Health Care REIT Inc.
), a real estate investment trust (REIT), which operates senior
housing and health care real estate, reported third-quarter 2013
normalized funds from operations (FFO) of 97 cents per
share, a cent ahead of the Zacks Consensus Estimate and up 6
cents year over year.
The improved results were primarily attributable to robust
revenue growth. Alongside, the company registered decent
Normalized Funds available for distribution (FAD) in the
reported quarter stood at 86 cents per share, up from 82 cents
per share in the year-ago period.
Behind the Headlines
Total revenue reached $786.9 million, escalating 70.4% year
over year. The figure also substantially exceeded the Zacks
Consensus Estimate of $728 million. Total same-store (cash NOI
(net operating income) increased 3.7% from the year-ago period.
This included a 9.4% rise in the seniors housing operating
Notable Quarterly Activities
During the quarter, Health Care REIT accomplished the
sale/leaseback transaction with Avery Healthcare for $212 million
(£140 million) in the UK. The portfolio comprises 14 seniors
housing communities with 940 beds.
Also, the company closed the triple net lease deal with
Emeritus Senior Living
) for a portfolio of 38 senior housing communities. Notably, the
properties were previously owned by Health Care REIT in an
80%/20% joint venture with Merrill Gardens. As per the deal,
Health Care REIT acquired Merrill Gardens' 20% interest in the JV
for $173 million, which includes pro rata mortgage debt of $74
In addition, Health Care REIT sealed the buyout of $95 million
worth of hospital acquisitions (at a blended yield of 9.5%) and
medical office building worth $50 million (at a blended yield of
6.9%). Moreover, the company finished the development of 2
seniors housing triple-net assets for $38 million (at a blended
initial yield of 8.1%) and 1 medical office building for $9
million (at an initial yield of 8.3%).
Year-to-date, as of Nov 5, Health Care REIT has garnered $412
million from asset divestitures and $66 million from loan
During the quarter, Health Care REIT accomplished the buyout
of the last phase of the Sunrise Senior Living property portfolio
worth $745 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 concentration
of age and income-qualified elderly including 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
Health Care REIT exited the third quarter with cash and cash
equivalents of $164.8 million, compared with $1.38 billion as of
the prior-year quarter end.
During the quarter, Health Care REIT generated $62 million of
proceeds through the issuance of over 1 million shares under the
dividend reinvestment program.
For full-year 2013, Health Care REIT revised its guidance and
now expects normalized FFO in the range of $3.74-$3.80 per share
(prior guidance being $3.70-$3.80). Also, it expects normalized
FAD to range from $3.29-$3.35 per share (prior guidance being
$3.25-$3.35). Both the projected ranges represent an increase of
6%-8% over the 2012 reported figures.
On Oct 31, 2013, Health Care REIT declared a quarterly cash
dividend of 76.5 cents per share, marking a rise of 3.4% over the
year-ago dividend of 74 cents. It will be paid on Nov 20, 2013,
to stockholders of record on Nov 12, 2013. This marks the
consecutive quarterly dividend payment.
We are encouraged with the strong 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 and
the Avery Healthcare investments 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,
) reported third-quarter 2013 adjusted FFO per share of 79 cents,
2 cents ahead of the Zacks Consensus Estimate and 10 cents above
the prior-year quarter figure. This was aided by substantial
growth in revenues.
) reported third-quarter 2013 normalized FFO per share of $1.04,
which exceeded the Zacks Consensus Estimate by nearly 2% and the
year-ago quarter figure by 8.3%. Results were driven by strategic
investments made this year and last year.
Health Care REIT currently carries a Zacks Rank #3 (Hold).
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
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