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  1. HCP, Inc. (HCP) Q4 Earnings Conference Call Transcript
  2. HCP, Inc. (HCP) Q4 2018 Earnings Conference Call Transcript
  3. Find Places to Stay in Irvine on Airbnb
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We're optimistic that in , it will stick out, as well, but with a positive number in front of it. So, the optimism is more looking into and , Jordan. I think '19 is difficult, in part because of the core portfolio which, amazingly, had a great That, I think, would compare well to pretty much anyone in the sector, but we did see performance tail off into 4Q, which is one reason we're less optimistic about the growth rate in for that core portfolio.

So, it's a good time to have a waiting toward triple net. Tom, I think you wanted to add something? You know, what I would add, Jordan, as we've looked at our senior housing business, certainly there's some more work to do, clearly, and with that comes the potential for some strong upside.

HCP, Inc. (HCP) Q4 Earnings Conference Call Transcript

I think the optimism that you're hearing is that we have systematically taken that business apart and are rebuilding it, literally in all aspects. We have rebuilt the team. We have put in place infrastructure and systems and have data and reporting. The portfolio today looks nothing like what it looked like a few years ago.

The operator mix has been changed dramatically. With more work to do and things that we're working on not that we're not ready to announce yet, but over time we will. So, it's been a systematic process, and we are definitely playing the long game on this one, because we believe we can create a very good business in a business that's quite inefficient, meaning that there are going to be some that do well and some maybe not so well.

We'd like to be part of the group that does well in this business, because we see long-term prospects being very good. That's probably the optimism that you're hearing within the comments. Got it. Thanks, Jordan.

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Good morning. I had a question on your development disclosure on page You provide a stabilized occupancy date for your developments, and then there's a footnote saying six months later you'll have economic stabilization. So, should be looking at this as the occupancy is the FFO contribution and the stabilization date, which is three to six months after, is the AFFO contribution?

That's probably a good way to look at it. Really the occupancy starts on these projects almost at six months after completion. The stabilized occupancy is when it gets -- for a medical office we normally consider that in the plus range, similar for life science. Each segment could take a little bit longer to get to stabilization. If that answers the question.

Well for instance, the Ridgeview and the Cove, is that going to -- are those going to contribute to FFO this year? There is some Yes, it will toward the latter half of the year. Now, there is a pre-rent component typically within the leases in life sciences. And then a follow up on your guidance. Some of your peers don't include acquisitions in their guidance.

Is it sort of a conservative number? And how much of this is driven by your cost of capital? I would describe it this way: Typically, we wouldn't put future acquisitions in our guidance, but as you're well aware, when we took certain actions in that raised a lot of capital, we paid down debt below the level that we considered to be the optimal place to function, and we had a forward equity issuance.

We have had a number of different transactions in line that we've been working on that would utilize those proceeds. It's been part of a bigger plan. Therefore, in this particular case because these funds are so obviously available, it would only make sense to you as you're trying to understand our numbers if we provide to you the acquisitions that we do see coming our direction in totality.

Otherwise, typically we would just If we didn't have the funds raised already and have access to them, we typically would exclude them. That's helpful. Our next question comes from Drew Babin from Baird. Drew Babin -- Robert W. Quick question on the development pipeline. As you go through The Cove at Oyster Point and Sierra Point, the remaining phases at those projects, can you talk about the sequencing of yields on that as they deliver? I know some of these projects, a lot of infrastructure was put on kind of in the initial phases and the yields kind of build over time, but a little more specifically, what should we expect with those?

If you look at the various phases, normally the last phase, as with The Cove, there are no amenities or parking garage. So, we're looking at a much higher yield on that in the upper 9s. The same is true of Sierra Point. The overall return on The Shore at Sierra Point is in the low 6s. If you look, Phase I had the amenity package. Phase II will have the parking garage.

And again, the final phase, Phase III, has none of that. So, the Phase III is more in the low 7 range while the other two phases are in the low 6s. Okay, that's helpful. And then just one question on the triple net portfolio. In the profile on page 28 of the supplemental, it looks like there's one lease with about 0.

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I was just wondering if you could talk a little more specifically about what that is, when it expires, and what might be done to deal with that? Yeah, Scott here. I'll cover that. I think you're referring to one of the Sunrise leases. The lease matures in about 10 years. It's a complicated ad rent structure that we inherited more than 10 years ago, and you've heard us talk on previous calls about the potential to convert some of the Sunrise ad rent leases into SHOP. I would put that in the category of a potential conversion. But despite the payment coverage showing up as 0.

And I guess just one more follow up on the topic of Sunrise. As you look out to , the triple-net maturities Obviously you've talked before about potentially converting some, if not all, of this to SHOP. Could it potentially be more economical to stay triple net with a lower rent payment, or do you kind of think about it as a troughing in the cycle might be better, all things considered, to just go SHOP? Yeah, it depends. Not all the situations are the same. Across the board, if you see us convert triple net into SHOP, you can be assured that it would be higher quality real estate and an operating partner that we have a lot of confidence in.

If we don't check those two boxes, I think it's highly unlikely that we would look to convert to SHOP. And then on Sunrise in particular, which is the most likely candidate for conversion, because of the complicated way the waterfall works, the CapEx is actually paid before the rent, so there would not be any leakage in the SHOP structure there. I would add to that when you think about the Sunrise conversion of those assets, again it's a structure that's dated.

SHOP has taken its place. So, when you think about our motivation to do it, it creates alignment with our operator that's a lot less confusing to you. Frankly, it's less confusing to us because all these arrangements are different; it's a major headache. And from an earnings perspective, it's relatively a push, and that's how I would look at it. Okay, that's all very helpful. Yeah, thanks. I know you made some remarks in your prepared comments.

I just wanted to confirm, had those assets been stabilized already, and have you seen declines in, I guess, executive director departures and employee turnover and things like that? I would definitely not call them stabilized. We transitioned 38 in total. The first wave of transitions occurred in March, but nearly half of the transitions occurred in the second half So, there's still quite a divergence, even within the transition portfolio and performance, and the ones that transitioned earlier have started to see a nice increase in occupancy and at least signs that expenses are getting closer to normal levels or that they will return to normal levels.

The assets that transitioned in the third and fourth quarter are still going through a period where occupancy is way down, hasn't yet started to recover. And we just have some crazy increases in expenses that just will not recur. I mean, they're just absurd numbers that we could through the exercise of normalizing all of this stuff, and it would be an enormous number.

So, we didn't normalize any of those things, but we keep trying to say this is such a small pool with such small dollars, with such unusual elevated expenses that the numbers this quarter are ugly, but we are going to recapture that. It's just a matter of time. Is that still a good estimate for stabilizing these assets and where that NOI number can go? Yeah, I think that's still a good estimate. The big question is timing, and I think we are going to start seeing improvement in At the same time, a number of the assets didn't transition until late in the year, and those will take some time.

We've put seven of the 38 assets into redevelopment, and there's massive upside on those, but it's actually diluted in , like any redevelopment. Then we start to see some real benefit in '20, '21, and ' And Scott, correct me if I'm wrong. Okay, great. That's right. Thanks, Scott. Our next question comes from Nick Joseph from Citi. Nick Joseph -- Citi -- Analyst. I just want to understand the thought process behind the refinancing of the debt given the low coupon, and then is there a cost associated with the early repayment nadir?

It's Pete here. So, what I would say about that is there wouldn't be a cost just given the low coupon that that bond trades at. It actually trades at a discount to par now. So, if we take it out early, we have to pay par on that, but nothing above and beyond par. But we've have to pay part of maturity anyways, too. As you think about refinancing that, we obviously would love to keep that low rate as long as possible, but we have to pay that debt back anyways in early By incorporating it in our guidance, it gives us some flexibility if the bond markets are cooperating to do something earlier, if we so choose.

We also have very little secured debt, as well, if we so choose to do something there, although our goal typically is to do the unsecured bond market from an issuance perspective. From a rate perspective today, where would we issue? The longer the tenor, the higher the rate. I would say on a year basis, we're probably right in the middle of that. Maybe we could do a little bit better today, but, again, we assumed a mid-year refinance of that.

And our next question comes from Vikram Malhotra from Morgan Stanley. LLC -- Analyst. Thanks for taking the question. The life science segment continues to be very strong; the guidance certainly suggests that. I'm wondering if you can give a bit more color on the components of that same-store NOI between sort of occupancy rent spreads and just given the expirations over the next two years where do you think those are relative to market? Herzog -- HCP, Inc. Yeah, good question, Vikram. Obviously that market is performing well, and was really a banner year across the board for the industry.

Rents have gone up pretty dramatically the last couple years in all of our markets, especially San Francisco. So, while we're having a nice year this year in life sciences as part of our guidance, we see this trend persisting for at least another year, perhaps beyond, which gives us some comfort with regards to the developments and other things we're doing within that segment. And to clarify that, when do the new developments roll into same-store? Typically it's about a year after it hits its stabilization period.

I don't think Phase I is actually in our same-store at this point in time. We really wait for a full year to wrap around for a good year-over-year comparison. Herzog- HCP, Inc. And, Vikram, we don't apply judgment on that. If you go back to our glossary on the stabilization period, you'll be able to read very specifically. Just so you don't think there's judgment that we apply.

And then just a clarification on the expirations and the restructuring -- potential restructuring you referenced. The triple-net expiration in , is that mostly Sunrise, and is that what you were referring to as a candidate for restructuring into RIDEA?

Hey, Vikram. It's Scott. The nearer term maturities, like , be assured we're actively asset managing each of those and have ongoing dialogues with the operators, but nothing to report at this point. Yes, that's correct. Not one operator. There could be different outcomes for each? Is there any majority are converting, or is it too early to tell right now?

I'd say the majority of that is very high-quality real estate that would be a good candidate for conversion, and there are a handful that are more likely sale candidates. Our next question comes from Chad Vanacore from Stifel. All right, thanks. I just want to roll back a few comments on the senior housing operating platform. Is that right? All right. It's really both, but it's compensation expense that is driving most of it, and that insurance expense is going to be elevated a bit in , as well. So, both labor and total operating expenses should be in the, say, mid-4s for And then, just given that, that leaves us a component -- a question on the occupancy, because that would imply still a deeper occupancy drop.

Is that -- are we thinking about that right? What level of occupancy drop are you expecting? I mentioned that occupancy trailed off in the second half of So, we actually see the core portfolio occupancy being down in the to basis points year-over-year, best guess. It's a small pool. That could change. But from where we sit today, that's our best guess. We do have some new supply impacting our local markets.

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The transition portfolio is likely to be more flat year-over-year, given the current trends. What's the How should we think about the difference between same-store NOI between that core and transitional portfolio? You think that transitional is dragging down the overall performance? Herzog - HCP, Inc. Yeah, a bit. Transitions will likely start out pretty negative on a year-over-year basis and then get better throughout and hopefully show a nice positive number by the end of the year, whereas core is more likely to be just sort of low-single digits down throughout the year.

But again, I'll keep saying it, both of them are very small pools. There's just a lot of variability in it. If something changes, we'll let you know. Got you. Well, just one final question on that. How should we think about that trend throughout the year?

Normal seasonality would be a dip in the first half and then recover in the second half. Should we expect that following, or should we expect a kind of faster ramp-up in the second half? It is seasonal, and occupancy does tend to fall in the first quarter. At the same time from an NOI standpoint, the first quarter is usually quite good for senior housing because there are fewer days in the quarter and you pay most expenses on a daily or hourly basis, whereas rates are paid monthly usually.

So, we usually see the first quarter as being quite strong on NOI, even though it's weak on occupancy. So, it's somewhat counterintuitive. Comparable-store sales for Sears Holdings overall fell 7. More importantly, Sears said it would accelerate the closing of about 50 unprofitable stores, and it continues to look for other ways to cut costs. With a combination of asset sales and other debt-reducing measures on tap for , Sears seems to be pursuing an unstated strategy of steadily winding down its businesses while trying to maximize their value. Even though CEO Cotter Cunningham said that the moves in the mobile market and attempts to personalize its offerings to users "will return the company to long-term sustainable growth," investors remained skeptical that RetailMeNot's turnaround efforts would ultimately be successful.

The drop might not have been as bad had it not been for a similar shortfall from senior living community specialist Brookdale Senior Living , which also gave investors a somewhat downbeat outlook for Even though the trends favoring healthcare investments over the long run are still intact, HCP and other businesses that seek to tap into the senior health trend are still prone to bumps in the road when things don't work out as well in the short run as investors expect. The next billion-dollar iSecret The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology.

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HCP, Inc. (HCP) Q4 2018 Earnings Conference Call Transcript

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    The unit can sleep up to 4 people. Unit consists of a beautifully decorated bedroom with queen sized real bed and pillow top mattress, large mirrored closet, and LCD cable tv with HBO, Cinemax and Showtime. The living room has a 44" tv, a convenient fully loaded snack bar with tons of snacks, quick small portion meals, and beverages such as wine, beer, liquer, iced tea, Fiji water, and soda. Snack bar items are at an additional charge and are priced very affordably for your convenience. Instant coffee and tea are complimentary.

    The living room about 20 feet long has a private entrance with lock and key to the outside. There is a simple pocket door dividing your space from the shared hall with a simple child lock at the top of the door. In your living room is a small dining table, bar with stools, sink, ceiling fan, high ceilings and lots of light. You will have a private bathroom with custom shower only yours , which is located in the hall that sectors my space from your wing. I have 2 very small dogs 7 lb chihuahua and 10lb dachshund.

    We also have a Weimaraner. He is a gentle giant and very sweet. Occasionally they might try to say hello when you are in the hall. It makes a very uncomfortable situation for all. This is great for families but isn't suitable for children 5 yrs old or younger. Airbnb does not have a category that suits me so I've noted here and house rules. In order to book, you will be prompted to read everything including house rules. Unfortunately some guests skim through this. Please message me when booking that you've read and understand everything: I've had about 10, people stay in my home!

    I've had the chance to meet a lot of interesting and wonderful people from all over the world and enjoy these experiences. So welcome! This home is in a very safe and quiet suburban neighborhood. It is about 5 minutes to Brea Mall and 2 quaint downtown areas with cute outdoor cafes, large chain restaurants, crepe restaurant and tons of night life, movie theaters, and shops. It is also in walking distance to , and a shopping center with a grocery store as there are several close by. Just a few min from Cal State Fullerton. Shopping centers and restaurants are everywhere. It is approx 2.

    Bus stop around the corner. Great place! Aleesha T Jordan T