreatbusinessabitmoredeeplyoverthelastseveralmonths.AndI'mverypleasedtoreportacceleratedgrowthofthisportfoliointhesecondquarter.NOIinthe234propertiesinoursame-storeportfolioincreased4%inthesecondquarterof2015overthesecondquarterof2014.Thisperformancewasachieveddespitethelingeringeffectsinthesecondquarterofaseverefluseason.Second-quartersame-storeoccupancygrowthversusprioryearwassolidat50basispointsandoccupancyincreasedinboththeAtriaandSunriseportfolios.Year-over-yearrategrowthwasalsostrongat3.2%,drivenbytheAtriaportfolio.Expensesgrewinlinewithrevenueinthequarteraswageincreaseswerepartiallyoffsetbybenefitsavingsandprocurementinitiatives.Asaresult,same-storeshopNOImarginsof33.6%inthesecondquarterwerestableversusprioryear.

Onasequentialbasis,andconsistentwithseasonalpatterns,same-storeoccupancydeclinedinthesecondquarterversusthefirst.Sequentialsame-storeNOIwasup3.9%asseasonalcostsassociatedwithfluandharshweatherinQ1abatedinthesecondquarter.Aswelooktothebackhalfoftheyearforthesame-storeshopportfolio,weexpectoccupancytotrendhigherversussecond-quarterlevels.Wealsobelievethatcurrentratelevelswillholdandexpenseswillmoveinlinewithrevenue;therefore,overall,weexpectsame-storeshopNOIgrowthtoapproximateorexceed4%inthethirdandfourthquarters.Turningnowtothe305assetsinthetotalshopportfolio.

ThetotalshopportfoliogeneratedNOIaftermanagementfeesof$155millioninthesecondquarter,representinggrowthof24%year-over-year.Thisgrowthwasdrivenbythestrongsame-storeperformance,aswellastheacquisitionof66newpropertiessincethesecondquarterof2014.Occupancyinthetotalportfolioat91%was70basispointshigherinthesecondquarterof2015comparedtotheprioryear.OurtotalUSportfoliooccupancyinthetop99marketsat90.8%exceedstheaverageseniorhousingoccupancyreportedbyNICby80basispoints,whileourRevPORexceedsNICaveragesby65%inthosesamemarkets.

Lookingatthesupplydynamicsinthebroaderseniorhousinglandscape,Ventas'sconstructionasapercentageofinventoryinthethree-miletraderadiusaroundourbuildingswas3.2%inthesecondquarter,whichcomparesfavorablytothe4.5%asmeasuredbyNICinthetop99markets.IwouldliketonowturntotheCompany'sfinancials.Itisimportanttosayupfronthowpleasedwearewiththeresultsofthesecondquarterandthefirsthalfoftheyear,aswellasouroutlookforthefullyear.

Lookingatthesecondquarter,wedeliverednormalizedFFOof$394million,anincreaseof19%versusprioryear.Q2normalizedFFOperdilutedsharewas$1.18versus$1.12in2014,anincreaseof5%.ThesolidQ2growthover2014,whichwasaheadofourexpectations,isprimarilyduetothepositiveimpactofaccretiveacquisitions,same-storeportfolioNOIgrowthof2.4%ledbygrowthinourshopportfolio,andincomefromthesaleofhealthcarebonds.ThesolidFFOgrowthwaspartiallyoffsetbya13%increaseinsharecountinQ2versusprioryear.

Weightedaveragedilutedsharesoutstandingforthesecondquarterof2015increasedto334millionshares,comparedto296millioninQ22014.Onafully-dilutedsharebasis,NAREITFFOgrewbyastrong8%to$1.16perfully-dilutedshare,upfrom$1.07inthesecondquarterof2014.NormalizedFADforthequartertotaled$1.08perfully-dilutedshare,anincreaseof7%overlastyear.Ventasgenerated$374millioninoperatingcashflowinthesecondquarter,anincreaseof20%overQ22014.Onaper-sharebasis,operatingcashflowincreased7%.Thedividendforthequartertotaled$261million,or$0.79pershare,up9%versusprioryear.

Ourpayoutratioremainsstrongatapproximately67%andprovidesupsideforfuturedividendgrowth.Indeed,weexpecttoincreaseourcombineddividendfollowingthespinbyatleast10%.Lookingatliquidity,assetdispositionsandloanrepaymentsyear-to-datereached$591millionataGAAPyieldof




7%.,rightinlinewithourguidance.

Duringthesecondandthirdquartersof2015,Ventasalsoaccessedthedebtandequitycapitalmarkets.Weissuedandsoldatotalof1.6millionsharesofcommonstockforaggregateproceedsofapproximately$105millionunderourat-the-marketequityprogramatanaveragepricepershareof$64.30.Weraisedthismodestamountofequitytopartiallyfundpendingandclosedinvestments.InJuly2015,Ventasalsoissued$500millionof41/8%seniornotesdue2026.Thesenoteslengthenedourdebtduration,whichnowstandsataweightedaverageof6.8years.Moreover,theCompanycurrentlyhasapproximately$1.7billionavailableunderitsrevolvingcreditfacility,aswellas$410millionofcashonhand.

TheCompany'snetdebttoadjustedproformaEBITDAatJune30,2015,is5.6times.Currentdebttoenterprisevaluenowstandsat35%.Withthatletmenowturntoourupdatedguidanceforthefullyear2015.Asareminder,ourpreviousoutlookwastodeliver2015normalizedFFOpershareintherangeof$4.67to$4.75.WearepleasedtonowraiseandnarrowourguidancerangeofnormalizedFFOperfully-dilutedsharetobetween$4.70and$4.76,representing5%to6%growthoverprioryear.Thedriversofthisupdatedguidanceincludeabetter-than-expectedfirsthalfandaccretiveacquisitionsclosedinthequarter,partiallyoffsetbyalaterQ3Ardentclosingdatethanpreviouslyforecast.

Wecontinuetoprojectfull-yeartotalcompanysame-storecashNOIgrowthofbetween2.5%to3.5%in2015.Thiscomparestothe2.8%same-storeNOIgrowthpostedinthefirsthalfof2015.Inaddition,aswediscussedwithyouatNAREIT,weexpectourfull-yearshopgrowthtobeinthelowerendofour3%to5%guidancerange.Wehaveassumednofurtherunannouncedacquisitionsorspeculativefeeincomeinourguidance.

ThisguidancealsodoesnottakeintoconsiderationanyimpactfromthespinoffofCareCapitalProperties.Wewillformallyupdateguidanceoncethespinofftransactioniscompleted.However,toprovideanideaofthespinimpactonVentas,theresetofFFOarisingfromthespinofCCPforonefullquarterisgoingtobea$0.20to$0.22reductioninnormalizedFFOperfully-dilutedshareforVentas.Intermsofcapitalstructure,Ventasiscommittedtoastrongbalancesheet,financialflexibility,andtoatargetnetdebttoEBITDAratiointhe5to6timesrange.

Wehavemultipleclubsinourbagtoachievethisrangeovertime,includinganassetdispositionprogram,equityissuance,andofcourse,ourstrongcashflowgeneration.Sotosumup,onbehalfofmyVentascolleagues,Iwouldliketoexpresshowfiredupweareaboutourstrongresultsinthefirsthalfandourcommitmenttofinishing2015asasuperior,faster-growingcompany.Withthat,operator,pleaseopenthelineforquestions.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)NickYulico,UBS.

NickYulico (Analyst-UBS):

Goodmorning,everyone.Fortheskillednursingportfolios,there's--Iguessonethere'sthatclosedrecently;someoneelsepurchasedandthere'sseveralotheronesoutthere.Youdidn'tannounceanyacquisitions.Areyouguyshavetowaitprocedurally,youthink,forthespinofCareCapitalbeforeyouarewillingtobuyaskillednursingportfolioouttheretoday?


IwillturnthatovertoRayafterIjustsaythatweareabletopurchaseanyassets,andifwe--weareworkingonpipelineopportunitiesforCareCapital,becauseitisastrongexternalgrowthstory.





Nick,Debbieis100%right.Ithink,aswehavesaidinthepast,therearedifferentiatedstrategieswithrespecttoacquisitions.Wearegoingtotargettheregionalandlocaloperators,andwehavebeenworkingwiththeVentasteamtobuildapipelineofthoseopportunities,sowe'regoingtohitthegroundrunningwhenwespinoff.Butiftherewerelargenationaloperatoropportunitiesaswell,I'msureDebbieandherteamwouldbelookingatthoseopportunities,too.Weareproceedingfullsteamaheadandbucketingthetransactionsintheappropriatecategoriesforthego-forward.


ThenoneotherCareCapitalspinquestionisoriginallyIguessyouweretalkingaboutraisingdebtatCareCapitalanddividendingcashtoVentasatthesame--Iguessconcurrentwiththespinandyoudidabonddealrecently.Isthattheplannowoffthetable?Howshouldwethinkaboutthat?


Nick,thisisBob.Youareabsolutelyright;thereiscertainlyaplanforCCPtoraiseitsowndebtandthathasgoneverywell,aswediscussedinourpreparedremarks.AndthendistributethattoVentas.Wewillusethattoreducenear-termmaturities,increaseourdurationofourdebt,andreduceourdebtnet-net.Sothatisontrackandremainsunchanged.


Sorry,couldyouremindmewhatthedollaramountwouldbeforthat?


Wehad,Ithink,saidbeforesomethinginthe$1.3billionrange,butagainthisisgoingtobefinalizeduponcompletion.


Okay,gotit.Thenjustoneotherquestiononthequarter.Itlookslikeyourinvestmentincomewasalittlehigherthannormal.Ithinkyousaidaboutyougotsomeincomefromthesaleofsomehealthcarebonds.Couldyoujustquantifywhatthatimpactwasforthequarter?Thanks.


Sure.Wesoldabout$75millionworthofhealthcarefixedincomesecurities.Thiswaspartofourbroaderdispositionplanandindeedispartofournormalcourseofbusinessasweinvestinloansandobviouslysellthoseoffintime.Thatwouldcontributeabout$6millioninincomeinthequarter,sothat'swhatwediscussedinthepreparedremarks.


Thanks.

Operator :

SmedesRose,Citigroup.

SmedesRose (Analyst-Citigroup):

Goodmorning.Iwantedtoaskyoujustalittleontheseniorhousingoperatingportfolio.Itlookedlikeinyourtop20marketsthatthesequentialgrowthfromfirstquartertosecondquarterwasparticularly




stronginNewYorkandmadeupquiteabitoftheoverallincrease.Iwasjustwonderingifthereweresomesortof--ifsomethingisgoingontherewhereyousawbetterpricingpowerorsomesortof--onthemove-insideorsomethingthatwashappeningsequentiallyintheNewYorkmarketforyou.


Yes,Smedes;it'sBobhere.Ithinkyou'rerighttosayNewYorkcontinuestogenerategreatperformance.Wehaveanadvantagedpositioninthatmarket,particularlywithintheAtriaportfolioandwehaveseenoccupancygrowth,rategrowth.Andthatgeneratescontinuedpositivegrowthinthequartersequentiallyandyear-over-year.That'sthebiggestpieceofourbusiness.Asyouknow,it'sperformingverywell.


Okay.Debbie,justasyouarefurtherdowntheroadwithArdent,nowIknowyouhavesaidinthepastthatyouhopeVentaswillbecomealeaderinhospitalconsolidation.Doyouhaveasenseofmaybewhere--afteryouclosekindofwhereyouwouldliketoseethatportfolioinayear?Wouldyoubehappywith--ifyourinvestmentgoesfrom10to20hospitalsorfrom10to15?Howareyouthinkingaboutthescope,Iguess,ofthatopportunity?


Good.Well,aswehavetalkedabout,welovetheArdentinvestment.Weareexcitedtocloseit.AllthepiecesarefallinginplaceandwebelieveitwillbeaplatformforgrowthinthewaythatLillibridgeinmedicalofficeandAtriainseniorhousinghavebeen.Ithinkinhospitalsthereisthishugemarketandwewillhaveopportunities,anditwillbe6%ofourNOIwhenweclose.Icouldseethatgrowingovertimeto10%,12%,butwearefocusedonquality.Wewanttohavehospitalsthathaveleadingpositionsintheirmarketsandbeintherightmarketsandhavepricingpowerinsortofgrowingoperations.ThatiswhatArdentisandwewanttocontinuetogodownthatpath.Soweareveryexcitedaboutit,asyousay,andIdobelieveandhopethatwewillgrow.


Okay,thankyou.

Operator :

JordanSadler,KeyBancCapitalMarkets.

JordanSadler (Analyst-KeyBancCapitalMarkets):

Thankyou,goodmorning.Wantedtoseeifyoucouldmaybeshedalittlebitmorelightonwhatproformaleveragewouldlooklike.IthinktheresetnumberwashelpfulpostCCPspin.IthinkthatwasFFOgoingdown$0.20to$0.22quarterly.AndIwasjustcurious:what'ssortofassumedasitrelatestothecapitalstructureinthat$0.22?SoIguessproformaleverageandthentheassumptiontogettothe$0.20to$0.22onthecapstructure.


Jordan,it'sBobhere.Intermsofourleverage,Ventasproforma,postbothArdentandCCP,whatisinherentlyassumedisanetdebttoleverageslightlyabove6times.Thatis,inpart,whywereinforcedourcommitmenttothe5to6timesleverageinthetoolsinourtoolkittogetthere.Ithink,asInoted,intermsofthedividendfromordistributionfromCCPthatisgoingtobeanetreductionindebt,butobviouslythestrongbalancesheetthatCCPisgoingtohavetopursueitsacquisitionstrategyisgoingtonet-netbe




modestlyleveragingforus.Sothat'showweendupatthatslightlyabove6timesnumber.


Okay.Andthe$0.20to$0.22reflectsthatdividendfromCCP,essentially?


That'scorrect,yes.


Yes,itreflectsit--.


Andinterestexpensearisingfromthedebtreductionisincluded.


Okay,okay.Andthen,inthepressreleasethereis--youtalkaboutsortofthefundingofArdentcomingfromafewdifferentcomponents,includingobviouslyequity.Anythoughtssurrounding--andI'mnotaskingyouaboutthat.Justaroundassetsalesandwhatthescopeofthatmightlooklike;anyopportunitytopickasasourceoffundingaswell?


Youarerightonpointthere.Wehavealreadysold$600millionofassetsthisyearandBobtalkedaboutdifferentclubsinourbag.I'mnotagolfer,butIknowwhatthatmeansandthatmeanswehavealotofopportunitiestorecyclecapitalaspartofthis,asIspokeaboutportfolioenhancementsaswellandcapitalrecycling.Andsoweareveryconfidentinourposition.


Okay,thankyou.

Operator :

MichaelKnott,GreenStreetAdvisors.

KevinT yler (Analyst-GreenStreetAdvisors):

Goodmorning.It'sKevinTylerherewithMichael.Justnowthatyourcostofcapitaladvantageisvirtuallygone,yoursharesaretradingclosertoNAVasweseeit,howdoyouthinkaboutapproachingcapitalallocation?


Good.Firstofall,


Good.Firstofall,IamabsolutelyenthusiasticthatourcostofcapitaladvantageisgoingtoreturnandthatispartofthevaluecreationopportunitythatItalkedaboutandthequalityoftheportfoliothatwehave.SoIamexcitedaboutthat.AndasImentioned,wehavemanagedthiscompanyandgrownthrougheverypossiblecapitalmarketsreinforcementandeconomiccycle.WealwaysfindawayatVentastodelivervalueandresults.Wedoitagainandagainandagain,andsoIfeelgoodaboutour




ability,whetherit'sthroughcapitalrecyclingorotherways,tocontinuetogrowanddrivevalue.Ithinkaswe'vesaidaboutthehospitaldeals,wethinkweareskatingtowherethepuckisgoing.Wethinkit'sgreatrisk-adjustedreturn.Wearebuildinganewbusinessinanareawherewereallycanhaveanadvantageandweclearlycanbeprofitableforshareholders.SoIthinkwearetakingalltherightstepstopositiontheCompanyforcontinuedgrowth.


Thanks.JustshiftingtotheUKforasecond,canyoutalkaboutyourappetiteinthatmarketcurrently?Obviouslyseeingthe$90millionorsothatyouputtoworkthere.Butcanyoujustgiveussomecoloronthatopportunitysetandifyouhaveanyconcernssurroundingsomeofthestaffing,nursingshortagesthatwe'vereadabout?


Well,again,theUKmarketsharesalotofthecharacteristicsthatwetalkedaboutintermsofbeinganattractiveinternationalmarket,whichareobviouslydemographics,policysupportforhealthcareandseniors,veryhighandefficientcapitalmarketsenvironmentsothatyoucanmatchfundandeffectivelyhedgeyourcashflows.Andabigenoughmarket,addressablemarketforustomakeallthebraindamageworthit.AndsoweobviouslyhaveidentifiedtheUK.WehadourSpirehospitalinvestment,whichweareveryexcitedabout.Spirebeingthesecond-largesthospitaloperatorintheUK;publictradedwithoverGBP1billionequitycap.Andthat'sgoingwell.Nowwe'veidentifiedCanfordasapartnerthereinthecarehomesmarket.AsImentioned,wedidourfirstdealwiththeminJanuaryandnowdidafollow-ondealwiththemalreadytohelpthemgrowtheirbusiness.Welikethatmarket.Webelievewewillexpandthereovertime,butobviouslyit'sonacase-by-casebasis.Wehaveestablishedsomegoodfootprintsthereandwewillhopetogrowthose.


Okay,that'sallIhad.Thanks.

Operator :

JohnKim,BMOCapital.

JohnKim(Analyst-BMOCapital):

Follow-uponJordan'squestion.SofaryouhavementionedcapitalrecyclingasthesourceoffundingtheArdentacquisition,butthisyearyouhavebeenbasicallymatch-fundingacquisitionswithdispositions,excludingArdent.Soshouldwebeexpectinganaccelerationofassetsalesinthethirdquarter?


IntermsoffundingArdent,wehaveraised$0.5billioninbondsandwealsohaveafive-yearbankloan.AndasBobmentioned,weraised$100millioninequityduringandafterthequarterintermsofourATM.Sowe'vegotthatfundinginplace,butaswegoforwardagainwehavetalkedaboutamodestamountofadditionalassetsalesandsoonaspartofourcapitalrecyclingandportfolioenhancementsinitiative.


IthinkBobmentionedonpriorcallsthatthiswouldbealeverage-neutraltransaction.SoIjustwantedtoclarifyisthataday-oneleverageneutralorisitafteracertainperiod?





Goodquestion.


Thankyouforclarifying.Itwillnotbedayoneleverageneutral.Wethinkitisappropriatetobeabletoshowwithapermanentcapitalstructuretotalkaboutitthatway,butbasedonthefinancingasjustdescribedbyDebbie,itwillbeslightlyleveragingintheshortrun.Again,that'swhywecomebacktothediscussionaroundourtargetfromalong-termandshort-termcapitalstructureperspective.


Gotit,okay.Debbie,youmentionedequitygroupasanimportantpartnerforyouandyourplantogrowtogether.GiventheCompany'sillustriouspropertybackgrounds,doyouhaveanyideaorinclinationiftheyareattractedtohospitalsasarealestateplay?


Well,it'simportanttonotethatEGI,whichforthoseofyouwhodon'tknowistheprivateequityfirmfoundedandrunbySamZell.70%ofEGI'sinvestmentsareinnon-realestatebusinesses.Andtheyhaveanimpressiveandextensivetrackrecordofinvestingsuccessacrossawidevarietyofindustries,includingenergyandhealthcare.SotheyaretheequitysponsorofArdentOpCo,ourtenant,andofcoursewewillbepartnerstheninhelpingtheopcogrow,butwearetherealpropertypartner.WewillownalltherealestateattheclosingandpresumablyparticipateinowningadditionalrealestateasArdentidentifiesadditionalacquisitionopportunities.AndEGIwillbetheequitysponsorontheoperatingcompanyside.


Sowoulditsurpriseyouiftheygotinterestedinrealestateinthefutureorhavethoseconversationsnothappened?


Weareclearlythebestowneroftherealestateasapubliccompany,justlikeEQRisthebestownerofapartmentsontherealestateside.AndsoIthinktheinterestreallythereinArdentisinthetenantoperator.


Gotit,okay.ThenIhadaquestiononyourdispositiondisclosure,whichIknowisrelativelynewandIappreciatethat.ButtherehavebeensixassetsthatyousoldduringtheperiodthathadazerocaprateandIjustwantedtounderstandifthatmeanttherewasnooperatorattheseassetsorifthefacilitywasbasicallycashflownegative.


Notcashflownegative,justnotincomeproducing.


Sothere'sphysicaloccupancythere?


Itwasaninfinitereturn,butwedidn'thavethatlittlesideways8onourtypewriter.





Okay,thankyou.

Operator :

ToddLukasik,Morningstar.

T oddLukasik(Analyst-Morningstar):

Goodmorning.Iwasjustwonderingifyouguyscouldcommentanymoreonthetriple-netdealsdoneinOregonandtheUKontheseniorhousingside,specificallywithregardstothetermsoftheleasesandwhatthelengthsandanyrentescalatorsthatthetenantsmayhaveagreedtoonthose.


Willdo.


SotheUKwetalkedabout,whichwastheChurchgatefollow-onfromCanford,whichIthinkDebbiewalkedthrough,whichiswethinkthe(inaudible)arebetween2%and5%.Sothat'sthefollow-ondealwithCanford.AndthesmalldealwedidinOregonwaswithanexistingcustomer,Avamere,whichweaddedtotheirexistingmasterleasethatwehaveinplaceandthat--Iforgetthespecifics,butit'snorthof2%.


Andthelengthsarelongertermwithrenewals?


TheChurchgate,ascanbetypicalintheUK,islongerandtheAvamereoneI'mguessingisatleast10years.


Okay,thanks.ThendoyouguyshaveanyguidancewithregardstothedividendpayoutratiosforCCPandVentaspostspin?


Ithink--again,goodquestion.Dividendgrowthisanimportantpartofourvaluepropositionand,again,wehave--areveryproudofourtrackrecordof9%dividendgrowthforthelast10years.Whatwehavesaidisonacombinedbasisafterthespinthatthecombineddividendwillgoupbyatleast10%.WesaidintheForm10forCCPthattheexpectationisthattherewillbe75%,76%ofFFOtargeted,normalizedFFOtargetedasthedividendpayoutratio.Bobmentionedourcurrentisabout67%andsothere'sroomforgrowththereandwehavehoveredinandaroundthat70%ish,plusorminus,overtimeatVentas.


Okay,great.Thanksfortakingmyquestions.

Operator :

VincentChao,DeutscheBank.




VincentChao (Analyst-DeutscheBank):

Goodmorning,everyone.Justwantedtoaskaquestionaboutsupplyhere.Itdoesn'tseemtohaveimpactedresultsintheshopportfolioherethisquarterandsoundslikeyoustillexpect4%growthinquartersthreeandfour.Butjustcuriousifyoucouldjustmaybeprovidesomequalitativecoloronwhatyouareseeingonthesupplyside.Itdoesseemlikethatwentupquiteabitversuslastquarter.


ThisisDebbie.I'mgoingtoaskBobtocommentingreaterdetail,butIthinktheimportantthingtoleadoffwithisalsothatthedemandsideisgrowing.Andthedemandsideisgrowinginexorablythroughdemographicsandthefactthattheover85populationisthefastest-growingpartoftheUSpopulation.AndwithinthatthatAlzheimer's,unfortunately,anddementiacarearetwoofthegrowingsubsegmentsofthecarethatweprovide.AndsoIthinkit'sveryimportanttothinkaboutthedemandsideandbalancethatasyoulookatthesupplyside.AndIwilljustturnitovertoBobtotalkaboutthesupplyquestion.


Wementionedinthepreparedremarksthatourinventoryconstructionpercentageisabout3.2%;thatcomparesfavorablytoNIC.IthinkthatreflectstheadvantagedpositionwehaveinplaceslikeNewYork,aswetalkedaboutearlier.IthinkthatreflectstheadvantagedpositionwehaveinplaceslikeNewYork,aswetalkedaboutearlier.Therehasbeenanuptickincertainmarketsforsure,asNIChastalkedaboutandaswehaveobserved,butagainit'sspotty.Andwelikeourportfoliorelativetowhereweseethatgrowth,sonet-net,notonlydowefeelgoodaboutthegrowthinthesecondhalfasItalkedabout.Andaswethinkaboutthesupplydemandequation,howthatplaysoutovertimewecontinuetobebullishabouttheshopportfolio.


Okay.Justmaybeanotherquestiongoingbacktothetriple-netportfolio,the1.9%--1.6%same-storeNOIgrowth.Iknowthatdoesbouncearoundquartertoquarter,andinsomecasestheremightbesomefeesintherelikelastquarter.Butisthe1.6%--wasthereanythingdrivingitdowntheotherwaythistimeoristhatsortofanormalizedrunrateoutsideoffeeincomethatyoumightgeteveryonceinawhile?


Vince,thisisRay.Yes,you'rerighttopointoutthatfromanyonequartertoanotherwemayhavemoreorlessfeeincomeinthatportfolioand,asyoulookatitover12-monthperiod,ittypicallyaveragesout.Inthisquarterweactuallyhadatoughercomplastyearbecauseofsomefees,sothathadalittlebitofanimpactonthegrowthrate.But,again,ifyoulookityear-to-dateweareatthat3.2%range,whichisinlinewithwhatanexpectationforanormalizedratewouldbe.


Okay,thanksalot.

Operator :

ToddStender,WellsFargo.

T oddStender (Analyst-WellsFargo):

Goodmorning.Forthenewmultitenantmedicaloffice,thepropertiesacquiredintheHCTacquisition,canyougointosomeofthepotentialupsidethatyouarelookingat,particularlythegroupofassetsthatIthinkRaytalkedaboutthatyouplantointernalizepropertymanagementbyyear-end?





Ithinkwehavealreadyinternalizedpropertymanagementonmostofthem.And,[Todd],doyoujustwanttocommentonwhereyouaredrivingvalueoncewetakethingsoverfromthird-partymanagers?

T oddLillibridge (EVP-MedicalPropertyOperations):

Debbie,asRaypointedout,wehave--ofthe83,37ofthemareagainbasicallysingle-tenanttriple-netleasedassets.Buttheportfoliothatwehaveinsourcedtoday,namely37withtheremainingfive,wearebringingourobviouslyleveragedplatformtothoseassetsandputtinginplace,ifyouwould,notonlythosebestpracticesbutmanyofourcost-savinginitiatives,whichisobviouslygoingtoresultindrivingNOI,whileatthesametimeweseelease-upopportunitiesintheportfolioaswell.


HaveyouguysbifurcatedwhatthatpotentialNOIcontributioncouldlooklikeonapercentagebasis,justrelativetowhatthesame-storepoollookslike?


No.


Todd,whileIhaveyou,canyouspeaktothenewmedicalofficebuildingyouguysacquiredinIndianapolisjusttohearwhat--?Itlooksliketheexpectedcashyieldis6.3,butmaybewiththetrailingnumberwasandanyoccupancynumbers.


We'reexcitedaboutthemostrecentacquisitioninIndy.It'safollow-onreallytoalong-standing,almost12-yearrelationship,we'vehadwithAscension.OrthoIndyisaleadingorthopedicpracticeinIndianapolisandinplace--ithasbeen,Iwouldsay,inthiscurrentfacilityforaboutadozenyearsandwehavearemaining11-yeartermonthelease.Asyousaid,weareinitat6.3withescalators.WeseeitasagreatcontributiontoouroverallportfolioinIndy,whereourcurrentoccupancyinthatportfolioisaround94%,andwecontinuetogetgreatsame-storegrowthoutofthatportfolio.SogoodrelationshipwithnotonlyOrthoIndy,whoisalreadyinourbuilding,butAscensionoverall,whichasmanyofyouknowisaleadingCatholichealthsystemaroundthecountry.


Great,thankyou.

Operator :

JuanSanabria,BankofAmerica.

JuanSanabria(Analyst-BankofAmerica):

Goodmorning.IwasjusthopingyoucouldspeaktosomeofthelargeM&Awehaveseenintheinsurerspace,happeninCIGNAtoday,andanypotentialincreasednegotiatingleveragetheymayhaveonsomeoftheoperatorsthatcouldimpactprofitabilityinareaslikeMedicareAdvantage.Haveyouhadanyofthoseconversationsordoyouhaveanythoughtsyoucouldshare?





Great,veryinterestingquestion.Foralltherealestatepeopleonthecall,Iwouldjusttellyouhealthcareissoexcitingandwearesoluckytobeatthissortofcrossroadsofrealestateandhealthcare.Whetherit'sthemanaged-caremaniathatyouareseeingwithalotofconsolidationthere,verticalintegrationwithUnitedandCatamaranPBM;whetherit'sCVSbuyingOmnicare,whicharetwodifferentbusinesses;orhospitalconsolidationaswehavetalkedabout,itissuchadynamictimetobeinhealthcareandthat'spartofwhatisjustsoexciting.Intermsofthespecificquestionyouasked,andIwillgetoffmysoapbox,isthatwhenwetalkaboutwhatkindofhospitalswewanttoinvestin,wetalkaboutqualityandwetalkaboutwhyisArdentagreatportfolio.Inthatcase,itismoreofananalysisofdominantmarketspositions,whichiswhatArdenthas,inareasthathavegoodemploymentprofiles,gooddemographicprofiles,etc.Andso,becauseArdenthasthatdominantmarketposition,wefeelveryconfidentintheircontinuedabilitytodrivepricingandvolumes.


Withregardstomaybeskillednursing,IknowwehaveseensomeissueswithpressuresonandgrowingshareofMedicareAdvantage.Anythoughtsonthatwithwhatwe'veseenontheconsolidationend?


IwouldsaythatMedicareAdvantagecontinuestobeabiggerpartoftheskillednursingandpostacuteworldandthesuccessfuloperatorswillbetheoneswhoareabletomanageintowhatwillbeashorterlengthofstay.Butbyshowingthattheycandeliveroutcomesthatareattractivetomanaged-careprovidersand,therefore,increasethepipelineofpatientsthatcomefrommanagedMedicare,becausethosearestillveryattractivepatientsfortheproviders.


Butourstrategy,Juan,isreallytobackthoseoperatorsthatareconsolidatingintheirlocalmarkets.YouthinkaboutaKindredforinstance,wheretheyhavetargetedtheclustermarketsandtheyarebuildingouttheentirepostacutenetworkwithhomehealthcare,rehab,skillednursing,LTACs,andthatreallypositionstheseoperators,whethertheyareregionaloperatorsornationaloperators,inthosemarketstolineupwellwiththemanaged-careprovidersandprovideanentiresuiteofpost-acutesolutions.


Okay.Andjustoneotherquestionforme.There'sbeensomepressarticlesaboutyourpotentialinterestinapieceofGEHealthcareFinanceunit.Maybeyoucan'tspeaktothatspecifically,butifyouparticipateingettingloansinsomeform,wouldtheviewbetohavinganangletowardsoreventuallygettingahandontherealestate?Oristhismaybeanotheropportunitythatmaybeweshouldthinkaboutalittledifferently?


Firstofall,mymothertoldmenevertobelieveeverythingyoureadinthepaper,soIwillstartwiththat.Andwedohave--look,wedon'tcomment,obviously,ondealrumorsasamatterofpolicy.Wehaveaverysmallpartofourportfoliothatisaloanportfolio,asBobtalkedabout,andweusethatsparingly.WeareveryfocusedonbeinganequityREITandbuildingthekindofbusinessthatwehavehadconsistentwithourstrategyandreallyfocusedonthesevalue-creatingactivitieswithArdentandTCP.Andthatiswhereourfocusis.


Great,thankyou.




Operator :

[DerekBower](technicaldifficulty).

DerekBower (Analyst-):

Thanks,goodmorning.Ijusthadacouplefollow-ups.OnCCP,IbelieveintheForm10theproformaforCCPinthefirstquarterwas$0.72,whichisabout$0.18onVentas'ssharecount.Socouldyoureminduswhatthedifferenceisagainbetweenthat$0.18andthe$0.20to$0.22thatBobtalkedabout?IsthatjustG&Adyssynergies?

LoriWittman (SVP-CapitalMarkets&IR):

Partofwhatyouhavetorememberisit'stheproformaandsoyou'vegotadjustmentsbeingmade,forexample,that--youhavetheacquisitionsthatweremadeinthebeginningoftheyearandproforma-Ingthoseversesotherchangesthataremade.SoIdon'tknowthatthatisreallyagoodrunrate,butthereisaswelltheG&Asynergiesthatareinthere.


Derek,tofollowonthat,youhavethreetopics:youhavetheunderlyingNOI,youhavetheG&Aimplications,andthenthecapitalstructureimplications.AndthenumberIquotedyouIthinkisourbestviewoftherealproforma.


ImpactonVentas.


TheimpactonVentasveryspecifically,correct.Andthosethingsdon'talwaysfollowtheaccountingrules,soyou'regoingtohavesomedifferencesthere.


Okay,thathelps.Thanks.ThenjustgoingbacktotheCCPpipeline,Ray,canyoutalkabout,asyouguysarestartingtoworkthroughthedeals,whatcapratesyouareseeinginthemarketrightnow,whetheritbeforone-offassetsorifthere'sanythingdifferentbetweentheone-offandasmallportfolio?


Therealpropertymarketcontinuestobefirm.Peopleareattractedtoourassetsforthereliabilityandgrowthincashflowthattheyhaveprovided,theneed-basednatureoftheassets.AndsofromacapratestandpointIwouldsaycaprateshavestayedrelativelyconsistentwithwhatwehaveseeninthepastwherehigh-qualityseniorhousingandmedicalofficeisinthekindof5.5to6.AndeveninsomecasesaBportfoliocouldbeinthatrangeifithasotherattractivecharacteristics.Andintermsofskillednursingandpostacute,reallyit'sinthat6to9range,dependingonwhatitisandthecreditandstructureandsoon.


ButasitrelatestoCCPandtheskillednursingdeals,thatwouldbe,Iimagine,thehigherendofthatrange,so8%to9%.Isthattherangethatyouguysarethinkingaboutfornewdeals?





ItwilldefinitelybepositivearbitrageintermsofexternalgrowthopportunitiesforCCP.


Ithinkthat'sright,Debbie.Andso,yes,Ithinkyouareprobablytrendingtowardstheupperendofthatrange,that7.5%to9%.Theseareoperatorswheretheyhavefewercapitalalternativesandweareabletogetalittlebetterpricingpowerthere,sothatissortofwhatweareseeing.Itstillhassomereallynicepositivenetinvestmentspreadsandthatispartofthestrategicthesisandtheopportunitythatwearelookingtocapitalizeon.


Aretheseprimarilywithexistingornewtenants,ornewoperatorsthatyouarebiddingon?


Both.


Okay.Thenjustlastoneforme.OntheotherUSmarkets,[yourDaya]portfolio,canyoujustremindusagainwhat'sdrivingthedouble-digitEBITDAorNOIgrowththisquarterandlast?


Sure,it'sarelativelysmallportfolio.Yourightlypointoutthatithasperformedverywell.We'vegotsomegreatassetsinthatpoolandsome--forexample,anewdevelopmentfromusinCapeCodthatisdoingvery,verywell.Soyouhaveveryspecificsortofdriversthere,butoverallsomestrongassetsinthatpool.


Okay,gotit.Thanks,that'sallforme.

Operator :

RichAnderson,MizuhoSecurities.

RichAnderson (Analyst-MizuhoSecurities):

Thanks.IthoughtIwasearlyinthequeue;apologizeforkeepingyougoing.Doyouhaveanyidea,maybetoRay,whereyouthinkCCPwilltradefromanimpliedcapratestandpointcomingoutofthegate?


Whatagreatquestion.


Thankyou.


Thatisforthemarkettodecideandso--.





Yes,itis,ofcourse.Yes.


I'vegotmyroadshowcomingupandI'mgoingtodomybesttotellthestory.Andhopefullythemarketwillrecognizewhatagreatcompanywehave.


Yes,obviouslyit'smarketdriven,butIdidn'tknowifyouhadacollarthatyouwerethinkingaboutasyouprepareforyourroadshow.Iguesstheanswerisno.


We'regoingtodothebesttotellthegreatstorywehaveandwewillletthemarketvaluethat.


Okay.Oneofthedifferencesbetweenthisquarterandlastquarterintermsoflanguagewasinthe--andIknowwehavetalkedaboutalittlebitmoreleverageinArdent,buttherewasaleverage-neutrallanguageinthelastquarterasfarasthefundingandnowthathasbeenremoved.Isthatafunctionofyourstockbeingdown10%thisyearoristhatjustclarifyingthelanguagealittlebitbetterbasedonwhatyoujustsaidearlieraboutlong-termversusshort-termleverage?


It'sjustatimingissue.


Okay.Sonothinghaschangedbetweenthenandlastquarterandthisquarterintermsofhowyouarethinkingaboutfundingit?


Wecontinuetothinkaboutaccretion,forexample,onapermanent,leverage-neutralbasis.


Okay,fairenough.AndthenmaybeaquestionforTodd.Someofthemessaginghaschangedinmymindasitrelatestomedicaloffice,specificallyonversusaffiliatedoff.IthinkmoreandmoreI'mhearingpeoplesaynicerthingsaboutaffiliatedoff-campus.72%ofyourportfolioison-campus.I'mwonderingifyouthinkthatthatmightshowupalittlebitinyourstrategygoingforward.YourpureHCNlikesoff-campusbetterthanmanyothers;I'mwonderingwhereyoustandonthatissue.


Ithink,Rich,forthepast20-plusyearswehavealwaysbelievedthataffiliatedis,infact,thenumberoneandkeygoalinallthis,irrespectiveofwhetherit'sonoroff.Itjustsohappensthatwehavebuiltastrongportfoliowithstronggroupofproviders.Asyouknow,96%todayisonand/oraffiliated.Ithinkwhatisimportant,though,isthequalityofthosethatareaffiliated,becauseinfact,89%ofourportfolio,thosethatweareaffiliatedwith,areinvestmentgradeorbetterintermsofcredit.Soweputalotofstockinwhowepartnerwithbytheverynatureofthehospitalandtheiraffiliationwiththehealthsystem.Weareverycomfortablegoingoff-campus.TheHCTacquisitionwewereexcitedaboutbecausetheaffiliationthattheyhaveinthosehealthsystemsandveryleadingprovidersaroundthecountry,asyouknow.Againwhatiskeyintheoff-campusisnotonlythatitisaffiliatedbutitisofasizeandwhatwewouldsay




ofacomprehensivenatureintermsofclinicalservicesandqualitythatcandelivertothemarketplace.WehavewhatIthinkisagreatbalancebetween70onand30off,roughly,andIthinkwe'regoingtocontinuetoseesomethingofthatsamebalance.Obviouslythere'salotoftalkaboutoff-campus,butfreestandingandoffandnotaffiliatedoraffiliatedwiththewrongsystem,I'mnotsosurewhatyouhave.


Gotyou,thankyou.


Again,affiliatedwithwhomisimportant?On-campuswithwhom?It'simportant.


Pickingtherightpartnershasbeenthenatureofthisbusiness,asfarasI'mconcerned,sincewegotinit30yearsago.


Thankyou.

Operator :

DanielBernstein,Stifel.

DanielBernstein (Analyst-Stifel):

Goodmorning,andIlookforwardtohearingRayonhiscallaswellinthenextquarter.


Thanks,Dan.


Sojustarealquickquestiononseniorshousingandtheshopportfolio.Itlookslikemanagementfeeswentdownalittlebitinthequarter.Isthat--didmanagementfeestweaklowerbecauseoftheperformanceinshopatalloristhatjustsomeseasonalitythatisnotclearlyvisible?


Dan,it'sBobhere.Asmallnumber.Ithinkyouwillseefluctuationsovertimeaswejusthaveaccrualsinanyonequarterthatwillvery,soIwouldn'tsayit'sreflectiveofanysortofunderlyingtrend.


Okay.There'snoresetofanymanagementfeesattheSunriseor--?


No.


Okay.Then,Debbie,yousaidyouwereskatingtowardsthepuckandIthinkthatyouarereferringtowardsthehospitals.Whatkindofopportunitiesareyouseeingoutthereonthehospitallandscape?




Areyouseeingmoreconsolidationyet?Doyouthinkyou'regoingtoseemoreconsolidation?IthinkCMSlastweekortwoweeksagoputoutsomemoreexperimentalbundledpaymentsystemsoutthere.SoistheinvestmentinArdentitself,areyouseeing--doyouthinkthere'sgoingtobemorehospitalconsolidationgoingforwardthesamewayweareseeingontheinsurancesideandelsewhereinthehealthcaresystems?


Yes,Ithinkwebelievethatthehospitalsegmentis$1trillionannualrevenuemarketthatishighlyfragmented.Itisrapidlyconsolidatingandtherearen'tenoughofthequalityassetsinpublichandslikeours,sothat'sthebasicthesisoftheinvestments.


Todd,Iguessmaybeinarelatedquestion,wehaveheardorseenmoremonetizationsmaybeinatrickleofmedicalofficecomingoutfromthehospitalsystems.Areyouseeingmoreofthoseopportunitiestobuymoremedicaloffice?Andonthesametokenareyouseeingmoredevelopmentopportunitiescomingfromthehospitalsystemsaswell?ItjustseemslikeMOBmonetizationsarejusttickingupalittlebitandIwantedtogetyourthoughtsonthat.


Iwouldagree.Hospital-relatedorhospital-ownedmonetizationsareaslightpickup,buttobehonestwithyou,it'snothugeoverprioryears.Thatisontheacquisitionfront.Onthedevelopmentfront,wearestartingtoseesomeincreasedactivitythatiscomingoutofwhatIwouldcallsomehistoricalhighsandthengoingtohistoricallowshere.Again,planningbutwhatreallyisconvertingintorealdealsissignificantlydownfromthe2007/2008timeframe;thatisdevelopment.Sowewillseesomeactivity,butwedon'tseeittobeclearlyasrobustasitwasinthepast.


Onthemonetization,Ibelieveweareaswellpositionedasanyonewithour400-plusclientstotakeadvantageofincreasedmonetizationsthatmayoccurandsothat'sgood.WewillcontinuetomindthatasToddhasdoneforalongtime.


Onequickquestion,Debbie.OneofyourS&P500peers,Simon,announceda$2billionbuybackwithyoursharesdownsome.Underwhatcircumstanceswouldyouwanttobuybackyourshares?WouldthatbeanappropriatestrategyforVentasoristhatnotanappropriatestrategyforhealthcare?


Ithinkourjobsasmanagersandasboardsobviouslyaretobethoughtfulstewardsofshareholdercapital,andovertimethatmeans,aswehavedone,andcreatealotofvaluebygrowinganddiversifyingandbuildingahigh-qualityportfolio.Theremaybetimesinthemarketwhereotherstrategiesareappropriate,suchasdividendincreases,etc.Basicallyourjobistomakesurethatwearepullingtheleversthatareappropriateatgivenpointsintimetomaximizeshareholdervalueandmaintainagoodstrategyandahigh-qualitycompanythatcancontinuetodeliveroverandover.AsIsaid,it'sthehallmarkofVentas.


Thanksfortakingthecallsandagain,congratsonthegoodquarter.





Thankyou.Ithinkwearehaveonemore,sowho'sbattingcleanup?

Operator :

MichaelCarroll,RBCCapitalMarkets.

MichaelCarroll(Analyst-RBCCapitalMarkets):

WithyourrecentCanfordinvestment,didyousaywherethosewerelocatedintheUK?AndifImissedthis,werethoseexistingassetsorwerethosedevelopments?


Theyarenewly-constructedhomesthatareinandaroundLondon.


Okay,great.ThenhowdeepisCanford'splatformandhowbigcanyougrowthatrelationshipinthenear-term?


Theyareveryexperienced,long-standingoperatorsofseniorhousingintheUKandwebelievewecancontinuetopotentiallygrowwiththem.OvertimeIthinktheyhavemanagedover70homesduringthelast20years.Theyareveryexperienced.


Okay,great.Iknowthecallislong,soIwillstopthere.


Well,thatwasagoodcleanupandIwanttothankeveryoneforjoiningustoday.and,asalways,foryourinterestinourcompany.Wereallyappreciateyoursupportandyourinterest.Lookforwardtoseeingyouagainsoon.Thankyou.

Operator :

Ladiesandgentlemen,thatconcludestoday'sconference.Wethankyouforyourparticipation.Youmaynowdisconnect.Haveagreatweekend.

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