Health Care REIT Inc.
), a real estate investment trust (REIT), reported second-quarter
2014 normalized funds from operations (FFO) of $1.06 per share, a
nickel ahead of the Zacks Consensus Estimate and up 13 cents year
The 14% year-over-year increase in normalized FFO per share is
primarily driven by same-store net operating income (NOI) growth
and notable portfolio investments in premium assets. Based on these
factors, the company has also increased its 2014 outlook.
Moreover, normalized funds available for distribution (FAD) stood
at 94 cents per share, up from 82 cents per share in the year-ago
Total revenue escalated 21.8% year over year to $826.4 million and
exceeded the Zacks Consensus Estimate of $818 million.
Inside the Headlines
In the second quarter, same-store NOI increased 4.4% from the
year-ago period, driven by 7.7% year-over-year rise in the seniors
housing operating portfolio.
Health Care REIT concluded gross investments worth $579 million in
the quarter under review. This comprised of, $455 million in
acquisitions, $44 million in development funding, $76 million in
loan advances as well as $4 million in capital improvements.
Notably, the second quarter acquisitions comprised of ten medical
office buildings, a post-acute asset operated by Genesis, a seniors
housing operating property managed by Revera as well as eight
seniors housing triple-net properties operated by existing
Health Care REIT exited the second quarter with cash and cash
equivalents of $207.4 million, down from $512.5 million as of Jun
30, 2013. Moreover, recently, the company closed on a new $3.23
billion unsecured credit facility. With this expanded, extended and
lower-priced facility the company could enhance its financial
flexibility and capital access.
2014 Outlook Raised
Health Care REIT increased its full year 2014 normalized FFO per
share guidance range to $4.05-$4.15 from $4.03-$4.13 guided
earlier, denoting a 6%-9% increase from 2013. The Zacks Consensus
Estimate of $4.07 also lies within the newly guided range. The
uptick in outlook is prompted by solid second-quarter operating
results and investment activity, partly dwarfed by a rise in
dispositions guidance to $450 million from $250 million.
Also, the company raised its normalized FAD per share outlook range
to $3.57-$3.67 from the previous range of $3.55-$3.65.
Health Care REIT's board of directors, declared a quarterly cash
dividend of 79.5 cents per share, marking a rise of 4% over the
year-ago dividend of 76.5 cents. This marked the company's 173rd
consecutive quarterly dividend payment. It will be paid on Aug 20,
2014, to stockholders of record as on Aug 11.
Health Care REIT's better-than-expected result, on the back of
notable operating portfolio performance, is encouraging. Going
forward, we believe that the strategic portfolio restructuring
activities and enhanced financial flexibility bodes well for its
growth. In addition, rise in senior citizen spending for healthcare
reasons promises strong prospects in the future. Also, the guidance
increase boosts shareholder confidence. However, an anticipated
rise in interest rate and intense competition remain pressing
Health Care REIT currently carries a Zacks Rank #3 (Hold). We now
look forward to the following stocks like HCP Inc. (
), Ventas Inc. (
) and Vornado Realty Trust (
), which are scheduled to release in the next fortnight. All of
these stocks carry a Zacks Rank #2 (Buy).
1. FFO, a widely accepted and reported measure of the
performance of REITs, is derived by adding depreciation,
amortization and other non-cash expenses to net income.
2. FAD, a measure to ascertain the ability of REITs to generate
cash, is derived by subtracting straight-line rent and
non-recurring real estate expenses from funds from operations.
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