Welltower Inc (WELL) 2002 Q2 法說會逐字稿

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Health Care REIT second quarter earning's conference call. At this time, all participants are in a listen-only mode. Following the formal presentation, instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press the star, followed by the zero. As a reminder this conference is being recorded today, July 17th 2002. I would now like to turn the conference over to Ms.

. Please go ahead ma'am.

Thank you. Good morning everyone, and welcome to Health Care REIT's second quarter conference call. By now everyone should have received a copy of the press release that we sent out. But if there is anyone on line who did not receive a copy, please go to Health Care REIT's Web site at www.hcreit.com or you may call

at 312-640-6691 and we will fax you one right away. Additionally, we are holding a life Webcast of today's call which you may access through www.ctbn.com or the company's Web site.

At this time management would like me to inform you that certain statements made during this conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Health Care REIT believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release and from time to time in the company's filings with the SEC.

And now I'd like to turn the call over to George Chapman, Chairman and CEO of Health Care REIT, for his opening remarks.

Please go ahead, sir.

Thanks very much.

Early in 2001 I suggested to you on an earlier earnings call that long-term care had hit bottom and that we'd already begun a new marketing program in November/December of 2000. And in doing so we renewed old relationships and began new ones awaiting the reopening of the capital markets. And when that happened in the second quarter of 2001 we moved into the second half of 2001 and made over 150 million of new investments. We followed that in the first quarter of 2002 with new investments of 101 million. And in the recently completed second quarter we closed new investments of 124 million, with runoff of approximately 33 million, which substantially all were repayments of mortgage loans. So that we ended the quarter with 91 million of net new investments for a total of 192 million through the first half of this year.

As we're going forward we're becoming more confident in our ability to rebuild our investment pipeline. But at this point, because of difficulties in determining the exact timing of additional payoffs as well as closings for several large transactions, the guidance for the remainder of the year will be, at this point at least, 100 million of net new investments through the remainder of 2002.

The quality of our new investments remains very strong. They are stabilized facilities with good coverages or very good solid real estate investments with a good operator that is producing desired results for us. And not surprisingly, at the end of the second quarter 90 percent of our portfolio is comprised of stabilized assets with payments coverages at around 1.6 to one.

So if you look at our portfolio today, it's comprised of very stable assets, 82 percent owned properties. And of those 81 percent of the owned properties are in master leases and our coverages are very strong. We're down to 17 properties in

with eight of those facilities with

over 70 percent. And at the end of the second quarter as well we had no facilities under construction. So we're very, very pleased with our positioning.

And with that I'd segway to Ray to take you through a report on the financial results.

Thanks, George.

I'll follow the customary pattern here and talk first about the quarterly financial results, then review portfolio matters, and finish up with management's outlook for '02 and '03.

We recognize FFO 66 cents per diluted share for the quarter, which was in line with our guidance. We are pleased that we were able to continue to reduce our FFO payout ratio, which is now down to 89 percent.

Revenues were 40.8 million for the quarter, representing an 11.69 percent yield on average assets. As George alluded to 82 percent of the revenues were from more property and a 64 percent were from assisted living.

On the expense side, our depreciation increased to 9.6 million from seven million in the prior year as a result of the increase in real estate owned. We also reported an asset impairment of $550,000 in connection with the anticipated sale of some undeveloped land. You may recall several quarters ago, George mentioned that in connection with the

restructuring, we agreed to take ownership of this parcel and sell it. It is under contract. We anticipate a closing and that would be the anticipated loss on sale.

We also added another $250,000 to our loan loss reserve, bringing it up to approximately 7.4 million. We continue to be the only health care REIT that maintains a loan loss reserve to mitigate against bad loans.

You'll also note that our income statement has a new section on discontinued operations. We have included some modifications in exhibit 11 as well to reflect the impact of discontinued operations on FFO. In the second quarter, we sold a property that triggered the discontinued operations treatment under FAS 144, which requires that any facility be treated as a separate operation for purposes of discontinued operation. We think the role is inappropriate for REIT's generally and health care REIT's in particular; however, we've chosen to follow the GAP characterization on that.

Finally we had a loss on extinguishments of debt this quarter of approximately 403,000. That was incurred in connection with the payoff of approximately $35 million of bonds, which were due in '03. With that retirement of bonds, we essentially eliminate all of our debt maturities until 2004.

Moving onto the balance sheet, we ended the quarter with net real estate of approximately 1.4 billion. As George mentioned, about 123.7 million of new investments for the quarter, we took advantage of some very good value opportunities this quarter. We purchased

with average yields of 10.63 percent and straight-line yields of 12.45 percent. Our

had an average cash yield of 10.41 percent, and a straight-line yield of 11.46 percent.

The acquisitions were with seven operators in eight states. We were pleased to add three new operators to our portfolio this quarter, constituting approximately half of these new investments.

We also had dispositions of 33 million, comprised of six assisted living properties with $31.5 million of loans, having an average yield of 11.46 percent. We had $1.5 million lease with an average yield of 12.5 percent, and a straight-line yield of 14.2 percent.

The dispositions were primarily, as I indicated, mortgages, which furthers our equity REIT status, and they were with operators that we've encouraged to finance out the properties with another financing source.

We anticipate that we will have further disposition activity through the balance of the year. We think that the range is somewhere between 50 and 100 million. We continue to see excellent acquisition opportunities, as George mentioned. To date we've reviewed over $5 billion of such opportunities. We currently have about 400 million in various stages of negotiating and underwriting. As we discussed last quarter, given the solid opportunities and our capabilities to act on them, we believe that we would hit approximately another 100 million in Q2, which we did, and we're confident that we'll have another 100 million of net new investments for the balance of the year for a total of approximately 292 net new investments for the year. The new investment opportunities are equally split between nursing and assisted living. We anticipate initial yields ranging from ten and a half to 11 percent, with 25 basis point annual escalators on ten to 15 year leases.

We typically also include a renewal option and option to purchase. Our option to purchase is based upon fair market value at the end of the lease term, with a sharing of appreciation between us and the tenant. We believe that this sharing of appreciation, along with the cap on our annual escalator

the operator to maximize EBITDA, and therefore the value of the property. All of our lease opportunities will be structured within master leases.

Finally, finishing up on the assets, we did have the third loan expenses increase, primarily as a result of the August 2001 debt offering. Receivables and other assets increased due primarily to increases in straight-line rents. Straight-line rents for the second quarter were $2.4 million. Our credit profile remains strong. We did have our annual review meetings with the rating agencies in June, and we anticipate hearing back from them in the next month or so.

Our leverage remains low at 40 percent debt to total book cap, and 32 percent debt to total market cap at the end of the quarter. Our interest coverage for the last 12 months is very strong at 3.8 times. As I mentioned earlier, our debt maturity schedule's in very good shape. The only thing coming due between now and '04 is our revolver. We are currently negotiating a line renewal for our $150 million revolver, which matures in March of '03. We anticipate upsizing the line somewhat, and we should complete the process in the late summer or early fall.

A couple other items to note on the balance sheet. We did have some of our series C preferred stocks converted into common. About 300,000 shares in the quarter. We also raised a little over $90 million this quarter with the $3.45 million equity offering. Our average shares outstanding for the quarter were 36.2 million, and at the end of the quarter we had about 38.1 million outstanding shares. A recent, a recent development, yesterday as a matter of fact, was the addition of Health Care REITs to the REIT Morgan Stanley index, effective July 19th.

We believe this is very positive for the sector, providing more visibility, particularly with instructional investors. Morgan Stanley did announce last night that we would be included in that index, and we're pleased with that development. At this point, I'll shift over and discuss portfolio matters. As George mentioned, we continue to remain pleased with our portfolio performance. Overall payment coverage is about one six times, 90 percent of the assets are stable, 82 percent are owned, and over 80 percent of those are in master leases.

In the assisted living portfolio we continue to focus on stabilization of the properties in full-up and monitoring industry conditions. We currently have 157 assisted living facilities in 31 states, with an investment balance of 875 million, representing 64 percent of our revenues. Only 17 of these remain in full-up, approximately 10 percent of our revenues. We expect most of these properties to reach stabilization in the fourth quarter and first quarter of '03.

Our assisted living occupancies and coverages have remained consistent over the last several quarters as we complete the stabilization process. To date our management team has overseen the stabilization of $650 million of assisted living assets, including over 300 million in the last eight quarters. We're confident that the balance of the properties should achieve stabilization on schedule.

We also think assisted living industry conditions are becoming more favorable. Assisted living development has slowed dramatically. The industry currently only has approximately 4,300 units under construction, which is less than one percent of total supply. With the demographic growth of the over age 75 population the new supply should readily be absorbed. Further, operators with stabilized properties have great pricing power. In our portfolio we have seen average rates increase by approximately four percent this year.

These limitations on supply, the attendant increases and industry occupancy and operator pricing power suggests improving performance over the next few quarters.

We have also been monitoring the industry for regulatory risks. We reviewed approximately 100 regulatory changes in 2001 and 2002 in the industry. The majority of those changes have minimal impact on capital cost or operating cost as they relate to formalizing disclosure and reporting requirements or clarifying existing regulations. A few regulations have increased operating costs but we have seen our operators able to pass through those costs. For example, we currently have investments in seven of the 10 states that require operators to carry liability insurance. All of our operators have the appropriate insurances and their cost is reflected in our payment coverages.

Our nursing - well, let me talk about one operator in the assisted living portfolio first, Alterra, because we've had a number of questions regarding them. We currently have 45 properties. Our investment balance is about 107 million. They're in a master lease. Occupancy's over 90 percent. Payment overage is over one-six times. We think that the master lease is very strong and insulates us against bankruptcy and rejection if they were to file bankruptcy. We have no news on the status of any bankruptcy or negotiations with creditors.

Move on - moving on to the nursing portfolio. We currently have 65 properties, 8,989 beds, $451 million investment balance, payment coverages of one-eight times. Average occupancies have risen from the low of 81 percent in the third quarter of 2000 to 94 percent today. We believe that these strong coverages present adequate protection against adverse impact from Medicare or Medicaid rate cuts. We do have an update on both of those for you. CMS announced in May that they would not be refining the

system prior to October of 2003 so that the reg add-ons will remain in place fiscal year 2003. This decision effectively retains about $21 per patient and Medicare reimbursement. We also expect that upon successful refinement of the regs that those add-ons will be folded into the base rates.

With respect to the other add-ons, there's currently a couple items of pending legislations. Senators

introduced Senate Bill 2490 in late May that would fold all of the add-ons into the base rate for no cut in the Medicare rate. Currently the bill has 14 co-sponsors in the Senate; however, on June 28th, the House passed House Resolution 4954, which retained a portion of the add-ons over the next three years, but decreased the size of the add-ons over time. Use and associate in a study of the bill estimated that it would result in a decrease in Medicare coverage of approximately $18 per patient day in fiscal year 2003.

So when looking at the two pieces of pending legislation, there appears to be a range of cuts in Medicare between zero and $18 per patient day. We think the rates may potentially impact us in two ways, or rate cuts.

First, would be on our portfolio coverage's. Because we have fixed annual payments and escalators, there would be no change in our lease revenues, but coverage's on the portfolio could deteriorate slightly.

Secondly, the looming rate cuts may affect the acquisition activity this quarter, because we think some transaction may be delayed to see the resolution of the Medicare bills.

Medicaid budgets were also set for most states that run on a July to June 30th fiscal year. We currently have nursing homes in 16 states and reviewed those budgets. The top five of those states account for about three-quarters of our nursing home portfolio. For our fiscal year 2003, the average Medicaid for

increased in most states is approximately six percent. Only two states in our portfolio, Indiana and Illinois, are proposing per diem payment reductions. We have four properties in those states with about $27 million investment balance.

Another issue that we were asked to comment on in this call is the increasing liability insurance costs. The issue hit headlines recently with the earnings pre-announcement by Five-Star Quality Care, that the company would miss earnings, partly due to increased insurance costs. We have been monitoring

reform, liability insurance and patient liability suits in our facilities for several years. If you go back and look at rates in 1990, nursing home industry insurance losses have increased ten-fold from 1990 to the current date. These increasing loss costs have been reflected in rising premiums. The cost of the insurance in our portfolio is currently reflected in our payment coverage's. Premiums now typically represent about 2.7 percent of facility revenues, while further increases in premiums may impact coverage's, we do not expect to see any payment defaults. We currently have insurance in place with all of our operators, and no operators have pending liability litigation or claims.

With that, I'll wrap up on the portfolio, and briefly discuss our outlook for the remainder of '02 and '03.

We are reaffirming our expectation of FFO of 264 to 268 for 2002, and providing guidance for 2003 of FFO 280 to 285. You might recall we did increase the guidance range last quarter, in anticipation of the higher than expected investment activity. The company intends to maintain its current dividend policy of 58 and a half cents per share, as we've discussed on prior calls, we will consider increasing the dividend again once the payout ratio moves into the mid to low 80 percent area.

That completes my report, and I'll flip it back to you George.

Well thanks Ray. A few concluding remarks. I focused my opening remarks on the positive momentum we've attained in the portfolio, and the attendant improvements to the FFO payout ratio. We're into the 80 percent payout level now, and clearly we are planning to drive that back down to the low 80-percentile level. You'll recall that before the capital markets dried up, and we began a very successful asset disposition program, we are in the low 80s, and we plan to get there again, if not into the high 70-percentile level.

But let me take a moment to remind you of how our business really works. In many ways you could characterize our business of managing 230 facilities and finding new business as a pretty tough, rigorous day-to-day business. First we have to find the best operators and projects, and that can be very demanding, and much of the credit in this arena goes to Chuck Herman and

, who do much of the hard work and bring good opportunities to us.

And thereafter the underwriting process involves a number of our analysts to evaluate the management team and specific facility investment. And in connection with every investment, each facility, our analysts visit the facility and the market, and do a lot of first-hand field work to determine whether an investment should be made. And this involves also visiting the particular development or planning office for the governmental entity to review even potential competition by finding pending applications for new projects.

And I know too that we reported in our last call that we'd added four new analysts to bring our team total to, of analysts, to ten. So we feel as though we've staffed up very well to continue this very rigorous process. After making the investments, we don't put them on the shelf and assume everything is going to go perfectly. We measure construction, fill up, census, financial results against our agreed upon models, and intervene early with an operator that is not performing adequately.

And since we receive facility, financial and other data monthly, we're usually able to intervene early in the process and get the operator back on track. But as all of you know who follow this company, if that does not work, we begin a process that leads to the replacement of an operator with a qualified regionally focused operator. And clearly this rigorous monitoring and underwriting helps us to minimize the possibility of losses, but a few other policies and structures should be noted as well.

One would be our historical focus on diversification. It has always been in our 32-year history a key portfolio management concept. In addition, having 81 percent of our own properties and master leases provides very significant additional protection, as does our loan loss allowance. Ray noted that in his remarks. But that has now reached 7.3 to $7.4 million and again, I would, I would pay, I would emphasize the importance of this, in terms of being conservative in terms of how we run the company ...

The fact is that we ran $250,000 of reserve through out income statement this last quarter and have been doing the same for many years. That, of course, depresses in some respects our earnings, but we really believe that that's the appropriate way to manage a company involved in the business we're involved in.

Let me close by moving away from the day-to-day operations and provide you some broader perspective on the company's position. The company has now proven its case of moving away from nursing home investments five or six years ago when we believed the revenue was not sustainable. As you know, we invested in assisted living and had the challenge of taking this portfolio through development and fill-up to stabilization.

With our portfolio at 90 percent stabilized we think we have succeeded and are very pleased with our equity REIT status, the master lease structures, and the very strong 1.6 to one coverages. And from a timing standpoint I'd remind you of a comment I made about two or three calls ago and that is, I believe this is a historically opportune time to purchase healthcare properties operated by very good operators. And I'm very pleased with our success in taking advantage of this opportunity.

And with that we'll open the call up for questions.

Thank you, sir.

Ladies and gentlemen, at this time we will begin the question-and-answer session. If you have a question please press the star, followed by the one on your push-button phone. If you'd like to decline from the polling process please press the star, followed by the two. You will hear a three-tone prompt acknowledging your selection, and your questions will be polled in the order they are received. If you are using speaker equipment you'll need to life the handset before pressing the numbers. One moment please for the first question.

Our first question comes from

with Legg Mason.

Please go ahead, sir.

Well, good afternoon or good morning I guess still, and congratulations on a good quarter.

Thanks,

.

One thing I wanted to explore, and I think it's an issue that's candidly raised by some of your competitors is just sort of the investment strategy, and you touched on this a bit. But the notion of sharing upside, and I think more particularly maybe the notion of, you know, probably taking a little lower cash yield and also allowing sort of a, you know, purchase option at the end. And I guess I want to drill in on the purchase option and just understand, you know, does that create the risks of, you know, surpass unexpected payoff sort of down the road if, you know, these things really stabilize. If you can just give us a little more color on how that works and kind of your sense, George, kind of the pros and cons of this versus kind of the traditional lease purchase that some of the other guys use.

Well, first of all, many of the healthcare REITs split the upside at the backend of a lease in the event that a operator exercises his option to purchase. Our approach,

, for many, many years, whether it's in the mortgage context of the old healthcare REIT or now the lease portfolio, is that we think there has to be incentives given to operators to keep their interest.

You know, our experience has been and I think the industry's experience has been that the most dangerous type of operator has been the operator that gives away all of the upside in the facility and just bets on being about to go public and cashing in on the public markets, which, as we all know, can be quite fickle. That is the most dangerous scenario, because the operator tends to expand too rapidly. It doesn't pay enough attention to the actual operations, because they're looking for a shorter term yet to their profits, and to their pocketbook.

We really believe that the long-term care sector is a particularly tough business. It's really minute-to-minute, hour-to-hour providing high-quality care to a pretty demanding part of the population, the elderly, the seniors, and we just think that it's, by far, the preferable policy to split 50-50, which is our usual approach, the upside over and above the original lease amount to keep the incentives aligned appropriately between financier and the operator.

, would you want to add anything to that?

No, I think it's absolutely the right strategy.

And in terms of just the ability to purchase, how long is that sort of, when do those things start popping in and that create much risk that you could get on expected payoffs down the road?

Well most of our leases are 15 year leases

, and sometimes we'll go a little shorter to, for companies that really prefer mortgages, and we entice with slightly shorter terms to bring them into the operating lease fold. But you know, I mean, we have a nine-year average life, and you know, that's pretty good, and it will be increasing as these new investments go online. I don't view that as a major risk at all. In fact, for those folks that do 100 percent of the upside in the REIT, you always get down to the end of the term and it's a negotiating session, I mean, you know. The operator has significant leverage in terms of being able to say, OK, I'm done, I'm walking away and/or, I'd exercise my option, but I'm not going to give you 100 percent of the upside, and what do you want to do, Mr. REIT executive. So it's just, we really believe the policy of aligning incentives is absolutely the right thing to do. It's based on a long experience in the sector and keeping the operator's focus on the facility and having upside is critical to, not only operating the facility well, but also you know, providing the quality care that we really demand that our operators give to their customers.

And the options at the end of the term

.

And it's just that it's an option base of the buy market essentially with the formula for determining or something.

Yes.

OK. And just one last question, then I'll go. I think, George, again, I very much agree with your categorization of the assisted living industry, sort of improving fundamentals and looking up as we go forward. Just in terms of investors, I mean, do you expect, I mean, with

announcement to sort of maybe spin-off their assisted living division, do you expect, so between, sort of now and maybe a year from now, as we kind of complete sort of this turn, you know, what other kind of noise, you know, potential bankruptcies, other filings, spin-offs should investors kind of expect as we kind of just work through the kind of the financial restructuring?

Well I think there probably are some companies that will get out of the business and so be it. I mean if they're not able to make a go of it, we just as soon as being great supporters of the assisted living sector, see those facilities move to people who are focused on that and who are being very successful in what, again, we believe is a very

time for this sector with the, you know, construction virtually stopped and top line revenues going up as a result. So that doesn't bother me in the least. It might even be a good opportunity for us to make new investments and take portions of those types of portfolios to one of our good regional operators.

So I think that's fine. We always are wondering about whether or not

is going to skate by the need to go into a Chapter 11, or whether they're going to do a prepackaged Chapter 11. It really doesn't matter to us in the least, we have such a good portfolio with them. I, you know, I'd just soon have it happen, one way or the other, sooner rather than later so that they can go on about their business. They're doing really, they're starting to do quite well again, and we have a lot of confidence in them.

Is that responsive

?

Yes. No I think that's fine. Thank you.

Our next question comes from

with Gem Investors. Please go ahead sir.

Hi. Actually it's

from Gem Investors.

Hi

.

Hi guys. Congratulations on the quarter.

Thank you.

Just have a couple of points if you could clarify these for me, or expand on them on a little bit. The coverage ratios you mentioned earlier were 1.6 times, 1.3 times after management fees. How do they look after a cap ex is over an FF&E reserve?

We don't pay those. That's what the operator does. Our leases are net.

Right. But are those built into their numbers? As far as ...

No, it's after a five percent management fee, on the, on the coverage after management fees.

OK.

And it's really difficult to pick any one number for each facility too

. So I mean, you can, you can take 250 up to $400 per bed I suppose, but in some of the older skilled nursing we think that the numbers should be higher, so it's sort of hard to have a rule of thumb.

Most of the portfolio is pretty new though.

What is it, about five to six years?

Right. Right. OK. And on the insurance trends you mentioned that the insurance costs, the new insurance costs are already in the coverage ratios.

Right.

And you mentioned 2.7 percent of facility revenues. What were they before? Just trying to get gauge of what, how the increase was from ...

Define before?

Before, let's say, from last year's rates for example.

That 2.7 percent of revenues, what was it last year? Do you know how much they've gone up in the last year?

We don't have that data handy.

OK.

We can get it.

OK. I'm just trying to get a gauge of how significant it's been. And ...

... as I indicated, I mean, they've gone up tenfold in these ...

Right.

... 12 years, so.

It's been pretty significant.

Right. And as far at the percentage of the portfolio that has the new policies, it's majority, would you say, half the portfolio?

Well not everybody has appropriate insurance.

I'm sorry?

What's your question precisely

?

Just trying to figure out what percentage of the portfolio, HCN's portfolio reflects the new insurance costs, or the higher insurance costs?

The whole portfolio.

The whole portfolio.

Yes.

So it, so it look likes all the new, or all the properties have the new ...

Some are lucky enough

to have a multi-year program going, but virtually all of them have been caught up in it by now.

Got you. OK. Can you talk a little bit about the occupancies the - more from a macro perspective in terms of how the assisted living properties - what kind of competition they've been seeing, what kind of pricing pressures, has price competition alleviated, have you been about to rent - raise rents? Have the operators been able to raise rents the regular four percent, or whatever it is, year-over-year and have they been able to drive occupancies as well as rents?

Yeah. This is Ray. I'll start.

If you look industry wide, industry-wide occupancies are about 84 to 85 percent, which should be for most facility-type models at or above a breakeven level. You look at how they got filled, yes, there was some - in some markets there were rent concessions, discounting, et cetera, to get there. What we've seen over the last couple years is those rent concessions burning off. And you're going to see coverages improving as those continue to burn off. We had not seen new concessions being introduced. We the last two years have seen significant rate increases in our stabilized buildings.

We look at the age 75-plus population because virtually everyone in these buildings, whether it be nursing or assisted living, is 80 years or older. So really the appropriate group to look at is 75-plus. And when you look at the expected growth there and you look at the number of unoccupied units and the new supply coming on line, we think that the embedded demand is going to exceed the supply the next few years.

OK. Have you seen any impact from the soft economy and the market sell-off in terms of marketing the units or occupancies ...

It's interesting. A lot of people started asking that question after September 11th as well. And we've been checking in with our operators and what we have concluded is that for about a two- to four-week period after September 11 activity was way down in terms of inquiries and tours of buildings. But it's picked back up and we have not seen a general decline due to recessionary conditions.

OK. All right, thanks, guys.

Thanks then.

Ladies and gentlemen, once again, if you have a question please press the star, followed by the one. If you'd like to decline from the polling process please press the star, followed by the two.

Our next question comes from Robert

with Prudential Securities.

Please go ahead, sir.

Good morning.

Hey, Robert.

Yeah, a few questions. First, your occupancies you're showing in your schedule were flat on a sequential comparison. Does this reflect the same-store comparison? And if it doesn't, what did you see on a same-store basis?

Couple things effect that number. One is you have new additions to the portfolio; two is you have dispositions from the portfolio; three, you have the stabilization of assets coming in. What we have seen pretty consistently over the last several quarters is 86-87 percent on those occupancies.

So basically in your same-store poll that would be a fair assessment, that it was pretty much in that range?

Yes, in that range, between 85 and 90.

OK, moving on. You mentioned 2.4 million in straight-line rent for the quarter. That brings it to 4.5 million for the first six months. Last year you recorded straight-line rent of 6.7 million. It appears that line is trending higher. Could you just give an indication of what you made back for the full year?

Yes. It's the new deal flow, new investments.

So there's two to two-and-a-half million a quarter would be a good run rate on that?

Yes, that's probably a safe number for you to use.

OK. And just on your investment, can you break out the number of facilities in assisted living and nursing homes, and also the number of units that you purchased during the quarter, and the coverages on these investments?

Yes, let me get that. We're pulling it together

, just bare with us for a second.

OK. I have one more question, if I can skip around that. Just if you given any indication on

performance?

Meeting expectations.

OK, so they're in line with your pro formas?

Yes.

OK, for, let me go back to your previous question

.

Sure.

On the

portfolio, I went through the numbers with you on, in terms of yield and straight-line yields.

Right.

You have the number from the press release on the volume on that, I believe. And what you don't have, I think are the beds, 542.

Did you indicate the number of facilities in the press release

? I didn't see it.

Do we have that number?

No.

Let me just add them up quickly here. Be five buildings.

OK.

And then on the L side we had 656 units, seven buildings.

And then finally, how about the rental coverages on the investments

?

The rental coverages going in were right around one times after management fee. Stabilized cap rates are in the 16 percent range for nursing, and 13 percent for assisted.

OK, again, that was one oh

on the coverage?

Yes.

And that was after ...

L's were a little higher. They were 110 and

were one oh.

After management.

After management fees.

OK, great. That's all my questions today. Thanks.

OK.

Thank you.

Ladies and gentlemen if there are any additional questions, please press the star, followed by the one. At this time there are no further questions. Please continue.

Yes, this is George Chapman. I'd just like to conclude by making my comment once again that we're very pleased with our performance this year. We're pleased with the marketplace, and believe that we're being very quite successful in taking advantage of what we deem to be an historic opportunity. Thank you.

Ladies and gentlemen, this concludes the Health Care REIT second quarter conference call. If you would like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000. Once again, if you'd like to listen to a replay of today's conference, please dial 800-405-2236 or 303-590-3000. Thank you all for participating, you may now disconnect.