NAREIT Presentation. June 12-14, 2012

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1 NAREIT Presentation June 12-14, 2012

2 Forward Looking Statements This document may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of These forwardlooking 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 ability to enter into agreements with new viable tenants for vacant space or for properties that the company takes back from financially troubled tenants, if any; its occupancy rates; its ability to acquire, develop and/or manage properties; the ability to successfully manage the risks associated with international expansion and operations; 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 critical accounting policies; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; its ability to meet its earnings guidance; and its ability to finance and complete, and the effect of, future acquisitions. 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 the 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, seniors housing and life science 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 ofgod affecting the company s properties; the company s ability to re-lease space at similar rates as vacancies occur; the failure of closings to occur as and when anticipated, including the receipt of thirdparty approvals and health care licenses without unexpected delays or conditions; the company s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; regulatory approval and market acceptance of the products and technologies of life science tenants; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future acquisitions and the integration of multi-property acquisitions; environmental laws affecting the company s properties; changes in rules or practices governing the company s financial reporting; the movement of U.S. and Canadian exchange rates; 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.

3 Health Care REIT s Relationship Strategy

4 What Does HCN s Investment Strategy Mean? Predictable Growth Unparalleled Platform High Quality Partners and Real Estate Proactive Portfolio Management Maximize Total Returns 4

Predictable Growth $1 billion invested per quarter 40% of investments represent business with existing relationships Quarterly Investments ($ millions) Note: Gross Investments (1) Based solely on the

5 Predictable Growth $1 billion invested per quarter 40% of investments represent business with existing relationships Quarterly Investments ($ millions) Note: Gross Investments (1) Based solely on the closing of the Chartwell transaction in the second quarter of 2012 and does not include any other investments that may close in the quarter. For the Chartwell transaction, currency references are in U.S. Dollars based on an assumed exchange rate of USD to CAD of

6 Unparalleled Platform 63 Transactions last 10 quarters 40 Distinct partners 6

Reputation Fosters Industry Leading Presence 15 of 22 2012 ALFA Best of the Best (1) award recipients are HCN operating partners; 10 of 15 award recipients are proprietary HCN

7 Reputation Fosters Industry Leading Presence 15 of ALFA Best of the Best (1) award recipients are HCN operating partners; 10 of 15 award recipients are proprietary HCN relationships 89% Of our MOB portfolio is affiliated with a health system; 86% of the health systems are investment grade (1) Ranking published in Senior Living Executive May/June 2012 edition. 7

8 Chartwell Partnership Expands Platform to Canada Partnership with Canadian market leader All private pay (1) U.S. Census Bureau (2) Statistics Canada 8

9 North American Footprint 9

10 Proactive Management Ensures Progressive Portfolio $1.1 billion strategic dispositions over the last five years Primarily Medicaid oriented SNFs, smaller SH outside of target markets and smaller off-campus MOBs $322 million gains on sale 36 operators managed out of the portfolio 10

11 Proactive Management Transformed Portfolio Increasing portfolio representation with large, industry leading seniors housing and post-acute providers Operators are well represented on boards such as ALFA, ASHA and NIC (1) Emeritus Genesis Healthcare Brookdale Merrill Gardens Signature HealthCare Benchmark Life Care Centers Brandywine Merrill Gardens Senior Living Communities Tara Cares Chartwell Gulf Coast Senior Star Kindred Belmont Village Lyric Brookdale Harborside Chelsea (1) 3/31/12 results pro forma for Chartwell. 11

12 Proactive Management Transformed Portfolio (1) Growth East & West Coast + Top 31 MSA 67% 76% +9% East & West Coast + Top 31 MSA RIDEA Only 0% 90% Private Pay 65% 73% +8% RevPOR (SH) $3,789 $4,764 Average Size (MOB) 41,590sf 61,683sf Health System Affiliation (MOB) 62% 89% 5% CAGR +20k/sf +26% (1) As of 3/31/2012 pro forma for Chartwell. 12

13 Why the Relationship Investing Strategy Works

14 Tenured Management Team Consistent team supports long-term relationship building The HCN team s industry tenure means expertise built over multiple business cycles 19 years 10 years Average experience (1) Average HCN career Note: Based on client facing decision makers. (1) Self reported length of time in healthcare real estate or related field. 14

15 HCN s Culture Fosters Collaboration and Loyalty Quarterly partner meetings to share best practices Synergy opportunities across partners Pooled insurance plan = 10-15% savings New investment opportunities identified through cross referrals Virtua Genesis Brandywine HCN public company expertise in finance and accounting improves our partners operations 15

(1) Care Delivery Thought Leaders (1) Board seats

16 Management Team Immersed in Health Care 23 Health care related board seats currently held by HCN team members (1) Care Delivery Thought Leaders (1) Board seats include trade organizations and partner operating companies. 16

17 HCN Value Proposition

18 Lower Risk Cash Flows Through Diversification Investment Concentration Top Five 37% Top Ten 50% Note: As of 3/31/2012 pro forma for Chartwell. 18

19 Portfolio Allocation Emphasizes Lower Risk Growth Portfolio Targets Seniors Housing and Care 70%-80% RIDEA 20%-25% SNF/Post-Acute <20% Medical Facilities 20%-30% Private Pay >80% (1) As of 3/31/2012 pro forma for Chartwell. 19

20 Long-Dated, Well Matched Maturities 10.1 years(1) Average Lease Maturity 9.5 years(2) Average Debt Maturity (1) Assume all early purchase options are exercised. (2) As of 3/31/2012 pro forma for April 2012 unsecured debt issuance and secured and convertible debt extinguishments. 20

21 Attractive Portfolio Growth 4.2% Average total portfolio SS cash NOI growth last five quarters 10% Quarterly average 21

22 Financial Performance and Value Creation Validates the Strategy

23 Efficient Capital Plan Current Line Balance $2.0B available Since 2010 $9.3B raised $0 drawn $250M average line balance since 2010 Note: As of 3/31/2012 pro forma for $600 million senior note offering closed in April. 23

24 Prudent Balance Sheet Management 12/31/11 3/31/12 Debt/Undepreciated Book Cap 46.1% 41.2% Debt/Enterprise Value 38.3% 34.2% Net Debt/EBITDA (1) 6.9x 5.5x Interest Coverage (1) 2.9x 3.2x Fixed Charge Coverage (1) 2.3x 2.4x (1) Adjusted EBITDA for the three months ending 12/31/2011 and 3/31/2012, respectively. 24

25 Consistent Value Creation Source: Green Street Advisors Research 25

26 Recent Results $6.0 billion Investments in 2011 $1.3 billion Investments YTD (1) 4.2% Average SS cash NOI growth last five quarters 5.3% Dividend yield (2) 11%/6% 2011 FFO/FAD (3) per share growth 24%/26% 1Q12 FFO/FAD (2) per share growth (1) As of 3/31/2012 pro forma for Chartwell (2) As of 6/7/2012 (3) Normalized results 26

All REITS 18 th 8 th 12 th * through 12/31/2011 ** through 3/31/2012 (1) Adjusted for stock splits.

27 Dividend and Valuation Growth Generates Long and Short-Term Returns Solid Dividend Record (1) $2.96 (2) (40+ years) Total Shareholder Return (4) 1yr* 5yr* 15yr** vs. Health Care REITS 1 st 2 nd 1 st vs. All REITS 18 th 8 th 12 th * through 12/31/2011 ** through 3/31/2012 (1) Adjusted for stock splits. (2) 2012 dividend represents the approved dividend rate for 2012 which is subject to quarterly review by the Board of Directors. (3) As of 3/31/2012. Assumes reinvestment of dividends. (4) Source: Key Banc Leaderboard, Reit Wrap. 27

28 Non-GAAP Financial Measures 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 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 entities. Normalized FFO represents FFO adjusted for certain items detailed in the reconciliations. FAD represents FFO excluding net straight-line rental adjustments, amortization related to above/below market 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 certain items detailed in the reconciliations. The company believes that normalized FFO and normalized FAD are useful supplemental measures of operating performance because investors and equity analysts may use these measures to compare the operating performance of the company between periods or as compared to other REITs or other companies on a consistent basis without having to account for differences caused by unanticipated and/or incalculable items. 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. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our seniors housing operating and medical facility properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations or transaction costs. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. SSCNOI is used to evaluate the cash-based operating performance of our properties under a consistent population which eliminates changes in the composition of our portfolio. For purposes of SSCNOI, same store is defined as those revenue-generating properties in the portfolio for the 15 months preceding the end of the reporting period. As such, properties acquired, developed or classified in discontinued operations during that period are excluded from the same store amounts. The company believes NOI and SSCNOI provide investors relevant and useful information because they measure the operating performance of the company s properties at the property level on an unleveraged basis. The company uses NOI and SSCNOI to make decisions about resource allocations and to assess the property level performance of our properties. EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends. A covenant in our primary 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. Effective July 27, 2011, our covenant requires an adjusted fixed charge ratio of at least 1.50 times. 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 investment 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. None of the supplemental reporting measures 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. 28

29 Same Store Cash NOI Reconciliations Three Months Ended Dollars in thousands June 30, 2010 September 30, 2010 December 31, 2010 March 31, 2011 June 30, 2011 September 30, 2011 December 31, 2011 March 31, 2012 Senior Housing Operating/RIDEA (1): Total revenues $ 116,650 $ 118,904 $ 122,501 $ 142,398 $ 124,768 $ 125,125 $ 128,986 $ 151,560 Operating expenses 82,492 82,940 86,833 98,698 86,297 86,218 90, ,357 Net operating income $ 34,158 $ 35,964 $ 35,668 $ 43,700 $ 38,471 $ 38,907 $ 38,411 $ 48,203 Year-over-year growth 12.6% 8.2% 7.7% 10.3% Average growth 10% (1) Represents data for those properties in the portfolio (both stable and unstable) for the 15 months preceding the end of the portfolio performance period. Certain amounts for prior year periods include the performance of some properties that were not owned or operated by HCN. Total Portfolio Prior Year Current Dollars in thousands Quarter Quarter % Change 1Q11 $ 108,457 $ 112, % 2Q11 146, , % 3Q11 160, , % 4Q11 162, , % 1Q12 187, , % Average 4.2% 29

30 FFO Reconciliations Funds From Operations Reconciliation Three Months Ended Year Ended Amounts in thousands, except per share and ratio data March 31, 2011 March 31, 2012 December 31, 2010 December 31, 2011 Net income (loss) attributable to common stockholders $ 23,372 $ 39,307 $ 106,882 $ 157,108 Depreciation and amortization (1) 74, , , ,605 Impairment of assets ,194 Loss (gain) on sales of properties (26,156) (769) (36,115) (61,160) Noncontrolling interests (2) (4,160) (4,990) (2,749) (18,557) Unconsolidated entities (3) 3,027 2,887 8,514 11,712 Funds from operations 71, , , ,902 Normalizing items (4) 37,142 10, ,121 69,134 Funds from operations - normalized $ 108,195 $ 174,522 $ 395,143 $ 594,036 Average diluted common shares outstanding 155, , , ,401 Per diluted share data: Net income (losss) attributable to common stockholders $ 0.15 $ 0.19 $ 0.83 $ 0.90 Funds from operations $ 0.46 $ 0.81 $ 2.18 $ 3.01 Funds from operations - normalized $ 0.70 $ 0.87 $ 3.08 $ 3.41 Year-over-year growth 24% 11% (1) Depreciation and amortization includes depreciation and amortization from discontinued operations. (2) Represents noncontrolling interests' share of depreciation and amortization. (3) Represents HCN's share of depreciation and amortization for unconsolidated entities. (4) See Earnings Releases dated May 8, 2012 and February 16, 2012 for three months and year ended, respectively. 30

31 FAD Reconciliations Funds Available for Distribution Reconciliation Three Months Ended Year Ended Amounts in thousands, except per share and ratio data March 31, 2011 March 31, 2012 December 31, 2010 December 31, 2011 Net income (loss) attributable to common stockholders $ 23,372 $ 39,307 $ 106,882 $ 157,108 Depreciation and amortization (1) 74, , , ,605 Impairment of assets ,194 Loss (gain) on sales of properties (26,156) (769) (36,115) (61,160) Noncontrolling interests (2) (3,836) (4,489) (2,708) (16,325) Unconsolidated entities (3) 1, ,485 5,149 Gross straight-line rental income (5,030) (11,139) (14,717) (41,067) Prepaid/straight-line rent receipts 3,612 1,014 8,537 9,489 Rental income related to above (below) market leases, net (658) (252) (2,856) (2,507) Non-cash interest expense 3,716 3,693 13,945 13,905 Cap Ex, tenant improvements, lease commissions (8,141) (8,585) (21,799) (36,073) Funds available for distribution 63, , , ,318 Normalizing items (4) 37,142 10, ,121 69,134 Prepaid/straight-line rent receipts (3,612) (1,014) (8,537) (9,489) Funds available for distribution - normalized $ 96,570 $ 156,690 $ 364,728 $ 523,963 Average diluted common shares outstanding 155, , , ,401 Per diluted share data: Net income (loss) attributable to common stockholders $ 0.15 $ 0.19 $ 0.83 $ 0.90 Funds available for distribution $ 0.41 $ 0.73 $ 2.01 $ 2.66 Funds available for distribution - normalized $ 0.62 $ 0.78 $ 2.84 $ 3.00 Year-over-year growth 26% 6% (1) Depreciation and amortization includes depreciation and amortization from discontinued operations. (2) Represents noncontrolling interests' share of depreciation and amortization, gross straight-line rental income, amortization of above/below market leases and non-cash interest expense. (3) Represents HCN's share unconsolidated entities' depreciation and amortization, gross straight-line rental income, amortization of above/below market leases and non-cash interest expense. (4) See Earnings Releases dated May 8, 2012 and February 16, 2012 for three months and year ended, respectively. 31

32 EBITDA Reconciliations Adjusted EBITDA Reconciliation (dollars in thousands) Three Months Ended Three Months Ended December 31, 2011 March 31, 2012 Net income $ 42,343 $ 57,459 Interest expense (1) 90,084 93,722 Income tax expense 825 1,470 Depreciation and amortization (1) 122, ,422 Stock-based compensation 1,745 11,323 Provision for loan losses 1,463 - Loss (gain) on extinguishment of debt (979) - Adjusted EBITDA $ 257,625 $ 291,396 Interest Coverage Ratio: Interest expense (1) $ 90,084 $ 93,722 Capitalized interest 3,075 2,421 Non-cash interest expense (3,777) (3,693) Total interest $ 89,382 $ 92,450 Adjusted EBITDA $ 257,625 $ 291,396 Adjusted interest coverage ratio 2.9x 3.2x Fixed Charge Coverage Ratio: Total interest (1) $ 89,382 $ 92,450 Secured debt principal amortization 7,683 8,529 Preferred dividends 17,234 19,207 Total fixed charges $ 114,299 $ 120,186 Adjusted EBITDA $ 257,625 $ 291,396 Adjusted fixed charge coverage ratio 2.3x 2.4x Net Debt to EBITDA Ratio: Total debt $ 7,240,752 $ 6,877,979 Less: cash and cash equivalents (163,482) (469,217) Net debt $ 7,077,270 $ 6,408,762 Adjusted EBITDA Annualized 1,030,500 1,165,584 Net debt to adjusted EBITDA ratio 6.9x 5.5x (1) Interest expense and depreciation and amortization include discontinued operations. 32

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