HCP Announces Results for Quarter Ended June 30, 2013
HCP Announces Results for Quarter Ended June 30, 2013
- FFO per share increased 4% to $0.72; FAD per share increased 11% to $0.62; and EPS was $0.47
- Achieved year-over-year three-and six-month cash SPP NOI growth of 3.5% and 2.3%, respectively
- Completed $367 million of investment transactions:
- £109 million ($170 million) UK mezzanine debt investment, purchased at a discount
- $102 million funding under a mezzanine loan facility
- $95 million of acquisitions and capital investments
- Increased full year guidance for FFO to $2.96 - $3.02 per share, representing a growth rate of 8% based on the mid-point over 2012 FFO as adjusted per share; EPS guidance of $1.98 - $2.04
- Increased full year guidance for FAD to $2.46 - $2.52 per share, representing a growth rate of 12% based on the mid-point over 2012 FAD per share
- Expanded our leading life science tenant relationship with Roche/Genentech in South San Francisco by 63,000 sq. ft. to a total of 857,000 sq. ft.
- Earned two ENERGY STAR labels, bringing our total to 104 labels
- Appointed Brian G. Cartwright to the Company's Board of Directors
|Three Months Ended||Three Months Ended|
|June 30, 2013||June 30, 2012||Per Share|
|Amount||Per Share||Amount||Per Share||Change|
Operating results for the quarter ended June 30, 2013 include a $0.02 per share charge resulting from a $9 million adjustment to non-cash rents primarily in our hospital segment. Operating results for the quarter ended June 30, 2012 include the positive impact of $0.02 per share resulting from a $7 million insurance recovery of past G&A expenses.
FFO, FFO as adjusted and FAD are supplemental non-GAAP financial measures that we believe are useful in evaluating the operating performance of real estate investment trusts. See the "Funds From Operations" section of this release for additional information regarding FFO and FFO as adjusted and the "Funds Available for Distribution" section of this release for additional information regarding FAD.
During the quarter, we made investments of $367 million, which included the following:
- On May 2, 2013, we acquired £121 million of debt at a discount for £109 million ($170 million). This investment earns cash interest at LIBOR plus a weighted-average margin of 3.14% and is secured by an interest in 160 healthcare facilities leased and operated by Barchester Healthcare ("Barchester"). Founded in 1992, Barchester is the operator of over 200 care homes throughout the UK with over 10,000 residents and approximately 17,000 employees. We anticipate repayment of this debt investment at par on or before its scheduled maturity in September 2013.
- On June 25, 2013, we funded the $102 million second tranche of our 2012 mezzanine loan facility to Tandem Health Care, an affiliate of Formation Capital, as part of their recapitalization of a post-acute/skilled nursing portfolio. The funds from the second tranche were used to repay debt senior to our loan. The loan bears interest at a fixed rate of 12% and 14% per annum for the first and second tranche, respectively. Including fees received at closing, the loan has a blended yield-to-maturity of 13%. The facility will have a total term of up to 63 months from the initial closing in July 2012. The mezzanine loan facility is subordinate to $444 million of senior mortgage debt.
- Funded $95 million to acquire a senior housing facility, marketable debt securities, construction and other capital projects, primarily in our life science, medical office and senior housing segments.
Subsequent to quarter end, we executed a new five-year lease (expected to commence January 2014) for an entire 63,000 sq. ft. building that further expands our relationship with Roche/Genentech in South San Francisco, CA to a total of 857,000 sq. ft.
During the quarter, we (i) earned two ENERGY STAR awards in our medical office and life science segments; and (ii) received two LEED certifications: a LEED Commercial Interior certification in our life science segment and a LEED certification in our senior housing segment. As of June 30, 2013, we have been awarded 104 ENERGY STAR labels.
Additionally, we recently completed our major sustainability reporting for fiscal year 2012, which included the submission of our second annual Carbon Disclosure Project ("CDP") survey, our first annual Dow Jones Sustainability Index assessment and our second annual Global Real Estate Sustainability Benchmark ("GRESB") survey, which was combined with NAREIT's Leader in the Light Questionnaire. Further, we published our second annual sustainability report based on the Global Reporting Initiative ("GRI") framework.
More information about HCP's sustainability efforts can be found on our website at www.hcpi.com/sustainability.html.
BRIAN G. CARTWRIGHT APPOINTED TO BOARD OF DIRECTORS
On July 8, 2013, we announced the appointment of Brian G. Cartwright to the Company's Board of Directors. Mr. Cartwright is a Scholar in Residence at the Marshall School of Business at the University of Southern California. From 2006 through 2009 he served as General Counsel of the United States Securities and Exchange Commission and from 2009 through 2011 he was a Senior Advisor to Latham & Watkins LLC.
On July 25, 2013, our Board of Directors declared a quarterly cash dividend of $0.525 per common share. The dividend will be paid on August 20, 2013 to stockholders of record as of the close of business on August 5, 2013.
We are raising our guidance for full year 2013; we expect: FFO applicable to common shares to range between $2.96 and $3.02 per share, which estimate at the mid-point represents an increase of 8% over the 2012 FFO as adjusted per share amount; FAD applicable to common shares to range between $2.46 and $2.52 per share, which estimate at the mid-point represents an increase of 12% over the 2012 comparable amount; and net income applicable to common shares to range between $1.98 and $2.04 per share. These estimates assume the par payoff of our Barchester debt investment in September 2013, resulting in a favorable impact of $0.03 per share, net of transaction costs. These estimates do not reflect the potential impact of future acquisitions or dispositions. See the "Projected Future Operations" section of this release for additional information regarding these estimates.
HCP has scheduled a conference call and webcast for Tuesday, July 30, 2013 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) in order to present the Company's performance and operating results for the quarter ended June 30, 2013. The conference call is accessible by dialing (877) 724-7556 (U.S.) or (706) 645-4695 (International). The participant passcode is 93305407. The webcast is accessible via the Company's website at www.hcpi.com. This link can be found on the "Event Calendar" page, which is under the "Investor Relations" tab. Through August 14, 2013, an archive of the webcast will be available on our website and a telephonic replay can be accessed by calling (855) 859-2056 (U.S.) or (404) 537-3406 (International) and entering passcode 93305407. The Company's supplemental information package for the current period will also be available on the Company's website in the "Presentations" section of the "Investor Relations" tab.
HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests primarily in real estate serving the healthcare industry in the United States. The Company's portfolio of assets is diversified among five distinct sectors: senior housing, post-acute/skilled nursing, life science, medical office and hospital. A publicly traded company since 1985, HCP: (i) was the first healthcare REIT selected to the S&P 500 index; (ii) has increased its dividend per share for 28 consecutive years; and (iii) is the only REIT included in the S&P 500 Dividend Aristocrats index. For more information regarding HCP, visit the Company's website at www.hcpi.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, the Company's expectations with respect to (i) net income applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis and FAD applicable to common shares on a diluted basis for the full year of 2013; (ii) the repayment of its debt investments; and (iii) the payment of the regular quarterly dividend. These statements are made as of the date hereof, are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of the Company and its management's control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include but are not limited to: changes in global, national and local economic conditions, including a prolonged period of weak economic growth; volatility in the capital markets, including changes in interest rates and the availability and cost of capital; the Company's ability to manage its indebtedness level and changes in the terms of such indebtedness; the effect on healthcare providers of the automatic spending cuts enacted by Congress ("Sequestration") on entitlement programs, including Medicare, which will, unless modified, result in future reductions in reimbursements; the ability of operators, tenants and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to the Company and the Company's ability to recover investments made, if applicable, in their operations; the financial weakness of some operators and tenants, including potential bankruptcies and downturns in their businesses, which results in uncertainties regarding the Company's ability to continue to realize the full benefit of such operators' and/or tenants' leases; changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect the Company's costs of compliance or increase the costs, or otherwise affect the operations of operators, tenants and borrowers; the potential impact of future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments; competition for tenants and borrowers, including with respect to new leases and mortgages and the renewal or rollover of existing leases; the Company's ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or the Company exercises its right to replace an existing operator or tenant upon default; availability of suitable properties to acquire at favorable prices and the competition for the acquisition and financing of those properties; the financial, legal, regulatory and reputational difficulties of significant operators of the Company's properties; the risk that the Company may not be able to achieve the benefits of investments within expected time-frames or at all, or within expected cost projections; the ability to obtain financing necessary to consummate acquisitions on favorable terms; risks associated with the Company's investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners' financial condition and continued cooperation; changes in the credit ratings on U.S. government debt securities or default or delay in payment by the United States of its obligations; and other risks described from time to time in the Company's Securities and Exchange Commission filings. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.
Consolidated Balance Sheets
In thousands, except share and per share data
|June 30,||December 31,|
|Buildings and improvements||$||10,692,628||$||10,522,399|
|Development costs and construction in progress||221,907||236,864|
|Accumulated depreciation and amortization||(1,905,879||)||(1,731,742||)|
|Net real estate||10,861,424||10,875,449|
|Net investment in direct financing leases||6,958,129||6,881,393|
|Loans receivable, net||555,791||276,030|
|Investments in and advances to unconsolidated joint ventures||208,878||212,213|
|Accounts receivable, net of allowance of $2,058 and $1,668, respectively||33,270||34,150|
|Cash and cash equivalents||53,114||247,673|
|Intangible assets, net||518,982||552,701|
|Real estate held for sale, net||6,936||9,578|
|Other assets, net||810,316||788,520|
|Liabilities and equity|
|Bank line of credit||$||261,582||$||—|
|Senior unsecured notes||6,564,842||6,712,624|
|Intangible liabilities, net||108,864||105,909|
|Accounts payable and accrued liabilities||313,627||293,994|
|Common stock, $1.00 par value: 750,000,000 shares authorized; 455,094,411 and 453,191,321 shares issued and outstanding, respectively||455,094||453,191|
|Additional paid-in capital||11,254,658||11,180,066|
|Cumulative dividends in excess of earnings||(1,100,834||)||(1,067,367||)|
|Accumulated other comprehensive loss||(12,360||)||(14,653||)|
|Total stockholders' equity||10,596,558||10,551,237|
|Joint venture partners||16,910||14,752|
|Non-managing member unitholders||184,791||187,788|
|Total noncontrolling interests||201,701||202,540|
|Total liabilities and equity||$||20,051,793||$||19,915,555|
Consolidated Statements of Income
In thousands, except per share data
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Rental and related revenues||$||280,616||$||244,603||$||565,251||$||484,859|
|Resident fees and services||37,590||35,569||74,481||71,748|
|Income from direct financing leases||158,286||154,976||315,156||309,511|
|Investment management fee income||499||470||942||963|
|Costs and expenses:|
|Depreciation and amortization||110,686||84,873||215,314||170,062|
|General and administrative||24,073||14,801||44,744||34,884|
|Total costs and expenses||318,289||272,104||626,483||548,399|
|Other income, net||3,240||1,028||15,303||1,462|
|Income before income taxes and equity income from unconsolidated joint ventures||201,235||189,339||420,532||368,410|
|Equity income from unconsolidated joint ventures||15,585||15,732||30,386||29,407|
|Income from continuing operations||215,166||204,900||448,388||398,358|
|Income before gain on sales of real estate||672||75||1,234||325|