Health Care REIT Inc.
), a real estate investment trust (REIT) that operates senior
housing and health care real estate, reported first quarter 2012
FFO (funds from operations) of 81 cents per share, compared to 46
cents in the year-earlier quarter. Funds from operations, a widely
used metric to gauge the performance of REITs, is obtained after
adding depreciation and amortization and other non-cash expenses to
Excluding one-time items, recurring FFO for the reported quarter
was 87 cents per share, compared to 70 cents in the year-ago
quarter. The recurring quarterly FFO was in line with the Zacks
Total revenues during the reported quarter were $435.4 million
compared to $245.8 million in the year-earlier quarter. Total
revenues for the reported quarter were well ahead of the Zacks
Consensus Estimate of $420 million. Total same-store cash NOI (net
operating income) increased 4.2% during the quarter compared to the
year-ago period, including 10.3% growth in the senior housing
During the reported quarter, Health Care REIT made gross new
investments of $753 million, bringing the year-to-date tally to
$1.3 billion. These included $654 million worth of acquisitions in
the reported quarter. The company also received $33 million in
proceeds from asset sale and loan payoffs, resulting in $0.8
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 the shareholders with steadily rising
During the quarter, the company made about $426 million worth of
investments in medical office buildings (MOBs) at a blended yield
of 6.7%. These include the purchase of 12 MOBs (average occupancy
of 94%) spanning 1 million rentable square feet in aggregate and 1
development conversion (98% leased).
At the same time, the company completed $119 million worth of
investments in senior housing triple-net leases at a blended yield
of 7.6%. These included the acquisition of 3 facilities operated by
Senior Lifestyle - the 10th largest seniors housing provider in the
U.S., and 1 development conversion.
In addition, during the reported quarter, Health Care REIT
completed the acquisition of 6 communities for $210 million at a
blended yield of 6.8%. The acquisition was made in partnership with
Belmont Village - the second such transaction recorded with it.
The acquired properties comprise 756 units (100% private pay)
located in diverse locations such as California (1 in San Diego),
Georgia (2 in Atlanta), Tennessee (1 in Memphis; 1 in Nashville)
and Texas (1 in Houston). The properties are spread across
attractive metropolitan markets in tune with the investment
strategy of the company, and are expected to support an annual NOI
growth of 4% to 5%.
During the reported quarter, Health Care REIT issued 20.7
million shares, raising approximately $1.1 billion capital from the
equity offering. The company reduced debt to undepreciated book
capitalization to 41% at quarter-end from 46% at year-end 2011. At
quarter-end, the company had cash and cash equivalents of $469.2
Health Care REIT increased its quarterly dividend from 71.5
cents per share to 74 cents in the reported quarter, which marked
the 164th consecutive quarterly dividend payment. The latest
dividend payout by Health Care REIT reinforces industry
expectations of seeing the healthcare sector paying steadily rising
dividends driven by solid growth dynamics.
Health Care REIT updated its recurring FFO guidance for fiscal
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
fiscal 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 #3
), one of the competitors of Health Care REIT.
HEALTH CR REIT (HCN): Free Stock Analysis
HCP INC (HCP): Free Stock Analysis Report
To read this article on Zacks.com click here.