Good day, ladies and gentlemen, and welcome to the Third Quarter 2015 HCP Earnings Conference Call. My name is Dennis, and I will be your coordinator today. At this time, all participants are in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. Now, I would like to turn the presentation over to your host for today's conference call, John Lu, Senior Vice President. You may go ahead, sir. John Lu - Senior Vice President – Financial Planning and Investor Relations: Thank you, Dennis. Today's conference call will contain certain forward-looking statements, including those about our guidance and the financial position and operations of our tenants. These statements are made as of today's date and reflect the company's good faith beliefs and best judgment based upon current information. These statements are subject to the risks, uncertainties and assumptions that are described in our press releases and SEC filings, including our annual report on Form 10-K for the year ended 2014. Forward-looking statements are not guarantees of future performance. Actual results and financial condition may differ materially from those indicated in these forward-looking statements. Future events could render the forward-looking statements untrue and the company expressly disclaims any obligation to update earlier statements as a result of new information. Additionally, certain non-GAAP financial measures will be discussed on this call. We have provided reconciliations of these measures to the comparable GAAP measures in our supplemental information package and earnings release, both of which have been furnished to the SEC today and are available on our website at www.hcpi.com. Also during the call, we will discuss certain operating metrics, including occupancy, cash flow coverage, and same-property performance. These metrics and other related terms are defined in our supplemental information package. I will now turn the call over to our CEO, Lauralee Martin.

Thank you, John, and welcome to HCP's 2015 third quarter earnings conference call. Joining me this morning are: Tim Schoen, Chief Financial Officer; Justin Hutchens, Chief Investment Officer of Senior Housing and Care; and John Lu, Investor Relations. I would like to start by highlighting our financial results in the quarter. Strong organic growth in four of our five property sectors combined with the benefit from accretive acquisitions completed over the past year, resulted in year-over-year increases in our FFO as adjusted and FAD per share of 5% and 3% respectively. Year-to-date, we've completed $1.9 billion of investments with a blended cash yield of 6.7%. During the quarter, we looked at many potential investment opportunities. However, our closed investment activity was relatively quiet. We continue to see aggressive market pricing for assets and portfolios with investment performance highly dependent on strong occupancy and revenue growth. In response, we have stepped up our capital recycling activities to benefit from this market pricing using proceeds to delever the balance sheet. We continue to focus on building new operator relationships to generate off-market investment opportunities. We also continued to selectively increase our development programs in medical office and life science, where returns can be optimized and we are expanding our investment management platform. Some highlights of these efforts. The Cove life science development is on track and now visibly coming to life, I encourage you to watch the live on-site webcam. We signed our first tenant for Phase 1 with occupancy expected to begin in August of next year. We are in active discussions with several other prospects and expect to make additional signing announcements very shortly. Direct market vacancy in South San Francisco is currently at sub 1%. Demand continues to be quite strong and market rental rate and terms continue to…

Thank you, Lauralee. I'm very excited to have joined HCP in my new role. My first impressions of HCP so far are even better than I was anticipating. I already had a favorable view of HCP's management team and the company's long successful track record as an industry-leading healthcare REIT. But now that I've had the opportunity to work with people directly and get to know the portfolio, I have found that: first, HCP has an incredibly deep and talented team beyond my expectations. Second, if we are going to have a significant operator concentration, it is to our advantage to have that concentration with national operators such as Brookdale and HCR ManorCare, who have the expertise, scale and efficiency to manage through business cycles. And third, while HCP is a well-established organization, the team here is committed to continuing the enhancement of systems and processes that support the company's growth. My top priorities coming into this role were to: assess internal processes around underwriting and business development; establish relationships with industry-leading operators, primarily in the senior housing and post-acute sectors, to position the company for continued growth; gain familiarity with the leadership teams of our two largest partners, Brookdale and HCR ManorCare, as well as our other significant relationships; and enhance our asset management and capital investment approach, particularly as it relates to our RIDEA portfolios. Over the past few months, I've had the opportunity to visit several properties and meet with the senior management teams of both HCR ManorCare and Brookdale; I've also met with several top operators as potential new partners across the country. I'm confident that we are laying the groundwork to position ourselves to carry out more off-market transactions with more existing and new partners in the future. Our senior housing same-store cash NOI grew…

Thank you, Mr. Schoen. We will now begin the question-and-answer session. Our first question will come from Smedes Rose of Citi. Please go ahead.

Hi. Good morning. I wanted to ask you on your – on your senior housing, it sounded like your commentary around supply, particularly where you have RIDEA exposures, you feel pretty comfortable with it, and it's not as much as maybe what we're seeing for other portfolios. Are you comfortable over time increasing your exposure to RIDEA there? And I also just wanted to ask on Houston, you mentioned taking market share with higher occupancies. Were you more aggressive on pricing in order to drive occupancy – what were, sort of, some of the strategies to make that happen?

This is Justin. Let me start with our comfort level with the RIDEA structure. We absolutely are committed to expanding that structure. As Lauralee mentioned in her prepared remarks, it give us financial alignment, where our joint venture partners own part of the real estate, we own part of the operations, and we're seeing some really good results from that structure. In terms of Houston, the primary driver of the performance was occupancy. There was some rate lift. I don't have the number offhand, but it was less significant than the occupancy increases that I pointed to. In terms of the overall market, I might also throw in that in my prepared remarks, I was focused on our RIDEA portfolio, but also if you looked across our triple-net portfolio, those that have similar exposure, the numbers are very similar. And in the case of Brookdale, they've gone through a similar experience where they've had integration that they faced over this past year. They've had the capital expenditure infusion of $100 million, one-third of which is completed. They're going to benefit from a rent reduction at the beginning of the year, based on a previously negotiated agreement with Brookdale. And overall, they have similar supply dynamics, and so we feel comfortable with that portfolio as well.

Okay. Thank you.

The next question will come from Nick Yulico of UBS. Please go ahead.

Thanks. I was hoping you could – Lauralee, if you can give us a little update on HCR ManorCare and the DOJ complaint, where that sort of whole process stands right now.

There really is no update on the Department of Justice. We had actually anticipated that a calendar would be set around discovery and that has not occurred, so at this point, there really is no new information.

Okay. And then just going back to the issue of impairing the equity of the OpCo and giving now your new, I guess, revised fixed charge pro forma estimate for ManorCare. I think you said – might have said that there might be some upside potential for coverage, and yet, how do we reconcile that though with you guys impairing the equity, which would seem to imply that actually the business is a little bit tougher than you had – you imagined?

Well, the comment on upside is relative to the lease coverage, and what we're mostly focused on is the coverage of the lease. September had a lot – the quarter ended September had a lot of new information as you've all watched with hospital admissions and referrals that came out of that. I think it was unexpected and a little more volatility. And so, if we think about that, our coverage with HCR is current through September, a lot of the industry is still on a one-quarter lag, not reflecting that. But as we think about HCR, they are adapting to changes in mix shift, the Medicare to Medicare Advantage. I actually think they're doing that quite well. If we think about their results year-to-date, year-over-year with revenues of just a little bit less than $3.1 billion, they have managed a Medicare to Medicare Advantage shift, which lowers rate, length of stay and yet their comparable revenues year-over-year are only down 0.3%. So, clearly they're responding to the marketplace, its market share and other actions. And with our lease amendment, we've given them more cash flow flexibility to start growing their business. It takes a while to do that, but we were excited to see the two recent assets that I talked about both in terms of Arden Court and the ProMedica coming on line, substantiating that there is significant growth potential as they have more flexibility.

Okay. That's helpful. Thanks. And then just one last one on – you talked about adding Justin doing more active asset management within the overall senior housing portfolio. Is that – can you talk a little bit more about, I mean, does that point to future revenue opportunities as you're looking at the triple-net assets where you actually could be – there's opportunities to be increasing revenues or is that more of a sort of – some of that a defensive type of positioning just relative to some of the trends that are going on, which are perhaps weaker trends in the industry, like supply or issues in post-acute being tough? Thanks. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Well. Sure, it's in active (29:25) asset management, from our standpoint, really applies, first and foremost, to our RIDEA exposure. And stepping back and looking at it, we've approached asset management from a real estate perspective. We have operating risk. We're partnered with operators. And we need to view the world from the operator's perspective. So, one way to do that is to track performance with our operators in regards to the regional divisional alignment, rather than by investments, for instance, RIDEA 1, RIDEA 2 and et cetera. Because we know that the operators that are overseeing our communities aren't really focused on ownership at the local level and regional level. So, we want to align and speak their language and also to give us insights into their multi-site management performance. We'd like to track leading indicators of performance rather than just historical financial results, so, we can get a view or have a view of where the communities are going, moving forward. We'll continue to do physical plant inspections. But we'll also spot-check operating performance upon our visits. And ultimately, what it's going to lead to is a more meaningful dialogue. And I think this is the case both with RIDEA and with triple-net, relationships where we can speak their language, take the conversation to a higher level and align ourselves as a capital partner and not just a property owner. And by the way, as Lauralee mentioned, we've already made a couple hires on our team, that both of which came from national operators that are going to help us to transform our asset management as noted.

Our next question will come from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.

Thank you. I just – I guess I wanted to come back to the write-down on the HCR equity and the timing. I – you mentioned, Lauralee, the new information coming to light. But I guess, I'm struggling with sort of the – that disconnect versus the operations. When do you normally review the valuation of that equity? Is it quarterly or is it annual? And just, I guess, what was the catalyst?

Yeah. Jordan, let me take that. We'll – we look at – that's an equity method investment, obviously the OpCo is a highly levered entity. So, smaller changes there – changes in the growth outlook have a significant impact on that. I think the two things that Lauralee mentioned is obviously the decelerating admissions across that acute care space. I think you've seen that in – reflected in the stock prices of the operators here in the last several months. And then we continue to see a shift from Medicare – or a shift to Medicare Advantage, which has impacted length of stay and reimbursement rates. All of that has an impact on the growth trajectory going forward. So, that's the biggest thing now. I know that flies in the face of improving coverage with regards to the lease. But it really is changing...

I guess, I also with that the lease amendment earlier this year would have been an enhancement to the equity value of the entity. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Yeah. And if you follow that growth...

And obviously you didn't write it down at that time, and that's kind of... Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Right, actually – that investment has moved around that was – the value of that investment was increased when we did do the lease amendment back in at the end of March.

Okay. And just moving on, I guess, one for you Justin, welcome aboard, but I'm curious you made the comment surrounding the value proposition offered by HCP senior housing portfolio. Could you maybe frame that up for us, share a little bit?

Sure. Is it – and really when you look at our properties that we have on our RIDEA is primarily Brookdale. And on a weighted average across the portfolio, we generally operate around mid-price point. And so there is – and these are also communities that are around 87%, 88% occupancy. So, if you look at – if you combine the capital infusion, with the fact that we're around average in terms of pricing in the markets and you consider new supply, that's going to come in at a higher price point, the consumer will have a choice. They can choose a refreshed property that is affiliated with a well-established national operator or a newer, higher priced property. And we think that we're well positioned in that regard to handle the new supply which, by the way, is fairly limited, as I mentioned in my prepared remarks.

Okay. Last one, just on the life science portfolio, Lauralee, you touched on sort of the print as sort of a favorable one to sort of look to during the quarter with Biomed, any thoughts on sort of your long-term investment in life science, is there an opportunity here to reduce exposure? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Yeah. I – listen, we like our exposure. I think as the largest landlord on the West Coast and having a deep concentrated portfolio in key markets, that's created a lot of value for us. You can see that in the same-store growth we've had this year where we've continued to lease up the portfolio with positive mark-to-market leases and increases in occupancy. That's a portfolio that's been a good earner for us, I guess, I would say, and something that we'll look to increase our investment in. We're going to do that, I think, primarily Jordan in the – on the development front on our land bank that seems to presents the best risk-adjusted return and value proposition at the moment as we continue to expand our footprint both in San Diego and in San Francisco.

And, if I could just pile on, in terms of thinking about us as being diversified in terms of what we bring, in terms of growth. To have a mix of sectors that are growing at different paces, we love the growth in life science right now. We like the fact that markets are so tight, that development returns can be significantly higher than acquisition returns. And we like the land parcels that we have that are extremely well positioned at the right time to take advantage of all of that. So, in a diversified healthcare portfolio, this is a big contributor to the growth dynamic.

Thanks for the time.

Our next question will come from Vikram Malhotra of Morgan Stanley. Please go ahead. Vikram Malhotra - Morgan Stanley & Co. LLC: Thank you. Justin, just wanted to clarify on the RIDEA analysis that you did in terms of new supply. You mentioned, I think, there was one radius you looked at was five miles and then there was a 25-mile radius. Can you just clarify what that difference is and why there is such a large difference between the two pieces of analysis?

Sure. The industry is looking recently at three miles, five miles, and seven miles. Five miles has been a reliable metric that we've used – and I've used over the years, and we've always really referred to assisted living and independent living as a five-mile radius business. And so, we – first and foremost, looked at our 106 RIDEA property portfolio and looked at the five mile radius. But then when you consider the CCRC marketplace, that's the campus that attracts from a broader market. And so, we reached out 25 miles and – in that case, and that's an entrance fee model community. It's a little bit more of a niche in that regard and it differentiates within the market and tends to attract from a broader market. So, that's why we chose the two radiuses. Vikram Malhotra - Morgan Stanley & Co. LLC: Okay. And then just turning to – just the investments in the UK, any update maybe in your conversations with Four Seasons on recent trends there. Sounds like there may have been some improvement in occupancy. But I'm just kind of wondering how you're thinking of your investments there, Four Seasons, the HC-One, et cetera, just in light of ongoing challenges and then potentially rising costs next year as the UK government plans to kind of increase minimum wages over there. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Vikram, we've got three relationships over there. Looking at those three relationships, they all are at different dynamics. We look at Maria Mallaband, which is primarily a private pay portfolio that's performing extremely well. We continue to expand this year our HC-One investment, and that continues to meet our expectations. And then obviously, with Four Seasons, they do remain challenged particularly from a liquidity standpoint. But I think that's more an issue related to that operator. But we're committed to that care home space in the UK. And we've got – when you look at our investments over there, it really is a different story with each of our operators.

I do think it's incredibly important to differentiate Four Seasons from the other two operators. Four Seasons is not performing indicative with the rest of the industry. There clearly is a private equity firm that is a financial private equity firm versus an operating equity firm. And if we look at their results, whether they meet management changes that resulted in embargoes, et cetera, the two operators that we have, Maria Mallaband being in that private pay sector, they are able to navigate if there are cost increases, because the revenue sources are private pay and they can very much focus on matching those. And if we look at HC-One, we've been converting that debt into real estate. And the conversions have been focused on that same private pay marketplace, again while we have very good coverage and performance. And if we look at the balance of HC-One, Chai Patel, who is the CEO there, is a very proven operator, highly respected in the industry, who is in ongoing talks about what can be done in terms of care models, staffing models to address some of the higher factors in the UK that are challenges on meeting a nurse shortage or just care shortages in general. And again, to have those kind of operators focused on the majority of our portfolio makes us a very long-term committed to the care industry in the UK. Vikram Malhotra - Morgan Stanley & Co. LLC: And just remind me, you said in HC-One, their conversions are focused more on the private pay. In general, what is the split – is it mostly private pay or is there more local authority funding?

There's just still mostly local authority or what they call top-ups over there, which is an ability to enhance some of the revenue sources with the mix. But we did do some new investments with HC-One that have more of a private pay focus. Vikram Malhotra - Morgan Stanley & Co. LLC: Okay. And then just last one on the MOB side. Your same-store occupancy, I believe, went down 50 basis points. Your same-store revenues went up 3.6%. Can you just maybe walk me through the – kind of what the annual rent bumps and maybe the rest of the increase was?

Yeah. Actually, on the same-store basis spectrum, we actually rental – our contractual rent steps are the largest – we did have a pickup in occupancy. Those were the two biggest things and then we did have some bad debt from last year, but the biggest pickup is really rent steps and increases in occupancy in that portfolio.

Yeah, I mean, you're looking... Vikram Malhotra - Morgan Stanley & Co. LLC: But your same-store went down?

Yeah. The same-store went down just a touch, insignificant, but total occupancy went up. But we continue to have very favorable mark-to-market rents of over 2% in the quarter.

But, it's mainly rent step spectrum. Vikram Malhotra - Morgan Stanley & Co. LLC: So, the rent steps are about 2%, you're saying?

A little bit higher than that.

A little bit higher than that. Vikram Malhotra - Morgan Stanley & Co. LLC: Okay. Okay. I can follow up with you two offline. Thank you.

You bet.

The next question will come from Juan Sanabria of Bank of America. Please go ahead.

Hi. I was just hoping if you could expand a little bit on the revenue-enhancing CapEx you're putting into the RIDEA business and what impact that's had on rate growth, kind of what your expectations were pre, and what that has gone to now that you've invested some of the money?

Sure. This is Justin. First of all, it's been typical over the years upon the recapitalization or the acquisition of assets to infuse capital to refurbish properties. REITs have been a major source of capital for this source – for this purpose. In the case of Brookdale, we had agreed on investment to infuse capital and the capital is being used to reposition properties with full major refurbs. We're doing major refreshes, we're doing expansions. We have conversions of assisted living to memory care, all of which support their ability to ultimately compete and attract market share. So far, what we're seeing is some impact on occupancy, there is a little bit of – because we're not referring to same store, there is some muddiness when we look at backwards in our RIDEA portfolios, really both in terms of revenue and expense because Emeritus and Brookdale were classifying things differently both in revenue and expenses. We don't have total clarity yet on rate impact, but we do know revenues are going up and occupancy is going up. And we have a lot more CapEx to infuse over the rest of this year and into next year. So, the program continues.

And what are the targeted returns for the revenue-enhancing CapEx? How should we think about that? Are you guys treating it as more basic s CapEx?

Generally we target north of 10%. We generally target north of 10% and you'll hear Brookdale with their program max target is 15%. So, if we can achieve above that.

Okay. And then just going back to ManorCare. Have you guys thought of that and looked at the potential implications of bundling for the single joint replacement study that CMS has done and kind of what percentage of ManorCare's volume is potentially at risk?

Sure. Well, first of all, ManorCare generally is in the higher acuity category. But if we were to apply the hips and knees as presented in the study or the study that's going on which is 75 MSAs, only 15% of their markets fall into those MSAs. If we were to use what we've seen as analyst projections that there could be a 7% impact on occupancy, it would mean that ManorCare would have less than 1%. So, combination of where they form the acuity and where they form those tests very minimal, but I do think there's a more important question to be asked that, there are a lot of bundled payment tests that are going to go on. HCR is two years into a relationship test with UnitedHealthcare, which is going very well, which is again testing how to get things to the lowest cost setting with the highest level of care. And the fact that HCR continues to invest in the technology that can report that, that is delivering those care results at a very high level, is one of the reasons they continue to become more and more of a preferred provider into important systems. That's really the case with Pragmatica, an important system in Ohio and Michigan, but has made HCR their preferred provider in the Toledo area, as a result of their joint venture.

So, you're saying on the – when you gave the stats about the 7% impact to occupancy, that ManorCare would be kind of roughly in line with the industry or is it ...

No. No. I was just saying if you were to provide what I – we have seen as analyst prints of that activity, I'm not saying that I can support that. But just there's been prints out there that it could be 7%. It would be insignificant to HCR.

Okay.

At less than 1%.

Okay. And then on the labor front. Just looking at the small sample set at the RIDEA, 2020 (47:39) asset pool, seems like expenses were up pretty significantly. What are you seeing there? Is your expectation that the expense growth will be above or below kind of what you guys are hoping for – for rate growth as we look forward? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: I think expense growth will be in line, I think there is just some lumpiness in the quarter. Justin said in his remarks for the year, we still expect RIDEA to grow over 7% although, like you said, it's a small sample size. We still expect it to grow over 7% this year. So don't really expect to have an outlier in terms of any new thing on the cost side.

Okay. In terms of labor management, I don't want to get ahead of Brookdale, but they have some programs in place to try to manage through wage pressures that they're facing and you were comfortable that they're on top of that?

I think in our RIDEA portfolio, we've seen increases in occupancy, increases in the margin and increases in rates. There's little lumpiness this quarter, but it's all positive trends across the broad in that RIDEA 1 portfolio.

Thank you.

The next question will come from Josh Raskin of Barclays. Please go ahead.

Thanks. Just wanted to start again with RIDEA portfolio and then you gave some helpful statistics on your Brookdale investment. And I'm curious, you didn't mention sort of average rate. So are you seeing promotions or other things in that book that are helping drive that occupancy above NIC data, especially in markets where you're seeing new supply.

We're a little – as I mentioned earlier, from a standpoint of comparing the accounting of Brookdale to Marysville on the rate impact so far. The occupancy was a clean metric that we could pull and obviously very easy to compare to the NIC data. We do know that that the industry does use pricing tool boxes. Certainly Brookdale is an operator that uses those as well to flex and stay competitive within their local markets. And we'll comment in future – by the way, I want to mention that we're in the process right now of doing our annual review of our supplemental materials, in the light of RIDEA exposure. Moving into next year, we'll have an opportunity to enhance the disclosure around our RIDEA and our operating metrics. To get to your exact question, really we're seeing – very clearly seeing lift in occupancy and revenue and definitely comfortable saying less so from rates, but don't have the exact figure. Yeah. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: And sequentially, we're seeing increases – Josh, we're seeing increases in occupancy across all of the RIDEA portfolios as Justin mentioned the 13% of our portfolio is in RIDEA. And we've actually seen rate increases in everything except the assets that we put into RIDEA last year or RIDEA 2 portfolio that's undergoing the transition from Emeritus to Brookdale, but again, occupancy gains across the board in the portfolios and rate increases with the exception of RIDEA 2, that's 2015 is the transition year. We would expect RIDEA 2 though to regain its growth profile next year after it gets through the transition.

Yeah. I mean, I guess we just see the RIDEA NOI number, we see occupancies going well. And then you talk about being a value product potentially and so the rate, I think is just as important as the occupancy, so, definitely looking forward to those new disclosures as the RIDEA portfolio growth. Lauralee, you had mentioned investments – aggressive pricing on investments and that's caused you to recycle some capital. And I'm just curious any more specific commentary on – is that a really new phenomenon or is that sort of in building, in any specific asset class that you'd point to?

Well, I think pricing has been aggressive all year. There still is lots of capital out there, with not a lot of good alternatives for yield. And healthcare assets still offer a great yield opportunity for investments. I think the big difference is that pricing has held not necessarily reflecting that there's been some changes in the maturity of the industry. And that's where we get a little bit more concerned as we think about where we want to invest our money going forward.

Okay. And then just lastly, the 38 ManorCare properties, the 12 that you sold, it looks like those will yield higher proceeds than the remaining assets. And I'm just curious where those larger facilities just better positioned, higher EBITDA numbers or what differentiated the first 12 out the door versus what's remaining?

The choice of assets that were selected were a combination, do you want to exit a state that's particularly GLPL-unfriendly to an operator, you might have a fairly decent or healthy operating profile, but it basically gets washed away with GLPL claims, some of that was early in that process because of a desire to exit as soon as possible against those claims. The balance of the portfolio is probably pretty consistent. And again, it's been a portfolio that is a lower Q mix probably in the mid-50%s versus ManorCare's mid-60%s, a lower occupancy probably by 10%, if we think about where they are, it would be in the mid 70%s. So, it's definitely assets that are not indicative of their broader portfolio. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: And Josh, its 12 assets across eight states. So, it's fairly disbursed.

Okay. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Like you should – at the end of the process, you'll have a much more streamlined portfolio in actually certain states like now I'll take West Virginia for example.

Right. Okay. Thanks.

The next question will come from John Kim of BMO Capital Markets. Please go ahead.

Thank you. I had a couple questions on ManorCare. So, now you're valuing the company's total equity at $233 million, and the company has $6 billion of debt, this quarter, EBITDA barely covered interest cost, was $124 million versus $120 million. So the question is, is this company going bankrupt?

Well, first of all, you can't look at a quarter in this business, because it has a great deal of seasonality. So, I think again, if we look at – started the year very strong, benefiting from the flu season, penetrated the senior housing space. We're going into the end of the year where we come back into a high level of seasonality. So, I think you're taking their performance out of context. And, again, we've been moving through increasing their flexibility with the asset sale. So, we've just started the asset sales. We know that's been a distraction and a disruption to their performance. We thank ManorCare very much for how attentive they've been to this process because it's absolutely optimized price, but there's no question that was an impact in the third quarter as well. So... Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Well, I think in the pro forma number that Lauralee mentioned, John, you take that one – that mid one-two (55:41) range, that represents $100 million of free cash flow when we take into account the rent restructure we did along with the asset sales. So, we feel that $100 million of free cash flow, that's a good place to start to build on.

And again, that coverage is looking at their performance through the end of September. I think the broader stats out in the industry are a quarter lagged. So, we've given you kind of a real-time look at them with the results here in the quarter. And we're now moving into a time of the year where operations improve just because of the volumes of the industry.

Sure. But you talk about seasonality with this business, but also you did take the impairment this quarter. So, it seems like there is this disconnect, I think Jordan asked it earlier. There's a disconnect between the improvement that you may see and the impairment you took this quarter? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Yeah. That's obviously some of the broader industry trends we're seeing as well, John, you've got to take that into consideration. And obviously, you've got, like we said, a fairly highly levered investment with the lease and it's sensitive to changes in the growth.

And I think you need to look at how the market has priced other operators in this space, which obviously they've been down dramatically. So when you just think about performance and what they think that performance is worth, the market has made a big shift in valuations and that needs to be a consideration.

Have you been in discussions with ManorCare on a rent cut or equity injection?

No. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: No.

Okay. On medical office, was the intention to JV the assets when you acquired the portfolio in June, and can you discuss how you approached the partner? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Yeah. There was a lot of institutional interest in that portfolio. As we mentioned last quarter, given the opportunity to expand with a leading operator and one of the largest MSAs in the United States, we thought that was a great opportunity. We had a lot of institutional interest to come in and JV with us. We've obviously had a long track record of a – being a successful partner to institutional capital, dating back almost 12 years or 13 years now. So there was a combination of a lot of incoming and in terms of sourcing it, we didn't have to go too far, make too many phone calls to find people that were interested in that portfolio.

And what kind of fees will you be getting from Morgan Stanley as far as asset management fees, leasing fees, property management and so forth?

Acquisition fee and ongoing administration fees.

Thank you.

The next question will come from Rich Anderson of Mizuho Securities. Please go ahead.

Thanks. Lauralee, the first question you mentioned, HCR ManorCare and their different geographical footprint and plus their acuity business puts them at a lesser impact from the hip and joint issue, is that what you said?

Correct.

Okay. So – but what happens should the 79 markets expand more broadly than just an acuity issue and they would be have – they would certainly see more impact if that were to happen, is that correct?

No, I think there's – I would say the changes in healthcare are going be evolutionary, not revolutionary. There's a lot of tests going on.

Yeah, fair.

One of the reasons I mentioned UnitedHealthcare is, HCR has been early in this process. What they do know is that the shifts that are going on are going to put the patient needing care into the lowest cost setting with the highest outcomes, and clearly they compete well there. One of the questions we've been asked is around the home health business, and is that a competitive factor. And actually I would – I would call the home health as a solution to the residents around the fact that the Managed Care companies are sending them home early and somehow, they need that level of care when they get home. But relative to HCR, they're dealing very well with taking market share to get more admissions and then managing to get best results against that lower length of stay to again complete the circle that they get more admissions and are the preferred provider. But I think it's really early to call that 75 markets is going to turn into something permanent, there's going be a lot of results and measurements that come out of that as judgments are made.

Fair enough. Okay, so one of the things that occurs to me when I listen to calls like yours and others is, companies have to show themselves in the best possible light and that's what you're commissioned to do, and I get that. But when you say things like some of the other REITs might say we're going to continue to invest billions of dollars a year. And when you say something like we're going to continue to expand our RIDEA platform in the face of all this supply, it just makes me nervous that REITs don't want to show their weakness or whatever, but there are real problems going on. That supply issue is a real problem. This bundling issue could become a real problem. Why would you want to talk about expanding RIDEA at this point when there is absolutely no clarity at all about how bad supply is going to get, when you have 2000, 2001 and what happened to the assisted living sector back then, not in the too distant past?

Hi Rich, its Justin. I wanted to address your question. So, in regards to our approach to entering the RIDEAs market, one area we focused on is primarily in the value-add category. I mean, we continue to look at opportunities where you might have a lower occupancy and opportunity to infuse capital and position the property to push occupancy and rate in the face of new supply which enters markets at a higher price point. There is no question that we need to be diligent, we need be selective about the markets we're entering, the operators that we partner with, it is a competitive period and we're very mindful of that. But we do anticipate growing the sector, but we'll do it selectively.

Okay. I mean, I guess I would...

And even at our best (01:02:28) Rich, it's a risk adjusted return discussion, right?

Yeah.

And supply is something that's become a big piece of the risk part of the equation, and something we keep an eye on when we're looking to making a new investment in the facility and we think about that whether it's ground up development or we have in our senior housing development loans or in portfolios we're looking to acquire.

Justin, did you say that year-to-date RIDEA growth was 5.2% and it's going to be 6.8% for the year, did I get that number right. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: For our same-store RIDEA portfolio, it's going to be over 7% and that's a function of the investment we've made in that portfolio over the last year and what Justin just said, which was occupancy that was non-stabilized. It was in the low 80%s. We put a fair amount of capital into that and we're benefiting from that over the last four years.

So, yeah guys...

Let me – can I hit the second part of your question which was, I think aimed at the post-acute sector.

Sure.

In that regard, and we've heard a lot of talk about it on the call, we're mostly focused on partnering with HCR ManorCare to help them improve the credit quality of the company. And obviously, the dispositions have played a key role. Some acquisitions and developments that we've both been a part of, they're the developer and we're an acquirer in some cases. And that helps to improve the credit quality of HCR ManorCare. What we're pleased about is the fact that we're partnered with an operator that has weathered these storms before. This is one of the few companies that made it through a major reimbursement change, when the reimbursement changed the prospective payment system. So, they're experienced. They are very focused on a daily basis on improving their competitiveness in market and they're going after market share and adjusting and adapting to the change in mix and length of stay. And so I'd say priority one is to continue to work with HCR ManorCare, improve their credit quality position, help to position their company to be strong in the long run. In terms of near market opportunities with other operators we're much more selective, we're very focused on operating track record, we're very focused on the credit quality of those operators as well and we have heightened selectivity, any time that there is government reimbursement in play.

Yeah.

There is one big difference today Rich than the last time the industry was significantly overbuilt and that is, there is an unbelievable amount of transparency of data. So, as you make an investment, you can look at the – you know what's already in line, what's coming in line in terms of new product and supply and you know how the product that you're looking at investing in is able to compete and you also can enhance that competition by making sure there is CapEx right from the beginning. So, I think there is a difference with the maturity of the industry and hopefully that will bring discipline across the board, but there is definitely a way to underwrite your new investments and do it safely and carefully and get returns.

Thank you very much. Justin, when you were over at NHI, you had this preferred return model and I'm just curious, I mean to what degree does the team there like that as it relates to RIDEA, which is really a hybrid, it will get you the operation upside eventually, but also protects you on the downside, any thought about that model as a way to expand RIDEA?

One thing that impressed me coming to HCP is that, almost every model that could ever be considered has been tried here, over many, many years and I think what I'm most comfortable with and in terms of what's been done here and what we're comfortable with as a team moving forward is just making sure that we have alignment of interest. We can underwrite lower performance as part of a sensitivity, but the expectations, we have alignment of interest, we have ownership in operations, is that it gives us the opportunity for outsized returns. And so, as I said, underwriting is very similar, whether you are from a credit and operating track record standpoint, whether you're underwriting triple-net or RIDEA, but there is a growth profile throughout the business cycle that we'd like to be a part of and RIDEA platform gives us that opportunity.

Can you hazard a guess as to how big RIDEA can become then in the next couple of years from 2013 that it is now?

We don't have a guess, but I can tell you that we're interested in expanding that exposure, and as I mentioned to you, we're going to be selective in doing so.

Rich...

And Tim, just a quick one, you talked about the leverage profile and ATM usage recently, do you have any – there is a perception that you guys need to de-lever. Do you feel a time pressure to do that and maybe a need for equity more through the ATM program or are you comfortable kind of doing it through asset sales – combination of asset sales and little bit on the ATM? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Like I said, we'll continue to recycle capital and we'll continue to judge the capital markets when there is opportunities, but we'll continue to recycle capital at the moment.

Okay, sounds good. Thank you.

The next question will come from Kevin Tyler of Green Street Advisors. Please go ahead.

Yeah. Hi. Following on that point on capital recycle, I may have missed it but what's the updated guidance, Tim, outside of ManorCare for fourth quarter and next year – early next year?

Well, I will take it all in total, Kevin. It's about $700 million – $650 million to $700 million in total.

Total for 2015?

Total – just total from the second half of 2015 through the first quarter of 2016.

Got it.

And we've done about – as I said, about $365 million of that so far.

Okay. And then on the ManorCare asset sales, have you provided a price per bed or can you provide more color price per bed? And then ultimately does it make sense for you to add to the for-sale list, given the outcomes you've achieved on the 50 that you haven't processed here. And Lauralee you mentioned is a distraction for ManorCare. So, I guess, I just wonder if it's a distraction, maybe it means you don't add to the list, but any more color you could provide on that will be helpful?

Yeah. We've averaged about 70,000 – will average about 70,000 of that over the 50 assets, so if that's helpful to you with, you know a couple higher given the choice to exit a state and obviously others that are not nearly as strategic as the average. At this point, we do not have any definitive plans to do more, we stay very close to HCR, encourage them as we look at the operations, would be flexible to consider more, but none are planned at this time.

Okay. Thanks. And then on the senior housing, Brookdale coverage is I noticed ticked down a bit, and there is a one quarter lag in those numbers. So it seems like coverage might then add a bit lower next quarter, given what we know about Brookdale currently. What can you be doing, Justin, to potentially mitigate any of these risks, and do you ultimately think Brookdale's EBITDA snaps back over the next few quarters?

I'll answer your question. I don't want to get ahead of Brookdale and I know they have an earnings call tomorrow, and they can speak on their behalf. But in regards to our portfolio, and I mentioned this earlier, the triple-net portfolio actually has similar supply dynamics to our RIDEA portfolio. So relatively limited impact, there is a rent reduction that will have an impact; it's going to add 2 basis points to the coverage.

That was part of the whole restructure with them, so nothing new. It's just what's been built into the transaction.

We've also been infusing capital, which should in time play a role in helping them to stay competitive. And I think most importantly, we're talking about a company that's gone through a major merger integration. And again, I'm not going to speak on behalf of Brookdale, but from our point of view in our properties and based on even property tours that I've made, the bulk of it is in the rearview mirror. It seems that all the back-office integration is done that can be very distracting, when you're focused on some of the basics during an integration that during regular course you don't have to think about or focus on. They're moving into the strategic side, which includes the resin assessment platform, which should be a value-add over time. So, in summary, I'm reasonably comfortable with the triple-net portfolio and also we continue to be comfortable with the overall credit that Brookdale provides.

Thank you.

The next question will come from Daniel Bernstein of Stifel, Nicolaus. Please go ahead. Daniel Bernstein - Stifel, Nicolaus & Co., Inc.: Hi. It's good morning for you still. I guess the one question I had is, could you talk a little bit more about JV opportunities, obviously I think a pretty good strategic move to do more joint ventures with Morgan Stanley on the MOB. So, if you could talk about opportunities not just in MOBs, but across different asset class, just how much kind of – how much interest are you getting in JVs beyond medical office?

Well, there's very strong interest in medical office, but you said you want to be on that, but clearly Morgan Stanley would like to do more. We had several others that we're very interested and you know it's an asset class that I think performs through cycles with just an enormous amount of consistency which is why it's desired. We've looked from time-to-time at our life science portfolio particularly around development and would consider that if there was development opportunities that might be appropriate. I would say that in terms of senior housing, we basically have our relationships with our operators. If we looked at the RIDEA portfolio where we got, you know 50-50 with Brookdale and the CCRCs and a percentage in the others. So, that's probably the way we would focus most as we look at the senior housing business. Daniel Bernstein - Stifel, Nicolaus & Co., Inc.: Okay. I guess the other question I would have here, actually goes back to ManorCare, HCR ManorCare. If we look at the – if we bifurcate the property lease coverage and the fixed charge coverage, it's pretty clear the other ancillary services and businesses at ManorCare help and support the fixed charge. So I don't know if you're at liberty to talk about those other businesses. But how are those businesses doing, it seems like there maybe some challenges again from the hospital volumes and maybe labor cost. So how are those other business performing, where do you – in terms of trying to think about the upside to that 1.25 times fixed charge coverage and the downside as well from other ManorCare businesses?

Well, their primary ancillary is hospice; you know they have an industry leading hospice business. I think the pressures that you're referencing are principally coming in home health with some of the changes in labor laws. So generally speaking, we think the hospice will survive quite nicely through that. But that's their primary ancillary business.

And then I might just add that there our core ManorCare portfolio continues to perform strong. We also check the supply risk within that portfolio and it's just also very minimal. I think we identified three properties that would impact their 50. Daniel Bernstein - Stifel, Nicolaus & Co., Inc.: Okay. That was actually going to be my next question. One follow-up question, the CapEx you're putting into the RIDEA portfolio, is that at the behest of Brookdale or is that you went out to the properties, took a look at them, assessed them and decided that more CapEx needed to be put in, to help those properties perform?

This was a joint decision upon investment, where of course Brookdale is playing a huge role on determining priority for the capital expenditures, HCP concurs. And so, it falls into several categories, but I think the most impactful categories are the conversions, the expansions, the total complete repositioning through a refurbishment and the refreshes, which all position the properties and should position them to be more competitive in their respective markets. Daniel Bernstein - Stifel, Nicolaus & Co., Inc.: Okay. That's all from me. Thank you.

Our next question will come from Michael Carroll of RBC Capital Markets. Please go ahead.

Thanks. I just wanted to touch on your comments about Medicare Advantage and how those continue to impact on HCR ManorCare, when do you think this trend will stabilize, if at all?

There's lots of different thoughts on that topic. I think that there is – well, let me back up, there's been a shift, but we also now are seeing that rate increases are coming into Medicare Advantage. So, I think that's important. There's some trends that in terms of market share that make it more constructive that there'll be growth. There continues to be very significant growth in Medicare and Medicare Advantages overall just because the population dynamics of who's now turning to 65 and eligible. And overall population going up, there is still reasons that some choose one over the other. And I think the industry is still trying to figure out what is the stabilizing factor in that. But ManorCare has just started getting on with it and realize that they got to win market share, deliver best outcomes and move forward with their business.

I'll just add that...

What exactly can they...

I'll just add – I'll add a point to that regarding HCR. They have an advantage of being in some mature markets as well. For instance, there's a Southern California market that where they – typical ManorCare property located next to a main artery Hospital where they attract the Medicare business primarily, but they also attract significant managed care business out to a 10-mile radius from several hospitals with I believe 40 different payers. Admission and discharge volume of 140 to 160 a month. And so, it's very sophisticated managed care driven market where they've experienced the maturity, the impact of a shorter length of stay, but also which we anticipate over time has increased volume where the lower cost setting can position themselves to be the preferred provider in a marketplace such as the example I gave, they can be a winner. And HCR has some background in some of the mature markets, which I believe is helpful as they are navigating the changing markets across the rest of the portfolio.

Okay, great. Thank you.

The next question will come from Tayo Okusanya of Jefferies. Please go ahead.

Hi, yes. Good afternoon. Most of my questions have been answered, so I just have a quick one, the asset sales at ManorCare. I know the cap rate credit you'd given them on the rents, but could you actually talk about the cap rates you actually sold the asset there, if that number actually is meaningful? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: It's not meaningful; it's not a meaningful number, Tayo.

If that's kind of given the NOI associated with those assets, is that what the issue is? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: EBITDA associated with the operations, yes.

Okay. That's what I suspected. Okay, that's helpful. Thank you.

The next question will come from Mike Mueller of JPMorgan. Please go ahead.

Thanks. I guess looking at the ManorCare asset sales putting aside your 7.75% rent credit that you're getting. What sort of cap rates are these assets clearing the market at? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: For our entire program, Mike?

Sure. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Our entire capital recycling efforts. Those are – the $365 million we talked about today it's in the high 5%. I think the $700 million I've talked about with regards to our recycling initiatives, those will be in the low 6% cap rate.

Okay, low 6%. So that – and that has – and that's getting... Timothy M. Schoen - Chief Financial Officer & Executive Vice President: That has HCR in there as well.

At that 7.75% for you? Okay, if you just look at HCR and thinking about market comps and ignoring the benefit you get, what sort of cap rates are they being sold into the market on?

They wouldn't be on a cap rate basis. They really are on a bed basis with the buyers anticipating the amount of revenue and return they can make off of each one of those beds. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: And operating them under a different operating model.

Right. So, they have really no coverage. So, it's hard to say that they...

Got it.

...have an NOI per cap rate. Timothy M. Schoen - Chief Financial Officer & Executive Vice President: We sort of revert back to our previous answer, it's just not meaningful.

Got it. Okay. And then Tim, when you were talking about same-store NOI guidance. I think you mentioned what the benefit of capital, I think specifically you were talking about senior housing. Can you just talk about what sort of capital goes into these properties that you are getting a benefit and do you have some sort of a same-store number that doesn't have capital being put in for expansion of properties et cetera, so little bit more of a not to use the term clean, but pure same-store? Timothy M. Schoen - Chief Financial Officer & Executive Vice President: Yeah. I think the same-store for the senior housing is not that much different. It is enhanced a little bit by the capital that we put into the properties as a result of our transaction and lease amendment with Brookdale where we agreed to put in $100 million at a 7% rate. They are about one-third of the way through that money – through that capital. But it doesn't really have a meaningful difference, Mike, to the guidance that we've provided. It's just a slight enhancement.

Got it. Okay, that was it. Thanks.

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back over to Lauralee Martin, President and Chief Executive Officer for her closing remarks.

Thank you. And thank you all for your interest and attendance on this morning's call. And most importantly, thank you for your support of HCP. We look forward to joining you at next conference.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.