Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Health Care REIT Fourth Quarter 2007 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. And again, I'd like to remind everyone that today's call is being recorded. And I would like to now turn the conference over to Ms. Katherine Shipstead [ph] of the Financial Relations Board. Please go ahead, ma'am. Unidentified Company Representative - Financial Relations Board Thank you. Good morning, and thank you for joining us today for Health Care REIT's fourth quarter 2007 conference call. In the event you did not receive a copy of the news release distributed late yesterday afternoon, you may access it via the company's website at healthcarereit.com. I would like to remind everyone that we're holding a live webcast of today's call, which may be accessed through the company's website as well. At this time, management would like me to inform you that certain statement made during this conference call are not historical and may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Health Care REIT believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in the news release and from time-to-time in the company's filings with the SEC. Having said that, I would like to now turn the call over to George Chapman, Chairman and CEO of Health Care REIT, for his opening remarks. Please go ahead, sir.

Thank you, Katherine. First, I will briefly go through our achievements for 2007, as this is the year-end call. One, we received... we were very pleased to receive debt upgrades from Moody's and Fitch to Baa2 and BBB flat respectively. And we're also very, very pleased at our timing in expanding and extending our unsecured lines of credit to $1.15 billion while at the same time reducing our interest cost 20 basis points to LIBOR plus 60. It gives us quite a bit of dry powder in what is becoming a very interesting investment environment. I'm very pleased to be added to the S&P Midcap 400 Index in November. And again, we were very successful in raising $900 million of capital through three transactions as well as through our dividend reinvestment plan. Our solid 6% FFO per share growth provided in… the shareholder return of 9% in a very down year for rates, again was a very welcome. I want to talk mainly today though about our growth platform and our portfolio. So clearly, people have an understanding of how our portfolio is changing… how it has changed and how it is going to change in the next year or so. One, last year our growth platform drove net investments of $1.1 billion, and at the end of 2007 we had one of the most diversified portfolios in this sector with 65% of our revenues derived from private pay. And in terms of skilled nursing and assisted living, especially standalones, we continue to drive that percentage down. At year-end, our total skilled nursing and assisted living concentrations constituted 32% and 21% of our portfolio respectively, down from 44% and 34% two years ago. And unlike some of the analysts, we do believe skilled nursing and assisted living, especially assisted living,…

Good morning, everyone. I'll start by reviewing our fourth quarter investments, discuss current market conditions, and then finish with a discussion on our portfolio and reimbursement outlook. During the fourth quarter, we completed a total of $298 billion of gross investments. This included senior housing acquisitions of $21 million at an average initial yield of 7.5% with an expected yield of 10.2%, MOB acquisitions of $31 million at an average yield of 7.5%, capital expenditures and loans of a $127 million at an average yield of 10.1%, and funded CIP of a $118 million with an expected average initial yield upon conversion of 9%. Our development activity, which is presented in detail in Exhibit 9 of the earnings release, currently includes 37 projects and a total commitment of $1.1 billion. We started an additional $292 million of development projects this quarter and have 34 million of projects completed with an average initial yield of 9.8%. These include a commitment amount of over 200 million for the construction of several [inaudible] and two medical office buildings, reflecting the extension of our programmatic financing strategy to medical facilities. On the disposition front, we had $25 million of asset sales and loan payoffs during the quarter that we sold at an average cap rate of 6.6%. In terms of market conditions, we're seeing some slowing of volume in the second half of 2007. Cap rates appear to be increasing across asset types with a credit market dislocation and our ability to finance transactions via considerable investment opportunities for this year. Turning to the portfolio, our portfolio composition is included in Exhibit 1 of the earnings release. At December 31, 68% of our portfolio was invested in senior housing and care and 32% of the portfolio was invested in medic facilities. We currently have…

Thanks, Ray. Good morning, everyone. Our fourth quarter normalized FFO per fully diluted share increased 4% to $0.80 from $0.77 in 2006. Normalized FAD per fully diluted share increased 1% to $0.75 from $0.74 in the comparable quarter last year. Please refer to the earnings release for a detailed reconciliation of FFO and FAD to net income per common share. We paid a dividend for the quarter ended December 31 of $0.66 per share, the company’s 147th consecutive quarterly dividend. The Board also approved a new quarterly dividend rate of $0.68 per share or $2.72 annually commencing with the May 2008 dividend, which represents a 3% increase above last year's rate. Our gross revenues totaled $133.5 million for the fourth quarter, up 56% versus the same quarter last year with 89% of gross revenues coming from rental income. Our interest expense increased to $35.5 million from $24.4 million last year, primarily as a result of debt assumed through Windrose and Rendina/Paramount transactions, interest from our convertible debt offerings completed in November of '06 and July of '07, and slightly higher average borrowings on our line of credit. Fourth quarter G&A came in at $9.3 million, representing 7% of quarterly revenues. We also remain comfortable with the improved quality of our loan portfolio and made no addition to the $7.4 million loan loss reserves during the quarter. There were several other items of note during the quarter. In particular, first, other income of $6.1 million in the quarter included a benefit from $3.9 million in income from [inaudible] equity provision, which was received as a part of the recapitalization transaction with Signature Healthcare that Ray previously mentioned. One other item of note in the quarter was that we recorded $11.7 million in gains on the sale of assets, which are recognized…

Thank you, Scott. Let me wrap up briefly and then we will open for questions. About five years ago, we made a very strong commitment to full spectrum investing and during the last 15 months we completed our platform that contains development and property management capabilities. The results have been gratifying as we've increased our medical office building portfolio percentage to 25% and we're also quite optimistic that our efforts to grow our acute care investment will continue to gain traction as we are beginning to make inroads with strong systems providers and development groups throughout the nation. Let me give you a few examples of medical facility investments. One is in January of this year, we purchased a 40-bed all-private suite acute care hospital with an attached 40,000 square foot medical office building. These facilities are on a 6.3-acre site, which should allow expansion for the development of additional health care or senior housing facilities. The facility is operated by physicians and the management company. As an example of where Health Care is going, meals are available from a gourmet menu and robots deliver lab samples equipment and prescriptions anywhere in the building. In the East, we're investing in a new 246,000-square foot medical office building within a 40-acre site anchored by a major health system that will offer customer focused health and wellness services, providing a continuum of care including traditional medical services, wellness, radiology, therapy, lab testing, fitness, [inaudible]. And we also expect to complete investments in two new hospitals with attached MOBs, medical office buildings; one in the Midwest and one on the West Coast. Both would be projects in rapidly growing areas. Both hospital systems are academic and medical centers, which are joint venturing with physician groups and it is attempting to extend their reach…

Thank you, sir. [Operator Instructions]. We'll go to Rich Anderson with BMO Capital Markets.

Hi. Thank you, and good morning everybody.

Hi, Rich.

I guess the... just first, you mentioned the shadow pipeline of $3 billion. Did you mention… and I might have missed this, like what’s sort of the source of that? Where is all that coming from? Why is it off market to you?

Well, a lot of it, Rich, when we are mainly doing long-term care, came out of our relationship programs, lines of credit where people commit… once we do the first projects, they commit to bringing us virtually all of their projects over a multi-year period. We have extended that to some degree in perhaps a different day by... in the acute care space and then we’ll lease space by forming relationships both with health systems and developers and other providers. So it's maybe a little looser than our lines of credit in the long-term care space, but we think that in both cases we add to the predictability the certainty of doing investments.

Okay, fair enough. When you talk about what… you said your sort of standalone SNF exposure, did you say it was 10%, I can't remember the percentage now.

It is right now the way we reported. It is at 32%... and 21%, but when we take out... when we really consider combination facilities, which we think are stronger assets generally, we drive these standalone SNFs, skilled nursing, and assisted living down to 24% and 10% respectively.

Okay. So 24% SNF and 10% assisted living?

Correct. And I would expect that to… over the next three to five years to… at least in the SNF area to continue to go down as we do more combination facilities and frankly do a few more standalone SNFs. But that's sporadic, so you have to look at it over a longer period.

I guess that was the question. I mean where do you see those percentages going, but I guess clearly it's a push downward but...?

Well, I would hope to get SNFs... skilled nursing down to 15% on a standalone basis at some point. About the time I tell you that, I then find a really attractive set of skilled nursing or assisted living, maybe some of those are right for adding other facilities to sites and making them into combination facilities. So we start down and we go up and we go down, but it's going to ratchet down toward 15% over the next three years or so.

Okay. You say that in the same breadth of how insensitive your coverage are to changes in Medicare reimbursement. So it's sort of like you like it but you don't like it, and I'm trying to reconcile that.

Well, to some degree we are dealing with the perceptions of the capital markets. We tend not to agree with many of the analysts in terms of skilled nursing. Skilled nursing in fact has been a winner in the Medicare rationalization process. They're very much favored because they provide good effective care. On the other hand, we tend to like campuses because we think over time that's going to be a much more sustainable platform than standalone any things, okay. So we just think diversification of a balanced portfolio is the best way to go.

Okay. On cap rates, can you sort of quantify the rise you're seeing and maybe break it out amongst your key property type?

As I indicated in the call last quarter, we think cap rates were at the lowest in mid 2007. And what we're seeing now are deals coming back to us that we previously quoted on and they didn't get done and they're coming back to us with higher cap rates. If you look at the NIC key financial indicators and their mean cap rates, the most recent data that they had with a little bit mix. IL was 7.4%, AL 9%, SNFs 12%, and CCLCs 9.1%, and that was for the third quarter of '07, reflecting deals that were negotiated several months earlier.

Okay. So maybe a rise in the 50 basis points to 75 basis points range?

I'd say 25 to 50 jointly.

25 to 50. Last question, Scott, you mentioned the word bridge in your financing alternatives. And obviously that's not a really great word these days. So maybe you can sort of talk about your thought process behind considering bridge Financing.

I guess I just used that as a generalization to make the point that I think our model is conservative in that we assume the traditional blend of debt and equity but we're looking at all the options available to us and I think you can assume we'll be intelligent in making our decision.

Okay. It sounds good. Thanks, Scott.

Thanks.

We'll go to Kristen Brown [ph] with Deutsche Bank.

Hi. Good morning, guys.

Good morning, Kristen.

I was hoping you could talk a little bit about the competitive landscaping and how it might vary by asset type in terms of acquisitions?

I'll start but then Ray will then jump in too. I think it's frankly a lot less competitive than it was because of the capital constraints that we have a lot… few early financial buyers going in. If they're coming in, they’re still perhaps coming in more on the MOB side, medical office building side and more assisted living and the independent living I suppose, because those are more of a real estate component. But we've seen a diminution of competition. So our job and those of our colleges I guess and the other health care REITs who have funds is to make the best allocation of those funds and trust that over time, given the defensive nature of healthcare, the inelastic demand for healthcare, that reasonably priced funds will be made available to all of us to continue pursuing very good investment opportunities. Ray, you want to add something?

Yes. Kristen, I would think that this is a very good time for us because as George alluded to, financing options are more limited than they were even six, nine months ago, so that's good news. The negative is that we anticipate transaction volumes will be down because a lot of the acquisition and refinancing activity occurred at the market peak in 2007. However, as mentioned earlier in the call, we approach our investment strategy a little bit differently using a programmatic relationship oriented approach and given the size shadow pipeline we’re very bullish about the opportunity to invest this year.

I mean you seem pretty confident in terms of volumes, but just if you don't close the volumes that you’re looking at, what's the earnings impact there?

I didn't quite hear all of that.

You’re breaking up, Kristen. Did you say basically the volumes will impact their earnings this year?

If you don't meet your targets.

I guess that the point would be would be more backing [inaudible] the guidance that we gave and you can see it would be consistent with the volume we saw in 2007. And I think we're very comfortable in attaining the guidance buffers we put out at this point given the potential deal volume we are seeing.

Okay. And then what do you estimate the interest savings will be with the ratings upgrade?

[inaudible].

Sorry. I just asked what do you estimate your interest savings to be from the ratings upgrade?

From our ratings upgrade? I think when we saw a relative improvement in our debt cost to capital of approximately 20 basis points.

Okay. That's it, thanks.

Yes.

We will go to Jerry Doctrow with Stifel Nicolaus.

Good morning.

Good morning, Jerry.

I had a couple of things. Just one specific beforehand, non-cash comp for the quarter, do you have that and is that going to be good run rate to go forward? I know you mentioned the $2.3 million or whatever it was in 1Q, but what was it for the quarter?

$1.3 million, it’s in Exhibit 13.

Okay.

It was $1.298 million in the fourth quarter, and I think generally that’s a reasonable run rate, again adding that $2.3 million one-time in number to that in the first quarter or '08.

Okay, thanks. [inaudible] dismissed I guess last night. Getting broader, you’re obviously stepping up the development. I kind of have a couple of questions there. One, I don't know if you can give us a sense of sort of when that… the $360 million and the $400 million are kind of going to deliver? Is it sort of spread over the year or is it weighted [ph] one way the other? And you might want to think about putting out a quarterly schedule just to help us do the modeling because it could make a meaningful difference quarter-to-quarter depending on how the deliveries are at timed.

Right. We agree, Jerry. We are actually… for everyone's benefit, we are working on an enhanced supplement and hopefully if we get our act together we will get it done in this first quarter. The number, the $361 million as we looked at it, it is more heavily backend loaded in the year.

Okay.

If you had to model, I would assume that fairly two-thirds of it would be in the latter half of the year.

Okay and then any color on '09, it’s further away obviously, but...?

At that point it’s pretty variable. We include in our… that exhibit the mandatory conversion date. So projects tend to move. It could be earlier, occasionally it can get pushed back later if there is weather delays or permitting delays. We’ve had a few instances, but...

Okay. We will take a look at the detail. And then you are doing a lot of funding of AL, IL, CCRCs, your occupancy numbers were up, which is good, but there's obviously been a lot of nervousness in the market about impact of the housing market and those things. So I was wondering if you could just give me any color… more color from your portfolio about how you think that business is doing, risk from the housing market, and kind of your confidence in going ahead and ramping up development at this point?

Clearly, any residential projects have had some effect from these housing issues. But we've really been very pleasantly surprised to see that the... especially in the buy-in projects that we are doing quite well and we are moving ahead very steadily. It's sort of hard to know exactly whether the projects are being impacted. They're moving ahead at a reasonable pace to give us the right results. So much of it is anecdotal. I just read something about one of our projects down in the Southeast yesterday that came out that suggested that the project was not at all being affected by the housing market. That happened to be in a particularly strong housing area generally. I mean I can't help… we haven't really noticed material effects on our CCRCs. I might add to that, about half of the... more than half of our CCRCs, at least the way we're looking at them, are rental and even if we extend it to campuses, which might not have the SNF component, Jerry, we're about half rental as opposed to the buy-in. So the thought would be if there are any that are going to be affected somewhat it would be the buy-in. And again, we've been pretty pleased with the success to date. We're watching it clearly.

But even in your buy-in you're saying you're really not seeing an impact in terms of occupancy slippage or slower lease subs.

If anything, one project in the Midwest is somewhat behind budget, but it's actually making up for lost time. What we are finding is, anecdotally… again, what we are finding is that sometimes the buy-in doesn't happen the way it was budgeted. In other words, if you are just in early stage construction, it seems as though people aren't quite that eager to move and now that we're almost ready to open that particular Midwest facility, it appears that there is an uptick in the purchases. So I think we're going to probably have a little bit more feel for the CCRC market in the buy-in and the timing of the same as each quarter unfolds. We are happy to do that. Scott, did you want to answer?

Yes, I just wanted to maybe give everyone a little bit more color. I think entrance fee communities represent currently about 5% of our portfolio. There's actually 12 communities in the portfolio today. Seven of those are under construction, four aren't still up. Of the four that aren’t still up, three of the four are actually on budget. The one as George mentioned that is slightly behind is actually meeting absorption expectations, but having a little bit higher expenses ,and then the one that is stabilized actually has coverage after management fees of 1.7 times and occupancy of about little over 90% for the last 12 months. So that's the perspective on the portfolio today, which is pretty reasonable I think.

And obviously you've got confidence going forward you wouldn't be funding more development.

Correct. We actually think these are going to be very, very strong properties and if any of them fill a little more slowly because of the housing crisis, we don't think it's a long-term effect whatsoever. And as Scott indicated to, as we look at the CCRCs the way we're looking at it, 9 out of 13 are stable and as we extend that to campuses that don't have the SNF component but those are the larger CCRC combination projects, 16 out of 24 are stable. So I think we're really being very careful about taking on development risk, but we will continue to do that with the operators have proved that they do a great job of looking at the markets, building, and then filling in facilities. We think these are clearly better platforms in the long run.

Okay. And just... and on the… my last question, on the sort of acute care side, which is as you’d indicated it's kind of a growing business for you. Anything you're doing there to kind of differentiate yourself from your competitors, I mean it’s a handful of other REITs that are sort of out there in that niche?

Yes. I think so, Jerry. I think for one thing, we've been in… we have a full service platform, as you know. So we can do the development or we can interface appropriately with some other developer that we work with and we can do the property management on their medical office buildings. And as you well know that some of the hospital systems like to have a buffer between themselves and their key doctors so that they don't have to worry about stark or fraud and abuse kind of issues. But I think finally… I think that our experience in the healthcare arena for all these years, in my experience for nine years being on the Board of an academic medical center together with the experience of our acute care people means that we can bring a lot of ideas to the health systems, what we're seeing around the country, what we think might be appropriate for them in their particular market. And we really expect to continue to add to our infrastructure in that space because we don't think that marketing to the acute care space is done the same way you do long-term care. You have to... one has to bring ideas, experience, be able to deal with doctors and hospital administrators, and I think we have some capabilities there that others may not.

Thanks.

We'll go to Philip Martin with Cantor Fitzgerald.

Yes, good morning.

Hi, Phil.

Hi, Phil.

Yes. Just following up a little bit on Jerry's question there, George, certainly the health systems are probably attracted to Health Care REIT as a capital source or an alternative. How much of the decision to maybe work with the Health Care REIT is driven by the need for these health systems to expand and maybe bring in other long-term care alternatives such as more of a campus style CCRC program, etcetera?

I think… and I want Fred Farrar to feel free to step in after I'm done as well. But I think that the health systems are looking hard right now for all kinds of ideas, okay. The world is changing rather dramatically for them, and the slow moving not-for-profit systems could actually find themselves in a bit of trouble several years down the road if they don't begin to move, because there is, one, an outreach sort of movement so that some of the hospitals that I mentioned… hospital MOBs that I mentioned that are going out to the suburbs to chase customers, to go where the customer is. That is so different than say, five or six years ago when the only MOBs that really made sense to a lot of the analysts, right on the campus attached to the hospital or whatever, but the fact that there is sponsorship by the hospital system, the health system is maybe building an MOB out of the suburbs to be followed by a smaller hospital or they’re building an emergency department to be followed by other types of health facilities suggest that the world is very dynamic. So more to your question, Philip, we've had some success, especially in I suppose planned communities out away from the central core and talking to hospital systems about our ability to bring CCRCs and other types of long-term care assets, senior care assets to them because those can be viewed as you well know as a feeder to that health system. So it can very favorable. Some like that, some don't. Obviously, it depends on the size of the property, but it could well be that we could do some things for the health systems if they have the particularly good site, but it's way too many acres for them. We could also not only bring them the feeder system, but we in fact can facilitate completion of purchase and the build-out and development of that larger community. Fred, do you want to add anything?

I think your focus on outreach facilities is very apropos as systems look to go where the patients want their treatment. And also our development pipeline through developer partners give us access into those systems that… or relationships that could take years to develop.

Do you find, Fred, that a lot of these health systems are lacking enough long-term care or senior living services and benefit by some programs that a health care REIT could bring?

It really varies by market. Some of these systems aren't particularly focused on that and others are. But we're seeing more of these, as George mentioned, these planned communities that include a medical component as well as a long-term senior housing component.

Okay. As the... maybe this is for Ray, but margins at the operator level, can you talk a little bit about what's happening at the operator level in terms of margin, rent growth, and even in terms of supply-demand fundamentals, which I think are pretty good, but again are these operators seeing what they need to see at the operator level and the demand level for their services to justify their development programs showing forward?

Let me break that down into a couple of components. I think in terms of existing facilities and their operating performance as reflected by the payment coverages we're seeing and by the industry statistics being published by NIC in both their key financial indicators and their MAP data, the long-term care and senior housing industries are operating at a very high level, some of the best operating performance we'd ever see. So the operating fundamentals continue to remain strong. In terms of new development, that is a market-by-market analysis. In some markets, the rental rates paid by building occupants will not justify development costs and in others they will. So you really have to look that in a market-by-market basis.

Do you find that the majority of our portfolio is located in above average growth markets, which I know can be defined any number of ways, but...?

Well, roughly two-thirds of our portfolio is located in the top 100 MFAs. So as the MFAs go, so go the opportunities for us.

Okay. Thank you very much.

We’ll go next to Rob Mains with Morgan Keegan.

Yes, good morning. Couple of clarification questions on number, my others have been answered. On the other income line, I understand the 3.9 million comes out. The figures still comes out about 1 million higher than it's been in other quarters. Is that a reasonable run rate to use for next year?

It does run between probably 1 million and 2 million. One thing we did do this quarter is we moved the property management income from Paramount. Our property management businesses, MOBs that they manage for third parties, up into that line, previously it was reduction in property operating expenses that was about 500,000 this quarter.

Okay.

So, I'll give modeling somewhere between 1.5 million, 2 million would probably be about right.

Okay, fair enough. And just wanted... the guidance for depreciation is kind of… for the full year will be flat compared to where it was in the fourth quarter, am I missing something? I think guidance is 160?

That is correct. We obviously have a very detailed model with estimates of timing of everything. So maybe we could look at that and if I notice anything I'll give you a ring, but...

Okay. It comes down the wash [ph] with FFO anyway, but I was just curious about that. And then… all my other stuff has been answered. Thanks a lot.

Thanks, Rob.

We’ll go next to Omotayo Okusanya with UBS.

Yes, good morning. Just going back to the development, going on back to what Jerry was talking about earlier on, just 2009, the conversion, I noticed that the yield has come down from where you had them at third quarter. You have them at 8.7 this quarter versus 9.9 last quarter. Just wondering if there was anything specific going in with those properties that caused the change?

It’s Scott. I think on that… with… in regards to that number specifically, the biggest factor is the fact that we've added, I think it’s a little over $70 million MOB construction that is expected to converge in 2009 that will squeeze [ph] that number from the number that would have been reported last quarter. That's something that we started in the fourth quarter.

Okay.

And that is actually the most significant factor. Otherwise, those numbers tend to move around slightly, treasuries may move around but we do have floors on [inaudible].

And with the ramp up in development activity across the CCRCs, the assisted living facilities, and you mentioned the medical office buildings, just with the big ramp up in fourth quarter of '07 do you still expect that you should be able to convert quite a lot of those properties in '08 so you’re pretty much going to have them constructed and ready to go by the end of '08 within a year? Am I reading that right?

I guess I don't have the number for what we had in the last quarter, but that number… no, we would have had projects that would have been underway before this, the numbers that we would have started in the fourth quarter, in addition to I would think most of the projects that we would have started in the fourth quarter would be out and… further than that. Generally speaking, you probably average… you look at… it ranges from 12 months at the short end to 24 to 36 months for a larger campus project.

So that's what I was thinking… the CCRC balance, you have committed balances of about $614 million as of fourth quarter.

Right.

Third quarter that balance was 464, for assisted living it was 218 this quarter versus 156 last quarter, but in general you have your conversions going up for 2008 from 270 last quarter to 360 this quarter just this stuff is expected to come on really fast and I thought it took longer to develop some of these projects.

The one other impact, Omotayo, is we had about 40 million to 50 million of projects run over that were previously expected to convert in the fourth quarter of this year, they've rolled over into...

Okay. That explains quiet a bit I think.

There was some weather delays and some permitting delays on several of our projects that pushed them into 2008.

Okay, that is helpful. And then going back to the whole idea of raising capital this year, could you talk a little bit about kind of with all the different alternatives you may have, kind of listing preference what you would like to do first versus what you would like to do least of the four, five options that you stated earlier on?

It is obviously difficult to answer [inaudible] issue common stock of 55 bucks a share, right? We have to basically… I think the way we intended it… and we are a little different, we talked about it in July. We prefer to give guidance including investments because I think it is important to give color on the investment growth we are seeing, but I think we've assumed the traditional kind of 50-50 debt and equity structure. Obviously, the unsecured market is horrible right now. I don’t think we will be inclined to do anything there, given where spreads are. So we will actually be watching all the markets opportunistically. We actually are looking at some potential for recycling capital in an environment like this. We think that is a good option available to us. And then, obviously we are watching the equity markets closely and we'll be as opportunistic as we can.

Great. Thank you.

Yes.

We'll go next to Chris Pike with Merrill Lynch.

Good morning, everybody.

Hi, Chris.

Hi, just a follow-up somewhat on that question, I guess back to Kristen’s question. I think you quoted the 20 basis points saving, that is on the line, correct? But if you were forced to issue unsecured at this point, given the re-rating upward from the agencies, where do you think the market is at this point?

We've looked as recently as the ... no, we watch it everybody. It's ugly, I mean our spreads and for everyone in the REIT land has gone up very significantly. There are... I don't think there has been any REIT on securities you’ve got to try to get estimated pricing today [inaudible] exercising utility, but I think five-year unsecured will be as high as 7.25 and all-in costs in 10 years...

Probably it's 50 up from there, right?

No. it's even a 100 [inaudible] order. So obviously those are prohibitive and then you say… we obviously think about what our long-term cost of capital is and I think it is somewhat less than that. We don't obviously feel like the markets will stay there for ever, but we don't anticipate doing anything in either those two markets until the conditions improve.

Okay. And then I guess back to the line, understanding you pushed it out this quarter, at what point do you guys feel comfortable and where should we expect you folks to start to look to term out some of the short-term debt into longer-term financing alternatives? 307 at the end of the quarter, right?

Yes. The $843 million available on our $1.15 billion lines, and yes, there is potential for a DRIP in cash on hand. We basically did hit the mid-point of our investment guidance and we wouldn't need to access the capital markets very much. On the other hand, the way we looked at it and the way we looked at our equity deal in December, we have to be opportunistic as we really see it's kind of a good investment opportunity. So we look at it everyday.

Okay. I'm sorry I missed this, Ray, but the yields on the sales and payoffs... I'm sorry, not so much the payoffs, but the yields on the acquisitions and the loans in the quarter and the timing, can you provide that for modeling purposes?

I would just assume mid-quarter, the new investment guidance.

No, what you guys...

The fourth quarter we had 21 senior housing at 7.5, average expected yield at 10.2, MOBs 31 million at 7.5, CapEx and loans of 127 million at 10.1, and funded CIP of $119 million with yield upon high convergence of 9%.

And you guys provided the timing in the previous press release when you walked through that stuff because I couldn't get it.

We don't have it here, Chris. I mean...

That's what I'm really concerned about, the timing.

The acquisitions… add those two numbers up, the $52 million or so in the mid-quarter, the loans were basically almost mid-quarter as well. So both of those you should model like mid-quarter.

Okay. And then I guess back to Ray. From the cap rate... the cap rate question earlier, can you just run through coverages on those caps to get back the lease yields?

Well, I quoted the NIC industry cap rates and those don't come along with coverages. You can sort of look at our portfolio and what its coverages are to get a sense for it.

Okay. Fine.

But we're seeing… I'd say, generally we're seeing lease yields on MOBs in the 7 to 8, and on seniors housing in the 8 to 9 category.

Okay. And I guess, George, back to your comments regarding MOBs, I guess on the Tenet call yesterday management spoke to potentially an MOB divestiture. I'm just wondering if you guys know any specifics about that portfolio, how big it is and any kind of market chatter on it?

No, we get some market intelligence, but we don't know enough to weigh in here.

Okay. Thanks a lot, guys.

Thanks.

[Operator Instructions]. We will go to a follow-up question from Rob Mains with Morgan Keegan.

Yes, Scott, one more question on modeling. I might have missed this if it was earlier… you ended the year with shares outstanding of $85.4 million. How do you get the $92 million guidance for diluted?

That was my point, Rob. When we model guidance we include financing or generic financing assumptions, which include a blend of debt and equity.

Okay. So... all right. So that would also imply that if I'm not going to assume… if one doesn't assume an equity offering, one would also probably have a slightly higher interest expense number. I know you don't give it, but that would sort of… that would come on the model.

Sure, and you could run out higher on the line and that would positively impact earnings relative to what we gave in our guidance.

Okay, I understand that now. Okay, good enough. Thanks.

Yes.

[Operator Instructions]. And we have no other questions at this time.

Great. Well, we appreciate everybody participating in the call, and Scott will be available for follow-up calls. So that's it.

Thank you, sir. And that does conclude today's conference call. Again, thank you for your participation. Have a good day.