芬塔 (VTR) 2006 Q2 法說會逐字稿

At this time, I would like to welcome everyone to the NHP conference call. Certain matters discussed within this conference call may constitute forward-looking statements within the meaning of the federal security laws. Although the Company believes the statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.

Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to risks and uncertainties described from time to time in the SEC reports filed by the Company.

The Company believes that funds from operations is an important supplemental measure of operating performance because it excludes the effect of depreciation and gains and losses from sales of facilities, both of which are based on historical costs, which may be of limited relevance in evaluating current performance.

Additionally, funds from operations is widely used by industry analysts as a measure of operating performance for equity REITs. The Company therefore discloses funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States.

The Company calculates funds from operations in accordance with the National Association of Real Estate Investment Trusts' definition. The measure may not be comparable to similarly titled measures used by other REITs. Consequently, funds from operations may not provide a meaningful measure of the Company's performance as compared to that of other REITs.

Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States. Funds from operations does not include changes in operating assets and liabilities, and therefore should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

I would now like to turn the call over to Mr. Doug Pasquale, President and Chief Executive Officer. Sir, go ahead.

Thank you, operator. Good morning and thank you for your interest in Nationwide Health Properties. Joining me for today's call are Abdo Khoury, Chief Financial and Portfolio Officer; Don Bradley, Chief Investment Officer; David Schneider, Vice President and Controller; and [Brent Chappell], Vice President, Portfolio Management.

Much was accomplished on all fronts during the second quarter and year to date, which has enabled us to increase our quarterly dividend and our 2006 guidance range for FFO before impairments to between $1.90 and $1.92 per share. The recent dividend increase, when coupled with the dividend increase in January 2006, represents a year-to-date increase of over 5%.

Since our published earnings release and supplemental analyst information are very thorough, I will refrain in my remarks from repeating information in that report in any detail and instead focus on what we believe are key headlines.

Our financial results for the quarter speak for themselves, with notable improvement across the board -- revenues up 25%, FFO up 15% and FFO per share up 4% to $0.48 per share and up 7% year to date from $0.90 per share to $0.96 per share.

On the investment front, we continue to be very successful in sourcing quality, accretive investments at a pace well ahead of any point in the Company's history. Our 431 million Hearthstone senior housing investment, which closed as scheduled on June 1, is proving to be better than projected on several fronts. Occupancy is at 89.4%, with rent increases of 5% or more having been implemented over the last few months.

Coverage is running ahead of plan, with EBITDARM coverage having already increased to 1.24 times, EBITDAR coverage is up to 1.1 times, and EBITDAR minus a $300 per unit CapEx reserve is at 1.07 times. The first phase of expansion is being prioritized and is currently scheduled for completion in 2007. For these reasons and many others, we remain very bullish on this investment.

There's also good news to report on our [Grove] Medical office building joint venture, with occupancy up 1 point since the last quarter at 83% and net operating income running better than we expected for both the quarter and year to date. Our partners and our high expectations for this investment and the doors we expect it to open for us have been confirmed by the performance so far.

With Hearthstone, we have now announced 630 million of new accretive investments for the year, with two quarters still to go. Perhaps more importantly, we believe our signature operator-oriented investments like Hearthstone, Wingate and Koelsch are proving to be a distinct competitive advantage.

We are using our extensive health care operating backgrounds to recognize and execute on unique opportunities to partner with an outstanding management team to buy out some or all of its existing investors by monetizing the real estate. This approach allows management to not only to continue to benefit from the existing operating platform and footprint they have developed, but also helps them and NHP grow together through a right of first offer, last look on future refinance. In fact, there are currently a couple of sizable potential transactions in our pipeline with prospective customers who were attracted to us because of this approach.

We are pleased to announce that Bill Henry has joined our investment team as a Senior Investment Officer and Vice President responsible for our Midwest region. Bill has been involved in real estate underwriting for over 15 years, most recently with our MOB joint venture partner, The Broe Companies. Specifically, he was the Managing Director in charge of Broe's senior housing properties, Aspen Retirement, which it recently sold. In short, Bill has the operational and real estate background we covet, and he should make an excellent addition to our team.

Turning now to our capital financing activities, we had planned to follow up our April 2006 equity offering with a 250 million debt offering that would substantially reduce our variable-rate debt exposure that had grown due in large part to the Hearthstone investment. In July, we pulled the trigger, and within hours of launching, we were advised the book was substantially oversubscribed. The market's positive reception led us to upsize the offering to 350 million in tandem with tightened pricing from an originally expected spread of about 160 basis points to an actual spread of 145 basis points.

As a result of two forward treasury locks, the effective rate ended up being about 6.4% for these five-year notes, which fit nicely in our debt maturity schedule. This 350 million debt issuance allowed us to reduce our variable-rate debt exposure by over 50% to about 18%.

The good news on the portfolio management front is that FFO leakage has been running less than expected, with lost rent from events during the first half of 2006 resulting in a 3.7 million actual revenue loss for the year. This equates to a 4.8 million full-year equivalent revenue loss. Additional rent losses during 2006 are expected to range from 0.5 million to 1.1 million on an actual basis and from 2.2 million to 5.7 million on a full-year-equivalent basis.

This concludes my formal remarks. We are now pleased to answer your questions. Operator, please open the line.

(OPERATOR INSTRUCTIONS). David [Suprose].

Can you just talk about your balance sheet, the pro forma for the debt issuance in July? What's your total outstanding debt? What's outstanding on your credit facility? And is there anything left on the bridge?

Certainly. We've got a grand total outstanding on the combination of the credit facility and bridge of 157 million as of today. 50 million of that is on the bridge. And there's not much change on the 630, other than a bump-up -- the 350 million for the senior notes.

Coverage was steady, I guess, on a year-to-year basis on the ALFs and CCRCs, but maybe down from Q1, which it looks like that spiked up, if you want. Is there a dynamic there where the coverage went up in Q1 versus prior quarters and then came back down in Q2?

Well, you are bringing online some large acquisitions that have coverages a little bit below the average, like Hearthstone, that were ramping up. So that is going to take down the average a little bit.

Perfect. And then just one last question, a technical question -- what is the straight-line rent on the Hearthstone properties?

That's 1% is a fixed straight-line rent with 2% [CTI]-based ups. And there is a potential that the year seven rent escalator may also be a straight-line [brought down], although we are not doing that at this point, I don't believe. Are we, David?

No.

(OPERATOR INSTRUCTIONS). At this time, there are no questions.

They're not used to us doing this early in the morning. Let's wait another minute, just in case.

(OPERATOR INSTRUCTIONS). Scott O'Shea.

Thanks for moving the call up a little bit. Could you maybe just expand a little bit on the sizable pipeline you've got going and kind of what that means for maybe funding in the back half of the year? I know you just did a large bond offering here, but is there a potential need for more financing later on, maybe in the fourth quarter? What might that look like?

Well, Scott, we always hope that there will be the need for incremental financing that is driven off of incremental investments that we find. As you know, we don't specifically comment on the pipeline. But Don and his team continue to do an excellent job of identifying potential transactions. We have several that we are looking at now.

The good news is, that David mentioned earlier, with the recent 350 million financing, we have substantially refreshed the credit facility. So there would be no imminent need for a capital market transaction again this year, except in the event of a very large transaction or a desire to further refresh the credit facility, depending on the volume of investment activity between now and the end of the year.

(OPERATOR INSTRUCTIONS). David Suprose.

While we're at it, I might as well ask another question. The Broe JV, is that capped in terms of how much equity is going to go into it right now? Then what's the process whereby you can increase that cap if you like the way things are going?

It is a mutual decision by both of us. In fact, we are meeting here in a couple of weeks to discuss that very point -- just how much more product we can get through the JV.

Is that based on an expectation of MOBs coming to the market? Or is that based on anything specific?

There's a lot of activity out there. It is probably a better way of saying it -- it is trying to be a little bit more refined in the approach with so many different opportunities out there, being a little bit clearer on what our criteria are going to be for pursuing those opportunities. But to answer your question, there's plenty of room to add more equity. There's plenty of room to grow the JV.

At this time, there are no further questions, sir.

Thank you, operator. If someone has a question later on, please feel free to get a hold of us. We appreciate your time. Have a good day. Thank you.

This concludes today's NHP conference call. You may now disconnect.