Good day, ladies and gentlemen, and welcome to the Second Quarter 2015 Ventas Earnings Conference Call. My name is Derik and I will be your operator for today. At this time, all participants are in a listen-only mode. We shall facilitate a question-and-answer session at the end of the conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I'd now like to turn the conference over to Ms. Lori Wittman, Senior Vice President of Capital Markets and Investor Relations. Please proceed.

Thank you, Derik. Good morning and welcome to the Ventas conference call to review the company's announcement today regarding its results for the quarter ended June 30, 2015. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meaning of the Federal Securities Laws. These projections, predictions and statements are based on management's current beliefs, as well as on a number of assumptions concerning future events. The forward-looking statements are subject to many risks, uncertainties and contingencies, and stockholders and others should recognize that actual events may differ materially from the company's expectations, whether expressed or implied. We refer you to the company's reports filed with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year-ended December 31, 2014, and the company's other reports filed periodically with the SEC for a discussion of these forward-looking statements and other factors that could affect these forward-looking statements. Many of these factors are beyond the control of the company and its management. The information being provided today is as of this date only and Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Please note that the quantitative reconciliations between each non-GAAP financial measure contained in this presentation and its most directly comparable GAAP measure, as well as the company's supplemental disclosure schedule are available in the Investor Relations section of our website at www.ventasreit.com. I will now, for the last time, turn the call over to Debra A. Cafaro, Chairman and CEO of the company.

Thanks, Lori, and good morning to all of our shareholders and other participants, and welcome to Ventas' second quarter earnings call. This morning, we are happy to share a strong Q2 results, discuss our pending strategic transactions and describe how we expect to finish the year strong as a higher-quality faster-growing company. Then, Ray Lewis will provide his last update as our President, giving you a report on our portfolio performance and a sneak peek at Care Capital Properties. Bob Probst will finish by describing our senior housing operating and financial results and our outlook for the balance of the year. Following our remarks, we’ll be happy to answer your questions. It's obvious that we had an incredibly productive quarter. We drove financial results, accelerated progress on our spin-off, took meaningful steps forward on our Ardent acquisition and expanded our international profile, all at the same time. It's always fun to start with strong results. In the second quarter, we generated normalized FFO per share of $1.18, representing 5% growth compared to the same period last year. Cash flow from operations increased 20% and our second quarter dividend per share grew 9%, in line with our long track record of sustainable recurring dividend growth. We are also pleased to report that we’ve achieved major milestones in our pending strategic moves to spin-off most of our skilled nursing portfolio into CCP and enter the US hospital space. We believe these innovative decisions will deliver significant benefits for our investors, lenders, customers and employees. Starting with our spin-off of CCP, a pure play skilled nursing REIT, we are poised to complete the transaction in the coming month, subject to applicable approvals. We recently filed our amended Form 10 with the SEC and believe it is close to final. CCP is well underway…

Thanks, Debbie. Our diversified and productive portfolio of 952 senior housing post acute and hospital triple net lease assets accounts for about half of our NOI and delivered another quarter of strong and stable performance. Cash NOI growth in the triple net same-store pool was 1.6% in the second quarter of 2015 and 3.2% year to date versus the comparable 2014 period. Cash flow coverage in our same-store triple net lease portfolio for the first quarter of 2015, the latest available information, was strong and stable at 1.6 times. Each of our senior housing, skilled nursing and hospital portfolios reported stable trailing 12 months coverage at 1.3 times, 1.8 times and 2.2 times, respectively. The reimbursement environment remains stable. In the first quarter, we told you that CMS has recommended increases of 1.4% for skilled nursing, 1.2% for LTCHs and 1.7% for IRFs. These recommendations are typically finalized in August and we expect increases along these lines to be implemented in October for the 2016 fiscal year. So our high-quality triple net portfolio continues to deliver reliable performance. Next, let me turn to our market-leading Lillibridge MOB business. For the second quarter 2015, NOI in the total consolidated portfolio of 359 properties was $93.2 million, an increase of 35.8% over the second quarter of 2014. Performance was driven by solid same-store results and the addition of 83 properties in January. Occupancy in the total consolidated portfolio was up 80 basis points to 92.5% and margins increased by an exceptional 320 basis points, reflecting the quality of the properties we acquired. Of the 83 newly acquired MOBs, 37 are long-term triple net leased. And of the remaining 46 multitenant buildings, we have insourced management on 37 assets so far and expect to insource five more by year end. So we are…

Thank you, Ray. I’d like to start by reviewing our second quarter performance for our SHOP portfolio, followed by a discussion of our overall Ventas Q2 financial results. In terms of SHOP, I really enjoyed meeting with our operators, touring our fantastic assets and digging into this great business a bit more deeply over the last several months. And I’m very pleased to report accelerated growth of this portfolio in the second quarter. NOI in the 234 properties in our same-store portfolio increased 4% in the second quarter of 2015 over the second quarter of 2014. This performance was achieved despite the lingering effects in the second quarter of a severe flu season. Second quarter same-store occupancy growth versus prior year was solid at 50 basis points and occupancy increased in both Atria and Sunrise portfolios. Year over year rate growth was also strong at 3.2%, driven by the Atria portfolio. Expenses grew in line with revenue in the quarter, as wage increases were partially offset by benefit savings and procurement initiatives. As a result, same-store SHOP NOI margins of 33.6% in the second quarter were stable versus prior year. On a sequential basis and consistent with seasonal patterns, same-store occupancy declined in the second quarter versus the first. Sequential same-store NOI was up 3.9% as seasonal costs associated with flu and harsh weather in Q1 abated in the second quarter. As we look to the back half of the year, for the same-store SHOP portfolio, we expect occupancy to trend higher versus second quarter levels. We also believe that current rate levels will hold and expenses will move in line with revenue. Therefore, overall, we expect same-store SHOP NOI growth to approximate or exceed 4% in the third and fourth quarters. Turning now to the 305 assets in the…

[Operator Instructions] And our first question will be from the line of Nick Yulico, UBS.

For the skilled nursing portfolio, there is one that closed, recently someone else purchased and there are several other ones out there, you didn't announce any acquisitions, are you guys have to wait procedurally for the spin of Care Capital before you are willing to buy a skilled nursing portfolio out there today?

I’ll turn that over to Ray, after I just say that we are able to purchase any asset and we're working on pipeline opportunities for Care Capital because it is a strong external growth story.

Nick, Debbie is 100% right. I mean, I think as we’ve said in the past, there are differentiated strategies with respect to acquisitions. We’re going to target the regional and local operators and we've been working with the Ventas team to build a pipeline of those opportunities. So we're going to hit the ground running when we spin-off. But if there were large national operator opportunities as well, I'm sure Debbie and her team would be looking at those opportunities too. So we're proceeding full steam ahead and bucketing the transactions in the appropriate categories for the go forward.

And then one another Care Capital spin question, originally you were talking about raising debt at Care Capital and dividending cash to Ventas, concurrent with the spin, and you did a bond yield recently, is that plan now off the table, how should we think about that?

You're absolutely right. There is certainly a plan for CCP to raise its own debt and that's gone very well as we discussed in our prepared remarks and then distribute that to Ventas. We will use that to reduce near-term maturities, increase our duration of our debt and reduce our debt net-net. So that is on track and remains unchanged.

And sorry, can you remind me what the dollar amount would be for that?

We, I think, said before something in the $1.3 billion range, but again it's going to be finalized upon completion.

And then just one other question on the quarter, it looks like your investment income was little higher than normal, I think you said about you got some income from the sale of some healthcare bonds, could you just quantify what that impact was for the quarter?

Sure. We sold about $75 million [worth of] healthcare fixed-income securities. This was part of our broader disposition planning, indeed its part of our normal course of business as we invest in loans and obviously sold those off in time. That contributed about $6 million in income in the quarter. So that's what we discussed in the prepared remarks.

Your next question will be from the line of Smedes Rose, Citigroup.

I wanted to ask you just a little on the senior housing operating portfolio, it looks like in your top 20 markets that the sequential growth from first quarter to second quarter was particularly strong in New York and made up quite a bit of the overall increase. I was just wondering if there were some sort of – is it something that's going on there where you saw better pricing power or some sort of on the move-in side or something that was happening sequentially in the New York market for you?

I think you are right to say New York continues to generate great performance. We have an advantage position in that market, particularly within the Atria portfolio and we've seen occupancy growth, rate growth and that generates continued positive growth in the quarter sequentially and year over year. So that's the biggest piece of our business. As you know, it's performing very well.

Debbie, just as you’re further down the road with Ardent now, I know you have said in the past that you hope Ventas will become a leader in hospital consolidation. Do you have a sense as to maybe where after you close – where you’d like to see that portfolio in a year? Would you be happy if your investment goes from 10 to 20 hospitals or from 10 to 15 or how you are thinking about the scope of that opportunity?

As we've talked about, we love the Ardent investment. We’re excited to close it. All the pieces are falling in place and we believe it will be a platform for growth in the way that Lillibridge in medical office and Atria in senior housing has been. I think in hospitals, there is this huge market and we will have opportunities. And it will be 6% of our NOI when we close and I could see that growing over time 10%, 12%. But we're focused on quality and we want to have hospitals that have leading positions in their markets and in the right markets and have pricing power and sort of growing operations. And that's what Ardent is and we want to continue to go down that path. So we’re very excited about it as you say and I do believe and hope that we will grow.

Your next question will be from the line of Jordan Sadler, KeyBanc Capital Markets.

Wanted to see if you could maybe shed a little bit more light on what pro forma leverage would look like. I think the recent number was helpful post CCP spin, I think that was FFO going down $0.20 to $0.22 quarterly and I was just curious what sort of assumed as it relates to the capital structure in that $0.22? So I guess pro forma leverage and then the assumption to get to the $0.20 to $0.22 on the cap structure?

In terms of our leverage, Ventas pro forma post both Ardent and CCP, what’s inherently assumed is a net debt to leverage slightly above 6 times. That is in part why we reinforced our commitment to the 5 to 6 time leverage in the tools in our toolkit to get there. I think as I noted in terms of the dividend from – our distribution from CCP, that's going to be a net reduction in debt. But obviously, the strong balance sheet that CCP is going to have to pursue its acquisition strategy is going to net-net be modestly leveraging for us. So that's how we end up at that slightly about six times number.

And the $0.20 to $0.22 reflects that dividend from CCP, essentially?

That’s correct, yes. [indiscernible] interest expense arising from the debt reduction is included.

And then in the press release there is – you talk about sort of the funding of Ardent coming from a few different components, including obviously equity. Any thoughts surrounding – and I'm not asking you about that. Just around asset sales and what the scope of that might look like, any opportunity to pick as a source of funding as well?

You’re right on point there. We’ve already sold $600 million of assets this year. And as Bob talked about different clubs in our bag, I’m not a golfer, but I know what that means and that means we have a lot of opportunities to recycle capital as part of this as I spoke about portfolio enhancement as well and capital recycling. And so we’re very confident in our position.

The next question will be from the line of Michael Knott, Green Street Advisors.

It's Kevin Tyler here with Michael. Just now that your cost of capital advantage is virtually gone, your shares are trading closer to NAV as we see it, how do you think about approaching capital allocation?

Good. First of all, I'm absolutely enthusiastic that our cost of capital advantage is going to return and that's part of the value creation opportunity that I talked about and the quality of the portfolio that we have. And so I’m excited about that. And as I mentioned, we have managed this company and grown through every possible capital markets reinvestment and economic cycle. And we always find a way at Ventas to deliver value and results. And we do it again and again and again. And so I feel good about our ability, whether it's through capital recycling or other ways to continue to grow and drive value. I think as we said about the hospital deals, we think we’re skating to where the puck is going. We think that's great risk-adjusted return. We are building a new business in an area where we can have an advantage and clearly can be profitable for shareholders. And so I think we’re taking all the right steps to position the company for continued growth.

Just shifting to the UK for a second, can you talk about your appetite in that market currently? Obviously, seeing the $90 million or so that you put to work there. But can you just give us some color on that opportunity set and if you have any concerns surrounding some of the staffing, nursing shortages that we've read about?

Well, again, the UK market shares a lot of the characteristics that we talked about in terms of being an attractive international market, which are obviously demographics, policy support for healthcare and seniors, very high and efficient capital markets environment so that you can match fund and effectively hedge your cash flows and a big enough market, addressable market for us to make all the brain damage worth it. And so we obviously have identified the UK. We had our Spire hospital investment which we are very excited about, Spire being the second largest private hospital operator in the UK, publicly traded with over £1 billion equity cap and that's going well. Now, we’ve identified Canford as a partner there in the care homes market. And as I mentioned, we did our first deal with them in January and now did a follow-on deal with them already to help them grow their business. And so we like that market, we believe we will expand there overtime, but obviously it's on a case by case basis and we've established some good footprints there and we hope to grow those.

And our next question will be from the line of John Kim, BMO Capital.

Follow-up on Jordan's question. So far you have mentioned capital recycling as the source of funding the Ardent acquisition, but this year you have been basically match-funding acquisitions with dispositions, excluding Ardent. So should we be expecting an acceleration of asset sales in the third quarter?

In terms of funding Ardent, we’ve raised $0.5 billion in bonds and we also have a five-year bank loan. And as Bob mentioned, we raised $100 million in equity during and after the quarter in terms of our ATM. So we've got that funding in place, but as we go forward, again, we have talked about a modest amount of additional asset sales and so on as part of our capital recycling and portfolio enhancement initiatives.

I think Bob mentioned on prior calls that this would be a leverage-neutral transaction. So I just wanted to clarify is that a day one leverage neutral or is it after a certain period?

Good question.

Thank you for clarifying. It will not be day one leverage neutral. We think it's appropriate to be able to show with the permanent capital structure to talk about it that way. But based on the financing, as just described by Debbie, it will be slightly leveraging in the short run, again that's why we come back to the discussion around our target from a long-term and short-term capital structure perspective.

Debbie, you mentioned Equity Group as an important partner for you and your plan to grow together. Given the company's illustrious property background, do you have any idea or an inclination if they are attracted to hospitals as a real estate play?

It's important to note that EGI, which for those of you who don't know, is the private equity firm founded and run by Sam Zell. 70% of EGI’s investments are in non-real estate businesses. And they have an impressive and extensive track record of investing success across a wide variety of industries, including energy and healthcare. And so they are the equity sponsor of Ardent OpCo, our tenant. And of course, we will be partners then in helping the OpCo grow, but we are the real property partner and we will own all the real estate at the closing and presumably participate in owning additional real estate as Ardent identifies additional acquisition opportunities. And EGI will be the equity sponsor on the operating company side.

So would it surprise you if they got interested in real estate in the future or have those conversations not happened?

We are clearly the best owner of the real estate as a public company, just like EQR is the best owner of apartments on the real estate side and so I think the interest really there in Ardent is in the tenant operator.

And then I had a question on your disposition disclosure, which I know is relatively new and I appreciate that. But there have been six assets that you sold during the period that had a zero cap rate and I just wanted to understand if that meant there was no operator at these assets or if the facility was basically cash flow negative.

Not cash flow negative, just not income producing. It was an infinite return, but we didn't have that little sideways 8 on our typewriter.

And the next question will be from the line of Todd Lukasik, Morningstar.

I was just wondering if you guys could comment anymore on the triple net deals done in Oregon and the UK on the senior housing side, specifically with regards to the terms of the leases and what the lengths and any rent escalators that the tenants may have agreed to on those.

We will do.

So the UK we talked about which was the Churchgate follow-on from Canford, which I think Debbie walked through, which is we think [indiscernible] between 2% and 5%. That's the follow-on deal with Canford. And a small deal we did in Oregon was with an existing customer, Avamere, which we added to their existing master lease that we have in place and that I forgot the specifics, but it is north of 2%.

And the lengths are longer term with renewals?

Yeah, the Churchgate, as can be typical in the UK, is longer and the Avamere one I'm guessing is at least 10 years.

And then do you guys have any guidance with regards to the dividend payout ratios for CCP and Ventas post spin?

Well, I think, again good question, dividend growth is an important part of our value proposition and again we are very proud of our track record of 9% dividend growth for the last 10 years. What we’ve said is on a combined basis after the spin that the combined dividend will go up by at least 10%. We've said in the Form 10 for CCP that the expectation is that there will be 75%, 76% of FFO targeted, normalized FFO targeted as the dividend payout ratio. Bob mentioned our current is about 67% and so there is room for growth there and we’ve hovered in and around that 70%-ish plus or minus overtime at Ventas.

And the next question will be from the line of Vincent Chao, Deutsche Bank.

Just wanted to ask a question about the supply here. It doesn't seem to have impacted results in the SHOP portfolio here this quarter and sounds like you still expect 4% growth in quarters three and four. But just curious if you could just maybe provide some qualitative color on what you are seeing on the supply side. It does seem like that went up quite a bit versus last quarter.

I’m going to ask Bob to comment in greater detail, but I think the important thing to lead us with is also that the demand side is growing. And the demand side is growing inexorably through the demographics and the fact that over 85 population is the fastest-growing part of the US population and within that Alzheimer's unfortunately and dementia care are two of the growing subsegments of the care that we provide. And so I think it's very important to think about the demand side and balance that as you look at the supply side. And I would turn it over to Bob to talk about the supply question.

We mentioned in the prepared remarks that our inventory construction percentage is about 3.2%. That compares favorably to NIC. I think that reflects the advantage position we have in places like New York as we talked about earlier. There has been an uptick in certain markets for sure as Nick has talked about, as we observed. But again, it's spotty and we like our portfolio relative to where we see that growth. So net-net, not only do we feel good about the growth in the second half as I talked about, but as we think about the supply/demand equation, how that plays out overtime, we continue to be bullish about the SHOP portfolio.

Just maybe another question going back to the triple net portfolio, the 1.9% – 1.6% same-store NOI growth, I know that does bounce around quarter to quarter and in some cases there might be some fees in there like last quarter. But is the 1.6%, was there anything driving it down the other way this time or is that sort of a normalized run rate outside of fee income that you might get every once in a while?

So you are right to point out that from anyone quarter to another we may have more or less fee income in that portfolio. And you look at it over a 12-month period, it typically averages out. In this quarter, we actually had a tougher comp last year because of some fees. So that had a little bit of an impact on the growth rate, but again if you look at it year-to-date, we’re at that 3.2% range which is in line with what is expectation for a normalized rate would be.

And the next question would be from the line of Todd Stender, Wells Fargo.

For the new multitenant medical office, the properties acquired in the HCT acquisition, can you go into some of the potential upside that you are looking at, particularly the group of assets that I think Ray talked about that you plan to internalize property management by year-end?

I think we've already internalized property management on most of them. And Todd, do you just want to comment on where you're driving value once we take things over from third-party managers?

As Ray pointed out, of the 83, 37 of them are again basically single tenant triple net leased assets. But the portfolio that we’ve insourced to date, namely 37 with the remaining five, we’re bringing – obviously the leverage platform of those assets and putting in place, if you would, not only those best practices, but many of our cost-saving initiatives which is obviously going to result in driving NOI, while at the same time we see lease up opportunities in the portfolio as well.

Have you guys bifurcated what that potential NOI contribution could look like on a percentage basis, just relative to what the same-store pool looks like?

No.

Todd, while I have you, can you speak to the new medical office building you guys acquired in Indianapolis just to hear what the – it looks like the expected cash yield is 6.3, but maybe with the trailing number was and any occupancy numbers?

Yes, we’re excited about the most recent acquisition in Indi; it’s a follow-on really to a long-standing almost 12-year relationship we’ve had with Ascension. Ortho Indy is a leading orthopedic practice in Indianapolis and in place, it has been I would say in this current facility for about a dozen years and we have remaining 11 year term on the lease. And as you said, we are in it at 6.3 with escalators and we see it a great contribution to our overall portfolio in Indi where our current occupancy in that portfolio is around 94% and we continue to get great same-store growth out of that portfolio. So good relationship with not only Ortho Indy who is already in our building, but Ascension overall which as many of you know is a leading Catholic health system around the country.

And the next question will be from the line of Juan Sanabria, Bank of America.

I was just hoping you could speak to some of the large M&A we have seen in the insurer space, had them in CIGNA today, and any potential increased negotiating leverage they may have on some of the operators that could impact profitability in areas like Medicare Advantage. Have you had any of those conversations or do you have any thoughts you could share?

Very interesting question. For all the real estate people on the call, I would just tell you healthcare is so exciting and we are so lucky to be in at the crossroads of real estate and healthcare. So whether it’s the managed care mania that you're seeing with a lot of consolidation there, vertical integration with United and Catamaran PBM, whether it's CVS buying Omnicare which are two different businesses or hospital consolidation as we’ve talked about, it is such a dynamic time to be in healthcare. And that's part of what is so exciting. In terms of the specific question you asked and I’ll get off my soapbox is that when we talk about what kind of hospitals we want to invest in, we talk about quality and we talk about why is Ardent a great portfolio. And in that case, it is more of an analysis of dominant market position which is what Ardent has in areas that have good employment profiles, good demographic profiles, et cetera. And so because Ardent has that dominant market position, we feel very confident in their continued ability to drive pricing and volumes.

With regards to maybe skilled nursing, I know we have seen some issues with pressures on and growing share of Medicare Advantage. Any thoughts on that with what we're seeing on the consolidation?

I would say that Medicare Advantage continues to be a bigger part of the skilled nursing and post acute world. And the successful operators will be the ones who are able to manage into what will be a shorter length of stay, but by showing that they can deliver outcomes that are attractive to managed care providers and therefore increase the pipeline of patients that come from managed Medicare, because those are still very attractive patients for the providers.

But our strategy, Juan, is really to back those operators that are consolidating in their local markets, you think about Kindred for instance where they have targeted the cluster markets and they are building out the entire post acute network with home health care, rehab, skilled nursing, LTCHs, and that really positions these operators, whether they are regional operators or national operators, in those markets to line up well with the managed care providers and provide an entire suite of post acute solutions.

And just one other question from me. There's been some press articles about your potential interest in a piece of GE Healthcare Finance unit. Maybe you can't speak to that specifically, but if you participate in getting loans in some form, would the view be to having an angle towards or eventually getting a hand on the real estate or is this maybe another opportunity that maybe we should think about a little differently?

First of all, my mother told me never to believe everything you read in the paper. So I’ll start with that. And we do have – look, we don't comment obviously on field rumors as a matter of policy. We have a very small part of our portfolio that is a loan portfolio, as Bob talked about, and we use that sparingly. And we are very focused on being an equity REIT and building the kind of business that we've had consistent with our strategy and really focused on the these value creating activities with Ardent and CCP and that's where our focus is.

Our next question will be from the line of Derek Bower.

I just had a couple follow-ups. On CCP, I believe in the Form 10 the pro forma for CCP in the first quarter was $0.72, which is about $0.18 on Ventas' share count. So could you remind us what the difference is again between that $0.18 and the $0.20 to $0.22 that Bob talked about? Is that just G&A synergies?

Derek, part of what you have to remember is that the pro forma and so you’ve got adjustments being made for example that you have the acquisitions that were made in the beginning of the year and pro forming those versus other changes that are made. So I don't know that that's really a good run rate, but there is, as well, some G&A synergies that are in there.

Derek, to follow on that, you have three topics: you have the underlying NOI, you have the G&A implications and then the capital structure implications. And the number I quoted you I think is our best view of the real pro forma.

Impact on Ventas.

Impact on Ventas, very specifically, correct. And those things don't always follow the accounting rule, so we had some differences there.

Then just going back to the CCP pipeline, Ray, can you talk about, as you guys are starting to work through the deals, what cap rates you are seeing in the market right now, whether it be for one-off assets or if there's anything different between the one-off and a small portfolio?

The real property market continues to be firm; people are attracted to our assets for the reliability and growth in cash flow that they have provided, the base nature of the assets. And so from a cap rate standpoint, I would say cap rates have stayed relatively consistent with what we've seen in the past where high-quality senior housing and medical office is in the 5.5% to 6%, and even in some cases a B portfolio could be in that range if it has other attractive characteristics. And in terms of skilled nursing and post acute, really it's in that 6% to 9% range, depending on what it is and the credit and structure and so on.

But as it relates to CCP and the skilled nursing deals, that would be, I imagine, the higher end of that range, so 8% to 9%. Is that the range that you guys are thinking about for new deals?

Definitely the positive arbitrage in terms of external growth opportunities for CCP.

I think that's right, Debbie. And so I think you're probably trending towards the upper end of that range, that 7.5% to 9%. These are operators where they have fewer capital alternatives and we’re able to get a little bit better pricing power there. So that's sort of what we're seeing and it still has some really nice positive net investment spreads and that is part of the strategic thesis and the opportunity that we are looking to capitalize on.

Are these primarily with existing or new tenants, or new operators that you are bidding on?

Both.

And then just last one from me. On the other US markets within your portfolio, can you just remind us again what's driving the double-digit EBITDA or NOI growth this quarter and last?

Sure. It's a relatively small portfolio. You rightly pointed out that this performed very well. We've got some great assets in that pool and some for example a new development from us in Cape Cod is doing very, very well. So you have very specific sort of drivers than, but overall some strong assets in that pool.

And the next question will be from the line of Rich Anderson, Mizuho Securities.

I thought I was early in the queue; apologize for keeping you going. Do you have any idea, maybe to Ray, where you think CCP will trade from an implied cap rate standpoint coming out of the gate?

What a great question? That's for the market to decide.

Thank you. Yes it is, of course.

I've got my roadshow coming up and I'm going to do my best to tell the story and hopefully the market will recognize what a great company we have.

Yes, obviously its market driven, but I didn't know if you had a collar that you were thinking about as you prepare for your roadshow. I guess the answer is no.

We are going to do our best to tell the great story we have and we will let the market value that.

One of the differences between this quarter and last quarter in terms of language was in the – and I know we’ve talked about a little bit more leverage in Ardent, but there was a leverage neutral language in the last quarter as far as the funding and now that has been removed. Is that a function of your stock being down 10% this year or is that just clarifying the language a little bit better based on what you just said earlier about long term versus short term leverage?

It's just a timing issue.

So nothing has changed between then, last quarter and this quarter in terms of how you are thinking about funding it?

We continue to think about accretion for example on a permanent leverage neutral basis.

And then maybe a question for Todd, some of the messaging has changed in my mind as it relates to medical office, specifically on versus affiliated off. I think more and more I'm hearing people say nicer things about affiliated off-campus. 72% of your portfolio is on-campus. I'm wondering if you think that that might show up a little bit in your strategy going forward. Your pure HCN likes off-campus better than many others, I'm wondering where you stand on that issue.

I think, Rich, for the past 20 plus years, we've always believed that affiliated is in fact the number one and key goal in all of this, irrespective of whether this it’s on or off. It just so happens that we build a strong portfolio with a strong group of providers. As you know, 96% today is on and/or affiliated. I think what's important though is the quality of those that are affiliated, because in fact 89% of our portfolio, those that we’re affiliated with are investment grade or better in terms of credit. So we put a lot of stock in who we partner with by the very nature of the hospital and their affiliation with the health system. We’re very comfortable going off-campus, HCT acquisition, we were excited about because the affiliation that they have in those health systems, some very leading providers around the country as you know. So again, what’s key in the off-campus is not only its affiliated, but it's of a size and what we would say have a comprehensive nature in terms of clinical services and quality they can deliver to the marketplace. So we have what I think is a great balance between 70 on and 30 off, roughly, and I think we're going to continue to see something of that same balance. Obviously, there is a lot of talk about off-campus, but freestanding and off and not affiliated or affiliated with a wrong system, I'm not so sure what you have.

Affiliated with whom is important, on campus with whom, important.

Seeking the right partners has been the nature of this business as far as I’m concerned since we got in it 30 years ago.

Next question is from Daniel Bernstein, Stifel.

So just a real quick question on seniors housing and the SHOP portfolio, it looks like management fees went down a little bit in the quarter. Did management fees tweak lower because of the performance in SHOP at all or is that just some seasonality that is not clearly visible?

It's a small number. We think you will see fluctuations over time as we just have accruals in any one quarter that will vary. So I wouldn't say it's reflective of any sort of underlying trend.

There's no reset of any management fees at the Sunrise?

No.

No.

And then, Debbie, you said you were skating towards the puck and I think that you are referring towards the hospital. So what kind of opportunities are you seeing out there on the hospital landscape? Are you seeing more consolidation yet? Do you think you're going to see more consolidation? CMS last week or two weeks ago put out some more experimental bundled payment systems out there. So is the investment in Ardent itself, are you seeing – do you think there's going to be more hospital consolidation going forward the same way we are seeing on the insurance side and elsewhere in the healthcare systems?

Yes, I think we believe that the hospital segment is $1 trillion annual revenue market that is highly fragmented. It is rapidly consolidating and there aren’t enough of quality assets in public hands like ours. So that's the basic thesis of the investment.

Todd, I guess maybe in a related question, we’ve heard or seen more monetizations maybe in a trickle of medical office coming out from the hospital systems. Are you seeing more of those opportunities to buy more medical office? And on the same token are you seeing more development opportunities coming from the hospital systems as well? It just seems like MOB monetizations are just ticking up a little bit and I wanted to get your thoughts on that.

I would agree hospital related or hospital owned monetizations are a tick up, but to be honest with you it's not huge over prior years. That is on the acquisition front. And on the development front, we're starting to see some increased activity that is coming out of what I would call some historical highs and then going to historical lows here. Again, planning, but what really is converting into real deals is significantly down from the 2007, 2008 timeframe, that is development. So we will see some activity, but we don't see it to be as clearly as robust as it was in the past.

And on the monetization, I believe we are as well positioned as anyone with our 400 plus clients to take advantage of increased monetization that may occur. And so that's good. And we will continue to mine that as Todd has done for a long time.

One quick question, Debbie. One of your S&P 500 peers, Simon, announced a $2 billion buyback with your shares down some. Under what circumstances would you want to buy back your shares? Would that be an appropriate strategy for Ventas or is that not an appropriate strategy for healthcare?

I think our jobs as managers and as boards obviously are to be thoughtful stewards of shareholder capital. And over time that means as we have done and created a lot of value by growing and diversifying and building a high-quality portfolio, there may be times in the market where other strategies are appropriate such as dividend increases, et cetera. And basically our job is to make sure that we are pulling the levers that are appropriate at a given point in time to maximize shareholder value and maintain a good strategy and a high-quality company that can continue to deliver over and over, as I said it's the hallmark of Ventas. I think we have one more, so with that we’ll clean up.

Final question is Michael Carroll, RBC Capital Markets.

With your recent Canford investment, did you say where those were located in the UK? And if I missed this, were those existing assets or were those developments?

They are newly constructed homes that are in and around London.

And then how deep is Canford's platform and how big can you grow that relationship in the near-term?

They are very experienced long-standing operators of senior housing in the UK. And we believe we can continue to potentially grow with them. Over time, I think they've managed over 70 homes during the last 20 years. They are very experienced.

I know the call is long, so I will stop there.

Well, that was a good cleanup. And I want to thank everyone for joining us today and as always for your interest in our company. We really appreciate your support and your interest and look forward to seeing you again soon. Thank you.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great weekend.