Stephanie Anderson - Chief Acquisitions Officer of Senior Housing Jeffrey H. Miller - Executive Vice President of Operations and General Counsel John T. Thomas - Executive Vice President of Medical Facilities Scott A. Estes - Chief Financial Officer and Executive Vice President Charles J. Herman - Chief Investment Officer and Executive Vice President George L. Chapman - Chairman, Director, Chief Executive Officer, President, Member of Planning Committee, Member of Executive Committee, and Member of Investment Committee

Bryan Sekino - Barclays Capital, Research Division Derek Bower - UBS Investment Bank, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Jana Galan - BofA Merrill Lynch, Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division Michael Odell - Medlife Richard C. Anderson - BMO Capital Markets U.S. Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division Robert M. Mains - Morgan Keegan & Company, Inc., Research Division Todd Stender - Wells Fargo Securities, LLC, Research Division Nicholas Yulico - Macquarie Research Karin A. Ford - KeyBanc Capital Markets Inc., Research Division James Milam - Sandler O'Neill + Partners, L.P., Research Division Jeff Theiler - Green Street Advisors, Inc., Research Division Unknown Analyst -

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2011 Health Care REIT Earnings Conference Call. My name is Brooke, and I'll be your operator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. Now I would like to turn the call over to Jeff Miller, Executive Vice President, Operations and General Counsel. Please go ahead, sir.

Thank you, Brooke. Good morning, everyone, and thank you for joining us today for Health Care REIT's Third Quarter 2011 Conference Call. If you did not receive a copy of the news release distributed this morning, you may access it via the company's website at hcreit.com. 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 its projected results will be attained. 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 like to now turn the call over to George Chapman, Chairman, CEO and President of Health Care REIT, George?

Thank you, Jeff, and good morning. Health Care REIT's relationship investing strategy continues to produce strong financial results. In the third quarter, we generated year-over-year FFO and FAD per share growth of 13% and 7%, respectively. We have increased our 2011 FFO guidance and now expect growth of 10% to 11% this year. We believe that this earnings growth together with the acknowledged high quality of our portfolio have both contributed significantly to share-value creation. The portfolio continued its strong performance generating same-store NOI growth this quarter of over 4% and our relationship investing strategy resulted in investments of $650 million in the third quarter and a record $4.8 billion year-to-date. We continue to see a healthy pipeline of private-pay senior housing assets concentrated in global -- in coastal markets and larger MSAs, as well as MOB investments affiliated with leading health care systems. Nearly all of these investment opportunities are derived from our long-standing industry relationships. The third quarter data released by the National Investment Center, NIC, last week affirms the positive trends and resiliency of our industry. The reports showed that industry fundamentals in senior housing occupancy and pricing are strong despite a volatile economic climate. Overall, improvement was particularly notable in key metropolitan markets. Markets that represent a substantial part of our senior housing portfolio. These encouraging industry trends aligned with a overall positive performance of Health Care REIT's senior housing portfolio again this quarter. The Health Care REIT sector generally has been a very steady performer during the current challenging macroeconomic conditions. Historically, Health Care REITs have produced stable growth and steady cash flows even in highly volatile markets. Current demographic trends, limited supply and favorable access to capital are contributing to a positive outlook for the industry. The consistency of cash flows, portfolio diversification and…

Thanks, George, and good morning, everyone. As George discussed, we continue to add attractive new investments our portfolio, having now completed a record breaking $4.8 billion of growth investments year-to-date through September. Our portfolio continued to perform well in the third quarter highlighted by blended same-store cash NOI growth of 4.2%. Our strong same-store performance and success on the investment front generated another strong quarter of FFO and FAD per share growth. While our confidence and our future growth potential enabled us to announce a dividend increase earlier this week. At this point, our portfolio diversity, by operator and a rent payment coverage levels are main among the strongest in the sector, providing greater certainty that we will continue to be paid our rents to the current government reimbursement cycle. Finally, our balance sheet remains strong and we have ample liquidity with over $1.7 billion of line capacity and cash on hand at the end of September. Turning to the details of the quarter, regarding investment activity, as George mentioned, we completed $644 million of growth investments during the third quarter. This consisted primarily of $569 million of acquisitions that have a blended yield of 7.3%. The most significant of these investments was our $308 million Chelsea Senior Living transaction detailed in our press release and on our website. The other significant acquisitions were 2 medical office building portfolios affiliated with health systems for combined total of $124 million and a blended average NOI yield of 7.3%. In terms of dispositions, we sold 3 smaller properties and had a few small loan payoffs totaling a combined $16 million, bringing dispositions year-to-date to just under $300 million. Based on our fourth quarter disposition projections, we have increased our disposition guidance for the full year slightly to $350 million, as we continue…

[Operator Instructions] Our first question comes from Jana Galan with Bank of America.

I understand you primarily focus on your relationships to drive investments but I was curious what you are seeing being marketed right now and how much in each of the different asset classes?

There are a number of decent-sized packages in both senior housing and the MOB space but fewer than say a year ago. And I think there's probably less of a tendency to go to market. People seem to be linking up with favored partners more than even at least a year or 2 years ago. John, you want to comment on MOBs? John Thomas?

This is John. There's been very few hospital modernizations over the last couple of years. There's a package out now and Scott's telling it [ph] -- everybody's very familiar with it, you know, not a very large package. So most of our attention is to our relationships and building new relationships and that's where most of our pipeline is coming from.

Chuck Herman, do you want to comment a bit on our senior housing?

Yes. And I think our operators are generating some decent investment volume, a lot of off-market transactions that are coming our way because of that, but relatively few large packages, as George stated.

And I think that after the third quarter acquisition activity, the senior housing operating NOI is now maybe around 14%. I'm wondering if you've -- where you kind of think that should be in your portfolio longer-term?

Jana, it's is Scott. That is correct. It's about 14% at this point. And I think we would consistently say that we'll probably continue to have opportunities to grow with our existing operators and continue to look at additional idea investments opportunistically. But that's probably a good place to think it would be for the intermediate-term, somewhere in the mid-current 14%, maybe up to 20% level.

Your next question comes from Jeff Theiler with Green Street Advisors.

I structured your Chelsea Senior Living deal as a triple-net lease, previously you've been doing a lot RIDEA stuff. Can you talk a little bit about -- is there something about the portfolio that lends itself to a triple-net or is it -- what's your thinking behind structuring?

Chuck Herman?

We structured that transaction -- we felt that it aligned with the best interest of both parties. So that's what we agreed to. RIDEA does not fit every operator nor is it the desire of all parties. So we have options in how we can structure. In this particular case, we felt triple-net lease was the appropriate structure.

It's not a change in philosophy necessarily going forward. It just happened to be the right one for this...

Jeff, this is George. I think that the better way to look at RIDEA versus net lease is exactly as Chuck indicated. That it could be the portfolio is very attractive for us to do, RIDEA, but perhaps the operator doesn't want to do it. Other operators came to us in part because they wanted to do business with us, but they -- others like to do deals as joint ventures. And so it isn't really the choice alone for the capital partner. It is a partnership. And I think it just -- it's just situational and in this case they elected to do a net lease and we're just fine with that. It adds significant quality and size to our very strong focus in the Northeast.

Makes sense. So the cap rate is a little bit lower, I think, than we've seen on recent triple-net deals. Is part of that due the mark-to-market rent structure, years 4 and 9? I guess can you walk me through the mechanism of that?

Sure, Jeff, it's Scott. Yes, I think this investment has, I would call, higher than average increase, there's a part of it, in terms of the bigger picture. And the short of it is, through 2015, the rents would increase at a fixed rate of about 2.6% per year, on average. And then at that time, there'll be a fair market value reset but the increase will be no less than 3.5%. And really from that point, through 2015 through '19 it grows at the rate of at least 3% a year. So in general, you have some benefit from the fair market value resets and probably on average with increased rents we think 3% a year.

Okay. I guess and then lastly, I noticed -- I guess last quarter, you stopped reporting EBITDAR coverage and kind of focused on cash flow coverage of EBITDARM, with the M. I just want to get your thoughts around the thinking behind that. I think that's a metric that a lot of people look at, the EBITDAR coverage and especially when you're comparing portfolios, like Genesis quarter to quarter, that kind of was initially talked about as an EBITDAR coverage metric, just kind of your thinking about taking that out of the supplemental.

Sure, Jeff. It's Scott, I'll answer that one. Frankly, we find there's a lot of inconsistency in how coverage is reported across our sector, and management fees are subordinate to our lease payments and I think again they're also been imputed inconsistently throughout the industry, so our view is we'll continue to provide the cash flow coverage and help you guys talk about if you want to imply a management fee you can get to and after management fee number, but that was in essence our thinking around doing that.

Your next question comes from Derek Bower with UBS.

George, before you talk a lot about the pipeline I guess for senior housing and MOBs, but is there anything in the skilled nursing front that you're currently underwriting? Or do you think the market is more of in a wait-and-see mode depending on what comes out of the Congress in the near future?

I think it's a little slower right now. We will look at individual transactions, either acquisitions or a development for one of our -- what is it, 6 or 7 key operators to help them. But you're right, in some sense, is that until there is a little bit more clarity, it's a little more difficult to underwrite it at this moment. So everybody's going a little more slowly than the past. But I echo what Scott said, we think that despite a very unfortunate decision about the White House to take away too much reimbursement away that skilled nursing is by far the most effective delivery system for care in the whole system and will be favored over time and will be very successful, very successful and key part of the health care delivery systems for many years to come. So I think we're just waiting for clarity. And then we look forward to, as I said in my comments, helping George and the rest of the Genesis team, and for that matter other of our key operators build out a system that really works in the evolving health care delivery system.

On the balance sheet front, really given the widening of spreads in the unsecured market, I'm guessing that it's unfairly an avenue you want to pursue. [indiscernible] So how do you think about your funding needs over the next 6 to 12 months on the right-hand side of your balance sheet with respect to [ph] that are coming due as well as your developments on any acquisition?

Hey Ross, it's Scott. You're breaking up a little bit but it seems like you're asking about just unsecured and secured pricing and it -- prospects on financing outlook going forward, so I'll give a quick overview that. Let me know if I miss anything. I guess the advantage for us is I think we have a lot of flexibilities. We think about our capital needs and that's why we put a $2 billion line in place. And I think that's the most important. As it relates to debt pricing, been a lot of movement in that market obviously as well as the overall markets I would take a current new tenure unsecured note for us probably in the 5.75% to 6% range based on current treasuries and spreads in pricing. And the secured debt market, basically, we have -- I think we have some availability in that bucket, you know, 13.6% currently. But again, we tend to assume debt that's already on properties that we acquire. And again, in terms of equity, as we've said, I think over the longer-term, we do have slightly more conservative leverage goals, as I mentioned in my prepared remarks, closer to 40% debt to undepreciated book in 5x to 6x net debt to EBITDA, so you'd expect us as always to be looking at that market, too.

And can we assume that the converts that are coming up here in a month or so are going to get taken out on the line?

I guess you could, although we put out a notification there's $126 million of convertible debt that's puttable to us on December 1. The reality is those are actually in the money. The conversion price is, I think, about $47.10 or so. So we have actually $5 in the money. And at least our expectation, if dependent upon our stock price, at this point is they would probably remain outstanding, but we will wait and see there.

Your next question comes from James Milam with Sandler O'Neill. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Just a quick follow-up on the capital question. It was a nice increase in the dividend. I'm just curious how you guys on the board are thinking about increasing that over time, and if you're trying to -- I think you could have increased it more, but are you trying to retain a little capital going forward? Or what do you think about in terms of payout ratios?

George, do you want to do that?

It's always a balancing act. And to some extent, we try to lower our payout ratios a bit, and we're making a lot of progress there. And unlike a lot of other of our colleagues, we see a great pipeline. And so we have plenty use for the money as well. So it is always a tough balancing act that I think we came up at the right place, but people can differ. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Is there any kind of -- I mean, obviously, there's a taxable income floor [ph] , but is there sort of a minimum payout ratio that you guys would want to exceed over time or a minimum growth rate that you would look at?

Right now, we're about where we want to be. We might drive it a little lower. This economy and attitudes of people swing so dramatically from -- we're starting to feel like the market wants to go up, and then we have a REIS [ph] Situation that comes in, everybody gets conservative. So I guess we're right now sort of erring a bit on the side of being somewhat more conservative in how we're running our balance sheet and how we're looking at our liquidity. But it wouldn't surprise me in the least. I have a totally different conversation in our next earnings call. So it just takes a hell of a lot of judgment right now and a balancing act to run any public company. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Okay, great. And then my second one, it looked like CSU did a couple of -- bought a couple new assets, did you guys participate in that? And then if not, can you just remind us what the obligations are of your operators to show you deals, and for you guys to participate in any transactions that they do?

They bought -- with the Capital Senior Living, they -- public company, they've got the ability to go and do assets -- do deals outside of our relationship. And in this particular case, they wanted to grow one balance sheet versus off-balance sheet. We still have an excellent relationship with them and expect to be continuing to do business with them over the long term. Each relationship we have is different. So a majority of the time, we have the right of first option, the right of first refusal on new deals and have lines of credit with many of our line -- leased lines of credit with many of our operators. So that's why we tend to see a lot of business. And when you're focused on relationships, that drives volume our way.

Your next question comes from Bryan Sekino with Barclays Capital.

I know some of the RIDEA assets that you've recently acquired have a fill-up component to them. Can you kind of give us some perspective on how the operating assets progress in a lease-up perspective?

Sure, Bryan. I guess, I would just generally say they're doing well. I think the -- a few of the -- it's actually only about 6 buildings. So of the 99 total, 6 are in aggregated fill-up. The portfolio is doing well. They continue to fill. And that's actually, I think, a big benefit when you think about our overall NOI growth potential and why over the last 2 quarters, we've generated the 12.6% growth last quarter and 8.2% growth this quarter.

Stephanie Anderson is running our RIDEA platform. Stephanie, any other color?

Yes. I mean, overall, our operators are doing really well. There's so many different levers that they can pull to drive occupancy. And the lease-up continues much as you would expect with all the concerns in economy. They just continue. We continue to lease-up and have positive momentum.

Your next question comes from Karin Ford with KeyBanc Capital Markets.

George, just wanted to follow up on a comment you made earlier that given some of the volatility in the capital markets and in the economy today, you might be running your balance sheet a little bit more conservatively. Have you changed your return expectations on new investments at all as a result of that as well? Or perhaps maybe your growth assumptions on things you're looking at underwriting for future acquisitions?

Karin, right now, we are intending to get most of our new transactions from existing customers, and we're doing the best we can to accommodate them. We are clearly looking harder at our returns. And to the extent new parties come to the table, we're probably being somewhat more selective, careful in terms of giving them commitments. But we try to keep everything in play that we can that looks good to us in terms of reasonable returns going forward and building relationships. But at the same time not disadvantaging anybody in the event that the capital markets turn down. So again, I just sort of reiterate what I said earlier, it's a very interesting balancing act for all of us running this company and, for that matter, our colleagues and the rest of the Health Care REITs. The only thing I'd also add is that all of us are doing pretty well in the Health Care REITs and have probably better access to capital and better opportunities in a better industry in a sort of a choppy economy than virtually any other property type.

Second question, just appreciate the update on Genesis -- your pro forma Genesis coverage for 2012. Does that incorporate an additional 2% Medicare cut under the automatic plan that could come down the line? And if it doesn't, have you run a sensitivity on what that impact might be?

Scott?

The numbers I articulated on the call really include basically what's known at this point, including their assessment of the therapy impacts inclusive of our full rent bump and net of their estimate of cost mitigation. To your specific question about the potential for the 2% sequestration cut, it's not included. But again, that's unknown. It would not go into effect until January of 2013, and it would be again a net cut so if there were any market basket increase, it would be net of that. The sensitivity answer is basically still the same for us as it's been. Each 1% reduction in overall Medicare rates. If you hold all else equal, it translates into about 3% to 4% of an impact to our coverage. Again, so 2% would obviously be roughly 68 basis points. But again, I would importantly reiterate is there could always be some netting out of some cost savings.

Helpful. Just final question. What was the pricing on the dispositions that you sold in the third quarter and what you've got teed up for sale in the fourth quarter?

The dispositions in the third quarter were assets that had been in our portfolio a very long time and were very small amounts. There was only $16 million in aggregate. I think the blended average was 8.5%, 9%. I think a fair estimate for the last $50 million in our guidance would be something in the range of, say, 10% probably of a disposition yield.

Your next question comes from Jerry Doctrow with Stifel, Nicolaus. Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division: A lot's been covered. I just have a couple of quick things. Shifting to kind of MOBs, it looked like you saw a little bit of occupancy slippage sequentially. One of your competitors reported the other day, noted some significant rent rolldowns. So I was just curious if you can give a little color on the MOB and whether there's a rolldown that we should worry about.

John Thomas?

Yes. Jerry, this is John. The -- we saw a very slight bump, but it's more of a timing on the occupancy. And we expect to finish the year making that up and strong. So far this year, we're a little ahead of budget on tenant rents and roll ups or increases, so it's -- we're still averaging 1.5% to 2% on renewals, and retention rates continue to be in the in that 80% to 85%. So we wouldn't expect any meaningful rolldown. Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division: And then construction, I went through some of the construction material you had on the website today. Clearly, you seem to be comfortable with construction remaining a decent chunk of your business. I was wondering if I can get a little color on the CCRC lease-up and just your thinking about construction, how much you're comfortable doing, that sort of thing.

Jerry, maybe I'll start and try to answer. It's Scott. Yes, we still like a selective construction. It's pretty small part of the aggregate portfolio right now. I believe we only have about $450 million of total projects underway. I think most importantly, we're focused on a triple-net lease senior housing assets with existing operators that would likely roll into master leases. And the other main focus would be, largely, almost in many cases almost 100% pre-leased medical office buildings. So that is the majority of the type of project that we believe are low risk and get also nice returns in terms of the additional construction that we may do. In terms of your question about the CCRC and entrance fee fill-up, they actually progressed pretty well this quarter. The entrance fee component of those assets increased from 54% to 56%. And I would actually point out one nuance in the portfolio in terms of what we report in the supplement. The rental occupancy is reported at 82%. The number was actually down if you just compare supplement-to-supplement, but that was because we added over 100 new units this quarter. So the previous quarter's number existing portfolio would have increased about 91.5%, I think it was, prior to the effect of adding some new units. So -- and we added those because a lot of our rental component of those facilities actually had a wait list. So as we mentioned before, we've added some new units, which is a positive, because we needed some additional capacity. Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division: And just in terms of how all that sort of plays out to any future rent bumps. I mean, if we're assuming sort of a continued, sort of a steady climb on the entrance fee, I mean, when might you bump rents again? Or where does that stand?

Well, we're looking at that right now, Jerry. We hope to have another rent bump of perhaps the same magnitude as last year. And we're going slow on it. The rental's doing great. The Health Care is doing great. And the entrance fee is sort of just chugging along, making progress in a very choppy economy. So it's going to be very deliberative -- it's going to be modest, and we're just going to keep moving along. Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division: And probably something like January 1?

Probably.

Your next question comes from Nicholas Yulico with Macquarie.

Looking at the senior housing construction portfolio. I see there's a good chunk of the units being dementia care. And I'm just wondering how that affects your underwriting since dementia wings are obviously very important to the ultimate value of the facility, but tend to be more costly for an operator to run.

We've had great luck with investing in dementia care. It's a great driver of value in our sector, and it's been very solid covering parts of our portfolio. We like it a lot, and we're doing business with people who can provide either the full continuum through adding dementia care or folks that are particularly skilled in providing dementia care, maybe higher-end dementia care, such as Loren Shook at Silverado. So we're very pleased with our investments in that area.

Okay, great. And then, I was wondering if you have actually some stash you could share on what percentage of your existing senior housing properties either have dementia care units, whether you had sort of a percent of beds number or even just a percent of total properties that have some portion of dementia care.

I think probably we should get back to you on that.

We need to research that. It's obviously -- we don't have that one right here at the table.

Good question. We'll get back to you on that.

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

Just getting back to the Genesis fixed-charge coverage you identified and reiterated at 1.3x to 1.4x post some of the known issues. One of the known issues you mentioned was the cost savings that they're looking to incorporate. But when you talked about them, you talked about quality mix improvements, and you talked about geographical footprint, but I didn't hear anything about specifics on where they could become more efficient from a cost perspective at the property level. Can you share some of that color?

We're not going to go to all of their cost savings. That gets into a lot of very -- a much private information for George. But obviously, there are ways to deal with travel, with wages, bonuses and what have you. And we are very much aware of the fact that George and his team have been very aggressive in terms of resolving these issues with the least effect on their staff, which is, I think, one of the best, if not the best, in that sector. Scott, do you want to add anything?

I will comment just briefly and let Stephanie make a comment as well. But I would say, Rich, I'd really still get back to, they're doing a great job and doing everything they can do on the cost front. I really think the most important differentiator is the quality mix over time opportunity for Genesis. I mean, again, we didn't mention it on this call, but the ability to move from the low 50s up to potentially 60% to 65% over the longer term, really, is an important opportunity. We calculate that each 1% improvement in quality mix would increase their coverage by 6 basis points. So obviously having that type of an opportunity, I think, is a real important part to not focus so much on all the moving parts near term, but really a long-term opportunity at Genesis. Stephanie, do you want to talk about anything in particular?

Sure. Rich, just to give you kind of a more broad highlight on areas that are of focus is they've really spent some time talking to their long-term vendors, as well as their employees and other partners and are setting expectations of cost-sharing, and they've been very successful in that. They are continuing to focus on delivering quality care, and that won't be -- continue to be their main focus. And there will be overhead savings at the corporate, as well as the utilization of technology and the therapy delivery. And just workflow benefits that they have with bringing people in and out of their therapy gyms. So there are a lot of things. They have a list of opportunities and really just making the entire quality of care even better that they'll be focusing on.

Okay. So let's say, a year from now, it's 1.35x fixed-charge coverage for Genesis. I mean, where are you comfortable -- I'm assuming you would hope to see that number go up. I mean, where are you comfortable in terms of coverage for that -- for the quality of that portfolio?

We're comfortable at Genesis, HC or Humana Care, our life care centers and the other quality senior -- skilled nursing operators can handle this situation again, like they've had handled it many, many times. We obviously would like to have our skilled nursing after management fee coverage more like $1.5 billion or so. And so we're not happy. No one's happy about what we think was cutting into muscle and bone by the White House. We think it's a mistake, but we have the ability to get back up to our desired level and above it in the very near future.

Okay, that's fair. And then, just big picture question for you, George and whomever. You guys obviously continue to be big-time investors and buying a lot of assets through your relationships and all the rest. Do you worry at all about becoming almost too big? Are you anywhere near that in terms of, from the standpoint of economies of scale or maybe that's not the right word, but it becomes harder and harder to grow the company, and it becomes this big boulder that keeps rolling down the hill, getting bigger and bigger, harder to grow. Do you ever want to say, "Maybe we should just sit back for a couple of years and enjoy the size of the company that we've done so far in grow off of that base as opposed to getting making the base bigger and bigger."

Rich, we've never grown just to become larger. And we continuously dispose of properties, even some that are at 9% and 10% rates because we think some of those properties will not be as attractive in the new health care and senior housing environment. So we're always very aggressive about managing our portfolio. This just happens to be a period in which the health care REITs have wonderful access to capital, equity and debt at very attractive rates. And there are -- is consolidation going on in the operator worlds, and we're going to run hard. And we're doing very well vis-a-vis our closest competitors in terms of getting the best and the brightest. And I think it's just one of those time period. Just wait a year or so when a lot of the packages are gone and then we will have the ability to do that $1.5 billion to $2 billion a year with our relationships. And there won't be that many transactions out there. So it's going to be a very different world in a year or so. It's just a very unique time period.

Your next question comes from Michael Mueller with JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: I was just wondering if you could walk through some of the detail behind how you got to the 4.5% or 4.4% top NOI growth on the same-store -- or triple-net senior housing portfolio?

Sure. Most of the -- I think you're referencing the 4.4% same-store senior's housing triple-net NOI growth. Okay. There was some benefit of, really, 2 factors, some catching up this year in terms of rents where we didn't get the full increase or in the prior year. And the other factor was the increase in the entrance fee properties this year versus last year helped to get us a little bit above what you'd probably expect to see in more normal, call it, 2.5-ish percent rate of growth in that portfolio. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay. So the entrance fee component, that specifically ties to the deferrals -- the rent deferrals that are coming back now?

Yes.

Your next question comes from Ureil Gioti [ph] with Morgan Stanley.

It seems overall that the RIDEA portfolio is performing well despite the macro headwinds that are in the economy. Do you believe, though, that at any point in this macro headwinds could cause RIDEA growth to soften below your expectations?

It's a sort of hard to answer that question because there'll be circumstances in the economy that could slow the growth in RIDEA. Yes, I mean, there could be. But we think we have a very reasonable balance between triple-net and RIDEA structures. And we've also -- so that we will manage any risk such as that. Also our experience, frankly looking back at our RIDEA partners is such that it's a very unlikely that the growth would go below at least the triple-net regular increase. But is it possible that we'll have slower growth? Yes. And probably the best way to look at RIDEA is sort of averaging out the rate of growth over a number of years and maybe even averaging out certain sections of the country that may be up while the others are down. So that's sort of how we present it to you. We think overall that we're going to get a better return on RIDEA over time than with the net lease.

Okay. And my other question is regarding one of the asset classes that you purchased this last quarter. You wanted the -- you purchased some hospitals. And looking at supplemental, you actually haven't gone into that space in a while. What motivated the purchase of hospitals in this quarter?

John Thomas?

Yes, this is John. That was with one of our existing good relationship clients. It was pursuing an acquisition consolidation within the LTAC space. And we've been with post-acute within patient rehab and LTACs, we've been concentrating on some life investments with our existing operators. And that particular operator is one of our better clients. So good assets, good pricing. And there's some opportunity from some upside of the company related to that transaction.

Some good coverage to it, John, I mean, projected to be in excess of cash flow coverage in excess of 2x.

Correct.

And where do you see hospitals overall in your portfolio like -- because you were saying earlier that you see RIDEA senior housing as being about 14%, 15% of your portfolio? Where do hospitals line up there?

In that kind of 5% and 10% total. And we wouldn't, we think, go lower into that range with growth. Again, mostly with selective clients that we already have or great new opportunities. We opened a hospital with Loma Linda this year. That's a -- that's been a great investment with the medical office building that opened completely full. So we're getting 9-plus-percent yields from a great institutional client like that. So pretty selective, and primarily with existing clients and just on the mix of assets in that range. And as Scott mentioned, we're focused on 2x to 3x coverage ratios.

Well, I think too, to add to add to that John, is that as we see the world evolving, it could be that our initial relationship with a hospital could be to do a hospital -- but where we think health systems are going is more toward outpatient facilities, more preventative care. And hopefully, these relationships that could start with a hospital investment will lead to a lot more of the modern post-acute or outpatient facilities that we really think are going to be the drivers in the future.

And I don't know if you mentioned this, or I might have missed it, but did you do provide the current key mix for the Genesis portfolio?

Scott?

Going into this year, I believe it has increased over the last 5 years from 47% up to about 53%. So generally, it's about that, 54% right now.

54%?

Yes.

Okay. And when you were looking in the Chelsea portfolio, were you thinking that this portfolio would fall, well, within your idea of synergies with the Genesis portfolio?

We think that -- I think we have total assets up in the Northeast right now, Northeast and mid-Atlantic, that is in excess of 40% of our portfolio, which is I think double the percentage of any of our main competitors there. And we do think that anytime we get up there with high-quality assets and assisted living or post-acute for that matter, even hospitals, that we're going to try to drive a lot of synergy. Our board meeting last week was in Philadelphia and in New Jersey where we met with Brandywine, actually had our board meeting at our Brandywine facility. George Hager was there from Genesis. And then we had a very nice meeting, a great meeting with Rich Miller, who's CEO of the Virtua System, the most profitable hospital system in New Jersey. So we are looking to begin that process of breaking down the silos, making Health Care senior housing more efficient. So, yes, we're going to be very, very aggressive in doing that. We're probably still 1 year or 2 away from moving toward full ACOs and bundled payments and things like that, but we're trying to help break down the silos and get people ready for it.

Your next question comes from Todd Stender with Wells Fargo Securities.

Can you talk about more -- a little more about the Chelsea portfolio? How did you source the transaction? And can you talk about the mix of IL and AL?

We've known the folks at Chelsea a number of years. Back when I was a consultant, we worked with them when they were starting out the company. So we've had a long history with these guys over the years. And our originating team has known them for many years when I was back a consultant, 10 buildings and expo markets in New Jersey and New York, all private-pay facilities, a little over 900 units, about 2/3 of them in the assisted living area and another 1/3 in memory care and IL side of the business. So I mean, real high-quality, excellent markets, tough to replace them. And like you've said, we've known them a long time and finally had the opportunity do business with them.

Are there any options to acquire existing facilities with Chelsea? Anything part of that deal.

We've been reviewing additional transactions with all of our operators. Right now, this is a majority of their portfolio. We've talked about other assets that they either have managed our have options on, and we expect to continue to grow the relationship over time.

Okay. And George, in your opening remarks, you highlighted the consolidation across several of the property types. It seems like skilled nursing would be a logical place to start. Can you comment on skilled consolidation or any other property types maybe you see for next year?

Well, I think that anytime you have sort of a shock going through any particular sector, some people are just going to hide and try to get through it. I always think that those kind of periods as periods of opportunity. So I think that will happen. I think we're still waiting for a little bit more clarity as people form relationships with one another, and then that can lead to more efficient pricing. So I would be surprised if consolidation would not occur.

Your next question comes from Rob Mains with Morgan Keegan. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: Just one question, kind of correlated to Todd's there. You talked about opportunities to add to the RIDEA portfolio that you've got. You've been holding steady at 99 facilities. Going forward, how -- what should we be expecting there if you're going to have? Would this be in the form of development with your partners or helping them acquire and integrate new facilities? Kind of just a sense of where that would go.

I think most of them would be new acquisitions, Rob, for now with very selective development within their particular region of focus, so strongly acquisition-oriented for at least the next year, some selective development. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: And I know if you can't write this in stone, but given that several of those portfolios are kind of geographically concentrated, I assume the acquisitions would be more on the smaller scale than significant change, or am I not thinking of it the right way?

Well, I think all of the existing acquisitions have tended to get somewhat smaller, okay? So I think you're generally correct, but there are some opportunities right now for, yes, $100 million, 500 million for some and -- but I guess that's tending to be a little smaller, given the size of our original acquisitions. But I still think they're significant and had too some of the cost efficiencies within the region for some of our top operators.

[Operator Instructions] The next question comes from Michael Odell with AIG Asset Management.

I was just hoping to revisit the discussion of utilizing EBITDARM and EBITDAR coverage. I understand the fees subordinate to lease payment. But in practice, have you ever actually received rent without a management fee being paid? And also on that note, when you underwrite deals, are you doing so on and EBITDAR or EBITDARM basis?

Mike, it's Scott. We do look at both. As we all know, we've provided both before and after management fees. So we have perspective, and we obviously, we can help you understand whatever numbers you want. So the inconsistency we found was causing a lot of confusion around the number. And there's intent to not help you understand what an after-management fee number is. So we'll continue to work with you to give you whatever you need.

Okay. Would you be able to provide those EBITDAR coverage numbers?

I don't have them in front of me right now.

At this time, there for no further questions. I will now turn the conference back over to Mr. Chapman for his closing remarks.

We would just, in closing, thank you for your participation and, again, indicate that Scott and his team will be available for follow-up questions after this call. Thank you.

Thank you. This concludes the conference. You may now disconnect.