Exhibit 99.2
| Exhibit 99.2 4Q09 SUPPLEMENTAL INFORMATION |
| TABLE OF CONTENTS CORPORATE Corporate Profile 2 Analyst Coverage 4 Investor Relations Contacts 4 Forward-Looking Statements and Risk Factors 5 33 3 FINANCIAL Consolidated Balance Sheets (Unaudited) 6 Consolidated Statements of Income (Unaudited) 7 Funds from Operations Reconciliation 8 Funds Available for Distribution Reconciliation 9 Adjusted EBITDA Reconciliation 10 Net Operating Income Reconciliation 11 Outlook Reconciliation 12 Revenue and Lease Maturity 13 Debt Maturities and Principal Payments 14 Fixed and Floating Rate Debt 14 Current Capitalization 15 25 INVESTMENT Gross Investment Activity — Quarter 16 Gross Investment Activity — Year 17 Investment Timing 18 Disposition Activity 18 Discontinued Operations 18 PORTFOLIO Portfolio Composition 19 Investment Metrics 19 Portfolio Concentration 20 Top Ten Operator Descriptions 21 MSA and Region Concentration 22 Portfolio Performance 23 Same Store Revenue Growth 23 Portfolio Performance — Independent Living/CCRC 24 Portfolio Performance — Assisted Living 25 Portfolio Performance — Skilled Nursing 26 Portfolio Performance — Hospitals 27 Portfolio Composition — Medical Office Buildings 28 Portfolio Performance — Medical Office Buildings 28 Portfolio Concentration — Medical Office Buildings 29 Development Activity 30 Development Funding Projections 30 Development Project Conversion Estimates 31 Unstabilized Properties 32 Portfolio Trends 33 GLOSSARY Glossary 34 Supplemental Reporting Measures 37 |
| CORPORATE HEALTH CARE REIT, INC., a real estate investment trust (“REIT”) with an enterprise value of $8.2 billion, invests in health care real estate, including independent living, assisted living and skilled nursing facilities, continuing care retirement communities, hospitals and medical office buildings. The company’s full service platform also offers property management and development services to its customers. Data as of: December 31, 2009 NYSE Symbol: HCN Enterprise Value: $8.2 billion Investment Concentration* Closing Price: $44.32 Gross Real Estate Assets: $6.8 billion Owned Assets: 93% 52 Week Hi/Lo: $46.74/$25.86 Debt to Market Capitalization: 30% Top 5 Customers: 24% Dividend/Yield: $2.72/6.14% Debt to Book Capitalization: 39% Top 5 States: 45% Shares Outstanding: 123.4 million Senior Debt Ratings: Baa2/BBB-/BBB * % of total investments FULL SERVICE PLATFORM Health Care REIT provides senior housing operators and health care systems with a single source for facility planning, design and turn-key development, property management and monetization or expansion of existing real estate. By extending successful relationship investment programs to health care systems across higher acuity asset classes, the company has significantly increased potential investment opportunities. DEVELOPMENT FUNDING GROSS REAL ESTATE ASSETS $ millions $ millions $7,564 $621 $6,764 $6,462 $555 $5,498 $4,477 $308 $3,131 $168 $44 2005 2006 2007 2008 2009 2010E* 2007 2008 2009 2010E* Future* *represents projected future funding for projects underway *based on mid-point of HCN 2010 net investment as of December 31, 2009 guidance of $700 to $900 million 2 |
| CORPORATE SECURE DIVIDEND Health Care REIT maintains a commitment to investment grade ratings, conservative balance sheet management and underwriting, asset and property management protocols that ensure prudent investments and proactive management over the life of its long-term leases. The company has declared 155 consecutive quarterly dividends during its 40-year history and remains focused on delivering attractive stockholder returns. GROWTH SINCE INCEPTION* SOLID DIVIDEND PAYMENT RECORD* $3,500,000 $3,000,000 $3.00 $2,500,000 $2.50 $2,000,000 $2.00 $1,500,000 $1.50 $1,000,000 $1.00 $500,000 $0.50 $0 $0.00 71 75 79 83 87 91 95 99 03 07 71 74 77 80 83 86 89 92 95 98 01 04 07 10 *value of $10,000 investment made 6/30/1971, *adjusted for stock splits assuming reinvestment of dividends TOTAL RETURNS* 1 year 12.8% 3 years 7.3% 5 years 9.9% 10 years 20.4% 20 years 15.2% Since inception 16.0% *assumes reinvestment of dividends RELATIONSHIP FOCUSED, LONG-TERM STRATEGY With 61 operators and over 800 medical office tenants in 39 states, the company strives to provide each customer with the highest quality service and attention to detail. Throughout the company’s 40-year history, it has been a long-term capital provider to senior housing and health care systems throughout all market cycles. The relationship approach enables the company to partner with the best regionally focused operators and health systems and help them grow profitably, while concentrating on what they do best — provide quality care to patients and residents. SPEED AND CERTAINTY OF EXECUTION Health Care REIT’s experience and knowledge enable it to make investment decisions within days, rather than weeks or months. The company has accessed over $3.9 billion in capital in the last five years, including $814 million in 2008 and $998 million during the twelve months ended December 31, 2009. The company’s $1.15 billion line of credit ensures new investments will be funded on time. 3 |
| CORPORATE George L. Chapman ANALYST COVERAGE Chairman, CEO & President Bank of America Merrill Lynch Mr. Chapman is currently Chairman, BMO Capital Markets Corp. Chief Executive Officer and President Deutsche Bank Securities Inc. of the company. He has served as Green Street Advisors, Inc. Chairman and Chief Executive Officer KeyBanc Capital Markets since October 1996, and previously Morgan Keegan & Co., Inc. Raymond James & Associates, Inc. served as President of the company Robert W. Baird & Co. from September 1995 to May 2002. Stifel Nicolaus & Company, Inc. From January 1992 to September UBS Securities 1995, he served as Executive Vice Wells Fargo Securities President and General Counsel of the company. Jeffrey H. Miller EVP-Operations & General INVESTOR RELATIONS Counsel ANALYST / INVESTOR CONTACT Mr. Miller is currently Executive Vice Scott A. Estes EVP & CFO President-Operations and General sestes@hcreit.com Counsel, He served as Executive Vice President and General Counsel from Michael A. Crabtree March 2006 to January 2009 and SVP & Treasurer Vice President and General Counsel mcrabtree@hcreit.com of the company from July 2004 to March 2006. From 1996 to June 2004, Mr. Miller was a partner in the GENERAL INQUIRIES real estate practice group of the law Erin C. Ibele SVP-Administration & Corporate Secretary firm of Shumaker, Loop & Kendrick, info@hcreit.com LLP. Scott A. Estes EVP & CFO Mr. Estes is currently Executive Vice President and Chief Financial Officer. He served as Senior Vice President and Chief Financial Officer of the company since March 2006 and served as Vice President of Finance of the company from April 2003 to March 2006. From January 2000 to April 2003, Mr. Estes served as a Senior Equity Analyst and Vice President with Deutsche Bank Securities. From January 1998 to December 1999, Mr. Estes served as a Senior Equity Analyst and Vice President with Bank of America Securities. 4 |
| CORPORATE Forward-Looking Statements and Risk Factors This document may contain “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company’s portfolio; the sale of properties; the performance of its operators/tenants and properties; its occupancy rates; its ability to acquire, develop and/or manage properties; its ability to enter into agreements with viable new tenants for vacant space or for properties that the company takes back from financially troubled tenants, if any; its ability to make distributions to stockholders; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; its critical accounting policies; and its ability to meet its earnings guidance. When the company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company’s expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and senior housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; the company’s ability to transition or sell facilities with profitable results; the failure to make new investments as and when anticipated; acts of God affecting the company’s properties; the company’s ability to re-lease space at similar rates as vacancies occur; the company’s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company’s properties; changes in rules or practices governing the company’s financial reporting; and legal and operational matters, including real estate investment trust qualification and key management personnel recruitment and retention. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements. |
| FINANCIAL Consolidated Balance Sheets (unaudited) (dollars in thousands) December 31, 2009 2008 Assets Real estate investments: Real property owned Land and land improvements $521,055 $504,907 Buildings and improvements 5,185,328 4,653,871 Acquired lease intangibles 127,390 133,324 Real property held for sale, net of accumulated depreciation 45,686 48,054 Construction in progress 456,832 639,419 Gross real property owned 6,336,291 5,979,575 Less accumulated depreciation and amortization (677,851) (600,781) Net real property owned 5,658,440 5,378,794 Real estate loans receivable (1) 427,363 482,885 Less allowance for losses on loans receivable (5,183) (7,500) Net real estate loans receivable 422,180 475,385 Net real estate investments 6,080,620 5,854,179 Other assets: Equity investments 5,816 1,030 Deferred loan expenses 22,698 23,579 Cash and cash equivalents 35,476 23,370 Restricted cash 23,237 154,070 Receivables and other assets (2) 199,339 158,803 Total other assets 286,566 360,852 Total assets $6,367,186 $6,215,031 Liabilities and equity Liabilities: Borrowings under unsecured lines of credit arrangements $140,000 $570,000 Senior unsecured notes 1,653,027 1,831,151 Secured debt 620,995 446,525 Accrued expenses and other liabilities 145,713 129,070 Total liabilities 2,559,735 2,976,746 Equity: Preferred stock 288,683 289,929 Common stock 123,385 104,635 Capital in excess of par value 3,900,666 3,204,690 Treasury stock (7,619) (5,145) Cumulative net income 1,547,669 1,354,400 Cumulative dividends (2,057,658) (1,723,819) Accumulated other comprehensive income (2,891) (1,113) Other equity 4,804 4,105 Total Health Care REIT, Inc. stockholders’ equity 3,797,039 3,227,682 Noncontrolling interests 10,412 10,603 Total equity 3,807,451 3,238,285 Total liabilities and equity $6,367,186 $6,215,031 Notes: (1) Includes non-accrual loan balances of $67,126,000 and $72,770,000 at December 31, 2009 and 2008, respectively. (2) Includes net straight-line receivable balances of $79,760,000 and $66,875,000 at December 31, 2009 and 2008, respectively. 6 |
| FINANCIAL Consolidated Statements of Income (unaudited) (amounts in thousands except per share data) Three Months Ended Year Ended December 31, December 31, 2009 2008 2009 2008 Revenues: Rental income $133,037 $125,350 $520,300 $475,822 Interest income 10,246 10,886 40,885 40,063 Other income 1,578 4,865 5,388 10,521 Prepayment fees 2,400 — 2,400 — Total revenues 147,261 141,101 568,973 526,406 Expenses: Interest expense 25,154 30,353 106,231 130,153 Property operating expenses 11,454 10,989 45,896 42,634 Depreciation and amortization 40,576 38,387 157,049 144,361 General and administrative expenses 10,908 13,501 49,691 47,193 Realized loss on derivatives - 21,880 — 23,393 Loss (gain) on extinguishment of debt 410 — 25,107 (2,094) Provision for loan losses 23,121 94 23,261 94 Total expenses 111,623 115,204 407,235 385,734 Income from continuing operations before income taxes 35,638 25,897 161,738 140,672 Income tax expense (151) (136) (168) (1,306) Income from continuing operations 35,487 25,761 161,570 139,366 Discontinued operations: Gain (loss) on sales of properties 16,487 33,120 43,394 163,933 Impairment of assets (23,350) (32,648) (25,223) (32,648) Income from discontinued operations, net 8,214 1,155 13,186 12,774 Discontinued operations, net 1,351 1,627 31,357 144,059 Net income 36,838 27,388 192,927 283,425 Less: Preferred stock dividends 5,520 5,541 22,079 23,201 Net income attributable to noncontrolling interests (382) (2) (342) 126 Net income attributable to common stockholders $31,700 $21,849 $ 171,190 $260,098 Average number of common shares outstanding: Basic 122,700 103,329 114,207 93,732 Diluted 123,105 103,840 114,612 94,309 Net income attributable to common stockholders per share: Basic $0.26 $0.21 $1.50 $2.77 Diluted $0.26 $0.21 $1.49 $2.76 Common dividends per share $ 0.68 $0.68 $2.72 $2.70 7 |
| FINANCIAL Funds From Operations Reconciliation (amounts in thousands except per share data) Three Months Ended Year Ended December 31, December 31, 2009 2008 2009 2008 Net income attributable to common stockholders $31,700 $21,849 $171,190 $260,098 Depreciation and amortization (1) 41,780 42,150 164,923 163,045 Loss (gain)Pon sales of properties (16,487) (33,120) (43,394) (163,933) Noncontrolling interests (564) (81) (798) (342) Prepayment fees (2,400) — (2,400) — Funds from operations 54,029 30,798 289,521 258,868 Impairment of assets 23,350 32,648 25,223 32,648 Realized loss on derivatives — 21,880 — 23,393 Terminated transaction costs — 2,291 — 2,291 Non-recurring G&A expenses — - 3,909 -Loss (gain) on extinguishment of debt 410 — 25,107 (2,094) Provision for loan losses 23,121 94 23,261 94 Additional other income (8,059) (2,500) (8,059) (2,500) Non-recurring income tax expense — - — 1,325 Funds from operations — normalized $92,851 $85,211 $ 358,962 $314,025 Average common shares outstanding: Basic 122,700 103,329 114,207 93,732 Diluted 123,105 103,840 114,612 94,309 Per share data: Net income attributable to common stockholders Basic $0.26 $0.21 $1.50 $2.77 Diluted $0.26 $0.21 $1.49 $2.76 Funds from operations Basic $0.44 $0.30 $2.54 $2.76 Diluted $0.44 $0.30 $2.53 $2.74 Funds from operations — normalized Basic $ 0.76 $0.82 $3.14 $3.35 Diluted $0.75 $0.82 $3.13 $3.33 FFO Payout Ratio Dividends per share $0.68 $0.68 $2.72 $2.70 FFO per diluted share $0.44 $0.30 $2.53 $2.74 FFO payout ratio 155% 227% 108% 99% FFO Payout Ratio — Normalized Dividends per share $0.68 $0.68 $2.72 $2.70 FFO per diluted share — normalized $0.75 $0.82 $3.13 $3.33 FFO payout ratio — normalized 91% 83% 87% 81% Notes: (1) Depreciation and amortization includes depreciation and amortization from discontinued operations. 8 |
| FINANCIAL Funds Available for Distribution Reconciliation (amounts in thousands except per share data) Three Months Ended Year Ended December 31, December 31, 2009 2008 2009 2008 Net income attributable to common stockholders $31,700 $21,849 $171,190 $260,098 Depreciation and amortization (1) 41,780 42,150 164,923 163,045 Loss (gain)Pon sales of properties (16,487) (33,120) (43,394) (163,933) Noncontrolling interests (472) (18) (530) (44) Prepayment fees (2,400) — (2,400) - -Gross straight-line rental income (4,917) (4,682) (19,415) (20,489) Prepaid/straight-line rent receipts 7,211 12,602 30,674 28,282 Amortization related to above/(below) market leases, net (369) (363) (1,713) (1,039) Non-cash interest expense 3,387 2,899 11,897 11,232 Cap-ex, tenant improvements, lease commissions (5,025) (2,865) (13,819) (6,347) Funds available for distribution 54,408 38,452 297,413 270,805 Impairment of assets 23,350 32,648 25,223 32,648 Realized loss on derivatives — 21,880 — 23,393 Terminated transaction costs — 2,291 — 2,291 Non-recurring G&A expenses — - 3,909 -Loss (gain) on extinguishment of debt 410 — 25,107 (2,094) Provision for loan losses 23,121 94 23,261 94 Additional other income (8,059) (2,500) (8,059) (2,500) Non-recurring income tax expense — - — 1,325 Prepaid/straight-line rent receipts (7,211) (12,602) (30,674) (28,282) Funds available for distribution — normalized $86,019 $80,263 $336,180 $297,680 Average common shares outstanding: Basic 122,700 103,329 114,207 93,732 Diluted 123,105 103,840 114,612 94,309 Per share data: Net income attributable to common stockholders Basic $0.26 $0.21 $ 1.50 $2.77 Diluted $0.26 $0.21 $1.49 $2.76 Funds available for distribution Basic $0.44 $ 0.37 $2.60 $2.89 Diluted $0.44 $0.37 $2.59 $2.87 Funds available for distribution — normalized Basic $0.70 $0.78 $2.94 $3.18 Diluted $0.70 $0.77 $2.93 $3.16 FAD Payout Ratio Dividends per share $0.68 $0.68 $2.72 $2.70 FAD per diluted share $0.44 $0.37 $2.59 $2.87 FAD payout ratio 155% 184% 105% 94% FAD Payout Ratio — Normalized Dividends per share $0.68 $0.68 $2.72 $2.70 FAD per diluted share — normalized $0.70 $0.77 $2.93 $3.16 FAD payout ratio — normalized 97% 88% 93% 85% Notes: (1) Depreciation and amortization includes depreciation and amortization from discontinued operations. 9 |
| FINANCIAL Adjusted EBITDA Reconciliation (dollars in thousands) Twelve Months Ended December 31, March 31, June 30, September 30, December 31, 2008 2009 2009 2009 2009 Net income $283,425 $ 314,613 $218,112 $183,478 $192,927 Interest expense (3) 141,059 131,750 122,927 116,406 109,772 Income tax expense 1,306 77 54 152 168 Depreciation and amortization (3) 163,045 164,797 165,898 165,292 164,923 Stock-based compensation (4) 8,530 11,248 10,922 10,525 9,633 Provision for loan losses 94 234 234 234 23,261 Loss (gain) on extinguishment of debt (2,094) (2,446) (2,446) 24,696 25,107 Adjusted EBITDA $595,365 $620,273 $515,701 $500,783 $525,791 Interest Coverage Ratio (1) Interest expense (3) $141,059 $131,750 $122,927 $116,406 $109,772 Capitalized interest (5) 25,029 29,727 35,690 39,301 41,170 Non-cash interest expense (11,231) (11,214) (11,289) (11,410) (11,898) Total interest $154,857 $150,263 $147,328 $144,297 $139,044 Adjusted EBITDA $595,365 $620,273 $515,701 $500,783 $525,791 Adjusted interest coverage ratio 3.84x 4.13x 3.50x 3.47x 3.78x Fixed Charge Coverage Ratio (2) Total interest (3) $154,857 $150,263 $147,328 $144,297 $ 139,044 Secured debt principal amortization 8,119 8,232 8,592 8,810 9,292 Preferred dividends 23,201 22,579 22,311 22,101 22,079 Total fixed charges $186,177 $181,074 $178,231 $175,208 $ 170,415 Adjusted EBITDA $595,365 $620,273 $515,701 $500,783 $525,791 Adjusted fixed charge coverage ratio 3.20x 3.43x 2.89x 2.86x 3.09x Net Debt to EBITDA Ratio Total debt $2,847,676 $ 2,589,873 $2,697,432 $2,420,487 $2,414,022 Less: cash and cash equivalents (23,370) (19,180) (79,505) (102,353) (35,476) Net debt $2,824,306 $2,570,693 $2,617,927 $2,318,134 $2,378,546 Adjusted EBITDA 595,365 620,273 515,701 500,783 525,791 Net debt to adjusted EBITDA ratio 4.74x 4.14x 5.08x 4.63x 4.52x Notes: (1) A comparable covenant in our senior unsecured notes is a minimum of 1.50 times. (2) A comparable covenant in our unsecured line of credit arrangement is a minimum of 1.75 times. (3) Interest expense and depreciation and amortization include discontinued operations. (4) Stock-based compensation expense was $912,000 and $9,633,000 for the three and twelve months ended December 31, 2009. (5) Capitalized interest was $10,305,000 and $41,170,000 for the three and twelve months ended December 31, 2009. 10 |
| FINANCIAL Net Operating Income Reconciliation (dollars in thousands) Three Months Ended Year Ended December 31, December 31, 2009 2008 2009 2008 Total revenues: Investment properties: Rental income: (1) Independent living/CCRCs $19,085 $19,562 $77,673 $66,402 Assisted living facilities 28,771 27,521 113,011 117,009 Skilled nursing facilities 40,733 41,056 167,425 163,731 Hospitals 10,779 11,898 44,968 41,707 Sub-total rental income 99,368 100,037 403,077 388,849 Interest income 10,246 10,886 40,885 40,063 Other income * 11,551 3,850 13,728 7,899 Total investment property income 121,165 114,773 457,690 436,811 Medical office buildings: Rental income (1) 35,980 33,138 136,834 133,332 Other income 254 222 949 930 Total MOB income 36,234 33,360 137,783 134,262 Non-segment/corporate other income 232 793 1,170 1,692 Total revenues 157,631 148,926 596,643 572,765 Property operating expenses: Investment properties — - — -Medical office buildings (1) 11,964 12,019 48,965 46,629 Non-segment/corporate — - — - Total property operating expenses 11,964 12,019 48,965 46,629 Net operating income: Investment properties 121,165 114,773 457,690 436,811 Medical office buildings 24,270 21,341 88,818 87,633 Non-segment/corporate 232 793 1,170 1,692 Net operating income $145,667 $136,907 $547,678 $526,136 * Includes $8,059,000 of other income from discontinued operations and $2,400,000 of prepayment fees Note: (1) The three months ended December 31, 2009 includes the following amounts (in thousands): Rental income from discontinued operations: Assisted living facilities $178 Skilled nursing facilities 900 Hospitals 363 Medical office buildings 870 Total $2,311 Non-cash rental income from continuing operations: Independent living/CCRCs $1,365 Assisted living facilities 946 Skilled nursing facilities 949 Hospitals 339 Medical office buildings 1,913 Total $5,512 Property operating expenses from discontinued operations: Medical office buildings $510 11 |
| FINANCIAL Outlook Reconciliation (amounts in thousands except per share data) Year Ended December 31, 2010 Low High Investments: Acquisitions $700,000 $800,000 Development 300,000 400,000 Gross new investments 1,000,000 1,200,000 Dispositions (300,000) (300,000) Net new investments 700,000 900,000 FFO Reconciliation: Net income attributable to common stockholders $178,420 $197,170 Depreciation and amortization (1) 206,500 206,500 Funds from operations $384,920 $403,670 Non-recurring G&A expenses (2) 2,580 2,580 Funds from operations — normalized $387,500 $406,250 Per share data (diluted): Net income attributable to common stockholders $1.43 $1.58 Funds from operations 3.08 3.23 Funds from operations — normalized 3.10 3.25 FAD Reconciliation: Net income attributable to common stockholders $178,420 $197,170 Depreciation and amortization (1) 206,500 206,500 Gross straight-line rental income (18,000) (18,000) Amortization related to above (below) market leases, net (6,500) (6,500) Non-cash interest expense 13,000 13,000 Cap-ex, tenant improvements, lease commissions (17,000) (17,000) Funds available for distribution $356,420 $ 375,170 Non-recurring G&A expenses (2) 2,580 2,580 Funds available for distribution — normalized $ 359,000 $377,750 Per share data (diluted): Net income attributable to common stockholders $1.43 $ 1.58 Funds available for distribution 2.85 3.00 Funds available for distribution — normalized 2.87 3.02 Notes: (1) Depreciation and amortization includes depreciation and amortization from discontinued operations. (2) Expenses recognized in connection with performance-based stock award. 12 |
| FINANCIAL Revenue and Lease Maturity (amounts in thousands except per share data) Rental Income (1) Independent Assisted Skilled Medical Total Rental Interest Total % of Year Living / CCRC Living Nursing Hospitals Office Income Income (2) Revenues Total 2010 $ — $ — $2,937 $ — $6,756 $9,693 $1,715 $11,408 2.0% 2011 — 988 — - 10,137 11,125 11,387 22,512 4.0% 2012 1,760 3,741 6,887 - 10,655 23,043 104 23,147 4.1% 2013 6,932 1,516 — - 8,465 16,913 13,755 30,668 5.5% 2014 — 2,859 6,230 — 10,928 20,017 1,812 21,829 3.9% 2015 — - 1,934 — 8,822 10,756 1,275 12,031 2.2% 2016 — - 6,374 — 13,497 19,871 273 20,144 3.6% 2017 — 14,742 3,632 2,350 5,860 26,584 2,697 29,281 5.2% 2018 3,997 33,873 16,705 — 2,399 56,974 1,422 58,396 10.5% 2019 — 18,636 17,851 — 9,461 45,948 395 46,343 8.3% Thereafter 71,170 45,071 101,820 40,304 22,343 280,708 1,807 282,515 50.7% $83,859 $ 121,426 $164,370 $42,654 $109,323 $521,632 $36,642 $558,274 100.0% Notes: (1) Rental income represents annualized base rent for effective lease agreements. The amounts are derived from the current contracted monthly base rent including straight-line for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves, if applicable. Rental income does not include common area maintenance charges or the amortization of above/below market lease intangibles. (2) Reflects contract rate of interest for loans, net of collectability reserves if applicable. 13 |
| FINANCIAL Debt Maturities and Principal Payments (dollars in thousands) % of Year Line of Credit (1) Senior Notes (2,4) Secured Debt (2,5) Total Total 2010 $ — $ — $12,204 $12,204 0.5% 2011 140,000 — 12,883 152,883 6.3% 2012 — 76,853 19,021 95,874 4.0% 2013 — 300,000 67,787 367,787 15.2% 2014 — - 128,232 128,232 5.3% 2015 — 250,000 69,712 319,712 13.2% 2016 — 300,000 159,788 459,788 19.0% Thereafter — 735,000 153,419 888,419 36.5% Totals $140,000 $1,661,853 $623,046 $2,424,899 100.0% Weighted Avg Interest Rate (3) 0.8% 5.6% 5.8% 5.4% Weighted Avg Maturity (4) 1.6 10.4 6.7 9.0 Fixed and Floating Rate Debt (dollars in thousands) Principal % of Debt Fixed Rate Debt Senior notes $1,661,853 68.5% Secured debt (6) 591,044 24.4% Total fixed $2,252,897 92.9% Floating Rate Debt Line of credit $140,000 5.8% Secured debt (6) 32,002 1.3% Total floating $172,002 7.1% Total debt $2,424,899 100.0% Notes: (1) Current line of credit capacity of $1.15 billion with remaining availability of $1.0 billion at December 31, 2009. Line of credit currently matures on August 5, 2011 but can be extended for one year at our discretion. (2) Amounts above represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet. (3) Line of credit interest rate represents 1-month LIBOR + 60 bps at December 31, 2009. Senior notes and secured debt average interest rate represents the face value note rate. (4) $340 million of convertible senior notes are puttable on December 1, 2011 and $395 million of convertible senior notes are puttable on July 15, 2012. Weighted average maturities would be 3.8 years and 4.4 years for senior notes and total debt, respectively, using the puttable dates. (5) $6,203,000 of secured debt that matures in 2013 relates to assets-held-for sale. Weighted-average maturities would be 6.7 years and 9.0 years for secured debt and total debt, respectively, if one used a 12/31/09 extinguishment date. (6) $99,950,000 of floating rate secured debt is characterized as fixed rate debt due to interest rate swap agreements at December 31, 2009. If one treated this as floating rate debt, total debt would be 88.8% fixed and 11.2% floating. 14 |
| FINANCIAL Current Capitalization (amounts in thousands except per share data) Balance % of Total Book Capitalization (1) Line of credit $140,000 2.2% Long-term debt obligations 2,274,022 36.6% Debt to total book capitalization 2,414,022 38.8% Total equity 3,807,451 61.2% Total book capitalization $6,221,473 100.0% Undepreciated Book Capitalization Line of credit $140,000 2.0% Long-term debt obligations 2,274,022 33.0% Debt to undepreciated book capitalization 2,414,022 35.0% Accumulated depreciation and amortization 677,851 9.8% Total equity 3,807,451 55.2% Total undepreciated book capitalization $6,899,324 100.0% Enterprise Value Line of credit $140,000 1.7% Long-term debt obligations 2,274,022 27.8% Debt to total enterprise value 2,414,022 29.5% Common shares outstanding 123,385 Period end share price $44.32 Common equity market capitalization 5,468,423 66.8% Noncontrolling interests 10,412 0.1% Preferred stock 288,683 3.6% Total enterprise value $8,181,540 100.0% Secured Debt as % of Total Assets (2) Secured debt $620,995 9.8% Total assets $6,367,186 Total Debt as % of Total Assets (3) Total debt $2,414,022 37.9% Total assets $ 6,367,186 Unencumbered Assets as % of Unsecured Debt (4) Unencumbered assets $5,898,117 328.9% Unsecured debt $1,793,027 Notes: (1) A comparable covenant in our unsecured line of credit arrangement is a maximum of 60%. (2) A comparable covenant in our senior unsecured notes is a maximum of 40%. A comparable covenant in our unsecured line of credit arrangement is a maximum of 30%. (3) A comparable covenant in our senior unsecured notes is a maximum of 60%. (4) A comparable covenant in our unsecured line of credit arrangement is a minimum of 167%. A comparable covenant in our senior unsecured notes is a minimum of 150%. |
| INVESTMENT Gross Investment Activity 17 Fourth Quarter 2009 Beds / Units / Amount Investment Per Bed / Initial Properties Square Feet ($000) Unit / Square Foot Cash Yield Real Property Acquisitions Freestanding skilled nursing 1 125 beds $11,650 $93,200 9.5% Hospital 1 60 beds 20,500 341,667 8.6% Medical office building 1 88,500 sf 35,523 401 7.7% Total acquisitions 3 $ 67,673 8.3% Construction in Progress Development projects: CCRC — entrance fee 2 613 units $22,945 CCRC — rental 1 32 units 480 Combination — entrance fee 2 363 units 9,650 Combination — rental 9 1,070 units 24,810 Freestanding dementia care 2 101 units 3,858 Hospital 3 212 beds 31,236 Medical office 3 294,168 sf 11,211 Total development projects 22 104,190 Expansion projects: CCRC - entrance fee 3 19 units 574 Combination — entrance fee 4 28 units 1,656 Total expansion projects 7 2,230 Total construction in progress 29 106,420 Capital improvements to existing properties 7,289 9.4% Loan advances 27,535 8.5% Gross investments $208,917 |
| INVESTMENT Gross Investment Activity Year End 2009 Investment Per Beds / Units / Amount Bed / Unit / Initial Properties Square Feet ($000) Square Foot Cash Yield Real Property Acquisitions Freestanding skilled nursing 1 125 beds $11,650 $93,200 9.5% Hospital 1 60 beds 20,500 341,667 8.6% Medical office building 1 88,500 sf 35,523 401 7.7% Total acquisitions 3 $67,673 8.3% Construction in Progress Development projects: CCRC — entrance fee 3 757 units $85,874 CCRC - rental 1 32 units 3,293 Combination — entrance fee 4 548 units 70,347 Combination — rental 16 1,722 units 150,825 Freestanding dementia care 3 157 units 10,807 Freestanding skilled nursing 1 120 beds 5,559 Hospital 3 212 beds 113,907 Medical office 6 870,062 sf 107,853 Total development projects 37 548,465 Expansion projects: CCRC — entrance fee 3 36 units 2,871 Combination — entrance fee 4 28 units 3,996 Total expansion projects 7 6,867 Total construction in progress 44 555,332 Capital improvements to existing properties 19,227 9.5% Loan advances 74,417 9.2% Gross investments $ 716,649 17 |
| INVESTMENT Investment Timing 16 (dollars in thousands) Initial Cash Loan Initial Cash Construction Initial Cash Acquisitions Yield Advances Yield Conversions Yield Dispositions Yield on Sale January - - $0.0% $2,226 11.5% $10,639 9.3% $26,211 9.8% February — 0.0% 2,485 10.7% — 0.0% 3,427 8.9% March — 0.0% 1,523 11.7% 26,790 9.0% 14,630 12.6% April — 0.0% 1,472 10.5% 242 8.8% 4,259 10.1% May - - 0.0% 26,806 9.1% 28,825 9.0% 11,293 8.5% June — 0.0% 2,534 11.0% 149,157 8.0% 63,192 11.2% July - 0.0% 4,648 10.2% 66,272 8.4% 17,975 7.3% August — 0.0% 2,465 9.0% — 0.0% 4,185 7.6% September - 0.0% 2,723 9.2% 167,900 7.5% 7,968 5.3% October — 0.0% 15,864 7.2% 15,894 6.1% 70,406 10.8% November 11,650 9.5% 4,331 8.4% — 0.0% 353 6.4% December 56,023 8.0% 7,340 11.2% 272,200 7.3% 56,670 6.4% Total $67,673 8.3% $74,417 9.2% $737,919 7.7% $280,569 9.6% Disposition Activity (dollars in thousands) Fourth Quarter 2009 Year Ended 2009 Amount % of Total Amount % of Total Dispositions by Investment Type Real property $54,013 42.4% $186,713 66.5% Real estate loans receivable 73,416 57.6% 93,856 33.5% Total $127,429 100.0% $280,569 100.0% Dispositions by Property Type CCRC — rental $ — 0.0% $24,341 8.7% Combination — rental 5,651 4.4% 27,148 9.7% Freestanding assisted living 4,791 3.8% 6,649 2.4% Freestanding dementia care — 0.0% 5,811 2.1% Freestanding skilled nursing 26,982 21.2% 37,206 13.3% Hospital — 0.0% 40,841 14.6% Medical office building 16,589 13.0% 44,717 15.9% Real estate loans receivable 73,416 57.6% 93,856 33.3% Total $ 127,429 100.0% $280,569 100.0% Discontinued Operations (dollars in thousands) Fourth Quarter Year End 2009 2008 2009 2008 Revenues Rental income $2,311 $7,825 $19,611 $46,359 Other income 8,059 - - 8,059 — Expenses Interest expense 442 1,877 3,541 10,906 Property operating expenses 510 1,030 3,069 3,995 Depreciation and amortization 1,204 3,763 7,874 18,684 Income / (loss) from discontinued operations, net $8,214 $1,155 $13,186 $12,774 18 |
| PORTFOLIO Portfolio Composition (dollars in thousands) Properties Investment Balance % of Total Committed Balance % of Total Balance Sheet Data Real property 568 $5,658,440 93.0% $5,872,385 93.2% Loans 22 427,363 7.0% 427,363 6.8% Total 590 $6,085,803 100.0% $6,299,748 100.0% Investment Concentration — By Predominant Service Type Independent living / CCRC 50 $1,210,005 19.8% $ 1,229,896 19.5% Assisted living 179 1,312,167 21.6% 1,325,834 21.0% Skilled nursing 214 1,496,360 24.6% 1,496,360 23.8% Hospital 29 639,930 10.5% 791,220 12.6% Medical office 118 1,427,341 23.5% 1,456,438 23.1% Total 590 $6,085,803 100.0% $6,299,748 100.0% Investment Concentration — Senior Housing & Care and Medical Facilities Senior housing & care portfolio CCRC — entrance fee 6 $ 373,594 6.1% $385,502 6.1% CCRC — rental 8 148,883 2.4% 148,883 2.4% Combination — entrance fee 8 374,612 6.2% 382,596 6.1% Combination — rental 128 1,200,916 19.8% 1,213,207 19.2% Subtotal combination / CCRC 150 2,098,005 34.5% 2,130,188 33.8% Freestanding independent living 15 139,567 2.3% 139,567 2.2% Freestanding assisted living 61 201,762 3.3% 201,762 3.2% Freestanding dementia care 31 161,127 2.6% 162,502 2.6% Freestanding skilled nursing 181 1,085,682 17.8% 1,085,682 17.2% Subtotal freestanding 288 1,588,138 26.0% 1,589,513 25.2% Land 5 16,510 0.3% 16,510 0.3% Other loans — 315,879 5.2% 315,879 5.0% Senior housing & care total 443 4,018,532 66.0% 4,052,090 64.3% Medical facilities portfolio Long-term acute care 15 204,283 3.4% 204,283 3.2% Acute care 7 279,919 4.6% 431,209 6.8% Inpatient rehab 5 133,812 2.2% 133,812 2.1% Land 2 11,120 0.2% 11,120 0.2% Other loans — 10,796 0.1% 10,796 0.3% Subtotal hospital 29 639,930 10.5% 791,220 12.6% Medical office 118 1,427,341 23.5% 1,456,438 23.1% Medical facilities total 147 2,067,271 34.0% 2,247,658 35.7% Total portfolio 590 $6,085,803 100.0% $6,299,748 100.0% Bed / Unit Committed Per Bed / Unit / Square Foot Balance ($000) / Square Foot Investment Metrics Independent living / CCRC 7,046 units $ 1,229,896 $174,552 Assisted living 11,116 units 1,325,834 119,273 Skilled nursing 28,692 beds 1,496,360 52,153 Hospital 1,716 beds 791,220 461,084 Medical office 5,634,181 sf 1,456,438 259 Total $6,299,748 19 |
| PORTFOLIO 18 Portfolio Concentration (dollars in thousands) Total Investment % of Properties Balance Balances By Operator / Tenant Senior Living Communities, LLC 10 $419,406 6.9% Brookdale Senior Living, Inc. 86 310,126 5.1% Signature Healthcare LLC 32 270,775 4.4% Emeritus Corporation 21 241,288 4.0% Life Care Centers of America, Inc. 18 204,558 3.4% Merrill Gardens LLC 13 164,393 2.7% One Lantern Senior Living LLC 9 158,891 2.6% Stratford Companies 2 157,082 2.6% Gulf Coast Health Care 25 152,393 2.5% Lyric Health Care, LLC 27 144,133 2.4% Remaining portfolio 347 3,862,758 63.4% Total 590 $6,085,803 100.0% Independent Assisted Skilled Medical Total Investment % of Living / CCRC Living Nursing Hospital Office Properties Balance Total Balances By State Florida $218,924 $59,916 $223,493 $ — $255,034 79 $757,367 12.4% Texas 10,134 106,407 182,959 173,058 192,444 75 665,002 10.9% California 162,858 64,008 — 168,419 163,156 30 558,441 9.2% Massachusetts 76,600 117,027 218,453 11,120 — 34 423,200 7.0% Ohio 99,749 40,631 175,784 34,069 7,013 31 357,246 5.9% Tennessee — 37,130 203,188 — 62,467 30 302,785 5.0% South Carolina 235,883 6,424 — - 16,564 9 258,871 4.3% Wisconsin 25,704 90,319 — 23,819 90,978 13 230,820 3.8% North Carolina 46,191 157,337 - - — 23,983 53 227,511 3.7% Nevada 6,240 73,852 — - 109,974 14 190,066 3.1% Remaining portfolio 327,722 559,116 492,483 229,445 505,728 222 2,114,494 34.7% Total $1,210,005 $1,312,167 $1,496,360 $639,930 $1,427,341 590 $6,085,803 100.0% Independent Assisted Skilled Medical Total Total % of Living / CCRC Living Nursing Hospital Office Properties Revenues (1) Total Revenues By State Florida $2,872 $1,129 $7,461 $ — $6,549 79 $18,011 12.4% Texas 598 2,468 4,631 4,289 4,751 75 16,737 11.5% California 4,614 1,863 — 1,844 3,114 30 11,435 7.9% Massachusetts 140 3,264 6,097 584 - - 34 10,085 6.9% Tennessee — 818 6,580 70 1,961 30 9,429 6.5% Ohio — 1,269 4,965 387 205 31 6,826 4.7% North Carolina 726 5,601 — - 489 53 6,816 4.7% Nevada 296 1,956 — - 2,285 14 4,537 3.1% Indiana 1,857 180 989 863 591 13 4,480 3.1% Illinois — 1,635 789 910 516 15 3,850 2.6% Remaining Portfolio 7,528 13,617 13,244 3,480 15,519 216 53,388 36.6% Total $18,631 $33,800 $44,756 $ 12,427 $35,980 590 $145,594 100.0% Notes: (1) Revenues represent rent and interest income including rent from discontinued operations for the three months ended December 31, 2009. Revenues exclude other income and prepayment fees totaling $12,037,000 for the three months ended December 31, 2009. 20 |
| PORTFOLIO Top Ten Operator Descriptions Senior Living Communities, LLC, located in Charlotte, NC, operates premier continuing care retirement communities (CCRCs) throughout the southeastern United States. The company operates ten campuses in four states. As of December 31, 2009, the HCN portfolio consisted of ten properties in four states with an investment balance of $419.4 million. Brookdale Senior Living, Inc. (NYSE:BKD), located in Chicago, IL, is a national public provider of independent living and assisted living services. The company operates 565 facilities in 35 states with the ability to serve over 53,600 residents. As of December 31, 2009, the HCN portfolio consisted of 86 properties in 16 states with an investment balance of $310.1 million. Signature Healthcare LLC, located in Palm Beach Gardens, FL, is a private operator of skilled nursing facilities spread among seven states. The company operates 64 skilled nursing facilities with 7,674 beds. As of December 31, 2009, the HCN portfolio consisted of 32 properties in four states with an investment balance of $270.8 million. Emeritus Corporation (AMEX:ESC), located in Seattle, WA, is a national public provider of independent living, assisted living and Alzheimer’s services. The company operates 288 communities representing capacity for approximately 30,000 residents in 37 states. As of December 31, 2009, the HCN portfolio consisted of 21 properties in 16 states with an investment balance of $241.3 million. Life Care Centers of America, Inc., located in Cleveland, TN, is one of the largest private owners and operators of skilled nursing facilities in the country. The company has grown to more than 330 skilled nursing, assisted living, retirement, home care and Alzheimer’s centers in 28 states. As of December 31, 2009, the HCN portfolio consisted of 18 properties in 11 states with an investment balance of $204.6 million. Merrill Gardens LLC, located in Seattle, WA, is a privately held corporation organized under the laws of Washington State. The company owns, operates and/or manages 53 IL/AL facilities with 6,455 units in eight states. As of December 31, 2009, the HCN portfolio consisted of 13 properties in seven states with an investment balance of $164.4 million. One Lantern Senior Living, LLC, a fully owned subsidiary of Lazard Real Estate Partners, LP, located in New York, NY, is a privately held corporation organized under the laws of New York. The company owns, operates and manages more than 29 assisted living and skilled nursing facilities with 3,336 units in six states. As of December 31, 2009, the HCN portfolio consisted of nine properties in three states with an investment balance of $158.9 million. The Stratford Companies, Inc., located in Indianapolis, IN, is a private operator of continuing care retirement communities. The company operates three properties with more than 760 units in three states. As of December 31, 2009, the HCN portfolio consisted of two properties in two states with an investment balance of $157.1 million. Gulf Coast Health Care, located in Pensacola, FL, is a private operator of skilled nursing facilities. The company operates 43 skilled nursing facilities with 5,480 beds/units located in Florida, Alabama, and Mississippi. As of December 31, 2009, the HCN portfolio consisted of 25 properties in three states with an investment balance of $152.4 million. Lyric Health Care, LLC, located in Columbia, MD, is a private operator of 31 skilled nursing facilities and long term acute care hospitals with 3,800 beds/units in 10 states and has a management agreement with Encore Healthcare LLC to operate the facilities. As of December 31, 2009, the HCN portfolio consisted of 27 properties in nine states with an investment balance of $144.1 million. 21 |
| PORTFOLIO Metropolitan Statistical Area Concentration * 19 (dollars in thousands) Top 31 Top 75 Top 100 Independent living / CCRC $317,194 $551,923 $748,021% of independent living / CCRC 26.2% 45.6% 61.8% Assisted living 477,683 738,868 777,291% of assisted living 36.4% 56.3% 59.2% Skilled nursing 451,806 808,255 880,275% of skilled nursing 30.2% 54.0% 58.8% Hospital 286,013 528,112 565,127% of hospital 44.7% 82.5% 88.3% Medical office 1,008,800 1,312,284 1,312,284% of medical office 70.7% 91.9% 91.9% Total portfolio $2,541,496 $3,939,442 $4,282,998% of total portfolio 41.8% 64.7% 70.4% * Metropolitan statistical areas are as defined by the U.S. Census Bureau. Top 31, 75 and 100 classifications are reported per the National Investment Center Market Area Profiles Subscription Service. Region Concentration (dollars in thousands) Total Investment % of Properties Balance Total By Region* South Atlantic 175 $1,536,675 25.3% East North Central 73 948,829 15.6% West South Central 107 787,585 12.9% Pacific 39 695,985 11.4% East South Central 66 521,862 8.6% Mountain 41 508,503 8.4% New England 46 485,171 8.0% Middle Atlantic 31 373,087 6.1% West North Central 12 228,106 3.7% Total 590 $6,085,803 100.0% *Region definitions are derived from census bureau definitions and are itemized in the glossary. 14 22 |
| PORTFOLIO Portfolio Performance Facility Revenue Mix TTM TTM Age Occupancy CBMF (1) CAMF (1) Private Pay Medicaid Medicare Stable Portfolio* Independent living / CCRC 11 89.6% 1.27x 1.08x 93.6% 2.3% 4.1% Assisted living 10 89.0% 1.58x 1.36x 86.7% 10.7% 2.6% Skilled nursing 23 84.2% 2.29x 1.69x 18.5% 51.9% 29.6% Hospital 11 56.5% 2.47x 2.14x 34.9% 4.4% 60.7% Medical office 12 91.3% n/a n/a 100.0% 0.0% 0.0% Total 14 2.01x 1.59x * Data as of December 31, 2009 for medical office and September 30, 2009 for remaining asset types. Notes: (1) Represents trailing twelve month coverage metrics. Same Store Revenue Growth (dollars in thousands) 4Q08 Same Store 4Q09 Same Store Properties (1) Revenue* Revenue* % Change Same Store Portfolio Independent living / CCRC (2) 34 $16,205 $13,950 -13.9% Assisted living 160 25,093 25,268 0.7% Skilled nursing 210 38,857 38,747 -0.3% Hospital 20 9,439 9,504 0.7% Total (2) 424 $89,594 $87,469 -2.4% * Same store revenue represents cash-only rent or interest income excluding the impact of lease or loan basis changes (e.g., rent-producing capital improvement additions for leases and principal draws or paydowns for loans). Notes: (1) Represents those properties in the portfolio (both stable and unstable) for the 15 months preceding the end of the portfolio performance period. (2) 4Q09 independent living/CCRC revenue impacted by rent deferrals related to certain entrance fee communities versus 4Q08. 4Q09 skilled nursing revenue impacted by the transition of one portfolio to a new operator and the restructuring of an existing master lease portfolio at reduced yields. Excluding the impact of these operators, independent living/CCRC 4Q09 same store revenue increased 1.8%, skilled nursing 4Q09 same store revenue increased 0.8%, and total 4Q09 same store revenue increased 0.9%. 23 |
| Same Store (19 properties) PORTFOLIO Portfolio Performance — Independent Living / CCRC Stable Trailing Twelve Month Payment Coverage Before Management Fees 1.50 1.40 1.30 1.27x 1.26x 1.20 basis 3Q09 / 3Q09 / 1.10 points 3Q08 2Q09 Same Store (9) (2) 1.00 Stable (6) (2) 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Occupancy 95% 89 .6% 90% 89.0% 85% basis 3Q09 / 3Q09 / 80% points 3Q08 2Q09 Same Store (310) 70 Stable (260) 60 75% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Revenue per Occupied Unit $3,500 $3,273 $3,300 $3,268 $3,100 3Q09 / 3Q09 / $2,900 (% chg) 3Q08 2Q09 Same Store 4.9% 0.3% $2,700 Stable 6.8% -0.1% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Expense per Occupied Unit $2,300 $2,244 $2,150 $2,232 $2,000 3Q09 / 3Q09 / (% chg) 3Q08 2Q09 $1,850 Same Store 7.5% 1.0% Stable 11.1% 1.6% $1,700 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 24 |
| Same Store (130 properties) PORTFOLIO Stable Portfolio Performance — Assisted Living Trailing Twelve Month Payment Coverage Before Management Fees 1.70 1.59x 1.60 1.58x 1.50 basis 3Q09 / 3Q09 / points 3Q08 2Q09 1.40 2 (1) Same Store Stable 1 (1) 1.30 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Occupancy 95% 89.0% 90% 88.4% 85% basis 3Q09 / 3Q09 / 80% points 3Q08 2Q09 Same Store (50) 60 75% Stable (10) 80 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Revenue per Occupied Unit $4,700 $4,553 $4,500 $4,527 $4,300 3Q09 / 3Q09 / $4,100 (% chg) 3Q08 2Q09 Same Store 1.4% 0.3% $3,900 Stable 1.6% 1.3% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Expense per Occupied Unit $3,150 $3,002 $3,000 $2,850 $2,952 3Q09 / 3Q09 / $2,700 (% chg) 3Q08 2Q09 Same Store 2.0% 5.0% $2,550 Stable 1.4% 5.1% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 23 25 |
| PORTFOLIO Same Store (211 properties) Portfolio Performance — Skilled Nursing Stable Trailing Twelve Month Payment Coverage Before Management Fees 2.4 2.32x 2.3 2 .29x 2.2 basis 3Q09 / 3Q09 / 2.1 points 3Q08 2Q09 Same Store 5 3 2.0 Stable 3 2 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Occupancy 90% 84.2% 85% 83.8% 80% basis 3Q09 / 3Q09 / points 3Q08 2Q09 75% Same Store 20 10 Stable 50 40 70% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Revenue per Occupied Bed $6,893 $6,900 $6,865 $6,700 $6,500 3Q09 / 3Q09 / $6,300 (% chg) 3Q08 2Q09 Same Store 5.6% 1.2% $6,100 Stable 6.0% 1.7% 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Expense per Occupied Bed $5,620 $5,650 $5,500 $5,553 $5,350 3Q09 / 3Q09 / (% chg) 3Q08 2Q09 $5,200 Same Store 5.5% 1.6% Stable 6.7% 2.9% $5,050 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 26 |
| Same Store (12 properties) PORTFOLIO Stable Portfolio Performance — Hospital* Trailing Twelve Month Payment Coverage Before Management Fees 2.8 2.6 2.59x 2.47x 2.4 basis 3Q09 / 3Q09 / 2.2 points 3Q08 2Q09 Same Store 41 20 2.0 Stable 29 10 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 Occupancy 65% 60% 56.8% 55% basis 3Q09 / 3Q09 / 56.5% points 3Q08 2Q09 50% Same Store 1,000 (230) Stable 970 (150) 45% 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 *Due to recent portfolio activity, the same store criteria for the hospital portfolio has been reduced to 15 months to capture a larger number of facilities in the above charts. Per occupied unit metrics not applicable for hospitals. 27 |
| PORTFOLIO Portfolio Composition — Medical Office Buildings (dollars in thousands) Investment Total Operating Properties Square Feet Balance Revenues Expenses NOI Age Occupancy On Campus 47 2,881,477 $786,378 $19,602 $5,917 $13,685 12 93.5% Off Campus-Affiliated 21 1,075,778 242,215 6,969 2,691 4,278 12 89.9% Off Campus 39 1,289,761 353,283 8,793 2,846 5,947 13 87.5% Subtotal 107 5,247,016 1,381,876 35,364 11,454 23,910 12 91.3% Held-for-sale 7 205,635 15,039 870 510 360 Development 2 181,530 21,498 Land 2 8,928 Total 118 5,634,181 $1,427,341 $36,234 $11,964 $24,270 Portfolio Performance — Medical Office Buildings (dollars in thousands) 4Q08 1Q09 2Q09 3Q09 4Q09 Total MOB Performance Properties* 102 102 102 105 107 Square feet* 4,522,164 4,522,164 4,522,164 5,099,505 5,247,016 Investment balance* $1,217,337 $1,206,698 $1,197,255 $1,343,659 $1,381,876 Occupancy* 90.6% 90.4% 90.8% 91.2% 91.3% Total revenue* $32,102 $32,064 $31,541 $34,021 $ 35,364 Operating expenses* $10,989 $11,048 $11,239 $12,153 $11,454 NOI from continuing operations* $21,113 $21,016 $20,302 $21,868 $23,910 NOI from discontinued operations $228 $ 468 $481 $415 $360 Total cap-ex / TI / LC $2,865 $2,425 $2,733 $3,637 $5,025 Expired (square feet)* 188,367 167,813 129,024 121,312 241,266 Retained (square feet)* 145,349 120,612 107,647 74,882 208,792 Retention rate* 77.2% 71.9% 83.4% 61.7% 86.5% 4Q08 1Q09 2Q09 3Q09 4Q09 Same Store Performance* Properties 102 102 102 102 102 Square feet 4,522,164 4,522,164 4,522,164 4,522,164 4,522,164 Investment balance $1,217,337 $1,206,698 $1,197,255 $1,187,890 $1,181,293 Occupancy 90.6% 90.4% 90.8% 91.0% 91.5% Total revenue $32,102 $32,064 $31,541 $32,696 $31,750 Operating expenses $10,989 $11,048 $11,239 $12,120 $10,919 NOI $21,113 $21,016 $20,302 $ 20,576 $20,831 2010 2011 2012 2013 2014 Remaining Lease Expirations* Square feet 349,121 460,467 497,580 384,590 543,661% of total portfolio 6.7% 8.8% 9.5% 7.3% 10.4% * Results and forecasts include month-to-month and holdover leases and exclude terminations and discontinued operations. 28 |
| Portfolio Concentration — Medical Office Buildings PORTFOLIO Square Feet % of Total By Tenant* Aurora Health Care, Inc. 293,629 5.6% Tenet Health Systems 254,145 4.8% Baptist Health System, Inc 161,933 3.1% United HealthCare Services, Inc 160,855 3.1% Community Health Systems 155,365 3.0% Remaining Portfolio 4,221,089 80.4% Total 5,247,016 100.0% *Excludes development and held-for-sale properties. Investment Balance per Properties Square Feet % of Total Balance ($000) Square Foot By Region* South Atlantic 45 1,465,959 26.0% $371,747 $254 West South Central 16 832,446 14.8% 204,296 245 Middle Atlantic 13 781,505 13.9% 186,121 238 Mountain 15 700,583 12.4% 203,678 291 East South Central 11 610,335 10.8% 112,831 185 Pacific 10 597,497 10.6% 190,766 319 East North Central 6 475,483 8.4% 129,302 272 West North Central 2 170,373 3.1% 28,600 168 Total 118 5,634,181 100.0% $1,427,341 $253 *Region definitions are derived from U.S. Census Bureau definitions and are itemized in the glossary. Investment Balance per Properties Square Feet % of Total Balance ($000) Square Foot By State Florida 26 918,153 16.3% $255,034 $278 Texas 15 787,643 14.0% 192,444 244 California 9 534,333 9.5% 163,156 305 New Jersey 5 406,985 7.2% 106,787 262 Arizona 5 339,205 6.0% 86,818 256 Nevada 9 324,992 5.8% 109,974 338 Alabama 5 303,907 5.4% 40,981 135 Wisconsin 1 293,629 5.2% 90,978 310 Georgia 7 286,152 5.1% 64,923 227 New York 7 276,388 4.9% 58,352 211 Remaining portfolio 29 1,162,794 20.6% 257,894 222 Total 118 5,634,181 100.0% $1,427,341 $253 27 29 |
| PORTFOLIO Development Activity (dollars in thousands) Beds / Units / CIP Balance 2009 YTD 2009 YTD CIP Balance Projects Square Feet at 12/31/08 Funding Conversions at 12/31/09 Development Properties CCRC — entrance fee 3 757 $167,925 $85,874 $ (154,050) $99,749 CCRC — rental 1 32 231 3,293 (3,524) -Combination — entrance fee 4 548 106,958 70,347 (127,762) 49,543 Combination — rental 16 1,722 162,215 150,825 (234,031) 79,009 Freestanding dementia care 3 157 13,994 10,807 (16,576) 8,225 Freestanding skilled nursing 1 120 9,002 5,559 (14,561) -Hospital 3 212 75,509 113,907 - 189,416 Medical office 6 870,062 96,772 107,853 (183,127) 21,498 Total 37 $632,606 $548,465 $ (733,631) $447,440 Expansion Projects CCRC — entrance fee 3 36 $3,814 $2,871 $ (3,330) $3,355 Combination — entrance fee 4 28 2,999 3,996 (958) 6,037 Total 7 6,813 6,867 (4,288) 9,392 Development Total 44 $639,419 $555,332 $ (737,919) $456,832 Development Funding Projections * (dollars in thousands) Projected Future Funding Beds / Units / Square Initial 2010 2011 Funding Unfunded Committed Projects Feet Yield Funding Funding Thereafter Commitments Balances Development Properties CCRC — entrance fee 1 288 10.0% $11,627 $ — $ — $11,627 $111,376 Combination - entrance fee 1 144 6.0% 6,657 — - 6,657 56,200 Combination — rental 5 523 7.8% 12,291 — - 12,291 91,300 Freestanding dementia care 1 84 9.0% 1,375 — - 1,375 9,600 Hospital 3 212 9.3% 106,914 44,376 — 151,290 340,706 Medical office 2 181,530 8.9% 29,097 — - 29,097 50,595 Total 13 8.9% 167,961 $ $44,376 $ — $212,337 $659,777 * Excludes expansion projects 30 |
| PORTFOLIO Development Project Conversion Estimates* (dollars in thousands) Quarterly Conversions Annual Conversions Projected Initial Projected Initial Amount Cash Yields (1) Amount Cash Yields (1) 1Q10 estimate $163,280 7.2% 2010 estimate $449,277 8.7% 2Q10 estimate 228,732 9.6% 2011 estimate 210,500 9.3% 3Q10 estimate 35,515 9.3% 2012 estimate — 0.0% 4Q10 estimate 21,750 10.1% 2013 estimate — 0.0% 1Q11 estimate — 0.0% 2014+ estimate — 0.0% 2Q11 estimate 210,500 9.3% Total $ 659,777 8.9% 3Q11 estimate — 0.0% 4Q11 estimate — 0.0% Total $659,777 8.9% * Excludes expansion projects Notes: (1) Actual initial yields may be higher if the underlying market rates increase. 31 |
| PORTFOLIO Unstabilized Properties (dollars in thousands) Acquisitions/ 9/30/09 Construction Expansions/ 12/31/09 Properties Stabilized Conversions Reclassifications Properties Property Type CCRC — entrance fee 4 0 1 0 5 CCRC — rental 2 0 0 0 2 Combination — entrance fee 5 0 2 0 7 Combination — rental 13 0 4 0 17 Freestanding assisted living 2 0 0 (1) 1 Freestanding dementia care 4 0 0 0 4 Freestanding skilled nursing 2 0 0 0 2 Long Term Acute Care Hospital 4 0 0 0 4 Acute Care Hospital 0 0 0 0 0 Total 36 0 7 (1) 42 12/31/09 Investment % of Total Properties Beds / Units Balance Investment Property Type CCRC — entrance fee 5 1,071 $270,490 4.4% CCRC — rental 2 727 86,124 1.4% Combination — entrance fee 7 1,274 301,121 4.9% Combination — rental 17 2,032 374,827 6.2% Freestanding assisted living 1 56 7,120 0.1% Freestanding dementia care 4 173 28,980 0.5% Freestanding skilled nursing 2 240 33,056 0.5% Long Term Acute Care Hospital 4 212 67,229 1.1% Total 42 5,785 $1,168,947 19.2% 9/30/09 Construction Acquisitions/ Progressions/ 12/31/09 Properties Stabilized Conversions Expansions Reclassification Properties Occupancy 0 — 50% 24 0 7 0 (4) 27 50% — 70% 2 0 0 0 4 6 70% + 10 0 0 0 (1) 9 Total 36 0 7 0 (1) 42 12/31/09 Months In % of Total Investment % of Total Properties Operation Revenues Revenues (1) Balance Investment Occupancy 0 — 50% 27 13 $42,040 7.5% $780,116 12.8% 50% — 70% 6 30 15,201 2.7% 152,566 2.5% 70% + 9 36 17,052 3.1% 236,265 3.9% Total 42 21 $74,293 13.3% $1,168,947 19.2% Notes: (1) Includes annualized revenues as presented on page 13. 32 |
| PORTFOLIO Portfolio Trends Operator Concentration Trend (1) 60% 50% Top 10 40% 36.6% Top 5 30% 23.8% 20% 12/31/2006 12/31/2007 12/31/2008 12/31/2009 Property Type Trend (2) 35% 30% 23.8% 25% SNF 23.1% 21.0% MOB 20% 19.5% ALF 15% ILF/CCRC 12.6% 10% HOS 5% 0% 12/31/2006 12/31/2007 12/31/2008 12/31/2009 Payor Mix Trend (3) 70% 68.8% 60% 50% Private 40% Medicaid Medicare 30% 20% 16.6% 14.6% 10% 12/31/2006 12/31/2007 12/31/2008 9/30/2009 Notes: (1) Operator concentration trend based on investment balances for the dates presented. (2) Property type trend based on committed investment balances for the dates presented. (3) Payor mix is weighted by investment balance including stable and unstabilized properties. 33 |
| GLOSSARY Age: Current year, less the year built, adjusted for major renovations. Assisted Living: Assisted living facilities are state regulated rental properties that provide the same services as independent living facilities, but also provide supportive care from trained employees to residents who require assistance with activities of daily living, including management of medications, bathing, dressing, toileting, ambulating and eating. CAMF: Coverage after management fees represents the ratio of EBITDAR to contractual rent for leases or interest and principal payments for loans. CAMF is a measure of a property’s ability to generate sufficient cash flows for the operator/borrower to pay rent and meet other obligations. The coverage shown excludes properties that are unstabilized, closed or for which data is not available or meaningful. Cap-ex, Tenant Improvements, Leasing Commissions: Represents amounts paid in cash for: 1) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, 2) second generation tenant improvements and 3) leasing commissions paid to third party leasing agents to secure new tenants. CBMF: C overage before management fees represents the ratio of EBITDARM to contractual rent for leases or interest and principal payments for loans. CBMF is a measure of a property’s ability to generate sufficient cash flows for the operator/borrower to pay rent and meet other obligations, assuming that management fees are not paid. The coverage shown excludes properties that are unstabilized, closed or for which data is not available or meaningful. CCRC: C ontinuing care retirement communities include a combination of detached homes, an independent living facility, an assisted living facility and/or a skilled nursing facility on one campus. Resident payment plans vary, but can include entrance fees, condominium fees and rental fees. Many of these communities also charge monthly maintenance fees in exchange for a living unit, meals and some health services. Combination: A property that offers two or more levels of care (i.e. independent living, assisted living, dementia and skilled nursing), but does not meet the definition of a CCRC. Committed Balance: Represents investment balance plus unfunded construction commitments for which initial funding has commenced. Construction Conversion: Represents completed construction projects that were placed into service and began earning rent. Dementia Care: C ertain assisted living facilities may include state licensed settings that specialize in caring for those afflicted with Alzheimer’s disease and/or similar forms of dementia. EBITDAR: Earnings before interest, taxes, depreciation, amortization and rent. Management fees are imputed at 5% of revenues for independent living, assisted living, skilled nursing and CCRCs and at 3% for hospitals which the company believes represent typical management fees. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate EBITDAR and has not independently verified the information. EBITDAR is used to calculate CAMF. EBITDARM: E arnings before interest, taxes, depreciation, amortization, rent and management fees. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate EBITDARM and has not independently verified the information. EBITDARM is used to calculate CBMF. Entrance Fee: A property where the resident pays a substantial upfront fee and an ongoing monthly service fee for the right to occupy a unit. Typically, a portion of the upfront fee is refundable. Expense per Occupied Unit: R epresents the ratio of revenue less EBITDARM to occupied units based on the most recent quarter of available data and excludes properties that are unstabilized, closed, or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by ten ants/borrowers to calculate expense per occupied unit and has not independently verified the information. 34 |
| GLOSSARY Freestanding: A property that offers one level of service. Independent Living: Independent living facilities are age-restricted multi-family properties with central dining facilities that provide residents access to28meals and other services such as housekeeping, linen service, transportation and social and recreational activities. Initial Cash Yield: Represents annualized contractual income to be received in cash at date of investment divided by investment amount. Investment Amount: Acquisitions — Represents purchase price. New loans — Represents face amount of new loan. Construction conversion — Represents book balance converted from CIP to real property upon completion. Capital improvements to existing properties — Represents cash funded to tenants under an existing lease agreement. Loan advances — Represents cash funded to operators under an existing loan agreement. Investment Balance: Represents net book value of real estate investments as reflected on the company’s balance sheet. Medical Office: M edical office buildings are office and clinic facilities, often located near hospitals or on hospital campuses, specifically constructed and designed for use by physicians and other health care personnel to provide services to their patients. They may also include ambulatory surgery centers that are used for general or specialty surgical procedures not requiring an overnight stay in a hospital. Medical office buildings typically contain sole and group physician practices and may provide laboratory and other patient services. Metropolitan Statistical Area: Metropolitan statistical areas are geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating and publishing Federal statistics. The NIC MAP™ Data and Analysis Service provides revenue, supply and demographic information for the IL/CCRC, assisted living, and skilled nursing service types and commonly aggregates the information for the top 31, top 75 and top 100 MSAs. The company provides investment balance information in the same categories as another measure of geographic concentration. Occupancy: M edical office occupancy represents the percentage of total rentable square feet leased and occupied, including month-to-month leases, as of the date reported. Occupancy for all other property types represents average quarterly operating occupancy based on the most recent quarter of available data and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy and has not independently verified the information. Off Campus: Properties that are neither on campus nor off campus affiliated. Off Campus-Affiliated: Properties not on campus are considered affiliated with a hospital or health system if one or more of the following conditions are met: 1) a ground lease is maintained with a hospital or system entity; 2) a master lease is maintained with a hospital or system entity; 3) significant square footage is leased to a hospital or system entity; or 4) the property includes an ambulatory surgery center with a hospital partnership interest. On Campus: Properties are considered on campus if one or more of the following criteria are met: 1) the land parcel is contained within the physical boundaries of a hospital campus; 2) the land parcel is located adjacent to the campus; or 3) the building is physically connected to the hospital regardless of the land ownership structure. 35 |
| GLOSSARY Region Definitions: E ight divisions as established by the Census Bureau. New England - Connecticut , Maine , Massachusetts, New Hampshire, Rhode Island, Vermont. Middle Atlantic — New Jersey, New York, Pennsylvania. East North Central — Indiana, Illinois, Michigan, Ohio, Wisconsin. West North Central — Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota. South Atlantic — Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia. East South Central — Alabama, Kentucky, Mississippi, Tennessee. West South Central — Arkansas, Louisiana, Oklahoma, Texas. Mountain — Arizona, Colorado, Idaho, New Mexico, Montana, Utah, Nevada, Wyoming. Pacific — Alaska, California, Hawaii, Oregon, Washington. Renewal Rate: T he ratio of total square feet expiring and available for lease to total renewed square feet. Renewed Square Feet: S quare feet expiring during the reporting period upon which a lease is executed by the current occupant. Rental: A property where the resident pays a monthly market rate for the level of care provided, but is not required to pay a substantial upfront fee. Revenue per Occupied Unit: R epresents the ratio of total revenue to occupied units based on the most recent quarter of available data and excludes properties that are unstabilized, closed, or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate revenue per occupied unit and has not independently verified the information. Same Store: F or the medical office building portfolio, same store is defined as those properties owned for the entire previous five quarters. Properties acquired, developed or classified in discontinued operations are excluded from the same store amounts. For all other property types, same store is defined as those properties in the stable portfolio for the 24 months preceding the end of the portfolio performance reporting period, unless otherwise noted. Skilled Nursing: S killed nursing facilities are licensed daily rate or rental properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these properties are licensed for Medicaid and/or Medicare reimbursement. Hospitals: H ospitals generally include acute care hospitals, inpatient rehabilitation hospitals and long-term acute care hospitals. Acute care hospitals provide a wide range of inpatient and outpatient services, including, but not limited to, surgery, rehabilitation, therapy and clinical laboratories. Long-term acute care hospitals provide inpatient services for patients with complex medical conditions who require more intensive care, monitoring or emergency support than that available in most skilled nursing facilities. Square Feet: Net rentable square feet calculated utilizing Building Owners and Managers Association measurement standards. Stable: A facility will generally enter the stable portfolio after it has generated CAMF of 1.10x or greater for three consecutive months. Additionally, a facility will enter the stable portfolio if a facility fails to meet the above criteria in the 12 months following the budgeted stabilization date. Unstabilized: An acquisition that does not meet the stable criteria upon closing or a construction property that has opened but not yet reached stabilization. Yield on Sale: Represents annualized contractual income that was being received in cash at date of disposition divided by disposition cash proceeds. 36 |
| SUPPLEMENTAL The company believes that net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National REPORTING Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Normalized FFO represents FFO adjusted for unusual and non-recurring items. FAD 35 represents FFO excluding net straight-line rental adjustments, amortization related to above/below market MEASURES leases and amortization of non-cash interest expenses and less cash used to fund capital expenditures, tenant improvements and lease commissions at medical office buildings. Normalized FAD represents FAD excluding prepaid/straight-line rent cash receipts and adjusted for unusual and non-recurring items. EBITDA stands for earnings before interest, taxes, depreciation and amortization. A covenant in our line of credit arrangement contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy this covenant could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of this debt agreement and the financial covenant, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge ratio of at least 1.75 times. Net operating income (NOI) is used to evaluate the operating performance of the company’s properties. The company defines NOI as total revenues, including tenant reimbursements and discontinued operations, less property operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. The company believes NOI provides investors relevant and useful information because it measures the operating performance of the company’s properties at the property level on an unleveraged basis. The company uses NOI to make decisions about resource allocations and to assess the property level performance of our properties. Other than Adjusted EBITDA, the company’s supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investmen t recommendations of companies. The company’s management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant of our line of credit arrangement and is not being presented for use by investors for any other purpose. The supplemental reporting measures do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Multi-period amounts may not equal the sum of the individual quarterly amounts due to rounding. 37 |
| HEALTH CARE REIT, INC. One SeaGate, Suite 1500 P. O. Box 1475 Toledo, OH 43603-1475 419.247.2800 main 419.247.2826 fax www.hcreit.com |