Health Care REIT Inc. (
, which operates senior housing and health care real estate,
reported fourth quarter 2012 normalized FFO (funds from
operations) of 85 cents per share, in line with the Zacks
Consensus Estimate. However, this was lower than the year-ago FFO
of 91 cents. The decrease in year-over-year FFO per share was
primarily attributable to increased number of outstanding shares
in the reported quarter.
For full year 2012, the company's normalized FFO came in at $3.52
per share, exceeding the Zacks Consensus Estimate by 3 cents and
was significantly ahead of the year-ago figure of $3.41 per
Funds available for distribution (FAD) in the reported quarter
stood at $192.4 million or 74 cents per share compared with
$149.0 million or 80 cents per share in the year-ago period. For
2012, FAD was recorded at $703.3 million or $3.11 per share
compared with $524.0 million or $3.00 per share in 2011.
Behind the Headlines
Total revenue reached $500.7 million, escalating 30.2% year over
year. The figure also exceeded the Zacks Consensus Estimate of
$489 million. Total revenue for full-year 2012, came in at $1.82
billion, surging 37% from a year ago and was marginally ahead of
the Zacks Consensus Estimate of $1.81 billion.
Total same-store cash NOI (net operating income) increased 4%
from the year-ago period. This included an 8.6% rise in the
senior housing operating portfolio.
Sunrise Senior Living Acquisition Update
Health Care REIT has now completed the acquisition of the Sunrise
property portfolio, the divesture of the Sunrise management
company and the acceleration of all planned joint ventures (JV).
Prior to the culmination of Sunrise property portfolio
acquisition, the affiliates of investment firms
Kohlberg Kravis Roberts & Co. (
and Beecken Petty O'Keefe & Company acquired the divested
management company business for $130 million. Notably, Health
Care REIT invested about $26 million for a 20% ownership stake in
Health Care REIT's current investment in Sunrise properties is
$3.5 billion and it expects the investment to increase to $4.3
billion by Jul 2013, subject to exercising of its rights to
acquire additional JV partner interests at favorable fixed
purchase prices. It expects to make $4.3 billion worth investment
in 120 wholly-owned properties and 5 JV properties. The
properties are located in high-barriers-to-entry markets such as
London, Southern California, Chicago, Philadelphia, Boston,
Washington D.C. and Montreal. Health Care REIT anticipates the
acquisition to generate an unlevered initial yield of 6.5% or
6.1% after capital expenditures.
During the quarter under review, Health Care REIT made gross new
investments of $2.0 billion. For 2012, it completed gross new
investments of $4.9 billion.
During the quarter, the company made $1.6 billion worth of
investments in senior housing operating portfolio, including $1.1
billion worth of acquisitions at a blended yield of 6.5% and $581
million of loans. The acquisitions comprise purchase of 11
properties with Belmont Village for $530 million, 11 properties
Brookdale Senior Living Inc. (
for $271 million and five properties from Sunrise Senior Living
for $265 million.
Also, Health Care REIT concluded investments worth $115 million
in seniors housing triple-net lease portfolio at a blended yield
of 8.0%. The investments included the acquisitions of 2
properties worth $52 million, at a blended yield of 7.3%. As
well, the company finished 5 development projects worth $63
million at a blended yield of 8.5% during the fourth quarter.
Additionally, Health Care REIT made about $267 million
investments in medical office buildings (MOBs) at a blended yield
of 7.3%. These include the purchase of 11 MOBs (average occupancy
of 96%) spanning 718,000 rentable square feet in aggregate and 2
development completion (312,000 rentable square feet, 94%
At the end of the year, Health Care REIT had cash and cash
equivalents of $1.03 billion.
Health Care REIT paid a quarterly dividend of 76.5 cents to its
shareholders on Feb 20. This marked the 167th consecutive
quarterly dividend payment. Notably, the fourth quarter 2012
dividend marked a 3.4% increase over the year-ago dividend of 74
For full year 2013, Health Care REIT expects normalized FFO in a
range of $3.70-$3.80 per share. Also, it expects normalized
FAD in a range of $3.25- $3.35 per share. Both the guidance
represented an increase of 5%-8% over the 2012 reported figures.
We are encouraged with the decent results at Health Care REIT.
Being one of the largest and oldest healthcare REITs in the U.S,
the company boasts a strong portfolio of senior housing,
long-term care and medical office facilities. Moreover, the
completion of Sunrise Senior Living facility acquisition further
boosted the company's high-quality senior housing portfolio and
extended its reach in the high-barriers-to-entry affluent
Also, the healthcare sector is relatively immune to the downturn
in the economy and provides a steady source of income that
insulates the company from short-term market volatility. Thus, we
expect Health Care REIT to maintain its growth curves through
strategic investments and simultaneously benefit the shareholders
by raising dividends.
Health Care REIT currently holds a Zacks Rank #3 (Hold). One of
the better performing REITs is
Ventas Inc. (
, which carries a Zacks Rank #2 (Buy).
Note: 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
BROOKDALE SENR (BKD): Free Stock Analysis
HEALTH CR REIT (HCN): Free Stock Analysis
KKR & CO LP (KKR): Free Stock Analysis
VENTAS INC (VTR): Free Stock Analysis Report
To read this article on Zacks.com click here.