Health Care REIT Inc.
), a real estate investment trust (REIT) that operates senior
housing and health care real estate, reported second quarter 2012
FFO (funds from operations) of 73 cents per share, compared to 84
cents in the year-earlier quarter. The decrease in year-over-year
FFO per share was primarily attributable to increased number of
outstanding shares in the reported quarter.
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Excluding one-time items, recurring FFO for the reported quarter
was 89 cents per share, compared to 90 cents in the year-ago
quarter. The recurring quarterly FFO beat the Zacks Consensus
Estimate by 2 cents.
Total revenues during the reported quarter were $453.1 million
compared to $369.6 million in the year-earlier quarter. Total
revenues for the reported quarter were well ahead of the Zacks
Consensus Estimate of $440 million.
Total same-store cash NOI (net operating income) increased 4.2%
during the quarter compared to the year-ago period, including 7.4%
growth in the senior housing operating portfolio.
During the reported quarter, Health Care REIT made gross new
investments of $1.1 billion, bringing the year-to-date tally to
$1.9 billion. These included $602 million worth of investments from
existing relationships with healthcare operators in the reported
quarter. The company also received $125 million in proceeds from
asset sales and loan payoffs, resulting in $32 million in profit
for the quarter.
Health Care REIT has continually invested in assisted and
independent living facilities, as demand for these facilities is
set to increase with an aging Baby Boomer generation. In addition,
the healthcare industry is the single largest industry in the U.S.,
based on Gross Domestic Product (GDP). Consequently, healthcare
REITs are well poised to maintain their growth curves and
simultaneously benefit shareholders with steadily rising dividends.
During the quarter, the company made about $212 million worth of
investments in medical office buildings (MOBs) at a blended yield
of 7.3%. These include the purchase of seven MOBs (average
occupancy of 97.3%) spanning 739,000 rentable square feet in
aggregate and one development conversion (71,000 rentable square
feet, 100% leased).
At the same time, the company completed $400 million worth of
investments in senior housing triple-net leases at a blended yield
of 7.9%. These included the acquisition of 14 (100% private pay)
seniors housing facilities for $234 million at a blended yield of
7.3%, and seven skilled nursing/post-acute facilities with Genesis
Healthcare for $96 million at a blended yield of 8.9%.
In addition, during the reported quarter, Health Care REIT
completed the acquisition of 42 seniors housing and care
communities in high-growth Canadian markets in association with
Chartwell Seniors Housing REIT. Out of these, 39 are equally owned
by both the parties, while Health Care REIT will wholly own the
remaining three properties. However, Chartwell will manage the
portfolio under an incentive-based management contract.
During the reported quarter, Health Care REIT issued $600 million
worth of 4.125% 7-year senior unsecured notes to increase its
liquidity. In addition, the company obtained a $250 million
Canadian denominated unsecured term loan (approximately $249
million USD) to further increase its cash reserves. At quarter-end,
the company had cash and cash equivalents of $204.9 million.
Health Care REIT maintained its quarterly dividend of 74 cents in
the reported quarter, which marked the 165th consecutive quarterly
dividend payment. The second quarter 2012 dividend marked a 3.5%
year-over-year increase over the year-ago period.
Health Care REIT updated its recurring FFO guidance for 2012 to
better reflect the effect of an increase in the non-core asset sale
target of $300 million from the previous target of $200 million.
The company has revised its recurring FFO guidance for 2012 from
the earlier range of $3.53 - $3.63 to $3.50 - $3.60 per share.
We maintain our Neutral recommendation on Health Care REIT, which
presently has a Zacks #3 Rank translating into a short-term Hold
rating. We also have a Neutral recommendation and a Zacks #2 Rank
(short-term Buy rating) for
), one of the competitors of Health Care REIT.
Note: FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.