Maintains Normalized FFO and FAD Per Share
Guidance of 3%-5% and 5%-7% Growth for 2015
Completes $2.2 Billion of First Quarter
Investments
Generates Same Store NOI Growth of
3.1%
Health Care REIT, Inc. (NYSE:HCN) today announced
operating results for the company’s first quarter ended March 31,
2015.
“This quarter demonstrates the unparalleled strength of our
platform and operating model,” said Tom DeRosa, CEO of HCN.
“Despite an unprecedented winter in the Mid-Atlantic and New
England impacting operating expenses and a severe flu season
affecting occupancy rates across the seniors housing industry, we
are able to maintain our full-year earnings and total portfolio
same store NOI growth expectations. We completed $2.2 billion of
high-quality investments, received an upgrade from Fitch to BBB+,
and continued to strengthen our balance sheet through a successful
$1.5 billion overnight equity offering, the largest in HCN’s
history. This performance demonstrates the consistency and
resiliency of our portfolio and is a testament to the benefits of
our portfolio diversification, state-of-the-art asset management
capabilities, the quality and locations of our real estate, and our
best-in-class operating partners. HCN’s business model remains
uniquely positioned to drive consistent returns and long-term value
for our shareholders.”
Dividend Growth As
previously announced, the Board of Directors declared a cash
dividend for the quarter ended March 31, 2015 of $0.825 per share,
as compared to $0.795 per share for the same period in 2014,
representing a 4% increase. On May 20, 2015, we will pay our 176th
consecutive quarterly cash dividend. The declaration and payment of
quarterly dividends remains subject to review by and approval of
the Board of Directors.
Earnings Results For the
quarter, we generated normalized FFO and FAD per share of $1.04 and
$0.92, respectively. First quarter results were impacted by the
February equity raise, decreasing our leverage to 37.3% net debt to
undepreciated book capitalization, completing $2.2 billion of
high-quality investments and total same store NOI growth of 3.1%.
Same store NOI for seniors housing operating was 3.0% for the
quarter and was negatively impacted by the unusually harsh winter
and flu season.
Outlook for 2015 We are
affirming our 2015 earnings guidance and expect to report
normalized FFO in a range of $4.25 to $4.35 per diluted share,
representing a 3%-5% increase, and normalized FAD in a range of
$3.83 to $3.93 per diluted share, representing a 5%-7% increase.
Our guidance includes the impact of the February equity raise and
reduced leverage for 2015. Additionally, in preparing our guidance,
we have updated the following assumptions:
- Same Store Cash
NOI: We continue to expect blended same store cash NOI
growth of approximately 3.0%-3.5% in 2015.
- Acquisitions: 2015 earnings guidance does not
include any acquisitions beyond what has been announced, including
those completed in the first quarter and investments associated
with the Mainstreet partnership.
- Development: We anticipate funding additional
development of $230 million in 2015 relating to projects underway
on March 31, 2015. We expect development conversions of
approximately $190 million in the remainder of 2015. These
investments are currently expected to generate initial yields of
approximately 8.3% upon conversion.
- Dispositions: As announced on May 4, 2015, we
expect to sell our unconsolidated life science investment in the
second half of 2015. Primarily as a result of this, we are
increasing our 2015 dispositions guidance to approximately $1
billion of pro rata proceeds at an average yield on proceeds of 7%
from the previous $400 million of book value at an average yield of
10% on book value.
Net income attributable to common stockholders guidance has been
increased to a range of $2.62 to $2.72 per diluted share from the
previous range of $1.70 to $1.80 per diluted share primarily due to
the items noted above and estimated net gains/losses/impairments
offset by normalizing items.
Our guidance does not include any additional 2015 investments or
dispositions beyond what we have announced, nor any transaction
costs, capital transactions, impairments, unanticipated additions
to the loan loss reserve or other additional normalizing items.
Please see the exhibits for a reconciliation of the outlook for net
income available to common stockholders to normalized FFO and FAD.
We will provide additional detail regarding our 2015 outlook and
assumptions on the first quarter 2015 conference call.
First Quarter Investment
Activity We completed over $2.2 billion of
pro rata gross investments for the quarter including $1.6 billion
in acquisitions/JVs, $101 million in development funding and $484
million in loans. Approximately 81% of these investments were done
with existing relationships. The $1.6 billion acquisitions/JVs have
a blended yield of 6.4% and are consistent with our strategic focus
on high-quality properties. The $101 million in development funding
is expected to yield 7.8% upon completion and the $484 million of
loans were made at a blended rate of 8.4%. In addition to the new
investment activity during the quarter, we placed into service four
development property expansions totaling $36 million with a blended
yield of 8.0%.
Notable Investments with Existing Operating Partners
Benchmark Senior Living
Benchmark is the largest seniors housing operator in New
England, and is one of our Top 10 operating partners. We partnered
with Benchmark on two separate acquisitions last quarter with
a total of ten private pay seniors housing properties with 771
units. The aggregate purchase price based on a 100% ownership
interest was $391 million, which represents a projected year one
cap rate in the high 5’s. Nine of the properties are located
in the Boston MSA and the tenth property is located in Fairfield
County, CT. The median housing value in the local markets is
nearly two times the national median. HCN owns 95% of the joint
venture and Benchmark owns the remaining 5%
interest. Benchmark previously operated all ten properties on
behalf of institutional capital partners, and will manage the
properties going forward under an incentive-based management
contract. Our existing portfolio of 39 properties with
Benchmark is concentrated in the Boston MSA, so these properties
add to our significant presence in this desirable market. The
investments are consistent with our strategy of growing
alongside our partners through the acquisition of high
quality private pay properties in densely populated, affluent
markets. Since closing our initial $845.5 million RIDEA
investment in 2011, we've completed $501 million of follow-on pro
rata investments with Benchmark.
Revera We expanded our
partnership with Revera last quarter through the acquisition of 23
private pay seniors housing properties in Canada. Revera is
the second largest seniors housing operator in Canada, and is one
of our Top 10 operating partners. The portfolio includes
approximately 2,900 units, which are predominately independent
living. Revera previously owned a 100% interest in the properties.
The purchase price based on a 100% ownership interest was
CAD$634 million, which represents a projected year one cap rate in
the mid 6’s. HCN owns 75% of the joint venture. Revera owns the
remaining 25% and will operate the properties under an
incentive-based management contract. The properties are
concentrated in Canada's largest metro markets, as two-thirds of
the NOI in the portfolio comes from properties in Toronto,
Vancouver, and Ottawa. The acquisition adds to our sizable
existing footprint in these desirable metro markets. Revera is
required to fund the first CAD$23 million of capital expenditures
into the portfolio after closing. The investment is consistent with
our strategy of growing with our partners by acquiring high quality
private pay properties in densely populated, affluent
markets. Since closing our initial $1.0 billion RIDEA
investment in 2013, we've completed $443 million of follow-on pro
rata investments with Revera.
Belmont Village We partnered
with Belmont Village, one of our Top 10 operating partners, to
acquire two private pay seniors housing properties with 351 units.
The purchase price based on a 100% ownership interest was $200
million. We are precluded from disclosing the cap rate on this
investment due to a confidentiality agreement with the seller, but
we anticipate returns consistent with our other high-quality
seniors housing investments. The properties were built by Belmont
Village in 2013 and 2014 and are located in affluent infill
locations, including the Turtle Creek submarket of Dallas, and the
West Lake Hills submarket of Austin, TX. The median housing
value in the local markets is nearly two times higher than the
national median. HCN owns 95% of the joint venture. Belmont
Village owns the remaining 5% and will operate the
properties under an incentive-based management contract. The
investment is consistent with HCN’s strategy of growing
alongside its best in class operating partners through
the acquisition of high quality private pay properties in
densely populated, affluent markets. Since closing our initial
$176 million RIDEA investment in 2012, we've completed $897 million
of follow-on pro rata investments with Belmont Village.
Avery Healthcare We acquired
a total of ten seniors housing properties that will be leased
to Avery, a highly-regarded developer and operator of private
pay seniors housing properties in the U.K. and one of our Top 10
operating partners. The properties contain 863 units and are
concentrated in Birmingham, the U.K.'s third largest
market. The average age of the properties is less than 5
years. The £130 million investment was added to the existing Avery
master lease at an initial lease yield of 7.6%. Rent will increase
annually by 2.5% in the first two years and by 3.0% each year
thereafter. The acquired properties are projected to have 1.4x
payment coverage after management fee upon stabilization of the
newly constructed properties that are still in lease up. The
master lease is guaranteed by the Avery parent company. The
investments are consistent with our strategy of growing alongside
our partners through the acquisition of modern, high quality
properties in major metropolitan areas. Since closing our
initial $204 million sale/leaseback in 2013, we've completed $465
million of follow-on pro rata investments with Avery.
Genesis Healthcare We
provided Genesis with a $360 million loan to help facilitate the
merger between Genesis and Skilled Healthcare Group. Genesis is an
existing partner and one of our Top 10 operators. The loan is
secured by a first mortgage against 67 skilled nursing and seniors
housing facilities and represents a loan-to-value of approximately
75%. The properties are concentrated in California, Texas and
Kansas. The term is two years. The initial rate is 7.25% and
increases by 50 basis points beginning 150 days after closing and
by 100 basis points every 90 days thereafter. We also received a 1%
commitment fee and a 1.5% funding fee. The loan is cross-defaulted
with the HCN/Genesis master lease and is guaranteed by the Genesis
parent company. Genesis expects to pay off the loan in tranches
with proceeds from new HUD loans over the course of 2015 and 2016.
The HUD refinance will further improve Genesis’ fixed charge
coverage and ownership of real estate will further strengthen its
financial flexibility. The loan is consistent with our approach of
helping our operating partners achieve their strategic objectives
with investments that are mutually beneficial. Since closing
our initial $2.4 billion sale/leaseback in 2011, we've completed
$677 million of follow-on pro rata investments with Genesis.
Merrill Gardens
We acquired a 26-unit seniors housing property in a
joint venture with Merrill Gardens. The property is located in
the Seattle MSA and shares a campus with a highly occupied property
already owned by the joint venture. The purchase price based
on a 100% ownership interest was $8 million, which
represents a projected year one cap rate in the mid 7’s. We own 80%
of the joint venture and Merrill Gardens owns the
remainder. Merrill Gardens is a leading developer and operator
of high quality seniors housing properties primarily on the West
Coast, and is a long time operating partner of HCN. Merrill Gardens
developed the expansion and will operate the campus under a
long-term management contract. The investment is consistent
with our strategy of growing alongside our operating partners
through the acquisition of modern properties in affluent, high
barrier to entry markets. Our relationship with Merrill
Gardens began in 1999 and they currently manage 11 seniors housing
operating properties for the joint venture with a pro rata
investment amount of $369 million.
Continuum Healthcare We
acquired a newly constructed seniors housing property in Alberta,
Canada in a sale/leaseback transaction with Continuum, who
developed the property. The transaction was the 53rd and final
property in the previously disclosed HealthLease acquisition. The
purchase price was CAD$19 million, which represents an initial
lease yield of 7.5%. Rent will increase by 2.25% each year.
Continuum now operates eight properties for HCN, all of which were
acquired through the HealthLease REIT acquisition. The eight leases
are cross defaulted and secured by a CAD$5 million security deposit
and a parent company guarantee. The investment is consistent with
our strategy of acquiring modern, high quality real estate.
Texas Health Resources We
acquired an outpatient medical building on a THR hospital campus in
Flower Mound, TX for $10 million, which represents a projected year
one mid 6’s cap rate. The property, which was built in 2014, is
100% leased. The property is anchored by THR, one of the
leading health systems in Dallas. We own 12 outpatient medical
properties with more than 800,000 square feet in the Dallas
MSA that are anchored by THR, an Aa3 rated health system. The
investment is consistent with our strategy of acquiring modern,
heath system affiliated outpatient medical properties that are
located in attractive, growing markets.
Signature Senior Lifestyle We
extended our relationship with Signature Senior Lifestyle by
providing a £65 million loan that was used by Signature’s
management team to help buy out a private equity owner for £79
million. Signature develops and operates premium seniors
housing communities in Greater London. The loan is guaranteed
by Signature’s parent company and is fully secured by Signature’s
joint venture equity interests in properties co-owned and managed
by Signature. We have fixed price purchase options on several of
the properties, and Signature’s proceeds from any such purchases
will be used to repay the loan. Signature’s leasehold interests,
management fees, and development fees provide additional security
for the loan. The interest rate is 10% and the term
is eight years. We also received the exclusive right to
own Signature’s substantial pipeline of development projects in
Greater London. Our existing portfolio with Signature includes six
properties: three properties are leased to Signature under a master
lease and three properties secure construction loans from HCN for
which we have fixed price purchase options upon stabilization.
Signature has four projects scheduled to commence
construction during 2015, and more than fifteen others in
various stages of development. Since closing our initial $37
million sale/leaseback in 2012, we've completed $210 million of
follow-on pro rata investments with Signature.
Cascade Living Group We
acquired a 192-unit seniors housing community north of Seattle
in an acquisition/leaseback transaction with Cascade. The
purchase price was $35 million, and the property was added to the
existing master lease with Cascade at an initial lease yield of
6.0% with 4% annual escalators. The investment is consistent
with our strategy of growing with our partners in their core
markets, as Cascade operates eight private pay
communities in the Pacific Northwest, all of which are leased from
HCN. Since closing our initial $5 million sale/leaseback in 2006,
we've completed $193 million of follow-on pro rata investments with
Cascade.
Trilogy/Mainstreet We
extended our relationship with Mainstreet through the acquisition
of a 100-bed post-acute facility for $18 million. This is the third
property that we’ve acquired pursuant to the 17-facility pipeline
announced in August 2014. The property is leased to Trilogy
under a 10-year lease. The initial lease yield is 7.5% with
2.5% annual escalators. The property was developed and owned
by Mainstreet and is a NextGen® building prototype. Construction
was completed in early 2015. Our relationship with Trilogy began
fifteen years ago, and Trilogy currently leases 15 properties from
HCN. The investment is consistent with our strategy of partnering
with high quality development and operating partners to own modern,
high quality real estate.
Notable Investments with New Operating Partners
Aspen Healthcare We acquired
four private pay hospitals in Greater London for £226
million. The hospitals were leased back to Aspen, a
leading private pay hospital operator in the U.K., under a
25-year master lease at an initial lease yield of 6.32%. Rent
escalates each year based upon RPI (Retail Prices Index),
with a ceiling of 4.5% per year, and a floor of 1.5% in
year two, 2.25% in year three, and 2.5% each year thereafter. The
Aspen parent company guarantees the master lease. The hospitals
focus on outpatient care and elective day/short-stay surgeries. The
properties have an average effective age of four years, having
undergone significant renovation and expansion to accommodate
market demand. Stabilized payment coverage is projected to be over
2.0x before management fee. The hospitals are located in densely
populated, wealthy areas of Greater London. The median housing
value in the local markets is over two times higher than the
national median. The two facilities (a hospital and a cancer
center) in Wimbledon are located a few hundred yards from
the world famous All England Lawn Tennis and Croquet Club. The
hospitals benefit from strong demand from consumers who are willing
to pay privately for faster service, better accommodations, and
better outcomes. The investment provides a platform for
creating connectivity across the continuum of care given our
extensive footprint of seniors housing properties in Greater
London. The investment extends our strategy of owning private
pay properties operated by best-in-class providers in high barrier
to entry markets in the U.K. Subsequent to our acquisition,
and consistent with our expectations, Aspen signed a definitive
agreement to be acquired by Tenet Healthcare (NYSE:THC) for
approximately $215 million. Under the terms of the agreement, Tenet
will acquire Aspen, including the leasehold interests. The
transaction with Tenet is expected to close by the third quarter of
2015. Tenet is a long-time relationship of ours as they are the
anchor tenant on 19 of our outpatient medical properties with
more than 1 million square feet in the U.S. A presentation
describing the investment is available on our website.
Oakmont Senior Living We
acquired two newly constructed private pay seniors housing
properties with 145 units built by Oakmont and opened in 2014. The
purchase price was $80 million, which represents a projected year
one cap rate in the high 5’s. The properties are located in the
Sacramento and Riverside MSAs. The median housing value in the
local markets is more than two times higher than the national
median. Oakmont is a leading developer/operator of high end
seniors housing properties in California, and will operate the
properties under an incentive-based management contract. The
investment is consistent with our strategy of partnering with
leading developers/operators to own high quality seniors housing
properties in affluent, high barrier to entry markets.
Notable Development Conversions
Kelsey-Seybold We completed a
51,000 square foot expansion of an HCN-owned outpatient medical
building that is sponsored by Kelsey-Seybold and located in
Houston. Kelsey-Seybold is a leading multi-specialty physician
practice with more than 380 physicians and was one of the
country’s first accountable care organizations. The investment
amount was $17 million and the initial yield on the expansion is
7.5%. The entire 294,000 square foot building is 100% occupied. The
building is Kelsey-Seybold’s flagship location and acts as the hub
in their hub-and-spoke model. We own 11 outpatient medical
properties with over 1 million square feet that are anchored by
Kelsey-Seybold. Since closing our initial $35 million
acquisition in 2012, we've completed $220 million of follow-on pro
rata investments with Kelsey-Seybold.
Brandywine Senior Living We
completed construction of 28 new units, modernized a 14-unit wing,
removed six units from service and redesigned several amenity areas
in a highly occupied seniors housing facility leased to Brandywine
in Rehoboth Beach, DE. The investment amount was $8 million and the
initial lease yield on the expansion is 8.0%. Since closing our
initial $599 million sale/leaseback in 2010, we've completed $287
million of follow-on pro rata investments with Brandywine.
StoryPoint Senior Living We
completed a 44-unit memory care expansion to a highly occupied
seniors housing facility leased to StoryPoint Senior Living in Avon
Lake, OH. The investment amount was $6 million and the initial
lease yield on the expansion is 9.0%. Since closing our initial $87
million sale/leaseback in 2010, we've completed $58 million of
follow-on pro rata investments with StoryPoint.
New Perspective Senior Living
We completed a 36-unit expansion to a highly occupied seniors
housing facility leased to New Perspective in Superior, WI. The
investment amount was $6 million and the initial lease yield on the
expansion is 8.25%. Since closing our initial $17 million
sale/leaseback in 2009, we've completed $83 million of follow-on
pro rata investments with New Perspective.
Notable Dispositions
We sold nine long-term care facilities with 1,151 beds for $143
million and a yield on sale of 8.6%. We realized a gain on sale of
$52 million and an unlevered IRR of 12.4% during our 12-year
holding period. The facilities are located in Texas with a
concentration in Houston. In addition, we received $10.6 million in
loan payoff proceeds on an $8.5 million loan and a $2.1 million
early payoff fee. The disposition is consistent with our strategy
of minimizing our investments in Medicaid-oriented long-term care
facilities.
We sold our 78.5% interest in a 56,742 square foot outpatient
medical building in Stafford, VA for $11 million and a yield on
sale of 7.3%. We realized a gain on sale of $3 million and an
unlevered IRR of 9.7% during our 6 year holding
period. We did not expect future growth with the sponsoring
health system, making it a non-core asset.
First Quarter Capital
Activity At March 31, 2015, we had $202
million of cash and cash equivalents and $2.1 billion of available
borrowing capacity under our primary unsecured credit facility. In
February 2015, we completed a public offering of 19,550,000 common
shares at a price of $75.50 per share for total gross proceeds of
approximately $1.5 billion. This was the largest overnight common
stock offering and the highest offering price in our history. In
March 2015, Fitch Ratings raised our credit rating to BBB+ with a
stable outlook from BBB with a stable outlook. This upgrade created
immediate value for the company and its shareholders through its
positive impact on the pricing of our credit facility.
Conference Call Information
We have scheduled a conference call on Friday, May 8, 2015 at
10:00 a.m. Eastern Time to discuss our first quarter 2015 results,
industry trends, portfolio performance and outlook for 2015.
Telephone access will be available by dialing 888-346-2469 or
706-758-4923 (international). For those unable to listen to the
call live, a taped rebroadcast will be available beginning two
hours after completion of the call through May 22, 2015. To access
the rebroadcast, dial 855-859-2056 or 404-537-3406 (international).
The conference ID number is 29557802. To participate in the
webcast, log on to www.hcreit.com 15 minutes before the call to
download the necessary software. Replays will be available for 90
days.
Supplemental Reporting
Measures We believe 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, we consider funds from operations
(FFO) and funds available for distribution (FAD) to be useful
supplemental measures of our 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 attributable to common stockholders, computed in accordance
with U.S. GAAP, excluding gains (or losses) from sales of real
estate and impairments of depreciable assets, plus real estate
depreciation and amortization, and after adjustments for
unconsolidated entities and noncontrolling interests. Normalized
FFO represents FFO adjusted for certain items detailed in Exhibit
1. 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. Normalized FAD represents FAD excluding
prepaid/straight-line rent cash receipts and adjusted for certain
items detailed in Exhibit 1. We believe 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. Our supplemental
reporting measures and similarly entitled financial measures are
widely used by investors and equity analysts in the valuation,
comparison and investment recommendations of companies. Our
management uses these financial measures to facilitate internal and
external comparisons to historical operating results and in making
operating decisions. Additionally, they are utilized by the Board
of Directors to evaluate management. The supplemental reporting
measures do not 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 us, may not be comparable to similarly entitled items
reported by other real estate investment trusts or other companies.
Please see the exhibits for reconciliations of supplemental
reporting measures and the supplemental information package for the
quarter ended March 31, 2015, which is available on the company’s
website (www.hcreit.com), for information and reconciliations of
additional supplemental reporting measures.
About Health Care REIT, Inc.
HCN, an S&P 500 company with headquarters in Toledo,
Ohio, is a real estate investment trust that invests across the
full spectrum of seniors housing and health care real estate. We
also provide an extensive array of property management and
development services. As of March 31, 2015, our broadly diversified
portfolio consisted of 1,384 properties in 46 states, the United
Kingdom, and Canada. More information is available on the company’s
website at www.hcreit.com.
Forward-Looking Statements and Risk
Factors This document contains “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995. When the company uses words such as “may,” “will,”
“intend,” “should,” “believe,” “expect,” “anticipate,” “project,”
“estimate” or similar expressions that do not relate solely to
historical matters, it is making forward-looking statements. In
particular, these forward-looking statements include, but are not
limited to, those relating to the company’s opportunities to
acquire, develop or sell properties; the company’s ability to close
its anticipated acquisitions, investments or dispositions on
currently anticipated terms, or within currently anticipated
timeframes; the expected performance of the company’s
operators/tenants and properties; the company’s expected occupancy
rates; the company’s ability to declare and to make distributions
to shareholders; the company’s investment and financing
opportunities and plans; the company’s continued qualification as a
real estate investment trust (“REIT”); the company’s ability to
access capital markets or other sources of funds; and the company’s
ability to meet its earnings guidance. Forward-looking statements
are not guarantees of future performance and involve risks and
uncertainties that may cause the company’s actual results to differ
materially from the company’s expectations discussed in the
forward-looking statements. This may be a result of various
factors, including, but not limited to: the status of the economy;
the status of capital markets, including 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 properties with
profitable results; the failure to make new investments or
acquisitions as and when anticipated; natural disasters and other
acts of God affecting the company’s properties; the company’s
ability to re-lease space at similar rates as vacancies occur; 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; liability or
contract claims by or against operators/tenants; unanticipated
difficulties and/or expenditures relating to future investments or
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 foreign currency
exchange rates; the company’s ability to maintain its qualification
as a REIT; key management personnel recruitment and retention; and
other risks described in the company’s reports filed from time to
time with the Securities and Exchange Commission. Finally, the
company undertakes no obligation to update or revise publicly any
forward-looking statements, whether because of new information,
future events or otherwise, or to update the reasons why actual
results could differ from those projected in any forward-looking
statements.
HEALTH CARE REIT, INC.
Financial Exhibits
Consolidated Balance Sheets (unaudited) (in
thousands) March 31, 2015
2014
Assets Real estate investments: Land and land
improvements $ 2,160,886 $ 1,883,866 Buildings and improvements
23,192,154 20,769,414 Acquired lease intangibles 1,187,094
1,066,626 Real property held for sale, net of accumulated
depreciation 234,829 18,502 Construction in progress 211,941
144,516 26,986,904 23,882,924 Less accumulated
depreciation and intangible amortization (3,186,424 )
(2,617,026 ) Net real property owned 23,800,480 21,265,898 Real
estate loans receivable(1) 745,267 351,401
Net real estate investments 24,545,747 21,617,299 Other
assets: Investments in unconsolidated entities 715,468 668,171
Goodwill 68,321 68,321 Deferred loan expenses 63,378 68,842 Cash
and cash equivalents 202,273 185,928 Restricted cash 85,177 67,797
Straight-line rent receivable 307,050 215,759 Receivables and other
assets 641,981 318,925 2,083,648
1,593,743
Total assets $ 26,629,395
$ 23,211,042
Liabilities and equity
Liabilities: Borrowings under primary unsecured credit facility $
410,000 $ 562,000 Senior unsecured notes 7,518,196 7,377,789
Secured debt 3,010,971 2,917,314 Capital lease obligations 75,622
84,371 Accrued expenses and other liabilities 604,149
612,671 Total liabilities 11,618,938 11,554,145
Redeemable noncontrolling interests 92,508 34,171 Equity: Preferred
stock 1,006,250 1,006,250 Common stock 350,434 291,091 Capital in
excess of par value 16,218,794 12,494,410 Treasury stock (41,373 )
(26,454 ) Cumulative net income 3,049,173 2,396,244 Cumulative
dividends (5,924,844 ) (4,848,008 ) Accumulated other comprehensive
income (107,496 ) (25,419 ) Other equity 4,449
6,241 Total Health Care REIT, Inc. stockholders’ equity
14,555,387 11,294,355 Noncontrolling interests 362,562
328,371
Total equity 14,917,949
11,622,726
Total liabilities and equity
$ 26,629,395 $ 23,211,042 (1) Includes
non-accrual loan balances of $21,000,000 and $0 at March 31, 2015
and 2014, respectively.
Consolidated Statements of Income
(unaudited) (in thousands, except per share data)
Three Months Ended March 31, 2015 2014
Revenues: Rental income $ 379,587 $ 336,455 Resident fees and
service 492,510 456,265 Interest income 16,994 8,594 Other income
5,086 493 Gross revenues 894,177
801,807 Expenses: Interest expense 121,080 120,833 Property
operating expenses 376,461 341,431 Depreciation and amortization
188,829 233,318 General and administrative expenses 35,138 32,865
Transaction costs 48,554 952 Loss (gain) on derivatives, net
(58,427 ) - Loss (gain) on extinguishment of debt, net 15,401 (148
) Impairment of assets 2,220 - Total
expenses 729,256 729,251 Income (loss) from continuing
operations before income taxes and
income from unconsolidated entities 164,921 72,556 Income tax
(expense) benefit 304 (2,260 ) Income (loss) from unconsolidated
entities (12,648 ) (5,556 ) Income (loss) from
continuing operations 152,577 64,740 Discontinued operations, net -
460 Gain (loss) on real estate dispositions, net 56,845
- Net income (loss) 209,422 65,200 Less:
Preferred dividends 16,352 16,353 Net income (loss) attributable to
noncontrolling interests 2,271 (1,175 ) Net
income (loss) attributable to common stockholders $ 190,799
$ 50,022 Average number of common shares outstanding:
Basic 336,754 289,606 Diluted 337,812 290,917 Net income
(loss) attributable to common stockholders per share: Basic $ 0.57
$ 0.17 Diluted $ 0.56 $ 0.17 Common dividends per share $
0.825 $ 0.795
Normalizing
Items
Exhibit 1 (in thousands, except per share
data) Three Months Ended March 31, 2015
2014 Transaction costs $ 48,554 (1) $ 952 Loss (gain) on
derivatives, net (58,427)(2) - Loss (gain) on extinguishment of
debt, net 15,401 (3) (148) Other expenses 695 (4) - Additional
other income (2,144)(5) - Normalizing items attributable to
noncontrolling interests and unconsolidated entities, net
1,334 (6) 105 Total $ 5,413 $ 909 Average diluted
common shares outstanding 337,812 290,917 Net amount per diluted
share $ 0.02 $ - Notes:
(1)
Primarily costs incurred with seniors
housing transactions.
(2)
Represents gain on derivative prior to
Genesis Healthcare option exercise.
(3)
Primarily related to seniors housing
secured debt extinguishments and redemption of convertible senior
unsecured notes.
(4)
Due to accelerated vesting of stock-based
compensation for a retiring officer.
(5)
Early termination fee on loan payoff.
(6)
Primarily related to debt extinguishments
and transaction costs incurred with unconsolidated seniors housing
investments.
Funds Available
for Distribution Reconciliation
Exhibit 2 (in thousands, except per share
data) Three Months Ended
March 31, 2015 2014 Net income (loss) attributable to common
stockholders $ 190,799 $ 50,022 Depreciation and amortization
188,829 233,318 Losses/impairments (gains) on properties, net
(54,625 ) - Noncontrolling interests(1) (6,338 ) (9,522 )
Unconsolidated entities(2) 25,837 14,399 Gross straight-line rental
income (28,537 ) (16,589 ) Amortization related to above (below)
market leases, net 113 85 Non-cash interest expense 119 330 Cap-ex,
tenant improvements, lease commissions (10,485 )
(12,392 ) Funds available for distribution 305,712 259,651
Normalizing items, net(3) 5,413 909
Funds available for distribution - normalized $ 311,125 $ 260,560
Average diluted common shares outstanding 337,812 290,917
Per share data: Net income (loss) attributable to common
stockholders $ 0.56 $ 0.17 Funds available for distribution $ 0.90
$ 0.89 Funds available for distribution - normalized $ 0.92 $ 0.90
Normalized FAD Payout Ratio: Dividends per common share $
0.825 $ 0.795 FAD per diluted share - normalized $ 0.92 $
0.90 Normalized FAD payout ratio 90 % 88 % Notes:
(1)
Represents noncontrolling interests' share
of net FAD adjustments.
(2)
Represents HCN's share of net FAD
adjustments from unconsolidated entities.
(3)
See Exhibit 1.
Funds From
Operations Reconciliation
Exhibit 3 (in thousands, except per share
data) Three Months Ended
March 31, 2015 2014 Net income (loss)
attributable to common stockholders $ 190,799 $ 50,022 Depreciation
and amortization 188,829 233,318 Losses/impairments (gains) on
properties, net (54,625 ) 0 Noncontrolling interests(1) (7,249 )
(10,520 ) Unconsolidated entities(2) 26,496
15,983 Funds from operations - NAREIT 344,250 288,803
Normalizing items, net(3) 5,413 909
Funds from operations - normalized $ 349,663 $ 289,712
Average diluted common shares outstanding 337,812 290,917
Per share data: Net income (loss) attributable to common
stockholders $ 0.56 $ 0.17 Funds from operations - NAREIT $ 1.02 $
0.99 Funds from operations - normalized $ 1.04 $ 1.00
Normalized FFO Payout Ratio: Dividends per common share $ 0.825 $
0.795 FFO per diluted share - normalized $ 1.04 $ 1.00
Normalized FFO payout ratio 79 % 80 % Notes:
(1)
Represents noncontrolling interests' share
of net FFO adjustments.
(2)
Represents HCN's share of net FFO
adjustments from unconsolidated entities.
(3)
See Exhibit 1.
Outlook
Reconciliations: Year Ended December 31, 2015
Exhibit 4 (dollars per fully diluted share)
Prior Outlook Current Outlook Low High Low High
FFO
Reconciliation:
Net income attributable to common stockholders $ 1.70 $ 1.80 $ 2.62
$ 2.72 Losses/impairments (gains) on sales, net(1,2) - - (0.78 )
(0.78 ) Depreciation and amortization(1) 2.55
2.55 2.39 2.39 Funds from
operations - NAREIT $ 4.25 $ 4.35 $ 4.23 $ 4.33 Normalizing items,
net(3) - - 0.02
0.02 Funds from operations - normalized $ 4.25 $ 4.35 $ 4.25
$ 4.35
FAD
Reconciliation:
Net income attributable to common stockholders $ 1.70 $ 1.80 $ 2.62
$ 2.72 Losses/impairments (gains) on sales, net(1,2) - - (0.78 )
(0.78 ) Depreciation and amortization(1) 2.55 2.55 2.39 2.39
FAD-only adjustments(1,4) (0.42 ) (0.42 )
(0.42 ) (0.42 ) Funds available for distribution $ 3.83 $
3.93 $ 3.81 $ 3.91 Normalizing items, net(3) -
- 0.02 0.02 Funds available for
distribution - normalized $ 3.83 $ 3.93 $ 3.83 $ 3.93 Notes:
(1)
Amounts presented net of noncontrolling
interests' share and HCN's share of unconsolidated entities.
(2)
Includes estimated gains on expected
dispositions.
(3)
See Exhibit 1.
(4)
Includes straight-line rent, above/below
amortization, non-cash interest and cap-ex, tenant improvements and
lease commissions.
Health Care REIT, Inc.Scott Estes, 419-247-2800
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