Health Care REIT Inc.
), a real estate investment trust (REIT), which operates senior
housing and health care real estate, reported second-quarter 2013
normalized FFO (funds from operations) of 93 cents per share, a
cent ahead of the Zacks Consensus Estimate and up 4 cents year
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The improved results were primarily attributable to
better-than-expected revenue growth. Alongside, the company
registered decent same-store NOI.
Funds available for distribution (FAD) in the reported quarter
stood at 82 cents per share compared with 79 cents per share in
the year-ago period.
Behind the Headlines
Total revenue reached $682.1 million, escalating 55.5% year over
year. The figure also exceeded the Zacks Consensus Estimate of
$655 million. Total same-store cash NOI (net operating income)
increased 3.8% from the year-ago period. This included an 8.4%
rise in the seniors housing operating portfolio. The company
increased its private pay mix to 82% in the reported quarter from
74% in the year-ago quarter.
On Jul 1, 2013, Health Care REIT accomplished the buyout of the
last phase of the Sunrise Senior Living property portfolio worth
$745.2 million. In total, $4.3 billion of investment was made
that brought on board 120 wholly-owned properties and five
properties owned in joint ventures with third parties.
The properties are located in markets with high concentrations of
age and income-qualified elderly including such as London,
Southern California, Chicago, Philadelphia, Boston, Washington
D.C. and Montreal. In the second half of 2013, unlevered NOI
yield from this portfolio is projected to exceed 6.5%, according
to the company.
During the quarter under review, Health Care REIT accomplished
gross new investments of $1.5 billion. It broadened its
international portfolio by entering into a $1.3 billion
partnership with Revera Inc. to own 47 high-quality seniors
housing and care communities with around 5,000 units that are
positioned in key metropolitan markets in Canada.
Following the deal closure, Health Care REIT now has a 75%
interest in the portfolio while the rest of the interest is owned
by Revera. The portfolio is projected to generate an initial
unlevered NOI yield of 7%.
Subsequent to the quarter end, the company also made a $213
million investment in the U.K. with Avery Healthcare. The
portfolio comprises 14 seniors housing communities with 940 beds
in the U.K.
On the other hand, Health Care REIT reaped proceeds of $366
million on dispositions in the first half of 2013. This led to
$52 million in gains.
Health Care REIT exited the quarter with cash and cash
equivalents of $512.5 million, compared with $204.9 million as of
the prior-year quarter end. The company generated $1.7 billion of
proceeds in May through the issuance of 23 million shares of
For full-year 2013, Health Care REIT reaffirmed its guidance and
expects normalized FFO in the range of $3.70-$3.80 per share.
Also, it expects normalized FAD to range from $3.25- $3.35 per
share. Both the projected ranges represent an increase of 5%-8%
over the 2012 reported figures.
Health Care REIT declared a cash dividend of 76.5 cents per share
for second-quarter 2013, marking a rise of 3.4% over the year-ago
dividend of 74 cents. It will be paid on Aug 20, 2013, to
stockholders of record on Aug 6, 2013. This marks the company's
169th consecutive quarterly dividend payment.
We are encouraged with the decent results at Health Care REIT.
The company boasts a strong portfolio of senior housing,
long-term care and medical office facilities. Moreover, the
completion of the Sunrise Senior Living facility acquisition, the
Revera deal in Canada and the Avery Healthcare investments in the
U.K. are expected to further enhance the company's high-quality
senior housing portfolio and extend its reach in the
high-barriers-to-entry affluent markets.
However, intense competition in the healthcare industry and the
company's acquisition spree is expected to raise the upfront
Another healthcare REIT,
) second-quarter 2013 normalized FFO per share of $1.01 missed
the Zacks Consensus Estimate by a penny but rose 6.3% year over
year. While a rise in share count, higher debt levels and an
increase in net cash balances acted as dampeners for the quarter,
Ventas' results benefited from strategic investments made in
Healthcare Realty Trust Inc.
) reported second-quarter 2013 normalized FFO per share of 32
cents, beating the Zacks Consensus Estimate by 2 cents.
Health Care REIT currently carries a Zacks Rank #3 (Hold).
Another well-performing REIT is
Extra Space Storage Inc.
) that has 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