DRIVING SUSTAINABLE ECONOMIES

Transcription

1 DRIVING SUSTAINABLE ECONOMIES

2 HCP: Best-in-Class Portfolio Large, diversified healthcare REIT with high-quality cash flows from needs-based private pay sources Complementary triple-net leases and operating business platforms across multiple healthcare sectors Medical Office 22% Other 14% (2) $1.3B Cash NOI plus Interest Income (1) Life Science 21% Senior Housing NNN 24% Senior Housing Operating Portfolio SHOP 19% 43 % Senior Housing 800 Properties (3) 77 % Concentrated in Top 50 MSAs (6) 94 % Private Pay (4)(5) 6 % (vs. 4% national avg) Strong Population Growth over Next 5 Years (7) 87 MSAs 43 States Geographically Diversified 39 % Top 3 Tenants Diversified Tenants (5) 2 HCP has a Younger, Higher Quality Portfolio of Private Pay Assets in Top 50 MSAs with Above Average Population Growth (1) Represents HCP s preliminary 2017 Outlook provided on 11/1/16 for cash NOI plus interest income from debt investments. (2) Other segment primarily consists of hospitals, U.K. real estate, and all debt investments. (3) After giving effect to the QCP spin and announced BKD transactions. (4) Self-pay and private insurance (including managed care); medical office properties are considered 100% private-pay. (5) Percentage based on cash NOI plus interest income. (6) Percentage based on cash NOI. (7) Source: Environmental Systems Research Institute (ESRI).

3 HCP: Diversified Senior Housing Portfolio 46% SHOP Investments 46% $573M Cash NOI 54% 3 54% Triple-net Leased Portfolio (1) Based on HCP s preliminary 2017 Outlook provided on 11/1/16. Note that following the completion of the announced Brookdale transactions, Brookdale will operate 204 communities for HCP generating approximately $350 million of expected annualized cash NOI, of which one third will be under triple-net leases and two thirds in RIDEA joint ventures.

4 Senior Residents HCP s 436 communities across 43 states represents home to over 45,000 senior residents Strong senior tsunami demographics By 2030, Americans age 75+ are expected to increase to 72 million Needs based demand: seniors are living longer, with higher acuity Initial growth more IL weighted 4 Source: U.S. Census Bureau

5 Performance Measures Traditional performance measurements rely on financial measures of performance. Balanced performance measurement systems add selected non financial measures to these traditional measures. Balanced performance management lends itself well to healthcare and other service industries. 5 Investment structures are shifting from traditional third party leases to management contracts making investors more focused on operational performance.

6 Performance Measures Traditionally, performance measurement programs focused on one measure such as profit. Healthcare companies have the responsibility to balance care and service delivery with profitability. 6 Profit Morale Quality Environmental Customer Satisfaction Values Safety

7 Balanced Performance Approach Balanced Performance Management is based on four perspectives: Shareholders Customers Internal Processes Innovation/ Learning 7 For each perspective, goals are linked to selected measures of performance

8 Scorecard Perspectives Financial results are LAGGING indicators of Value Creation Non-Financial Metrics are LEADING indicators of Value Creation Financial Goals Measures 8 Customer Internal Goals Measures Goals Measures Innovation Goals Measures HCP VERVIEW

9 Customer Perspective Perhaps, satisfied customers are viewed as a requirement for financial success Example: Goals Measures 9 Availability Satisfaction Survey Service Market share Value Family/Friend Referrals Quality 3 rd Party Endorsements Satisfaction Complaints

10 Innovation Perspective Organizational learning is part of the innovation perspective Example: Goals Measures 10 New Program/Service Number of Services Technology Competencies Employee Development Retention Productivity

11 Internal Perspective The efficiency of internal processes are important Example: Goals Measures 11 Quality Employee Satisfaction Regulation Compliance Values External Firm

12 Financial Perspective The ultimate goal is good financial performance Example: Goals Measures 12 Growth in Value Share price (growth) Financial Security Census Expand market share Revenue Growth Pricing EBITDARM Margin Expected Cash flow

13 Linking Strategy Strategy Financial Customer Internal Innovation 13 Critical Success Performance Measures

14 Putting it all together with Net-Operating Income (NOI) and Cap-rates The definition of a stabilized property is a judgment call but it is generally considered a two-year run-rate with 90% or better occupancy Budget Occupancy 95.7% Rev/unit $4,758 Management fees and capital expenditures are actual cash expenses that must be included in the Adjusted NOI calculation. Cap-rate: A rate of return on a real estate investment property based on the expected income that the property will generate. (Divide the income the property will generate (after fixed and variable costs) by the total value of the property (purchase price). Revenue $6,118,348 Op Expenses (2,950,203) NOI $3,168,148 5% M gmt fee (158,407) Cap Ex $1,000/unit (113,000) Cap Rate Adjusted NOI $2,896, % Lease Amount $2,520,000 LS CR 1.15x 14

15 Summary Operators are tasked daily with balancing efficiency, service delivery, regulatory compliance and financial results. Financial measures are useful for directing attention at problem areas and getting the attention of managers. Non financial measures are useful for identifying actions that can be taken to correct problems. 15 The successful execution of a balanced business plan will lead to value creation.

16 Introducing HCP Center of Excellence 16

17 HCP Center of Excellence Vision Online resource where operators, industry leaders, preferred vendors, universities and researchers work together to enhance community operations and develop the future senior living executive leaders. Research & Analysis Financial Benchmarking Tools Market Analysis (i.e. Vision LTC) Customizable Reports / Ask HCP Services & Savings Preferred Vendors Referrals and Discounts Excellence Audits Archives 17 Industry Best Practices Webinars & White Papers Industry Resources & Calendar of Events Quarterly Newsletter Workforce Development Executive Director training and certification programs Scholarships for students taking senior living executive coursework