Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HEALTHPEAK PROPERTIES, INC. | a8-kinvestorpresentation09.htm |
Investor Presentation
September 2017
HCP 2
Table of Contents
Introduction to HCP
Segment Overviews
Development and Redevelopment
Balance Sheet, Guidance and Sustainability
Appendices
3-12
13-18
19-22
23-28
29-33
Data in presentation is as of June 30, 2017 unless otherwise noted.
HCP 3
INTRODUCTION TO HCP
HCP 4
Introduction
HCP at a Glance
HIGH-QUALITY
PRIVATE PAY
DIVERSIFIED
32 YEARS AS A PUBLIC COMPANY
Member of S&P 500
4.9% Dividend Yield(2)
799 PROPERTIES
18 Million Sq. Ft. Medical Office
7 Million Sq. Ft. Life Science
46,000 Senior Housing Units
3RD LARGEST HEALTHCARE REIT
$23 Billion in Enterprise Value(1)
$15 Billion in Market Cap(1)
STRONG BALANCE SHEET
S&P: BBB (Stable)
Moody’s: Baa2 (Stable)
Fitch: BBB (Stable)
DIVERSIFIED SCALE
ESTABLISHED
(1) Enterprise value and market capitalization based on HCP’s share price of $31.96 on 6/30/17 and total consolidated debt and HCP’s share of unconsolidated JV debt as of 6/30/17.
(2) Based on share price as of 9/8/17.
INVESTMENT GRADE
HCP 5
What Differentiates HCP
Strong and improving investment grade balance sheet with ample
liquidity and no signif
44% of Cash NOI and Interest Income(1) from a diversified senior
housing portfolio: 25% triple-net with well-covered leases and 19%
SHOP
Premier Life Science portfolios in San Francisco and San Diego
83% on-campus MOB portfolio
Cypress MOB
Cypress, Texas
High-quality, 95% private-pay portfolio with a balanced emphasis on Senior Housing, Medical Office, and
Life Science real estate
Investment grade balance sheet with ample liquidity and no significant debt maturities until 2019
~$1 billion development and redevelopment pipeline with an
additional 1.8 million square feet of entitlements
Global leader in sustainability & best-in-class disclosures and
transparency
(1) Cash NOI plus Interest Income excluding $9.4 million of interest income from our HC-One debt investment which was repaid 6/30/17 and $7.6 million of interest income from our
Tandem Consulate Health Care debt investment as we entered into a definitive agreement in July 2017 to sell this investment.
HCP 6
Senior Leadership
TOM HERZOG PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Herzog is our President and CEO and a member of our Board of
Directors. Mr. Herzog is responsible for all aspects of the
Company’s business and has been instrumental in the recent
repositioning of the Company through the sale or transfer of non-
strategic assets, balance sheet improvements, and reductions in
tenant concentrations. Previously, Mr. Herzog was CFO of UDR,
Inc. from January 2013 until June 2016. Prior to joining UDR, Mr.
Herzog served in various CFO and Chief Accounting Officer roles
in the real estate industry.
SCOTT BRINKER CHIEF INVESTMENT OFFICER
Mr. Brinker is anticipated to become our EVP and Chief Investment
Officer effective January 4, 2018. In addition to leading the
Company’s investment activities, Mr. Brinker will also oversee our
senior housing platform. Mr. Brinker most recently served as EVP
and Chief Investment Officer at Welltower from July 2014 to
January 2017. Prior to that, he served as Welltower’s EVP of
Investments from January 2012 to July 2014. From July 2001 to
January 2012, he served in various investment and portfolio
management related capacities with Welltower.
Effective
January
2018
MICHAEL McKEE EXECUTIVE CHAIRMAN
Mr. McKee is our Executive Chairman and works closely with our
senior management team refining the strategic direction of the
Company, pursuing business development initiatives, and
advancing our corporate governance practices and process.
Currently, he chairs our Investment Committee. Mr. McKee has
been a member of our Board of Directors since 1989. Previously,
he was Vice Chairman and CEO of The Irvine Company and CEO of
Bentall Kennedy U.S., two of the largest privately-owned real estate
firms in North America.
PETER SCOTT CHIEF FINANCIAL OFFICER
Mr. Scott is our EVP and Chief Financial Officer and is responsible
for all aspects of the Company’s finance, treasury, tax, risk
management, and investor relations activities. In addition, Mr.
Scott sits on our Investment Committee. Prior to joining HCP in
2017, he served as Managing Director, Real Estate Banking Group
of Barclays from 2014 to 2017. His experience also includes various
positions of increasing responsibility at the financial services firms
Credit Suisse from 2011 to 2014, Barclays from 2008 to 2011 and
Lehman Brothers from 2002 to 2008.
TROY McHENRY GENERAL COUNSEL & CORPORATE SECRETARY
Mr. McHenry is our EVP, General Counsel and Corporate Secretary
and serves as the chief legal officer. He is responsible for
providing oversight and a legal perspective for the Company’s real
estate and financing transactions, litigation, as well as corporate
governance and SEC/NYSE compliance. He previously served as
SVP – Legal and HR from July 2013 to February 2016, as well as
other legal related capacities since December 2010. Prior to
joining HCP, Mr. McHenry held various legal leadership roles with
MGM Resorts International, Boyd Gaming Corp., and DLA Piper.
TOM KLARITCH CHIEF OPERATING OFFICER
Mr. Klaritch is our EVP and Chief Operating Officer and oversees
the Company’s specialty office platform with the life science and
medical office businesses reporting to him, and works closely with
the respective teams to advance the competitive performance and
growth of this platform. Mr. Klaritch previously served as Senior
Managing Director – Medical Office Properties from April 2008 to
August 2017. In aggregate, Mr. Klaritch has 34 years of operational
and financial management experience in the medical office and
hospital sectors.
HCP 7
SH - NNN
25%
SHOP
19%
Life Science
23%
Medical
Office
23%
Other
10%
$23B
Enterprise
Value
$1.1
Trillion Other
public
REITs
HCP
Other owners of
healthcare real estate
U.S. HEALTHCARE REAL ESTATE(1)
The Opportunity
HCP Has a Significant Pipeline for Future Growth
HCP’s PORTFOLIO(2)
(1) Sources: National Investment Center for Seniors Housing & Care (NIC), HCP research.
(2) Enterprise value based on HCP’s share price of $31.96 on 6/30/17 and total consolidated debt and HCP’s share of unconsolidated JV debt as of 6/30/17. Percentages by segment
represent 2Q17 reported Cash NOI plus Interest Income excluding $9.4 million of interest income from our HC-One debt investment which was repaid 6/30/17 and $7.6 million of
interest income from our Tandem Consulate Health Care debt investment as we entered into a definitive agreement in July 2017 to sell this investment.
HCP 8
HCP Portfolio & Strategy Overview
Focused Growth in Three Core Segments
One of the largest MOB portfolios
18M sq. ft.; 83% on-campus
87% in Top-50 MSAs(1)
Senior Housing Medical Office
Parker Adventist Denver, CO The Solana Preserve Houston, TX
Life Science
MEDICAL OFFICE FOCUS
Grow relationships with top hospitals
and health systems
Pursue on-campus opportunities and
select off-campus assets with strong
hospitals and health systems
Remain disciplined as pricing
expectations continue to rise
National portfolio of 46,000 units
57% NNN / 43% SHOP portfolio(1)
87% in NIC-99 markets(1)
SENIOR HOUSING FOCUS
Reduce Brookdale concentration, focus
on growing relationships with 10-12
operators
As pricing for stable assets continues to
rise, focus on select development
opportunities in top markets
Capitalize on redevelopment
opportunities
95% located in 2 of the top 3 LS markets
High-quality land bank
Top-tier relationships
LIFE SCIENCE FOCUS
Focus on core Life Science markets
Assemble clusters of assets through
acquisitions, development and
redevelopment
Grow existing relationships by providing
expansion opportunities to our tenants
The Cove South San Francisco, CA
(1) Percentage based on Cash NOI for senior housing and square footage for medical office and life science.
HCP 9
HC-ONE LOAN
REPAYMENT
TANDEM
LOAN SALE
ANNOUNCEMENT
$500M BOND
TENDER
SALE OF 64
BROOKDALE
ASSETS
FOUR SEASONS
LOAN SALE
SALE OF INTEREST
IN BROOKDALE
PORTFOLIO
Execution of Strategic Repositioning
SPUN-OFF SNF
ASSETS
OCTOBER 2016 JANUARY 2017 MARCH 2017 SUMMER 2017
ELIMINATED DIRECT SNF EXPOSURE
REDUCED LEVERAGED DEBT INVESTMENTS
REPAID $3.7B OF DEBT / DELEVERED BALANCE SHEET
REDUCED BROOKDALE EXPOSURE
We Have Made Steady Progress…
HCP 10
Portfolio Summary
Post-Acute / Skilled Nursing 26% ~0%(2)
Medical Office & Life Science 29% 46%
Senior Housing 35% 44%
Private Pay 80% 95%
Brookdale Coverage 1.02x 1.2x(3)
Top 3 Tenant Concentration 54% 38%
Mezzanine Loan Investments(4) $719M $17M
SNF
26%
LS
15%
MOB
14%
Other
10%
SH NNN
22%
SHOP
13%
LS
23%
MOB
23%
Other
10%
SH NNN
24%
SHOP
18%
Execution of Strategic Repositioning
…Resulting in a More Focused, High-Quality Portfolio…
64% 90%
3Q 2016 2Q 2017(1)
1) Represents 2Q17 Cash NOI and Interest Income excluding $9.4 million of interest income associated with HC-One which was repaid in full on 6/30/17 and $7.6 million of interest
income from Tandem Consulate Health Care as we entered into a definitive agreement in July 2017 to sell this debt investment.
2) Excludes Post-Acute / Skilled Nursing units located in senior housing communities.
3) Excludes the previously announced planned sale or transition of 25 properties and reflecting the November 2016 reallocated, annualized rents, the EBITDAR CFC for Brookdale is
approximately 1.2x.
4) 3Q16 balance includes investments in Four Seasons, HC-One, and Tandem. 2Q17 balance excludes $200 million investment in Tandem as we entered into a definitive agreement in
July 2017 to sell this debt investment.
HCP 11
Execution of Strategic Repositioning
…With Several Remaining Steps
Reduce Brookdale exposure to less than 20% of portfolio through sales and/or transitions
Continue to enhance senior housing asset and portfolio management capabilities
Further reduce net-debt/EBITDA to 6x or below over time
Close announced Tandem mezzanine loan disposition
Exit the remaining U.K. portfolio
Aegis Dana Point Dana Point, CA Sky Ridge III Lone Pine, CO
HCP 12
SHOP Update
Collaboration with Brookdale to Improve Performance
SPECIALIZED SALES RESOURCES
“Floating” sales specialists, dedicated to HCP’s SHOP assets, to
temporarily backfill community Sales Director roles until vacancies
can be filled
INCREASED PROPERTY-LEVEL SALES RESOURCES
Adding additional sales resources to assets with low occupancies to
broaden referral base, generate leads and increase occupancy
RAPID REPRICING
More frequent evaluation of market-rates at underperforming
communities to balance rate and occupancy to drive total revenue
TARGETED MARKETING SPEND
Increase targeted marketing and advertising spend to drive leads
and occupancy
REDUCING TURNOVER
Ongoing wage analysis for key community leadership positions to
monitor local-market trends and adjust when necessary
SERVICE ALIGNMENT
Optimizing community labor hours and staffing resources based on
changes in occupancy
Q3 2017 UPDATE
Expanding our senior housing asset management team
with additional resources
Senior-level HCP & Brookdale executives directly
participated in property and market tours of 23 lower-
performing communities across nine states
Continue to assess asset-by-asset action plans in
coordination with Brookdale which include targeted
cap-ex investments, redevelopment, and non-core
asset sales
Implementing key performance improvement initiatives
aimed at producing immediate and long-term
improvement across our Brookdale portfolio
Doug Pasquale, former Chairman and CEO of
Nationwide Health Properties and former President and
CEO of Atria Senior Living, serving as a Senior Advisor
to the executive team and working closely with the
expanded senior housing leadership team
KEY PERFORMANCE IMPROVEMENT INITIATIVES
HCP 13
SEGMENT OVERVIEWS
HCP 14
362
Properties
87%
NOI in NIC-99 Markets(1)
46,000
Units
Diversified Senior Housing Portfolio
Balanced Mix of Well-Covered Triple-Net & SHOP
NNN
57% of Cash NOI
SHOP
43% of Cash NOI
(1) Percentage based on Cash NOI.
HCP 15
Concentration in 2 of the Top 3 Cluster Markets
Annualized Base Rent by Tenant Type Deep Industry Relationships
97%
Average occupancy over the
past 2 years
20+
Years as premier life science
owner and developer with
1.8M sq. ft. of entitled land
87%
Revenues from public or
well-established private
companies
Pharma, 19%
Office and
R&D, 16%
University,
Government,
Research, 4%
Private
Biotech/Medical
Device, 18%
Private
Biotech/Medical
Device, 43%
Irreplaceable Life Science Portfolio
HCP 16
4.7M sq. ft.
San Francisco Submarkets
South San Francisco Redwood City Mountain View Hayward
2.1M sq. ft.
Mountain View Redwood City South San Francisco
San Diego Submarkets
Torrey Pines University Towne Center Sorrento Mesa Poway
Torrey Pines Sorrento Mesa
Life Science Portfolio Overview
San Francisco and San Diego account for 95% of ABR(1)
(1) Annualized Base Rent (ABR) and sq. ft. at 100% share.
HCP 17
Market Density (sq. ft.)
500K+ 100K – 250K 250K- 500K under 100K SF
90%+
Consistently Occupied
83% / 95%
On-Campus / Affiliated
~80%
Average retention rate
last five years
Industry-Leading On-Campus Medical Office Portfolio
238 properties encompassing 18 million sq. ft.
HCP 18
$531M investment dollars, 14 properties and 2,100
beds
NNN leases with 1.5%-2.5% average annual rent
escalators
Key relationships: HCA, Hoag, HealthSouth
Hospital International
$155M debt(2) and $388M real estate investment
dollars, 61 properties and 3,200 beds
NNN leases with 1.5%-2.5% average annual rent
escalators
Deep partnerships with top U.K. operators HC-One
and Maria Mallaband
Medical City Dallas Campus (HCA)
Dallas, TX
HC- One - Greenfield Park
Glasgow, Scotland
6.1x
EBITDAR lease
coverage(1)
71%
Cash NOI from acute-
care hospitals
1.3x
EBITDAR lease
coverage(1)
91%
Occupancy
Hospital and International Portfolio
(1) EBITDAR lease coverage is for the trailing 12-months ended March 31, 2017.
(2) Includes $145M bridge loan to Maria Mallaband which HCP has the option to convert to fee ownership through the exercise of a call option in 2017.
HCP 19
DEVELOPMENT AND REDEVELOPMENT
HCP 20
Represents a driver of
accretive NAV and
earnings growth upon
stabilization,
supplementing internal
growth
$313M of remaining spend
to be funded with retained
cash flow and non-core
asset sales
Development Summary(1)
3%
81%
16%
Phases I & II of The Cove development are
combined 100% leased; recently commenced
Phase III representing ~336,000 sq. ft.
Medical Office developments are 70% leased
and affiliated with / anchored by strong health
systems (Memorial Hermann and HCA)
Development program targets 150-200 basis
point spread between development yield and
market cap rates; current pipeline expected
yield is above the high-end of this range
$849M of Committed
Ground-up Developments
Life
Science Medical
Office
Driver to Increase NAV and Earnings Over Time
($ millions)
SHOP
$277
$62
$196
$59
$211
2016 2017 2018 2019
Pipeline Expected to Stabilize in Phases over Next
Three Years
$313
remaining
spend
$208
placed in
service
$536
funded to
date
$849
2H
2017
1H 2H
2018
1H 2H
2019
(1) Reflects committed ground-up development projects as of 6/30/17.
HCP 21
Key Development Projects
The Cove and Sierra Point
Sierra Point
The
Cove
SF Bay
Sierra Point (S. San Francisco)
Premier 23-acre waterfront development site with entitlements
to develop approximately 600,000 sq. ft. over time in a
flexible, highly-amenitized design
Targeting a Phase I start in mid-’18 with returns ~150 to 200
basis points above market cap rates
The Cove (S. San Francisco)
$720 million, ~1M sq. ft. Class A life science development in
South San Francisco
478,000 sq. ft. of Phases I & II are 100% leased; 336,000 sq. ft.
Phase III anticipated delivery 4Q18
LEED Silver campus with market-leading amenities including
full-service food, fitness and 187-room AC Hotel (Marriott)
HCP 22
Redevelopment Opportunity and Land Bank
1.8 million sq. ft. of entitlements on parcels we own
and control
Entitled land is located in key West Coast life science
markets of San Francisco and San Diego
Creates a shadow development pipeline in-excess of
$1 billion
Our portfolio has significant embedded
redevelopment potential
We expect to increase the size of our current
redevelopment pipeline to target $100+ million of
projects per year over the next several years
Target cash-on-cost returns of 9-12%
Life Science Land Bank and Entitlements
Before
After
3535 Market
After
Redevelopment
3535 Market Redevelopment
$40M redevelopment to reposition this well-located,
urban medical office building adjacent to The
University of Pennsylvania
(1) Estimated rentable square feet in 000s.
HCP 23
BALANCE SHEET, GUIDANCE & SUSTAINABILITY
HCP 24
Debt Maturity Schedule(1)
$34 $32
$690
$815
$751
$918
$806
$1,153
$1,371
$3
$404
$0
$400
$800
$1,200
$1,600
$2,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Thereafter
Senior Unsecured Notes Secured Debt (incl/ pro rata JV) Unsecured Term Loan
$7.0 billion of total debt
4.1% weighted average interest rate
6.4 years weighted average maturity
($ in millions)
(natural hedge for UK investments)
No meaningful
near-term debt
maturities
Well-Laddered with No Material Maturities Until 2019
(1) As of 6/30/17, excluding revolving credit facility and other debt, and pro forma for the $500 million bond tender of Feb’21 senior unsecured notes completed in July 2017.
HCP 25
100
150
200
250
300
350
Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17
HCP
VTR
HCN
Improved Debt Spreads Post-Spin
Since the QCP spin, HCP’s credit spreads have improved in absolute terms and relative to peers
Repaid $3.7B of debt(1)
Reduced Brookdale concentration from 35% to 27% as of 6/30/17
Completed
QCP spin
(1) Debt repaid over the period from 9/30/2016 through 6/30/2017, including pro forma for $500 million Feb’21 tender offer in July 2017.
B
as
is
P
oi
nt
s
Announcement
of QCP spin
10 Year New Issuance Spread
HCP 26
5.5%
4.0%
3.0%
1.3%
(1.5%)
3.0%
SH NNN Life Science Medical Office Other SHOP Total HCP
Senior Housing triple-net performance is primarily driven by contractual rent increases and Brookdale lease restructure
Life Science performance driven by contractual rent escalators and leasing activity
Steady Medical Office performance benefits from high tenant retention and on-campus locations
SHOP performance is primarily driven by lower occupancy and expense growth
2017 Cash NOI Same Property Performance Guidance(1)
(1) Represents mid-point of 2017 SPP Cash NOI growth guidance range provided on 8/1/17.
HCP 27
2017 Guidance
YoY Cash NOI SPP Growth 2.5%-3.5%
YoY NOI SPP Growth 1.2%-2.2%
G&A Expense $83M-$87M
Interest Expense $300M-$310M
Net Dispositions(1) $2.1B-$2.6B @ 8.0%
Recurring CapEx / 2nd Generation(2) $108M-$115M
1st Gen TIs/ICE and Revenue Enhancing(2) $112M-$127M
Re/Development Spend(2) $345M-$400M
Diluted FFO as Adjusted per Share $1.89-$1.95
Dividend per Share $1.48
Fully Diluted FFO as Adj. Wtd. Avg. Share Count 469M
Assumptions for 2017 Guidance
(1) Includes $1.125 billion related to 64 Brookdale properties that sold March 2017; $480 million related to the sale of a 40% interest in and refinancing of the RIDEA II JV that occurred
in January 2017; $367 million related to HC-One debt repayment; and $197 million from the Tandem loan repayment which is expected to be reinvested in real estate. The
remaining proceeds were used to pay down debt.
(2) Includes HCP’s share of unconsolidated joint ventures.
HCP 28
Commitment to Sustainability
Received 2017 ENERGY STAR Partner
of the Year for the first time
Named to the 2016 N. America Dow
Jones Sustainability Index (DJSI) for
4th consecutive year and to the World
DJSI for 2nd year in a row
Named to the FTSE4Good Index for
the 5th consecutive year
Ranked 2nd in the Healthcare Sector
in 2016, and achieved Green Star
rating for 5th year in a row
Received the 2016 NAREIT
Healthcare Leader in the Light Award
Named to the 2016 Leadership
category by CDP and achieved an
overall score of A-
Our commitment to sustainability is critical to our continued long-term success. We recognize sustainable
growth comes from operating our business with integrity and in a manner that respects the environment,
our shareholders, our partners, our employees and our communities.
HCP 29
Appendices
HCP 30
Healthcare Expenditures Expected to Grow
$5.5
Trillion
$3.2
Trillion
17%
18%
19%
20%
21%
Projection
Healthcare Expenditures as a Percentage of U.S. GDP
CMS projects a $2.3 trillion increase in spending within the next 10 years – this would
likely provide abundant opportunities for our three core segments
Source: CMS.
Pe
rc
en
t
of
G
D
P
HCP 31
Approaching Senior Demographic Tsunami
First Wave of Baby Boomers Turn 75 in 2020
0%
2%
4%
6%
8%
10%
12%
1980 1990 2000 2010 2020E 2030E 2040E 2050E
Last
Decade
This
Decade
From 2020-2030, the 75+ population is expect to grow by 11 million people,
representing a 50% increase in this segment of the population
Source: US Census Bureau.
%
o
f U
.S
. P
op
ul
at
io
n
HCP 32
Healthcare Spending Increases with Age
Average Annual Healthcare Expenditures by Age Group
$0
$5
$10
$15
$20
$25
$30
$35
0-18 19-44 45-64 65-84 85+
On average, annual healthcare spending by seniors age 65+ is over 4x the annual
spending by the under 65 population
Source: CMS - National Health Expenditure.
Th
ou
sa
nd
s
HCP 33
MOBs Benefit from Increased Outpatient Visits
Acute Services Move Away From Hospitals
207 198 180
383
572
693
1994 2004 2014
Inpatient Outpatient
Inpatient Days and Outpatient Visits
(in millions)
Seniors make over 2x the number of annual physician visits compared to the under 65
population
Sources: American Hospital Association, US Census Bureau, US Centers for Disease Control and Prevention.
HCP 34
This presentation is being presented solely for your information, is subject to change and speaks only as of the date hereof. This presentation and comments made by management do not constitute
an offer to sell or the solicitation of an offer to buy any securities of HCP or any investment interest in any business ventures of HCP. This presentation is not complete and is only a summary of the
more detailed information included elsewhere, including in HCP’s Securities and Exchange Commission filings. No representation or warranty, expressed or implied is made and no reliance should
be placed on the accuracy, fairness or completeness of the information presented. HCP, its affiliates, advisers and representatives accept no liability whatsoever for any losses arising from any
information contained in this presentation.
FORWARD-LOOKING STATEMENTS
Statements in this presentation, as well as statements made by management, that are not historical factual statements are “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, our statements regarding
demographic, industry, market and segment forecasts, our planned or pending transactions, our developments, our planned or pending transactions, our future business strategies, our financing
plans, our prospects, and our economic guidance, outlook and expectations. All forward-looking statements are made as of the date hereof, are not guarantees of future performance and are
subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of our and our management's control and difficult to forecast—that could cause actual
results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our reliance on a concentration of a
small number of tenants and operators for a significant percentage of our revenues, with our concentration in Brookdale increasing as a result of the consummation of the spin-off of QCP on October
31, 2016; the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory
proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants' and operators' leases and borrowers' loans; the ability of our existing and future
tenants, operators and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan
payments to us and our ability to recover investments made, if applicable, in their operations; competition for tenants and operators, including with respect to new leases and mortgages and the
renewal or rollover of existing leases; our concentration in the healthcare property sector, particularly in life sciences, medical office buildings and hospitals, which makes our profitability more
vulnerable to a downturn in a specific sector than if we were investing in multiple industries; availability of suitable properties to acquire at favorable prices, the competition for the acquisition and
financing of those properties, and the costs of associated property development; our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or
we exercise our right to foreclose on loan collateral or replace an existing tenant or operator upon default; the risks associated with our investments in joint ventures and unconsolidated entities,
including our lack of sole decision making authority and our reliance on our partners' financial condition and continued cooperation; our ability to achieve the benefits of acquisitions and other
investments within expected time frames or at all, or within expected cost projections; operational risks associated with third party management contracts, including the additional regulation and
liabilities of our RIDEA lease structures; the potential impact on us and our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than
expected litigation costs, adverse results and related developments; the effect on our tenants and operators of legislation, executive orders and other legal requirements, including the Affordable
Care Act and licensure, certification and inspection requirements, as well as laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future
reductions in reimbursements; changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or
otherwise affect the operations, of our tenants and operators; volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit
ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential
transactions; changes in global, national and local economic or other conditions, including currency exchange rates; our ability to manage our indebtedness level and changes in the terms of such
indebtedness; competition for skilled management and other key personnel; the ability to maintain our qualification as a real estate investment trust; and other risks and uncertainties described from
time to time in our filings with the Securities and Exchange Commission. We caution investors not to place undue reliance on any forward-looking statements. We assume no, and hereby disclaim
any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.
MARKET AND INDUSTRY DATA
This presentation also includes market and industry data that HCP has obtained from market research, publicly available information and industry publications. The accuracy and completeness of
such information are not guaranteed. Such data is often based on industry surveys and preparers’ experience in the industry. Similarly, although HCP believes that the surveys and market research
that others have performed are reliable, HCP has not independently verified this information.
NON-GAAP FINANCIAL MEASURES
This presentation contains certain supplemental non-GAAP financial measures. While HCP believes that non-GAAP financial measures are helpful in evaluating its operating performance, the use of
non-GAAP financial measures in this presentation should not be considered in isolation from, or as an alternative for, a measure of financial or operating performance as defined by GAAP. You are
cautioned that there are inherent limitations associated with the use of each of these supplemental non-GAAP financial measures as an analytical tool. Additionally, HCP’s computation of non-GAAP
financial measures may not be comparable to those reported by other REITs. Reconciliations of the non‐GAAP financial measures to the most directly comparable GAAP financial measures are found
in the “2Q 2017 Discussion and Reconciliation of Non-GAAP Financial Measures” which can be found on the Investor Relations session of HCP’s website at www.hcpi.com.
34
Disclaimer