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HCP (NYSE:HCP)

Q4 2010 Earnings Call

February 15, 2011 12:00 pm ET

Executives

Company Speaker -

Thomas Herzog - Chief Financial Officer and Executive Vice President

Paul Gallagher - Chief Investment Officer and Executive Vice President

James Flaherty - Chairman and Chief Executive Officer

Analysts

Dustin Pizzo - UBS Investment Bank

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

Karin Ford - KeyBanc Capital Markets Inc.

Omotayo Okusanya - Jefferies & Company, Inc.

Robert Mains - Morgan Keegan & Company, Inc.

James Milam

Richard Anderson - BMO Capital Markets U.S.

Quentin Velleley - Citigroup Inc

Bryan Sekino - Barclays Capital

Michael Bilerman - Citigroup Inc

Adam Feinstein - Barclays Capital

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Year End 2010 HCP Earnings Conference Call. My name is Marissa, and I'll be your coordinator today. [Operator Instructions] Now I would like to turn the presentation over to your host for today's conference call, Mrs. Beejal Northrup [ph], HCP's Director of Investor Relations. You may go ahead, Madame.

Company Speaker

Thank you, Marissa. Good afternoon and good morning. Some of the statements made during today’s conference call will contain forward-looking statements, including the statements about our guidance. These statements are made as of today’s date and reflect the company’s good faith, belief and best judgment based upon currently available information. The statements are subject to the risks, uncertainties and assumptions that are described from time to time in the company’s press releases and SEC filings. Forward-looking statements are not guarantees of future performance. Some of these statements may include projections of financial measures that may not be updated until the next earnings announcement, or at all. Events prior to the company’s next earnings announcement could render the forward-looking statements untrue, and the company expressly disclaims any obligation to update earlier statements, as a result of new information.

Additionally, certain non-GAAP financial measures will be discussed during the course of this call. We have provided reconciliations of these measures to the most comparable GAAP measures, as well as certain related disclosures in our supplemental information package and earnings release, each of which has been furnished to the SEC today and is available on our website at www.hcpi.com.

I will now turn the call over to our Chairman and CEO, Jay Flaherty.

James Flaherty

Thank you, Beejal [ph], and welcome to HCP's 2010 year-end conference call. I am joined by Executive Vice President and Chief Investment Officer, Paul Gallagher; and Executive Vice President and Chief Financial Officer, Tom Herzog. Let's begin with a review of HCP's fourth quarter and full year 2010 results. And for that, I turn the call over to Tom.

Thomas Herzog

Thank you, Jay. 2010 was an active and productive year for HCP. Highlights included generated cash, same property growth of 4.8%; reported FFO before impairments, recovery and merger-related items of $2.23 per share, which was at the upper end of our guidance; completed a substantial exit of our high-yield bond portfolio resulting in gains; made investments totaling $721 million; transitioned 31 Sunrise managed senior housing communities to Emeritus; contracted to purchase our partner’s 65% interest in HCP Ventures II, which was closed last month; signed a definitive agreement to acquire substantially all of the real estate assets of HCR ManorCare for $6.1 billion; and raised over $2.4 billion in equity offerings. In addition, in January 2011, we raised $2.4 billion of senior unsecured notes.

Given this summary, there are several topics I will cover today. First, our fourth quarter and full year 2010 results. Second, our investment and disposition transactions. Third, our financing activities and balance sheet. Fourth, our full year 2011 guidance. And finally, our 2011 dividend.

Let's start with our fourth quarter and full year 2010 results. In Q4, we generated year-over-year cash Same Property Performance of 4.7%. Paul will review our performance by segment in a few minutes. For the fourth quarter, we reported FFO of $0.64 per share before giving effect to merger-related items of $0.02 per share, compared to $0.55 per share before impairments for the fourth quarter of 2009. These results include $0.06 per share of onetime gains resulting from the sale of HCA bonds and a premium received from the prepayment of a mortgage debt investment in our hospital segment.

Fourth quarter merger-related items of $0.02 per share pertain to our pending acquisition of HCR ManorCare and include a $0.01 of acquisition pursuit cost and $0.01 of negative carry resulting from our $1.47 billion December equity offering that pre-funded a portion of the purchase price.

Turning to our full year 2010 results. 2010 year-over-year cash SPP grew by 4.8%, which was above the midpoint of our revised guidance of 4.5%. It should be noted that these results were favorably impacted by several nonrecurring items, including, among others, the payback of previously deferred rent from a Life Science tenant in April 2010; the expiration of rent abatements at our Hoag Hospital in June 2010; and working capital adjustments resulting from two senior housing portfolios transitioned from Sunrise to replacement operators. On a normalized basis, excluding the net impact from these nonrecurring items, our 2010 year-over-year cash SPP increased 2.6%.

2010 FFO was $2.23 per share before $0.19 of impairments net of recovery and $0.02 of merger-related items. This was at the upper end of our most recent guidance. 2010 Funds Available for Distribution, or FAD, was $1.89 per share.

Second, our investment in disposition transactions. During 2010, we invested $721 million as follows. Debt investments in Genesis HealthCare purchased for $290 million, a $38 million discount from the face value of $328 million; $255 million of real estate acquisitions; $135 million for construction and other capital improvements; and $41 million related to the buyout of management contracts for 27 Sunrise managed communities.

During the year, we monetized debt investments for $174 million, primarily our remaining HCA bonds, recognizing gains of $14 million. In addition, we sold real estate for $56 million recognizing gains of $20 million.

Subsequent to year end, we acquired our partner’s 65% interest in an $860 million senior housing joint venture for $137 million, and assumed our partner’s share of $650 million of debt with an average remaining term of 6.2 years at an average fixed rate of 5.66%. In addition, year-to-date 2011, we acquired four Life Science facilities and one medical office building for an aggregate of $99 million, including an assumed debt of $48 million.

Third, our financing activities and balance sheet. During the fourth quarter, we completed two equity offerings, generating $2 billion of gross proceeds, which consisted of $486 million issued in November and $1.47 billion issued in December. Net proceeds from these offerings were used to fund our acquisitions, including the Ventures II buyout and Genesis debt investments; prepay the $425 million secured debt encumbering our HCR ManorCare first mortgage investment; and purchase an additional $360 million participation in the outstanding first mortgage debt of HCR ManorCare, which was done last month, with the remainder held as cash for the closing of the HCR ManorCare transaction.

Also in January 2011, we issued $2.4 billion of senior unsecured notes in four separate tranches. The notes have a weighted average maturity of 10.3 years and a yield of 4.93%, including issuance fees. Proceeds from this offering, together with the remaining proceeds from the December equity offering and reinvestment of our existing HCR ManorCare debt investments, represent substantially all of the cash consideration required to close the HCR ManorCare acquisition.

As a result of our recent acquisition and related financing strategy, our credit metrics, after closing the HCR ManorCare transaction, will improve materially and are projected as follows: Financial leverage between 40% and 42.5%; secured debt ratio between 10% and 11%; and on a full year normalized basis, fixed charge coverage between 3.0x and 3.3x and net debt-to-EBITDA between 4.8x and 5.1x.

The improvements in our credit profile led to positive feedback from the rating agencies. In January, Moody's upgraded our credit rating from BAA3 to BAA2 and Fitch moved us to Watch Positive on our BBB rating.

We ended the year with a free and clear revolver, which expires this August. We have launched the renewal of our $1.5 billion credit facility, which we expect to close late in the first quarter on favorable terms.

Fourth, our 2011 guidance. FFO, as defined by NAREIT [National Association of Real Estate Investment Trusts], is projected to range from $2.45 to $2.51 per share. Our FFO guidance assumes the pending HCR ManorCare acquisition will be closed at the end of the first quarter and reflects $0.13 of merger-related items, which is expected to consist of $0.06 of direct transaction-related costs, $0.13 of negative carry on equity and debt proceeds raised to prefund the acquisition.

These items are offset in part by $0.05 of estimated gains on the reinvestment of our HCR ManorCare debt investment and $0.01 of other miscellaneous items. The $0.05 of estimated gains reflects the difference between the fair value and the book value of our HCR ManorCare debt investment at closing, which represents only a portion of the total unaccreted discount and is required to be recognized as a gain in accordance with GAAP.

FFO, as adjusted, which we have defined to exclude impairments and merger-related items is projected to range from $2.58 to $2.64 per share. Our FFO guidance includes the following assumptions: Cash SPP growth between 2 1/4% and 3 1/4% or 2.75% at the midpoint. On a normalized basis, 2011 cash SPP is expected to grow by 3.4% at the midpoint, which excludes the net benefit in 2010, resulting from certain nonrecurring activities, including those mentioned earlier. G&A expense of $76 million, including merger-related items; development, redevelopment and first-generation capital funding of approximately $115 million, including capitalized interest of $23 million and no acquisitions or dispositions of real estate or debt investments other than the pending HCR ManorCare transaction and the $99 million of year-to-date 2011 investments previously mentioned.

Our 2011 FAD is projected to range from $2.02 to $2.08, which at the midpoint represents year-over-year growth of 8.5%. Our FAD guidance is based on our FFO as adjusted as modified for the following items: DFL accretion of $120 million, of which $110 million represents contribution from the HCR ManorCare real estate commencing in the second quarter; straight-line rents of $54 million; amortization of above and below market lease intangibles and deferred revenues related to tenant improvements of $8 million; second-generation lease commissions and tenant and capital improvements of $63 million; stock-based compensation of $20 million; amortization of debt premiums, discounts and issuance costs of $13 million; and additional cash flow adjustments of negative $13 million on a net basis. We have provided each of these items on a per-share basis on the last page of the earnings release.

Finally, our 2011 dividend. In the first quarter, we increased our quarterly dividend from $0.465 to $0.48 per share, which represents an annualized dividend of $1.92 and a $0.06 or a 3.2% increase over 2010. In addition, our FAD dividend payout ratio is projected to decline from 98% in 2010 to 94% in 2011 based on the midpoint of our guidance and 90% assuming a full year impact from the HCR ManorCare acquisition. I will now turn the call over to Paul. Paul?

Paul Gallagher

Thanks, Tom. HCP's portfolio in 2010 had excellent performance across all five sectors and is reflected in the strong same-store growth. The portfolio experience increased occupancy in senior housing, stable cash flow coverages in the hospital and post-acute sector and increased occupancy, leasing activity and retention in the MOB and Life Science sectors. Now let me break down the 2010 fourth quarter and full year performance in detail.

Senior housing. Occupancy for the current quarter in our same property senior housing platform is 86.2%, a 60-basis point sequential increase over the prior quarter and a 30-basis point increase over the prior year. Facility margins for our senior housing portfolio continued to improve and cash flow coverage is up slightly to 1.17x.

Current quarter, year-over-year same property cash NOI for our senior housing platform was 9.4%, driven primarily by rent steps for the properties transitioned from Sunrise to new operators. The underlying facility performance of the assets transitioned from Sunrise have also seen solid improvement. For the trailing 12 months, the 11-property ARIA’s portfolio operated by Emeritus has seen property level NOI growth in excess of 10%, driven by increased occupancy, rate growth and margin expansion.

Property-level NOI for the EdenCare portfolio, which was transitioned in the fourth quarter of 2009 to three new operators is also up 10% driven by margin improvement from expense savings. Both portfolios reported trailing 12-month cash flow coverage of 1.09x.

For the retained Sunrise assets, trailing 12-month occupancy is 87.7%, representing a 20-basis point decline from the prior quarter, with mansions occupancies flat at 90.6% and non-mansion occupancy at 85.2%. Cash flow coverage for the prior quarter remained unchanged at 1.21x. For 2011, we are targeting same property NOI growth for our overall senior housing portfolio of 3.25% to 4.25%. HCP has no lease expirations in the senior housing portfolio in 2011 and only one lease, with annual rent of $324,000, expiring in 2012.

During the quarter, HCP in an off-market transaction acquired an assisted-living and memory care facility in Vero Beach, Florida for $19 million and added it to our master lease with Harbor Retirement Associates. The facility is adjacent to an independent living facility also owned by HCP and operated by HRA. The lease has a 15-year initial term, with an initial lease yield of 8.5%.

In January this year, we completed the acquisition of our partner's 65% interest in the Ventures II portfolio. The $137 million buyout was based on an $860 million asset value or a 7.7% cap rate and assumption of the partner's share of secured debt.

Hospitals. Same property cash flow coverage decreased four basis points to 4.71x. Year-over-year same property cash NOI for the fourth quarter increased 10.6%. The growth was driven by our Hoag lease with 2011 same property cash NOI expected to continue to benefit from the Hoag lease at 5% to 6% increase from 2010. HCP has no lease expirations in its hospital portfolio until 2013.

Post-acute, skilled nursing. Our owned post-acute, skilled nursing portfolio year-over-year NOI for the fourth quarter in our same property portfolio increased 2.4%, cash flow coverage is strong at 1.52x. 2011 same property NOI growth in our post-acute, skilled nursing portfolio is expected to range between 2 1/2% and 3 1/2%.

As we discussed on our last call, HCP purchased participations in both the senior term loan and the mezzanine debt of Genesis HealthCare for a blended yield of 11 1/2%. For the trailing 12 months ended September 2010, Genesis generated cash flow for a year-to-date debt service coverage ratio of 2.06x on its entire debt stack. HCP has no lease expirations in its post-acute, skilled nursing portfolio until 2014.

Medical office buildings. Same property cash NOI for the fourth quarter was up 6.6%. The growth was due to normal rent steps, continued success in our expense control initiatives and an adjustment to deferred revenue. Quarterly, same property operating expenses were down $1.4 million or 4.7% when compared to 2009. We are targeting 2 1/2% to 3 1/2% same-property NOI growth in 2011, driven by an increase in occupancy and contractual rent growth.

Our MOB occupancy for the fourth quarter increased 20 basis points to 91%, with strong leasing activity in California, Florida and Texas. During the fourth quarter, tenants represented 659,000 square feet of occupancy, of which 486,000 square feet related to previously occupied space.

Our annual average retention rate was 83.8%, our highest retention in over four years. Renewals for the quarter occurred at 2.9% higher mark-to-market rents and included seven major leases, totaling 145,000 square feet at an average term of over six years. The average term for new and renewal leases in 2010 was 54 months, an increase of over nine months over 2009 lease executions.

Looking forward to 2011, we have 1.62 million square feet of scheduled expirations including 256,000 square feet of month-to-month leases. This is a 700,000 square-foot reduction in annual leasing expirations compared to 2010. Our pipeline remained strong with 210,000 square feet of executed leases that have yet to commence and 534,000 square feet in active negotiations.

Our sustainability initiatives continue to provide positive results. Despite rate increases by utility providers in most of our markets, utility costs on a same property basis were down $200,000 in 2010 versus 2009. In addition, seven of our properties were awarded ENERGY STAR labels during the fourth quarter, which brings our total ENERGY STAR labels awarded in 2010 to 18, more than any other medical office owner. Since beginning our work with the EPA, we have been awarded 28 labels, which accounts for 35% of the total awarded in the MOB category.

We also received the lead silver designation for one of our MOBs on our Swedish campus in Seattle. That property, as well as two other MOBs in Seattle, were awarded the E2C Energy Efficiency award by The American Society of Healthcare Engineering.

Through our relationship with Faulkner Real Estate in Louisville, Kentucky, we acquired three MOBs on December 2009 in an off-market transaction. The properties, one of which is located on an existing HCP-owned campus, were purchased for $44.3 million at a cap rate of 7.6%. We also sold three MOB condominium units in Utah for $2.9 million, generating a gain on sale of $923,000.

Subsequent to year end, we acquired a facility in San Antonio on our existing North Central Baptist Hospital campus for $31.8 million at a cap rate of 7 1/2%. The project is 100% leased and is anchored by an ambulatory surgery center.

Life Science. Same property cash NOI was down 4.8% for the quarter and up 0.5% for the year. The decline in the fourth quarter was principally due to the first half of an installment payment for previously deferred rent received in the fourth quarter of 2009. Absent the payment, NOI for the quarter was up 3 1/2%.

Looking forward to 2011, we expect same property cash NOI to be flat, reflecting the impact of the second installment payment of previously deferred rent received in 2010. Excluding the second installment of the deferred rent, annual cash NOI is expected to increase between 1.25% and 2.25%.

Occupancy for the entire Life Science portfolio increased 140 basis points during the quarter to end the year at 90.3%. The increase in occupancy was driven by new leasing in the Bay Area as the portfolio benefited from growth from a cross-section of industries in the region, including biotech, medical device, energy clean technology and particularly high tech. High tech names like Facebook, Salesforce.com, LinkedIn and Google continue to expand along the peninsula. In fact, both LinkedIn and Google have expanded with HCP over the last 12 months, including a new 10-year lease with Google that was executed in the fourth quarter for 124,000 square feet.

For the quarter, we completed 299,000 square feet of leasing, with a retention rate of 96%. During the year, we completed 735,000 square feet of leasing that commenced in 2010, producing a retention rate of 76%.

Looking to 2011, we have 358,000 square feet of expirations representing only 1% of HCP's annualized revenue. And these expirations have been further mitigated since we renewed or released 223,000 square feet or 62% of the 2011 expirations.

Looking to 2012, we have 144,000 square feet of expirations, which represent only 0.4% of HCP's annualized revenue. In the fourth quarter, we acquired a $19 million redevelopment opportunity in Cambridge, Massachusetts with a targeted return on cost of 10%. With the addition of this new 66,000 square-foot project, HCP's Life Science development pipeline now consists of four redevelopment projects totaling 293,000 square feet, with redevelopment funding requirements projected at $43 million.

In January 2011, we acquired a $67 million portfolio consisting of four properties in the core Life Science submarkets of San Diego. These properties are 75% occupied with a stabilized cap rate of 8 1/2%. The acquisition increases HCP's presence in Torrey Pines and adds the UTC Life Science submarket to our portfolio. The tenancy is anchored by CovX, a subsidiary of Pfizer and Synthetic Genomics, an entity that is working on renewable energy and chemicals in partnership with ExxonMobil and BP.

Finally, on a separate note, in prior years, we captured our Medicare and Medicaid reimbursement exposure based on revenues generated at the facility level. We now calculate these percentages based on HCP's base rent from our tenants and operators, which we believe represents a more meaningful measure of our true exposure to government reimbursement.

Based on the information provided by our tenants and operators, excluding our Medical Office segment, at December 31, 2010, we estimate that 7% and 4% of our annualized base rent from our tenants and operators is dependent on Medicare and Medicaid reimbursement, respectively. After giving pro forma effect to the HCR ManorCare and Ventures II buyout transactions, our reimbursement exposure based on annualized rents would be 20% and 13% for Medicare and Medicaid, respectively. And our private pay source NOI would be 67% of HCP's annual cash flow. With that review of HCP's portfolio, I'd like to turn it back to Jay.

James Flaherty

Thanks, Paul. As you can tell from Tom and Paul's comments, HCP is firing on all cylinders. Our 2010 cash Same Property Performance reflected broad-based contributions from each of our five property sectors. On a normalized basis, our cash Same Property Performance is expected to increase by 80 basis points in 2011.

Recent rating agency upgrades reflect the strong credit metrics of the company's balance sheet. With a sector-leading total shareholder return of 28% last year, HCP has emerged from the great recession, stronger than ever, having created meaningful separation and consolidated its leadership role among all REITs.

Our board of directors' decision of two weeks ago to accelerate the growth trajectory of HCP's annual dividend increase, the 26th consecutive annual increase in HCP's dividend, underscores their confidence in our investment platform and the company's unique five-by-five business model.

HCP was an acquirer in four of its five property sectors in 2010, all of which were off-market deals and all of which will produce excellent returns. Our redevelopment program, albeit small, is generating exceptional results, with well-situated real estate. The performance of our debt platform compares favorably with any private equity or hedge fund healthcare real estate track record. Our joint venture platform has become a source of meaningful acquisitions. And our proprietary down REIT dialogue has had a significant uptick in activity.

The first quarter of 2011 is off to a very good start and likely exits by private equity of several of our operating partners may result in additional opportunities. We remain on track to close our acquisition of HCR ManorCare by quarter end.

As Tom noted, we have pre-funded substantially all of the required $6.1 billion consideration, and HCR continues to perform exceptionally well. HCR Chairman and CEO Paul Ormond and I will be with a number of you this Thursday in Midtown as guests of Barclays Healthcare Facilities research analyst, Adam Feinstein.

Let me provide a first time ever multiyear forward-looking HCP perspective. In 2011, we project the combination of contractual rent bumps, outsized contributions from our Sunrise transition portfolios and the acquisitions of HCP Ventures II and HCR ManorCare will produce an 8.5% increase in funds available for distribution.

For 2012 to 2014, we expect that a mid-3% cash Same Property Performance result levered at a BBB+ credit profile of 40% debt, 60% equity should generate organic compound annual FAD growth of almost 6%, funding meaningful cash dividend increases while simultaneously reducing the company's payout ratio. On top of this organic growth, HCP's attractive cost of capital will enable us to externally grow earnings via accretive acquisitions.

I want to acknowledge two outstanding contributions to HCP. First, after more than 25 years as a Director of HCP, in fact, as one of the company's original board members a quarter century ago, Max Messmer has announced his decision to not stand for reelection to the board. Max's counsel and insight have been invaluable and will be missed. We wish Max and his family all the best in the years ahead.

Finally, 2010 was an exceptionally active year for our HCP colleagues. We reviewed several transactions and I am as proud of the deals we did not do as those we did. An amazing effort was put forth by the HCP team, involving tremendous personal sacrifice. And for that, we say thank you and long may you run.

We'd now be pleased to take your questions. Marissa?

Question-and-Answer Session

Operator

[Operator Instructions] You do have your first question from the line of Michael Bilerman from Citi.

Michael Bilerman - Citigroup Inc

Jay, I'm here with Quentin Velleley. Jay, I just want to go to your questions, I guess, on just acquisitions and thinking about the balance sheet in terms of pre-funding. I think a lot of the activity last year, you made sure that the balance sheet was always in a position to be able to capitalize on those acquisitions and really brought leverage down meaningfully prior to doing the deal. So I guess, as you look at the landscape today, it sounds like the ManorCare transaction and some other things have potentially accelerated some discussions that you're having. I think you referenced more down REIT transactions and perhaps there's some larger scale things that are starting to come more alive. So I'm just questioning, how you will think about that from a capital perspective and where you sort of stand on the deal side.

James Flaherty

So it's kind of two separate questions, is that fair?

Michael Bilerman - Citigroup Inc

Yes.

James Flaherty

Well let me say on the capital side, we spent a lot of time with the rating agencies in the last several months, in fact, I'll be there tomorrow. We've committed to them to have a long-term target debt-to-equity ratio of 40% to 60%, 40% debt, 60% equity, and Tom took you through what the reset key credit metrics: leverage, secured debt ratio and fixed charge coverage ratio will be. And we've got a tactical band that we can move around in, but that's the long-term commitment that we've made to the credit markets, both with respect to the rating agencies and then also putting our money where our mouth is, with respect to the introduction for the first time in our 25-year history of standard REIT covenants in the unsecured debt issuance we just did, so that's where we’re at on that. Obviously, we're very fortunate we've got a very attractive cost and capital available to us, so that's good. And Tom mentioned, we're out in the market with a relaunch of the revolver and that's nicely oversubscribed at this point. So that's how it addressed the capital side of the equation. With respect to the deal side, I raised some eyebrows, I guess, two Novembers ago on a call when I indicated that I thought the next 12 months, which would have been calendar 2010, could see deal volumes in excess of the three prior years combined. With the benefit of hindsight, that was conservative. It was more like 4x. So as we sit here today, it's a very, very active deal environment and I would suggest that as big a year as 2010 was, 2011 will exceed that. And again, that's based on where we sit here today at the fun part of 2011.

Michael Bilerman - Citigroup Inc

And I guess just from an equity perspective on the capital side, we should expect that you'll probably pre-fund some of this prior to transactions getting announced?

James Flaherty

No, I think, our history has been, with the exception of the HCR ManorCare deal was to basically take the deals to the market after they've been announced. If you think about up until actually the December deal. But if you think about the last couple of deals, they were always after, I think the June deal was after we had acquired the portfolio that we transitioned to Emeritus from Sunrise. And after we had made the commitment to buy out the 27 properties that we transitioned from Sunrise. If you think about the November deal, that was after we announced about $330 million at face of Genesis debt investment and then, obviously, the December deal was after we'd announced the HCR ManorCare. So I think our view is that we want to give the shareholders the opportunity to kind of assess the transactions and that's in the spirit of being good long-term partners. That's the right way to do that.

Quentin Velleley - Citigroup Inc

It's Quentin here. Just one quick question on the DFL interest accretion from the ManorCare deal. Tom, I think you said it was $110 million in the guidance number, which annualized would be almost $150 million. Had that number changed at all from the time of the deal when you announced the accretion and when you gave guidance?

Thomas Herzog

No, it's the same. Unchanged.

Operator

And your next question comes from the line of Rich Anderson from BMO Capital Markets.

Richard Anderson - BMO Capital Markets U.S.

Question on why you think pre-funding is a reasonable thing to consider a merger cost. When you pre-fund, there is a benefit to you for that, that is to protect yourself from any changes in the capital market. So just curious what your thought process is in guiding people to think of pre-funding as a onetime item?

James Flaherty

Well you sound like -- you're specifically talking about the HCR ManorCare, Rich?

Richard Anderson - BMO Capital Markets U.S.

Yes.

James Flaherty

Let me just say that the transaction that we entered into in December was very attractive, and we were motivated to effectively lock in the spread, which we've now done between the equity and debt issuance which is why we've got the confidence. With respect to my perspective on a multiyear, we can talk not first quarter of 2011 or all of 2011, we can actually look out over the next four years and can talk with confidence about what we think the results at HCP will be. In fact, I would suggest to you that as impressive as the ability to do that is, the more impressive point is the extremely high likelihood that we will deliver exactly that result. When we think about that, take a step back and think about, first, the left-hand side of the balance sheet and then the right-hand side of the balance sheet. On the left-hand side of the balance sheet, you've got 80% of the investment portfolio comprised of long-dated triple net leases with minimal lease expirations over the next several years, diversified by four property sectors, with high quality credit tenants like Amgen, Genentech, Hoag, HCA, HCR ManorCare, Emeritus and Brookdale, master leased with very attractive annual bumps. The other 20% on the left side of the balance sheet is our on-campus MOB portfolio where we've got 85% retention and the majority of those campuses are HCA campuses. Now if you look at the right side, given the answer to your first question, having locked in the financing, what we've got is a completely match funded BBB+ credit profile balance sheet with no floating-rate debt. So the bottom line is there's just not a lot that’s going to even possible to go bump in the night on either the left side of the balance sheet or the right side of the balance sheet over the next several years and that only speaks to the organic growth. Now on top of that, we obviously will have external bumps. So that's a little bit about the philosophy. Let me have Tom pick up on the second part of your question, which I think was related more to the treatment of the pre-funding negative carry with respect to our guidance. Tom?

Thomas Herzog

Rich, all that we are seeking to do is to provide a run rate number for you guys to assess, so we've shown the FFO, including the merger-related and excluding the merger-related costs. So you can choose whichever one you'd like to use. But as I look at it internally, I think about it on a run rate basis, and it's helpful for me to carve out the premerger funding costs, as well as like the gain that we recorded on the HCR ManorCare debt investment so that it neutralizes it for those items.

Richard Anderson - BMO Capital Markets U.S.

So you're going on record to say you want the Street to follow the premerger and pre-funding costs range?

Thomas Herzog

That's how I'm looking at it internally. And if I were in your shoes, I probably would look at it that way. But if you disagree, then I've provided the other numbers as well.

Richard Anderson - BMO Capital Markets U.S.

The other question is I was kind of going through last quarter's transcript and there was some reference to -- you hired Kendall to review idea structures for independent living. I wonder if there's been any progress there.

James Flaherty

A lot of hard work and effort. Stay tuned.

Richard Anderson - BMO Capital Markets U.S.

Can you just walk me through the strategy. I guess it's again back to pre-funding but you bought additional Americare debt, $360 million. What's the thought process there?

Thomas Herzog

Rich, we are seeing a lot of cash on our balance sheet as a result of the pre-funding of the equity and the pre-funding of the debt. And by buying this tranche of the HCR ManorCare debt, that pays LIBOR plus 1 ¼%. And as you can imagine, we're comparing that to earning about three or four basis points in treasuries. So we get to pocket that spread and that was between $700,000 and $800,000 so that's also netted out in the premerger numbers that I've described.

Richard Anderson - BMO Capital Markets U.S.

Lastly, on the Sunrise transition. Your first year rent with Emeritus is 19% above the previous year if I'm doing my math right. Does that suggest that the rest of what is still a sizable Sunrise portfolio is that far kind of below what you can be getting from a rent perspective?

James Flaherty

Let me answer a question with a question first. You mentioned Emeritus. We had four portfolios transitioned.

Richard Anderson - BMO Capital Markets U.S.

The most recent one, the 27.

James Flaherty

We haven't been out a year yet on that.

Richard Anderson - BMO Capital Markets U.S.

You mentioned $30.3 million of rent, which is a $1.5 million annual increase if I read it correctly, which would suggest a 19% increase versus last year on an annualized basis.

Thomas Herzog

I think, if you could go into the remaining 48, is that kind of where you're heading?

Richard Anderson - BMO Capital Markets U.S.

Yes.

Thomas Herzog

I think you've got kind of a tale of maybe three cities there, if you will. A number of those 48 are DFLs. I want to say that's about 11. So they're going to be more debt-like in terms of the result in HCP's P&L. Moving away from that, you've got a very nice mansion portfolio and then the remaining Brighton Gardens. It’s the Brighton Gardens that are most representative, Rich, of the four portfolios we’ve previously transitioned from Sunrise. So I think if you go to the tale, in my example of the tale of three cities, so the first, you got to carve out the DFL piece, the 11. Of the remaining 37, as Paul indicated, you've got attractive 90-plus percent occupancy with very good metrics in that mansion portfolio and then you've got the remaining Brighton Gardens portfolio that's got a different run rate right now, not dissimilar quite frankly from the previously four portfolios that we've transitioned. So that's how I'd assess that.

Operator

And your next question comes from the line of Adam Feinstein from Barclays Capital.

Adam Feinstein - Barclays Capital

I have Bryan Sekino here also. Jay, maybe just to start with a question on ManorCare, just a two-part question. I guess, one, the trends in nursing home stature have been very strong since you guys announced this deal with the benefit from RAD4 [ph]. So as you guys think about your coverage and everything, I guess, were you already assuming that benefit? I'm just curious if it's been better than what you guys were thinking as you thought about your coverage ratios. And then at the same time, just how are you guys thinking about the purchase option on the OpCo? I guess, is that something that you anticipate figuring out over the next 12 months or should we think about that longer term?

Thomas Herzog

And again, Adam, thanks to you and Bryan for putting on your production on Thursday in New York. With respect to the performance of HCR ManorCare, we had the benefit, since we signed the deal on December 13, of effectively having a window on the majority of their fourth quarter. So I think the last internal financials we had a chance to review prior to signing would have been through November 30. So we had two months’ actual results. So we had, obviously, a pretty good view as to the likely outcome of the fourth quarter. They have not finalized their fourth quarter results, by the way, nor has Genesis, but we're privy given our investments there to both that. So we had between -- I would say between where we were in the quarter on HCR ManorCare and the benefit we had from the internal financials we were seeing as a result and the dialogue we were having relative to Genesis. Obviously, we had an exceptionally good window on what was going on in the business. So to answer your first question, I would say that, that is not a surprise to us. With respect to the option, which is set at a $95 million strike price to acquire 9.9% of OpCo, I think we're more likely to resolve that at or slightly before closing the transaction. So that's likely to be more a March sort of trigger on that decision.

Bryan Sekino - Barclays Capital

Jay, just another question here. Just shift gears a bit. Now you've completed the investment in Joint Ventures II and you have more flexibility with total ownership there, can you give us an update on what your plans are for those assets?

James Flaherty

Again, unfortunately, there's not much of an update. We were motivated to consolidate our ownership position in the real estate as a first course, we negotiated that and finished that in December as Paul mentioned. We just closed on that a couple of weeks ago. So now that we've got that, we're spending a lot of time looking at our alternatives. It's a good portfolio. It's performed notwithstanding the real rough economic period that the country has been through. It's clicking along at 90-plus or -minus percent occupancy and approaching 40% margins. It's NOI on an annual basis. I think, I mentioned in a previous call, was $68 million the year we bought it, it was $64 million last year. So we're down about $4 million. But still notwithstanding given that the independent living composition of that portfolio, still, I think, a very satisfactory performance. We were excited about what could be in store for that portfolio going forward. And a lot of that is going into our thinking and evaluation right now. So I suspect by the time of our next call, we'll have some resolution on what our plans are there.

Operator

And your next question comes from the line of Jarrell Royalty [ph] from Morgan Stanley.

Unidentified Analyst

So post acute care was, obviously, the big add to your portfolio in 2010. As you look to 2011, what property-types seem the most attractive? And also what cap rates are you seeing in those property types?

Thomas Herzog

Well I think post acute will probably be the biggest addition in 2011 because the deal, while we announced it in December, is not expected to close till the end of the first quarter. Of course that could change. But as we sit here today, I would think that, that would be the bigger deal. Away from that, if you followed our company with our five-by-five business model, we don't have pre-prescribed allocations to the sectors or things like that. We're really very opportunistic not only across the five property types but also within the product types. For example, let me just point out one. If you went back to this call 12 months ago, we had well in excess of $2 billion of HCP shareholders’ capital, 13%, 14% of the balance sheet invested in basically high yield debt investments. Pro forma for ManorCare now, that's been dramatically reduced. And I suspect may get reduced to zero here given some of the indications that are in the marketplace regarding Genesis. So I think you ought to think about that in the context of what’s happened to the high-yield market during that time frame. We obviously were able to put on a fair amount of risk investments in the teeth of the recession and then as the capital markets improved, I was struck by an article just last week, February 8, in the Wall Street Journal that said for the first time in the history of the capital markets, the yield on junk bonds had broken through 7%. It was 6.9%, 7.6%. So I think we've been able to kind of move in and move out of some of these property types and product types and create a material shareholder value for the benefit of our shareholders, and I expect we'll continue to do that.

Unidentified Analyst

Another thing I wanted to know was if you can comment on the implications of -- so there's been recent M&A activity within the post acute care space. And I was wondering, what are the implications of this activity, particularly, as it pertains to your portfolio, perhaps specifically towards HCR ManorCare.

Thomas Herzog

Well, I'd defer to the Chairman and CEO in terms of the strategic implications to HCR ManorCare of post acute M&A activity in that space. We do have a number of our operating partners are either subject to or rumored to be the subject of exits on the part of their private equity owners. I predict kind of at the next call we'll probably be talking about some of those. So that's an activity level that we're watching but we think there could be some additional favorable upside to our portfolio in 2011. But as it relates to the strategic implications for HCR ManorCare, I don't think that would be appropriate for me to comment on that.

Operator

And your next question comes from the line of Jerry Doctrow from Stifel, Nicolaus.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

This may be more for Tom. You touched on sort of -- I guess, Jay touched on, I think, how much of the balance sheet is triple-net leased and 20% I think was MOBs. I wanted to just clarify a little bit how much of the triple-net lease is really straight-lined and how much is not. Because I think there was an item, I guess, specifically on Emeritus which we thought maybe was straight-lined, but it wasn't straight-lined in the quarter. I'm just trying to clarify how much of the portfolio we should think of as sort of having variable rents from an FFO perspective and how much should not. Does that make sense?

Thomas Herzog

Jerry, the vast majority of it is straight-line. It's only in a few circumstances where we have a lease that has less certainty where we've decided not to straight-line it. But the vast majority of our leases are straight-lines.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

Away from the Sunrise portfolio, would there be others or is it primarily the Sunrise portfolio?

Thomas Herzog

I think it’s just pretty much Sunrise.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

And on Sunrise, some of that is still interest rate sensitive, so are you picking up a little bit more growth on that because of those formulas?

Thomas Herzog

Jerry, can you repeat that?

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

So I thought that some of the Sunrise leases, which is the one through these sort of third parties. The formula there I thought was somewhat interest rate driven from past calls. So are you going to pick up a little bit more ramp on the Sunrise portfolio because of that formula?

Paul Gallagher

If interest rates increase, yes, we will be the beneficiary there.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

And they've already picked up a little bit. Paul, I think you said on the MOBs that you actually had picked up improved margins, I think, utilities and other sorts of things there. Should we think of that continuing or sort of the margins where they are and if that make sense.

Paul Gallagher

Well for the past two years, we've been able to reduce expenses. It's something that we focus on continually. I would think that kind of where the margins are at today is probably a good number to be modeling.

James Flaherty

Jerry, one thing I would add to that though is there are a handful of leases that are CPI based that don't have floors and under GAAP you're not allowed to straight-line those. So there will be a handful but it wouldn't be a lot.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

Okay. Not that material?

James Flaherty

Right.

Operator

Your next question comes from the line of Rob Mains from Morgan Stanley (sic) [Morgan Keegan].

Robert Mains - Morgan Keegan & Company, Inc.

Just a couple of questions, Jay. Couple of sort of investment opportunities that you haven't deployed much lately. I know you're doing a little bit of development in Life Sciences, any appetite for development? There's been sort of a paucity of supply in the sector?

James Flaherty

In Life Science, Rob?

Robert Mains - Morgan Keegan & Company, Inc.

In any of the sectors.

James Flaherty

Well, actually we got -- this is one of the many curses I think of being large. We’ve actually got some pretty exciting, attractive development opportunities. In senior housing, we've got just coming online this year with Horizon Bay, a gorgeous community down in the Hyde Park section of Tampa. Absolutely fantastic. Very excited about that. And then, we've committed to one or two others in the senior housing space, including one down in the Germantown, Tennessee. Is that right? In medical office, I think there the play is more redevelopment. We've got a couple going on in California, one up in Northern California, one down in Southern California, San Diego submarket. And then in Life Science to date, that has been largely a redevelopment play, particularly up in the Redwood City submarket. We've had some very good success there. And we've done a modest amount out in San Diego. But we continue to look at the Life Science space from a development standpoint. I think that's likely to be more Northern California than San Diego. And I think the driver there is the San Francisco -- the Bay Area Life Science market has tightened quite a bit, tightened good in the last couple of months for a whole bunch of different reasons, some supply went out of the market, some supply got converted to another user, non-Life Science and then there's just been some good absorption. So that's something we're looking at quite closely right now.

Robert Mains - Morgan Keegan & Company, Inc.

But it sounds like sort of more the opportunities that you see around the acquisitions side than development, that could be a significant change in what the growth strategy is?

James Flaherty

No, I mean, we're very excited about the redevelopment, again, I started my comment by saying it's one of the curses of being large you could have the greatest -- we'll take you down to this Hyde Park community in Tampa. But it's going to do great, what were the return kind of profiles there?

Paul Gallagher

North of a 13% return on cost.

James Flaherty

Yes, but it's probably not going to move the needle a whole lot anytime soon. So we're staying active there. It makes us better attuned to what's going on in the markets in our five sectors and makes us better acquirers, things like that.

Robert Mains - Morgan Keegan & Company, Inc.

The institutional joint ventures. If I remember right, most of you entered into post CNL. Is that an opportunity -- obviously you're exiting one of them that you still see that kind of receded given what's going on with some of the potential partners and your ability to own the assets outright?

James Flaherty

I think that's certainly a potential opportunity what we've got left there. We actually set up three immediately after closing CNL. The one was sized initially at about $1.1 billion. That was the senior housing joint venture, which we just acquired, the 65% joint venture partner. The other two were focused on medical office building, one of those was more slanted towards off-campus and one was more slanted to on-campus. And those ownership splits are 80% to our joint venture partner, 20% to HCP. So those are certainly additional opportunities we’ve had dialogue around that topic with the partner but to date have not moved forward on that sort of activity.

Robert Mains - Morgan Keegan & Company, Inc.

And is there any interest in initiating new joint ventures?

James Flaherty

No. Right now, we had a lot of approaches given the amazing success we've had in our debt platform. Were we to reload there, we’ve had a lot of people approach us about throwing in with us. But I think for now, our balance sheet is really in great shape. We’ve got amazing access to capital and I think it'd be an unusual although not impossible scenario where we would prospectively create a new joint venture.

Operator

And your next question comes from the line of Omotayo Okusanya from Jefferies & Company.

Omotayo Okusanya - Jefferies & Company, Inc.

Did you happen to give out the number for your same-store growth expectations for the Life Sciences portfolio in 2011?

James Flaherty

I think Paul did. Paul took you through -- Tom gave you the headline number and Paul took you through the components. But Paul, could you just...

Paul Gallagher

We said it was going to be flat. We also had a second installment of some deferred rent. X that, second installment we would expect it to come in at 1 ¼% to 2 ¼%.

Omotayo Okusanya - Jefferies & Company, Inc.

X that, it would be 1 ¼% to 2 ¼%.

Paul Gallagher

Correct.

Omotayo Okusanya - Jefferies & Company, Inc.

Just when I look at Page 15 of the supplemental about -- it gives all the details on the Life Science portfolio. Change in rents negative 10% in the quarter. And then I take a look at the TI and the LCs as well that are still pretty high. I'm just kind of wondering overall in this business just what you're generally seeing out there in regards to the ability to kind of sign tenants and to know why there continues to be a lot of pressure on rental rates because the change in rent has now been negative for quite a couple of quarters.

Paul Gallagher

Well, first off, we don't have a lot of space in the portfolio either this year or next year rolling. If you look at that 9.7%, it was really comprised of three different groups, two of which we’re negative, one of which we’re positive. We've actually seen the space that was signed probably seven years or so ago coming to market today. Seven years ago, they were signed at extremely high rents when the market was peaking. And now, coming out of recession, we've actually started to see rents firm up and increase albeit just not as much as where it has been historically from a high standpoint.

Omotayo Okusanya - Jefferies & Company, Inc.

Just switching over to the MOB portfolio and they were the same specifications of 2 ½% to 3 ½%. You did about 2.7% in 2010. Just wondering why you feel a little bit more bullish about that business in 2011 versus your performance in 2010.

Paul Gallagher

Well, I think, the big piece here is the guys have done a very good job of pushing out lease terms. We have 700,000 square feet less space to lease this year so the focus on what we will be leasing is going to be that much easier for us to be able to hopefully drive occupancy. Occupancy and normal rent steps is the component that's going to be driving same-store growth.

Omotayo Okusanya - Jefferies & Company, Inc.

Jay, just a quick one for you. I know you’ve touched on this briefly. But a few points you made about opportunities with private equities. If you could just talk a little bit more about what you're seeing in the market right now.

James Flaherty

Well, I just think we're -- if you take a look at our portfolio as being a good window on some of the private equity investments. A lot of them are three, four, in some cases, going on five years in duration. And obviously the private equity model is a model built on taking exits after a period of time to return capital to the LP investors. So I just think it's a combination of the fact that we're well along in terms of the duration of some of those investments. The markets have gotten better. And so I just think it's normal course. You should expect a large number of exits, some of which will be quite legendary I suspect by the time we’re done with all this.

Operator

Your next question comes from the line of Karin Ford from KeyBanc.

Karin Ford - KeyBanc Capital Markets Inc.

Another question on ManorCare as we're nearing closing here. The option that you have to pay the Carlyle equity piece in cash instead of in HCP stock. With your stock price materially higher than the fixed price you had struck there, can you talk about your thoughts on exercising the option and paying in cash? And if so, how you think about funding it.

James Flaherty

Well, first off, it's HCR ManorCare not to be confused with ManorCare. Secondly, we do have that option. I think, Karin, that's probably a decision we're going to make at or slightly before closing, so it'd be premature to speculate on that. But what is absolutely not up for speculation is the fact that we have committed to the rating agencies to fund this acquisition in a mix of 40-plus or -minus percent debt, 60-plus or -minus percent equity. So were that piece of the funding for the acquisition to go away, it would be replaced with a similar balance sheet component so we're not going to change our stripes or anything like that with respect to the commitments we've made to the rating agencies and to our new debt investors as of a month ago.

Karin Ford - KeyBanc Capital Markets Inc.

The guidance assumes though that Carlyle’s paid in stock?

James Flaherty

Yes, it does.

Karin Ford - KeyBanc Capital Markets Inc.

Final question is just on the line renewal. Can you give us indicative terms on what you're seeing as you're negotiating that just general size and rates relative to your current terms?

Thomas Herzog

Well, obviously, the revolver that's been renewed is an old revolver at a different time in the market. But there's no question that revolver rates and terms have improved quite a bit over the last six to nine months. We're looking at a $1.5 billion revolver and as to the rates right now, we are out in the market, and I'm going to hold back on providing those rates at the current time that we're currently marketing it at. But I think I'd add that the revolver rates have improved but the credit profile of HCP has improved as well, so we expect to get kind of a two for here, Karin, in terms of benefit because of both of those dynamics.

James Flaherty

Probably the terms of these things are being pushed out a bit where they were quite short over the last year or two. We're looking more back in the range of maybe a four-plus-one.

Thomas Herzog

If I could just take a moment, just one other thing in my script that I misspoke on something in the FFO guidance. I said that the G&A expense of $76 million was including merger-related items. I should correct this so you don’t all model it wrong, I intended to say $76 million excluding merger-related items.

Operator

Your next question comes from the line of James Milam from Sandler O'Neill.

James Milam

Jay, I think you alluded to this, but it sounds like you're expecting to get the capital on the Genesis, that investment, back in the second quarter from what you're hearing on their progress with the CMBS offering?

James Flaherty

We've modeled that the investment stays outstanding for the full year, is that right? So in terms of what you have in your guidance, it's full year. Like I've alluded to, there's an awful lot of M&A activity out there right now so I'd be surprised if that debt investment is remaining in our portfolio by year end. I think I'll leave it at that.

James Milam

And then you guys gave some good color about the dividend, your expectations for growth. But looking out, is there some sort of -- as your cash flow increases, is there some sort of payout ratio that the board is thinking about as a target over the long term as a mix between keeping leverage low and just a long-term ratio that they expect the payout to be?

James Flaherty

Not at this point. We're, obviously, now moving into an environment where we've completed a complete, complete and total repositioning of the company investment portfolio that on the front-end of that repositioning involved a lot of older legacy assets that were very high yielding going away via disposition and being replaced with newer assets with a higher growth profile. The combination of that, while it was a fantastic trade, did put a little bit of pressure on the dividend payout ratio. Coming out the back-end of this five-year repositioning, now that we've got all our ducks lined up the way we want them, both property type and then within the property types and we can layer over the HCR ManorCare. Now we're going to have a much faster ramp in terms of FAD growth. And again as important or maybe more important as the much faster ramp in FAD growth is the likelihood that it'll be achieved which goes to the fact that there's just not a lot moving around on either side of our balance sheet right now. So as we kind of clear through that in the next 12 months, I suspect that will be a very good discussion for our board to have. We've signaled the message already this year that we’ve materially upticked the trajectory in the annual increase of the dividend. We'll come back and relook at that at the end of this year, in January of next year. If things go according to plan, I suspect you'll continue to see that sort of behavior on the part of our board.

James Milam

The last one for Tom. You guys disclosed $0.03 of loan cost amortization from the bridge loan. Is that all in interest expense in the first quarter or does that amortize over a longer period of time?

Thomas Herzog

No, there was just a small amount of it in the fourth quarter of 2010 with the balance in the first quarter of 2011.

Operator

[Operator Instructions] You do have your next question from the line of Dustin Pizzo from UBS.

Dustin Pizzo - UBS Investment Bank

Jay, just more broadly what are your views on Medicaid reimbursement risks as we look beyond 2011? And I recognize that your exposure in Texas is pretty minimal, but do you have any specific thoughts there on what we'll see given the recent budget proposals that would cut reimbursements by, I guess it was, something like 33% at the long-term care facilities and 10% to hospitals?

James Flaherty

Well, I think with respect to Medic – you said Medicare reimbursement, right?

Dustin Pizzo - UBS Investment Bank

Medicaid, but feel free to comment on Medicare as well.

James Flaherty

Medicaid, we have next to nothing in terms of Medicaid exposure in Texas. So that's really not a concern of ours. I think Medicaid has been a concern of ours, witness what we've done in terms of divesting portfolios of skilled nursing communities that have a lot of Medicaid exposure in them. And witness what we've done with respect to who we elected to move forward in the post acute space. It was the platform that enjoys the highest quality mix, i.e., the lowest Medicaid exposure. So that's absolutely on our minds. Now we have as a result of the HCR ManorCare acquisition, we have increased our Medicaid exposure but we've done that with a very fine operator who's got a track record of performing exceptionally well through all sorts of different cycles and happens to have the lowest cost setting and on top of all that, we've got a very, very healthy entity level coverage, 1.5x. So I think we've spent a lot of time thinking about that and the triple-net nature of that lease with the coverage and the quality of operator would be where we would be kind of hanging our hats, if you will.

Operator

And I'm showing no more questions at this time. So I would like to turn the call back to Mr. Jay Flaherty, Chairman and CEO.

James Flaherty

Okay, everyone. Thank you for your time very much. Thank you for your interest in HCP. For those of you that we don't see Thursday in New York, I suspect we'll see most of the rest of you down in Hollywood, Florida at Mr. Bilerman's do next month. So thank you for your time and your interest in HCP.

Operator

Ladies and gentlemen, that concludes today's presentation. Thank you for your participation. You may now disconnect. Have a great day.

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