Health Care REIT Earnings Call Insights: MOB Assets, Dispositions Increase

On Tuesday, Health Care REIT, Inc. (NYSE:HCN) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

MOB Assets

Jana Galan – Bank of America Merrill Lynch: I have a question on the greater disposition guidance and you already have a large portion under contract, are you seeing increased demand or more favorable pricing for this significant MOB assets?

George L. Chapman – Chairman, CEO and President: I think the fair answer to that would be that we have more interest and ability on the parts of the operators to buy back, refinance, recap some assets and we have an interest in reducing our commitment to Medicaid oriented SNFs and certainly, an overall desire to move toward Private Pay at 80% to 85%. So it’s just really that their abilities and desires seem to be coming together with ours, so we see more opportunity to do it, but until it’s over, it’s not over. We will wait and see to some extent but we have some term sheets in certain cases and some desire on others and we will keep reporting back to you.

A Closer Look: Health Care REIT Earnings Cheat Sheet>>

Jana Galan – Bank of America Merrill Lynch: I believe there is also a hospital marked for sale. May be if you could speak to that?

Scott A. Estes – EVP and CFO: There was just a small hospital facility in the held for sale bucket that also met similar criteria.

George L. Chapman – Chairman, CEO and President: (indiscernible).

Scott A. Estes – EVP and CFO: We gave you the amount I don’t have it right in front of me.

George L. Chapman – Chairman, CEO and President: 1 bps. $1 million. So it’s a small amount.

Scott A. Estes – EVP and CFO: Very, very small and there was sales subsequent to quarter end.

Jana Galan – Bank of America Merrill Lynch: Just quickly on the financing for potential future acquisitions. You brought down leverage quite a bit. I was wondering, if you we should still kind of think about them being funded as 40% (that) 60% equity going forward?

George L. Chapman – Chairman, CEO and President: We think so. We think we have done a few things that are going to be very important to strengthen the Company going forward. One is, keeping the leverage at around 40% and two, moving towards a higher percentage of Private Pay.

Dispositions Increase

Bryan Sekino – Barclays Capital: Good morning this is Bryan Sekino on behalf of Adam. Just a question on the dispositions increase, would you classify them more motivated by potential acquisitions that you’re seeing and needing just a little bit more firepower or is it kind of a change in your view of those assets given some of the reimbursement changes over the last few months?

George L. Chapman – Chairman, CEO and President: I think the latter Bryan. We have $2.2 billion worth of firepower and right now an incredible ability to raise capital. So we don’t need it for that but we are still very much dedicated to the post acute platform and to certain operators who have been in SNF portfolio. But strictly within the Medicaid oriented SNFs we think we can drive higher company value by having more dedicated to the key components of the future healthcare delivery systems such as post-acute but in particular driving more value through private pay whether it’d be MOBs or perhaps more importantly through private senior housing.

Bryan Sekino – Barclays Capital: Just an update on the deal environment looks like you’ve got an improved balance sheet there are certainly some unknowns for reimbursement, but I guess it appears CMS is not likely to issue proposed rules or make significant changes for SNFs and other post-acute providers. So is that helping the deal environment despite the uncertainty in the election and maybe talk about your appetite to capitalize on that?

George L. Chapman – Chairman, CEO and President: Well, we are not going to be out there buying a whole lot of skilled nursing. We are going to help George Hager and his team grow his post-acute platform. We think that’s just critical and for us we’ve had an ongoing access to good deals because of our relationship investing platform. I think we told the Street in the last 10 quarters we’ve averaged new investments of $1 billion. 40% of those have come from our ongoing partners. So we are just seeing it because of our relationships. So senior housing is people are still coming to us, people are adding on to their existing portfolio and we feel like we have an ongoing predictable deal flow.