Good morning, ladies and gentlemen, and welcome to the third quarter 2009 Health Care REIT earnings conference call. My name is Casey and I will be your conference operator today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) As reminder, this conference is being recorded for replay purposes. Now, I would like to turn the call over to Mr. Jim Bowe, Vice President of Communications for Health Care REIT. Please go ahead, sir.

Thank you, Casey. Good morning, everyone and thank you for joining us today for Health Care REIT's third quarter 2009 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 www.hcreit.com. I'd like to remind everyone that we are holding a live webcast of today's call which may be accessed through the company's website as well. Certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Health Care REIT believes results projected in any forward-looking statements are based on reasonable assumptions, the company can give no assurance that projected results will be obtained. Factors and risks that could cause actual results to differ materially from those in the forward-looking statements are detailed in the news release and from time to time in the company's filings with the SEC. I would now like to turn the call over to George Chapman, Chairman, CEO and President of Health Care REIT for his opening remarks. Please go ahead, George.

Thank you, Jim. We have used the last two or three years that have been very difficult in the economy and in the capital markets as an opportunity to essentially condense five to seven years of planned progress into two or three. In the capital markets, we have lengthened our maturities, enhanced liquidity and deleveraged, and along the way, we have match-funded our development pipeline through equity raises that have totaled over $1.4 billion for 2008 and 2009 year-to-date, as well as through agency paper totaling $266 million with an average rate of 6%. We are now in a position to raise both equity and debt capital and begin a new growth phase for the company. In the portfolio, we made tremendous progress in executing our game plan, to emphasis combination facilities in the senior housing sector and new state-of-the-art customer focus facilities in the medical sector. We have pursued these goals through our usual culling through our portfolio adding favored new investments and selling assets that are less desirable in the long-term. In executing these plans, we have generated significant gains. In 2008 and 2009 year-to-date, we have net gains after any losses or impairments relating to this activity equal to $151 million. In the fourth quarter of this year we have already recognized gains of approximately $20 million on the sale of a skilled nursing portfolio. Generally our portfolio is performing quite well with an overall facility coverage level of 1.98 to 1, up from 1.94 to 1 in the previous quarters. Our skilled nursing, assisted living and independent living facilities performed well with increases in facility coverage quarter-over-quarter. Surprisingly, in these tough economic times, independent living and CCRC have the greatest occupancy pressure because of the elective nature of the services. Yet, IL coverage remains solid after…

The third quarter was an active one in terms of both capital markets and portfolio management. Our equity offering in September generated $357 million in proceeds. We placed $133 million of new secured debt with Freddie Mac at a blended rate of 5.9% and prepaid $59 million of secured debt maturing prior to 2012, with an average rate of 7.2%. We successfully tendered for 161 million of our 8% senior unsecured notes due 2012, which will lower future interest expense and improve our debt maturity schedule. On the portfolio side, we completed 234 million of high quality development projects, including the three medical office buildings affiliated with strong health systems that George just mentioned with over 577,000 square feet that are 93% pre-leased, adding immediately to earnings. Our unfunded development at the end of September had declined to only $329 million on our $967 million of projects still under construction, and we're projecting another $277 million of construction completions in the fourth quarter. In terms of third quarter investment activity, we completed a total of $126 million of net investments. Gross investment activity of $156 million was primarily ongoing development funding, while dispositions of $30 million included 10 medical office buildings, totaling roughly 175,000 square feet. The 10 properties were previously classified as held for sale. I would point out that subsequent to quarter end; we sold one additional medical office building and six skilled nursing facilities for gross proceeds of $51 million, generating a $20 million gain that will be recorded in the fourth quarter. I ‘d also note that we received loan payoffs of $40 million related to two of our skilled nursing operators thus far in the fourth quarter as well. In terms of portfolio performance, I mentioned our 234 million of construction completions this quarter, which…

Thank you, Scott. We're now open for questions.

(Operator Instructions) Your first question comes from the line of Michelle Ko with Banc of America.

I was wondering if you could give me a little bit more color on the rent deferrals if you anticipate taking any more of those further down the road and in terms of timing when you expect things to improve?

Michelle, the exact timing of increasing the return is difficult. I would say unless that we could have taken more risk in terms of the liquidity of our operators and not taken this large of a deferral, but we chose to do that to be conservative hoping that we're positioning ourselves to have some nice revenue increases over the next three to five years. What we've seen so far has been that tours have essentially gone up by 30 or 40% at the CCRCs between the first and the third quarter. If you look at some of our largest operators, ongoing properties that have been just open, for example, we've seen sales double between first and third quarter. I'm trying to give you a metrics. The other variables are when will the people sell their homes and therefore begin to pay off the deferred obligation they have, which totals $7 million or so for our largest operator, 14 million overall? Moreover, when will they convert the 10% deposits, both at our largest operator and throughout the portfolio? Those are all variables and that's why we chose to be what we think is pretty conservative. So we're hoping that in fact we will not have any further reductions. We're hoping that there's a cleared path upward, but there are a number of variables. I would say this we have a much greater sense of optimism, as do our operators, and the data is bearing that out. Scott, did you want to add anything?

The only thing I would think just maybe from timing purposes, we looked essentially 12 to 18 months out, so our best assumption at this point would assume we stay at the same rate through most of next year as well. We're optimistic and hopefully could maybe start to recapture some of the deferred rents by the end of next year, but probably for conservatism purposes, you could assume the same rate from now through next year.

Okay. Could you also comment on the increased level of activity and property transactions where you think cap rates are for the different Health Care property types? Also, if you could comment on your decision, whether it's better to develop or maybe make more acquisitions in the future, which you prefer and the yields associated with each?

Scott, why don't you give them early cap rates and then I'll comment on development.

Sure. We're seeing both, on the senior housing side, Chuck Herman and the team, as well as John Thomas on the medical facility side see a pickup in potential activity. In regards to specific cap rates, in senior housing I would still say the independent and assisted living cap rates are still probably in 8% to 8.5% type range. You still obviously have the agencies lending to the space as impacting the market pricing. In the skilled nursing area, we are not as actively looking at transactions. I would say the cap rates there probably are in the 11% to 13% range. Then medical office buildings, I would probably say would be in the 7.5% to 8.5% rate range. I don't know. John or George, you want to add any color on the market.

John, you want to add on the medical facilities area?

I think that's right. For the higher quality, on-campus or off-campus affiliated properties are probably where the ranges started to settle into. Then on development, where we continue to see a lot of opportunity, it's still north of 9%, even for the highest quality projects.

As to your question on development versus acquisition, I suppose in a perfect world, we would rather just buy brand new purpose-built facilities because it immediately drops to the bottom line in terms of our earnings. However, the reality is that the world is changing and I would suspect more in the acute care side than the senior housing side the need for different real estate and better real estate platforms is more prevalent. We have purchased an attached cancer center out in New Jersey a year or two ago, and we would like to buy more of those. On the other hand, many of them have yet to be built. So we're going to have to do some development to be in the forefront of acute care, investing in development. In the senior housing side, I think that there are going to be some good opportunities to do some development. The assisted living and dementia, for example, have worked out very well with some of our top operators, IL-AL combinations and as well with CCRCs, but I just think that there's going to be more ability to acquire in the senior housing side perhaps than in the medical facility side. Having said that, every time we make a guess like that, different opportunities come about and the world changes, but that's our current thinking.

Your next question comes from the line of Mark Biffert with Oppenheimer.

George, just continuing on with the development side, a number of the operators, Brookedale mainly came out and said that they are starting to look at their expansion projects again. How are you guys helping out with that? Would you look to lend to them to help them complete those expansions in some of the assets that maybe they leased from you?

I think the best transactions we can do, the best investments we can make are to help great operators like Brookedale expand their existing facilities where they already have waiting lists. Those are just perfect deals to do and we would do that all day for our other operators. We think those are terrific.

What kind of yield would you expect to get on those?

Probably more than they want to pay, but that would be a process of negotiation. Certainly the current market would have to be considered along with the existing terms for their existing projects.

Then to the non-profit hospital world, I'm just wondering if you can comment if you guys are planning on targeting that world where credit maybe is not as available for them, given what we're seeing and a lot of their charitable giving may be down as well?

Mark, it's John Thomas. I think we continue to have great access to opportunities there. The credit markets for them have eased a little bit and so I think right now on two or three projects that we are in discussions about, really the competition is their own balance sheet versus our development services. We expect to continue to add some development directly with non-profits and came online this quarter with what is now the largest single tenant in our medical office space, which is Aurora, which is a very strong non-profit system based in Milwaukee and we're very pleased to have them jump at the top of our MOB portfolio.

I mean, did you guys bid? (inaudible) bought a portfolio from those guys. I mean what are you seeing from opportunities? Is Aurora and other people coming out? Are these portfolio-sized opportunities or are these one-off assets that people are trying to sell?

We've got, I would say, in discussions with a number of non-profit systems some larger portfolios than others, some off-market, some on, but we continue to see some good opportunities. I think what we're talking about right now are really some larger portfolio trades with those non-profits in particular.

John, I might add too. I believe we are trying to capture some transactions is the fact that we can also provide them with development and design services and some thoughts about where the systems should be going and more often than not in the acute care space other than some one-off transactions, the ability to add ideas and to add some real value is helpful in capturing deals and capturing development opportunities.

That's correct, George, and again, the non-profit systems, again, CSOs, somebody they can trust with their physicians when they sell off their on-campus billings or partner with us in their on-campus billings, and again, those non-profits that we're looking to work with are those who are looking at health care reform as an opportunity to expand their reach with their physicians and integrate technical and outpatient services in new buildings and are looking for us to help them think through that process and then develop those facilities for them.

Then lastly, George, I'm just wondering, looking out down the road three to five years, obviously, the senior housing space will be much improved over that period, but I'm just wondering if you can talk about maybe the percentage of your NOI you expect to have in each of the different segments that you guys are playing in?

Again, this is just guess work, but looking at the world as it exists today and our capabilities, I would expect senior housing and care to be somewhere around 50% to 55% as our attention to medical facilities, MOBs included, gets some traction. Within senior housing, I would expect that our standalone skilled nursing portfolio would be down to 15% or so, and our standalone IL, and for that matter, AL, might be down to 7%, 8%, and most the rest of them will be combination of some sort. Then, again, as we look at combinations, I would expect probably the entrance fee properties to be more like 10% of the total and most of ours to be rental, but we still think that there is just a great place for the entrance fee communities. Within the medical facilities, it might be around 45% then, Mark. I would guess that, that the medical office buildings would be 25% and hospitals and other types of medical facilities would be 20%. That's just my guess right now.

Your next question comes from the line of [Jarell Solati] with Morgan Stanley.

We've noticed that the projection on in initial cash yield for 4Q ’09 conversions increased 40 bps to 8.9% from what you had in the second quarter. We were wondering if this is reflective of a change in the asset mix coming in line or if it's indicative of the market in general?

I don't think it's really reflective of any changes in the specific assumptions. The only addition we had in our projects underway was the one MOB I mentioned at 9.3%, and I think the numbers, at least over the most recent couple of quarters, I think are bouncing around a little bit just based on timing. For instance, we closed a couple of the MOBs this quarter a bit earlier than previously anticipated. So you just have some movements by facility type that are moving maybe quarter to quarter.

The other question I had was in terms of same store revenue growth, which, excluding the impacts of rent deferrals is 0.7%. I was wondering if you can talk a little bit more as to why the number was lower when compared to previous quarters.

Excluding the impact of the couple of exceptional items, we were advertising kind of 1% to 2% same store revenue growth, and I think we would be on pace for that this year. You're probably seeing the impact of the 70% of our leases in the senior housing area have increasers that are based on CPI, where it's only about 7% in our medical office portfolio, but in essence, with CPI turning negative, I think the first month was December of 2008 through current. You missed out on some of the increasers and I was even looking at the data, CPI stays where it is, probably by the end of this year, you would start to be able to recapture some of those increasers and who knows next year, but that's probably been the biggest factor why just sequentially you’ve seen the number turn to be about 1%.

Your next question comes from the line of Dustin Pizzo with UBS.

Scott, just quickly, I may have missed this, but the rental income numbers that are in the supplemental for the quarter, those already reflect the rent deferral?

Yes. The deferral was effective July 1, so that would be in all of our numbers and quarterly earnings impact, yes.

On the MOB portfolio, can you just talk a bit about what's behind the decline in operating margins that we’ve seen there and is it specific to either the (inaudible) portfolio or the legacy winner of that, or is it really just across the board?

It's really a very small number of facilities. Probably the biggest impact, and we talked about this I think last quarter on the same store number, was a very large ASC that rolled out of one of our buildings. We have replaced the tenant. We've actually replaced that tenant with two tenants, but the conversion of that ASC into essentially two smaller ASCs and at lower rents than were there historically, so that's part of the single biggest impact. It's probably a third of the same store number impact. We've actually increased our occupancy on a same store basis and absorbed some space last year and through this year with some very aggressive leasing activity. We've also made some investments in some people, again, increasing our leasing team and some other resources. So overall, I think we're still in line and we are really well positioned to continue to increase not only our same store, but really our core numbers continue to improve and by the end of the year, we will have leased well north of 600,000 square feet this year. So we're very pleased with where we are. We had a slight timing miss, as Scott mentioned, attributable to a couple of renewals in one building that surprised us, but we feel good about where we are for the rest of the year.

Only thing I would add Dustin on the margin is; there's some higher expense items like utilities. A lot of our portfolios in the southeast, typically in the third quarter results, so as we looked at that that impacted margin this quarter. We had some higher utility costs in the portfolio as well.

As you look at the expiration in 2010, what are your expectations today for where market rents are relative to the in-place rents?

We're ahead of pace on next year, so some of our renewal numbers reflect some pretty aggressive leasing for next year’s renewal. So, we're doing a good job on particularly getting two to three years increased terms on those renewals, and I think some of the in-place rent we're trying to stretch out and get 2% to 3% increase on those renewals to current market rates. So, I think we're still working through the expectations for next year and we'll have a better estimate of that. However, again, we had a lower amount next year of expirations and continue to be well ahead of track on where we expect to be next year.

Scott, just finally, turning to the loan book, I know you talked about the nonaccrual balances last year, but seeing as that number hasn't really changed much, are there any moves being made on your part to foreclose and how many loans are really in this bucket and what is the associated underlying asset value there?

You're correct, the loans that are in our nonaccrual bucket really hasn't changed. For everyone's benefit, the loans on nonaccrual stands at 72.4 million as of the third quarter. We obviously do have a reserve in place of 7.6 million. As we look forward, there's about five different buckets of properties in that portfolio. There's one specialty hospital in there and probably the majority of the rest are independent living campuses, where you have some unit or cottage sale components to them. So, you haven't really seen a lot of fluctuation, because as we assess the carrying value and the appropriateness of our reserve, we have to look forward often times three to five to even more years in terms of making estimates for future sales in terms of the appropriateness of the reserve. I think for an earnings recognition perspective, we're taking as conservative stance as you can by keeping them on nonaccrual.

Scott, I might add a couple things. One, as it relates to the mortgage loan portfolio, we've had some payoffs in the fourth quarter that were $40 million that we are reporting. Then the other points I would make and it goes really back to the last question as well, when John reports on the MOBs, you can expect us to be very aggressive in terms of buying new and better and larger facilities, MOBs, and developing them. At the same time, we will probably continue our cutting out process of our portfolio and we will select some MOBs for sale. Frankly, our feeling is if we have any impairments or if we have any losses, we'll do it anyway because we combine some rigorous activity in terms of selling some that we think are going to produce some very good gains as we have over the last two years; $150 million, now $170 million. We will take impairments and we will take losses on the sale of MOBs. Similarly, if we find by the year end that any of the loans should be written off, we'll do that. Don't be surprised. We've done that throughout our history and we're going to continue to do it. It's just part of our process of portfolio managing.

Your next question comes from the line of Jerry Doctrow with Stifel Nicolaus.

I'm going to shift gears a little bit, I wanted to go over to just kind of capital markets side. I think you categorized that a lot of this catch-up stuff maybe has been done and you're now looking at making acquisitions. So as we go forward, I guess I want to just get a little better sense of how you're thinking about the capital markets? Obviously, unsecured debt costs have come in a lot, I think even since we talked the last time on this call. So if you're funding new stuff what might you be using? How much need do you feel to continue to buy back the 8% or do some of the other debt refundings at this point in advance?

We have been pretty successful in terms of moving our maturities out. We're not sure really that we have to do much more work at this point. We have our whole line available to do transactions or to use in whatever way is appropriate and we're finding that, as you say, the unsecured debt markets have come in to 7%, maybe 6% or a little less than that. So we think we have the ability to access capital. We also have had like our colleagues in the health care REIT sector, we've had pretty good support in the equity markets. So whereas our stock price moves up, the chances of the convertible debt actually exercising their right as opposed to pushing it off for five years, becomes less of an issue. So I think we're in very good shape right now. What we're waiting for, Jerry, is to know exactly what transactions, acquisitions, we are going to have and are proceeding to closing, and what other development projects we are going to pursue subject to keeping some limits on that activity. So it's really a hard [dance] but right now we have adequate capital and we have access to adequate capital and we're just waiting to being certain about our acquisition and development activities.

Just maybe to re-categorize that or characterize that, so we might get back to a more normal pattern where you build up acquisitions online and then go out and do unsecured and kind of proportionally issue equity. On the equity, which you would be more likely to do larger deals or may be continuous equity issuance?

I said in my remarks that I thought we're approaching a more normal time and so I think you characterized it appropriately. We like the, sort of the continuous equity program to a certain extent, but we also know that we need the support of the investment banks and the bankers, so we will from time-to-time do some equity transactions as well. Again we're going to keep our leverage at a somewhat lower level and perhaps we did the last three or four years, which is usually shooting for 45% to 50%. Right now we're probably more like 40% to 45%, so we're going to continue our discipline, perhaps at somewhat lower levels until there's even more visibility on the capital markets.

Just last thing, you said that you are going to return to kind of a typical average (inaudible) going back to look at the average but what's in your mind, what's that number for acquisitions?

I've told the street that with John's team and Chuck's team and our reach in the market place and our relationship-driven programs, both in senior housing and increasingly in acute care, that we're a team that is built to do up to $1.5 billion a year. Now, that means that there have to be adequate possible transactions and development out there and it's been a little sticky in the transactional side, a little bit unevenness in the bid/ask area. We are built to do that kind of volume and we're built to then watch all of those assets with our asset management team. So I think we can do that.

Your next question comes from the line of Rich Anderson with BMO Capital Markets.

George in that last comment, the $1.5 billion; that was total investment dollars out the door per year or is that just development?

Rich, when we think about it right now, and again, the world changes dramatically sometimes. We usually think that with our relationship folks, we can do $200 million, $300 million, $400 million, maybe up to $0.5 billion. We think that we could do development of $300 million to $500 million and then maybe new deals of another $300 million to $500 million. Then, we're inevitably going to be selling $100 million, $150 million, maybe $250 million, so maybe the net number is more like a $1.3 billion.

I actually said that wrong. I meant to say at any time development, your development pipeline could be how large?

The way we look at this is we would really like to drive development and for that matter, fill-up properties that are mainly related to senior housing for the reasons I mentioned earlier, down to may be 10% each. Right now, we're a little higher than that and we've explained to the street that that is partly a result of the market place catching all of us cold, so that we have development underway and we can [just continue stable] or acquisitions, so we got a little higher than we wanted to be. We got up to the high teens on our development and I don't think we want to be there. We'll gradually work it down to probably 10% to 15% development a year.

Back to the deferral rent strategy for your entry fee, I'm just trying to do the math. I think you gave, you gave the lease rate decline from 9% to 6%, but did you say what your investment balance was in those nine assets? Maybe you have it in your disclosure.

Let me connect the dots for you, Rich. Yes, there was an aggregate deferral from roughly 9% to 6% on the current lease spaces of 385 million. The same-store number does not include two properties that came on within the last year, so that number is more or like the 280 million same-store lease spaces.

To do the math to get to the 2.4 million, I have used 280?

That's right.

Now, you think that you captured this and these are the nine lease-up entry fee communities, but you have seven others under development. What is the status of those and how are they progressing toward a point where you will have to start thinking about the lease rate deferral idea for those?

Yes, we actually have nine that are open and there are five that are under development of the total of 14. You can see those numbers on page 30 of our supplement. There are currently about 350 million that are still under development. They are coming on. There's about two or three of them coming online toward the end of this year, and then another two, I think, about middle of 2010. We lift the initial yield in our supplement because that is as the current contractual yield, which for those two lines is 10% on one and about 8% on the other. We don't know. It is still contingent upon continued fill-up between now and when the assets open, but to be conservative, could we see a potential 6% to 7% type initial rate there? Yeah, I think it's possible. A lot of variability still, but that's probably up to you and until we actually negotiate anything. We'll obviously let you know every quarter.

I think you mentioned that your entrance fee operators are 8% behind budget, is that right?

No, the actual move-ins.

The move-in number is only 8 units behind. Year-to-date, we have 158 move-ins versus the projected move-in number of 166.

So, if it's just that slight bit behind budget, why such a big cut to the lease rate, the deferral? It’s just wiggle rooms or what's the story on that?

I think they were probably being conservative. I hope we're being conservative.

I think it’s the best comment and also the nature as you mentioned, George, there's a pretty significant deferred amount as well. A lot of these again were only getting 10% to 20% of the entrance fee, building up a significant receivable. Also the health care component fill up, which is probably not a factor here, because the rental components of these buildings are actually filling fairly well. So, I think that's probably the biggest factor, and we're trying to set an appropriate rate that’s really sustainable over the next 12 to 18 months.

You feel as though that all of the deferral, all the building AR is a collectible over the next couple of years?

We think that it is. I mean the folks are obligated to pay. Now, what happens if there are deaths and other things, I mean there could be some slippage, but there is an obligation to pay and they are living there and enjoying it generally. So it looks very certain.

Then lastly, just as an explanation for me, I'm just looking at your supplemental notes 16 and 17 and you have year-to-date and third quarter gross investment activity. In the third quarter, just looking at the entrance fee, it looks like you made investments in five of the seven. Am I reading that right for the third quarter? I'm confused. I'm trying to draw a connection between the seven for year-t- date, r is that two that have since gone to the operating portfolio?

This would be the investments during the quarter on the projects that were under construction. If something converted in the quarter, the dollars would also be in that chart, but the specific question, the entrance fees, we have two CCRC entrance fees and three combination entrance fees. That matches the development projects on the other page we just highlighted.

So, two have since gone to the operating portfolio?

Yeah, I think so. We can check and talk after the call, but that's what would be the factors there, Rich.

Your next question comes from the line of Rob Mains with Morgan Keegan.

Pretty much got everything I needed to know about entrance fee community. Just want to make sure I heard you right earlier, Scott. The 2.4 million is reflected in this quarter as rental income line?

Yes.

Then also in the updated FAD guidance, CapEx and TIs were up. It looked like that was kind of a blip in this quarter. Was there anything particular going on?

I think part of the biggest blip was, I mentioned before, the ASC that rolled out proprietary hospital at the ASC, of the long-term master lease and repositioning that ASC into two smaller ASCs which have both been leased require additional TI to do that.

So that project sounds like it’s done now?

Yes. They are moving through the TI build out now, so those will come online I think, one by the end of the year and the other half by the early second quarter of 2010.

So we should be kind of drifting down to a more normalized quarterly rate?

Yes.

Your next question comes from the line of Tayo Okusanya with Jefferies & Company. Tayo Okusanya - Jefferies & Company: Most of my questions have been answered. Just two quick ones. In regards to Freddie and Fannie and their requirements now when they are underwriting loans backing senior housing properties, could you give us a sense of what kind of terms they are asking for now and kind of what it looks like versus six to nine months ago?

I don't think the terms have changed a heck of a lot. It seems like to me like pricing still is zeroing in around the 6% range. It depends obviously terms and then what you're looking at a shorter length of term. Honestly, we actually removed our incremental secured debt assumption, because I think as George mentioned, we're looking at the unsecured market spreads between that, and the secured market is probably a bit narrower. So, I guess as the REITs think about it for us, if 10 year unsecured is 7%, it maybe in the midsize to 6% on a secured, I don’t know. Mike Crabtree, is there anything you would add to that in terms of the secured markets?

I think the thing going on right Tayo is that, they are underwriting a little tougher, so they might have a leverage of 65%, but they are leveraging a tougher underwritten NOI. So, I think that's what you might be finding. Tayo Okusanya - Jefferies & Company: Then just in the supplemental on page 23, I know we've talked about this before, the $4 million of rent deferrals, but there was also a rate adjustment for the specialty care hospital?

Yes. Tayo Okusanya - Jefferies & Company: Could you just talk about that a little bit and what that was?

Sure. It's a hospital that's been in our portfolio. We basically reduced rent by about $242,000 a quarter, but are still receiving a return of about 10% after that reduction. So, based on performance at the hospitals and its sustainable rental rates, so we actually getting a reasonable yield but the $240,000 reduction quarter versus last year impacts the reported results. Tayo Okusanya - Jefferies & Company: What was the issue with the hospital itself? It's just revenue pressures?

Yeah, actually a lot of that is based on procedural volume that fluctuates often quarter-to-quarter and over time. So, you look forward to making ongoing assessment of appropriate rental rates in the hospital world. Tayo Okusanya - Jefferies & Company: Does the hospital have any particular specialization? I'm sorry.

Neuro and orthopedics. Tayo Okusanya - Jefferies & Company: Both in neuro and ortho hospital, okay. I appreciate that. Thank you.

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

Can you give us the cap rate on the fourth quarter sales and the rate on the fourth quarter loan payoffs?

Yes. The fourth quarter loan payoff averaged probably a little higher. It's about 11.5% when you blend it together. There are two pieces to that 40 million that we alluded to. The skilled nursing portfolio I believe was on our books for about $27 million where we had $20 million gain. I don't have the cap rate in front of me on that one. I could get that for you. It’s probably around 10.

Just a final question. Can you tell us how much you currently have acquisition wise under contract and letter of intent today?

No.

Your next question comes from the line of Buck Horne with Raymond James.

Quick question, and maybe a little early to know this just yet, but do you know if a senior household might qualify to use the new $6,500 move-up tax credit as part of using it to enter an entrance fee community?

The first time homebuyer?

Well, it would not be the first time homebuyers. It's the new move-up tax credit that Congress is passing for homebuyers that have lived in a house for at least five years.

Actually, it's probably the first time we thought about that. So we'll look into that.

We'll get back to you, Buck.

(Operator Instructions) Your next question comes from the line of Jim Sullivan with Green Street Advisors.

You talked about some optimistic data points with respect to the CCRC fundamentals, a very contrary data point would be the bankruptcy of Erickson. When you were talking about the motivations for the rent deferral in your portfolio you mentioned I think the liquidity of your operators. So I'm curious what you make of the Erickson bankruptcy, and I'm curious with respect to your operators that we're headed on, it's FAD, if not for the rent deferral?

We're very unhappy to see the Erickson bankruptcy because John and Erickson have been leaders in the sector. The model is really quite different from ours in a lot of respects, in the sense that there's a bifurcated involvement between a non-profit and a developer and some of the funds go to different buckets, and therefore, may or may not be accessible by the residents under certain circumstances. While John develops and manages very large communities at a middle market price point, but there are certainly a lot more marketing and sales that have to occur. I will say this that Erickson was very aggressive about expanding, Jim, and probably was out there was out there with too many projects at a time that the markets just crashed on him and for that matter all of us. So I don't see that as frankly much more than the typical headline risk that we all face from time to time when any particular sector that we invest in has sort of a problem. Our sales are slower as you know and rental is pretty good. So I guess one of the reasons we diversify is that there's going to be something that's a little more difficult with respect to one of our segments from time to time and then it shifts from time to time. John just had a huge development pipeline and I think ours is much more manageable.

Then on a separate topic, cap rates being 11% to 13%, were you referring to cap rates or lease yields?

Cap rates.

So what were the lease yields?

It depends on the property. We typically underwrite skilled nursing assets to stabilized coverages of 1.5 to 1. So if you had a 12% cap rate at an 8% initial yield then that would be the concept. We haven't been doing as many of those lately.

At this time, there are no further questions.

Okay. Well, let me wrap up just by thanking everybody for participating and per usual, Scott and his team are available for follow-up questions. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect.