Welltower Inc (NYSE:WELL) Q3 2017 Earnings Conference Call - Final Transcript

Nov 07, 2017 • 10:00 am ET

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Welltower Inc (NYSE:WELL) Q3 2017 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Chad Vanacore with Stifel.

Analyst
Chad Vanacore

Just picking up the Sagora conversion from triple net to RIDEA, you converted 11 properties. What was the coverage on those properties? And then, was this always in the plan or is this opportunistic? And then should we expect them to convert more of these remaining leases to RIDEA over time?

Executive
Mercedes Kerr

Yes, it's Mercedes. Let me talk to you a little bit more about Sagora. So we started this relationship in 2010, and as Tom mentioned, this triple net structure rather was somewhat of an incubator process, if you will, but there were a group of properties, these 11 properties that we converted to RIDEA, which stood out from what is otherwise a very solid portfolio, a very consistent performing portfolio, as a group of properties that had outsized growth.

And so those were the ones that we decided fit very well in this RIDEA model. As you probably know, we are very selective about what we want to own in that kind of a joint venture structure. We try to, I suppose, manage volatility by really picking properties that we think have the opportunity for outsized growth and performance. So in any event -- the rest of the portfolio, which we thought was very suitable for the triple net lease structure because they are, by all accounts, cash cows for Sagora but don't have the same growth prospect.

It's kind of the decision that we made with them. You saw, what we're calling kind of our version 2.0 of RIDEA joint venture, structuring tools, and by that I mean with respect to alignment, with respect to management contracts. So Sagora was very instrumental in us sort of designing some of these new found tools that we think are going to be very useful for us going forward.

Analyst
Chad Vanacore

Mercedes, the outsized growth expectation, is that because these were in process of stabilization or they're outperforming in some other way?

Executive
Shankh Mitra

No, these properties, Chad, are in the best of markets in the footprint, and so we expect this portfolio that we have in, in RIDEA outperform because they're in the best submarkets as well as the best demographics.

Executive
Thomas J. Derosa

Yes, Chad. It's Tom. Let me just make a comment regarding your broader question you asked. We built our business model around owning RIDEA assets. For Welltower, we see that as a lower risk structure because we've built the full complement of skills, tools, technology to maximize the value of real estate in a RIDEA structure.

So you will continue to see us look for operators that we may incubate in a triple net lease format to transition eventually to a RIDEA structure. And you'll see us likely move away from operators where we don't see the opportunity to transition the operator or the real estate into a RIDEA structure in the future.

That is -- this is -- Sagora is a great example, and I'm sitting here looking at