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Increases 2008 Dividend 3% to $2.72TOLEDO, Ohio, Feb 26, 2008 (BUSINESS WIRE) -- Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its fourth quarter and year ended December 31, 2007.
"During 2007, Health Care REIT successfully leveraged its platform and infrastructure to generate a 9% total return for our stockholders in a year where the Morgan Stanley REIT index total return declined nearly 17%," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "The benefits of our improved platform were demonstrated through $1.2 billion of gross investments, an increase in our line of credit to $1.15 billion, ratings upgrades from Moody's and Fitch, and the company's inclusion in the S&P Midcap 400. We look forward to 2008 as we continue to apply our disciplined relationship financing approach across the broad spectrum of health care real estate."
2007 Highlights.
-- Generated 2007 total stockholder return of 9%
-- Completed net new investments totaling $1.1 billion
-- Reported 2007 normalized FFO growth of 6% per share
-- Received debt upgrade to Baa2 from Moody's Investors Service
-- Received debt upgrade to BBB from Fitch Ratings
-- Raised $894 million of capital through three transactions and DRIP
-- Expanded and extended unsecured lines of credit to $1.15 billion
-- Added to Standard & Poor's MidCap 400 Index
Key Performance Indicators.
4Q07 4Q06 Change 2007 2006 Change
----------------------------------------------------------------------
Net income available to
common stockholders
(NICS) per diluted share $0.52 $0.27 93% $1.46 $1.31 11%
----------------------------------------------------------------------
Normalized FFO per diluted
share $0.80 $0.77 4% $3.12 $2.95 6%
----------------------------------------------------------------------
Normalized FAD per diluted
share $0.75 $0.74 1% $2.92 $2.85 2%
----------------------------------------------------------------------
Dividends per common share
(1) $0.66 $0.64 3% $2.62 $2.54 3%
----------------------------------------------------------------------
Normalized FFO Payout Ratio 83% 83% 84% 86%
----------------------------------------------------------------------
Normalized FAD Payout Ratio 88% 86% 90% 89%
----------------------------------------------------------------------
(1) The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been excluded from 4Q06
and 2006 and included in 2007.
4Q07 Earnings. The company generated FFO of $0.86 per diluted share for the quarter ended December 31, 2007. This was due in part to the benefit of $3,900,000 of income related to the payoff of a warrant equity investment and $1,081,000 of a debt extinguishment gain. The following table summarizes certain items impacting NICS, FFO and FAD:
NICS FFO
-------------------- --------------------
4Q07 4Q06 Change 4Q07 4Q06 Change
----------------------------------------------------------------------
Per diluted share $0.52 $0.27 93% $0.86 $0.69 25%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of
real property (1) $0.14 ($0.02)
----------------------------------------------------------------------
Merger-related expenses
(2) ($0.08) ($0.08)
----------------------------------------------------------------------
Debt extinguishment
gain (3) $0.01 $0.01
----------------------------------------------------------------------
Additional other income
(4) $0.05 $0.05
----------------------------------------------------------------------
Cash receipts -
prepaid/straight-line
rent (5)
----------------------------------------------------------------------
Per diluted share -
normalized (a) $0.80 $0.77 4%
----------------------------------------------------------------------
FAD
--------------------
4Q07 4Q06 Change
----------------------------------------------------------------------
Per diluted share $0.89 $0.72 24%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of
real property (1)
----------------------------------------------------------------------
Merger-related expenses (2) ($0.08)
----------------------------------------------------------------------
Debt extinguishment gain (3) $0.01
----------------------------------------------------------------------
Additional other income (4) $0.05
----------------------------------------------------------------------
Cash receipts - prepaid/straight-line
rent (5) $0.08 $0.07
----------------------------------------------------------------------
Per diluted share - normalized (a) $0.75 $0.74 1%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $11,662,000 of gains and $1,324,000 of losses for 4Q07 and
4Q06, respectively.
(2) $5,213,000 of merger-related expenses for 4Q06.
(3) $1,081,000 of gains on extinguishment of debt for 4Q07.
(4) $3,900,000 of additional other income for 4Q07.
(5) $6,678,000 and $4,285,000 of receipts for 4Q07 and 4Q06,
respectively.
2007 Year End Earnings. The company generated FFO of $3.16 per diluted share for the year ended December 31, 2007. This was due in part to the benefit of $3,900,000 of income related to the payoff of a warrant equity investment and $1,081,000 of a debt extinguishment gain, partially offset by $1,750,000 of one-time acquisition finders' fees. The following table summarizes certain items impacting NICS, FFO and FAD:
NICS FFO
---------------------- ----------------------
2007 2006 Change 2007 2006 Change
----------------------------------------------------------------------
Per diluted share $1.46 $1.31 11% $3.16 $2.86 10%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales
of real
property (1) $0.18 $0.02
----------------------------------------------------------------------
One-time acquisition
finders' fees (2) ($0.02) ($0.02)
----------------------------------------------------------------------
Merger-related
expenses (3) ($0.08) ($0.08)
----------------------------------------------------------------------
Debt extinguishment
gain (4) $0.01 $0.01
----------------------------------------------------------------------
Additional other
income (5) $0.05 $0.05
----------------------------------------------------------------------
Cash receipts -
prepaid/
straight-line rent
(6)
----------------------------------------------------------------------
Per diluted share -
normalized (a) $3.12 $2.95 6%
----------------------------------------------------------------------
FAD
-----------------------
2007 2006 Change
----------------------------------------------------------------------
Per diluted share $3.18 $3.09 3%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of real
property (1)
----------------------------------------------------------------------
One-time acquisition
finders' fees (2) ($0.02)
----------------------------------------------------------------------
Merger-related expenses (3) ($0.08)
----------------------------------------------------------------------
Debt extinguishment gain (4) $0.01
----------------------------------------------------------------------
Additional other income (5) $0.05
----------------------------------------------------------------------
Cash receipts - prepaid/
straight-line rent (6) $0.22 $0.33
----------------------------------------------------------------------
Per diluted share - normalized (a) $2.92 $2.85 2%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $14,437,000 and $1,267,000 of gains for 2007 and 2006,
respectively.
(2) $1,750,000 of one-time acquisition finders' fees for 2007.
(3) $5,213,000 of merger-related expenses for 2006.
(4) $1,081,000 of gains on extinguishment of debt for 2007.
(5) $3,900,000 of additional other income for 2007.
(6) $17,469,000 and $20,561,000 of receipts for 2007 and 2006,
respectively.
Dividends for Fourth Quarter 2007. As previously announced, the Board of Directors declared a dividend for the quarter ended December 31, 2007 of $0.66 per share, as compared to $0.64 per share for the same period in 2006. The dividend was paid on February 20, 2008 and was the company's 147th consecutive dividend payment.
Dividends for 2008. The Board of Directors approved a new quarterly dividend rate of $0.68 per share per quarter ($2.72 per share annually), commencing with the May 2008 dividend. This represents a 3% increase from the $0.66 per share rate during 2007. The company's dividend policy is reviewed annually during the Board of Directors' January planning session. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Directors.
Outlook for 2008. The company is introducing its 2008 guidance and expects to report net income available to common stockholders in a range of $1.55 to $1.65 per diluted share, FFO in a range of $3.27 to $3.37 per diluted share and FAD in a range of $3.01 to $3.11 per diluted share. In preparing its guidance, the company made the following assumptions:
-- Gross investments of $900 million to $1.2 billion, including acquisitions of $500 to $700 million at average initial yields of 7.75% to 8.25%.
-- Gross investments include funded new development of $400 to $500 million with the investment balance capitalized at the company's average cost of debt (approximately 6.0%) and recorded as a reduction in interest expense until completion.
-- Dispositions of $100 to $200 million at average yields of 9.25% to 9.75%.
-- Net investments of $700 million to $1.1 billion.
-- General and administrative expenses of $40 to $42 million for the full year 2008.
The company's guidance excludes any impairments, unanticipated additions to the loan loss reserve or other additional one-time items, including any additional cash payments other than normal monthly rental payments. Please see Exhibit 16 for a reconciliation of the outlook for net income available to common stockholders to FFO and FAD.
Conference Call Information. The company has scheduled a conference call on Wednesday, February 27, 2008 at 9:00 a.m. Eastern Time to discuss its fourth quarter and year end 2007 results, industry trends, portfolio performance and outlook for 2008. Telephone access will be available by dialing 866-293-8968 or 913-312-1457 (international). For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the call through March 12, 2008. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 5848761. To participate in the webcast, log on to www.hcreit.com or www.earnings.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through the same websites. This earnings release is posted on the company's website under the heading News & Events.
Supplemental Reporting Measures. The company believes that net income available to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Normalized FFO represents FFO adjusted for unusual and non-recurring items. FAD represents FFO excluding net straight-line rental adjustments, rental income related to above/below market leases and amortization of deferred loan expenses and less cash used to fund capital expenditures, tenant improvements and lease commissions. Normalized FAD represents FAD excluding prepaid/straight-line rent cash receipts and adjusted for unusual and non-recurring items.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. The company believes that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of its operations. Additionally, restrictive covenants in the company's long-term debt arrangements contain financial ratios based on EBITDA. Adjusted EBITDA represents EBITDA as adjusted for stock-based compensation expenses and the provision for loan losses pursuant to covenant provisions of our unsecured lines of credit arrangements. The company primarily utilizes EBITDA to measure its interest coverage ratio, which represents EBITDA divided by total interest, and its fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred stock dividends.
Net operating income (NOI) is used to evaluate the operating performance of the company's properties. The company defines NOI as total revenues, including tenant reimbursements and discontinued operations, less property operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. The company believes NOI provides investors relevant and useful information because it measures the operating performance of its properties at the property level on an unleveraged basis. The company uses NOI to make decisions about resource allocations and to assess the property level performance of its properties.
The company's supplemental reporting measures are financial measures that are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The company's management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, they are utilized by the Board of Directors to evaluate management. The supplemental reporting measures do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Please see the exhibits for reconciliations of the supplemental reporting measures.
About Health Care REIT.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is an equity real estate investment trust that invests across the full spectrum of senior housing and health care real estate, including independent living/continuing care retirement communities, assisted living facilities, skilled nursing facilities, hospitals, long-term acute care hospitals and medical office buildings. Founded in 1970, the company was the first real estate investment trust to invest exclusively in health care facilities. The company also offers a full array of property management and development services. As of December 31, 2007, the company's broadly diversified portfolio consisted of 638 properties in 38 states. More information is available on the Internet at www.hcreit.com.
This document may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company's portfolio; the sale of properties; the performance of its operators and properties; its occupancy rates; its ability to acquire or develop properties; its ability to manage properties; its ability to enter into agreements with new viable tenants for vacant space or for properties that the company takes back from financially troubled tenants, if any; its ability to make distributions; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; its critical accounting policies; and its ability to meet its earnings guidance. When the company uses words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company's expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including prevailing interest rates; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies; operators' and tenants' difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and senior housing industries; negative developments in the operating results or financial condition of operators or tenants, including, but not limited to, their ability to pay rent and repay loans; the company's ability to transition or sell facilities with a profitable result; the failure of closings to occur as and when anticipated; acts of God affecting the company's properties; the company's ability to timely reinvest sale proceeds at similar rates to assets sold; the company's ability to re-lease space at similar rates as vacancies occur; operator or tenant bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates; liability or contract claims by or against operators and tenants; unanticipated difficulties and/or expenditures relating to future acquisitions and the integration of multi-property acquisitions; environmental laws affecting the company's properties; changes in rules or practices governing the company's financial reporting; and legal and operational matters, including real estate investment trust qualification and key management personnel recruitment and retention. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements.
FINANCIAL SCHEDULES FOLLOW
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
December 31,
-------------------------
2007 2006
-------------------------
Assets
Real estate investments:
Real property owned
Land and land improvements $ 447,029 $ 386,693
Buildings and improvements 4,224,955 3,659,065
Acquired lease intangibles 131,312 84,082
Real property held for sale, net of
accumulated depreciation 0 14,796
Construction in progress 313,709 138,222
------------ ------------
5,117,005 4,282,858
Less accumulated depreciation and
intangible amortization (478,373) (347,007)
------------ ------------
Total real property owned 4,638,632 3,935,851
Loans receivable 381,394 194,448
Less allowance for losses on loans
receivable (7,406) (7,406)
------------ ------------
373,988 187,042
------------ ------------
Net real estate investments 5,012,620 4,122,893
Other assets:
Equity investments 1,408 4,700
Deferred loan expenses 30,499 20,657
Cash and cash equivalents 30,269 36,216
Receivables and other assets 139,060 96,144
------------ ------------
201,236 157,717
------------ ------------
Total assets $ 5,213,856 $ 4,280,610
============ ============
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of
credit arrangements $ 307,000 $ 225,000
Senior unsecured notes 1,890,192 1,541,814
Secured debt 507,476 378,972
Liability to subsidiary trust issuing
preferred securities 0 52,215
Accrued expenses and other liabilities 95,145 101,588
------------ ------------
Total liabilities 2,799,813 2,299,589
Minority interests 9,687 2,228
Stockholders' equity:
Preferred stock 330,243 338,993
Common stock 85,412 73,152
Capital in excess of par value 2,370,037 1,873,811
Treasury stock (3,952) (2,866)
Cumulative net income 1,074,255 932,853
Cumulative dividends (1,446,959) (1,238,860)
Accumulated other comprehensive income (7,381) (135)
Other equity 2,701 1,845
------------ ------------
Total stockholders' equity 2,404,356 1,978,793
------------ ------------
Total liabilities and stockholders' equity $ 5,213,856 $ 4,280,610
============ ============
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
--------------------------------------
2007 2006 2007 2006
------------------ -------------------
Revenues:
Rental income $119,282 $78,841 $450,164 $290,696
Interest income 8,151 5,651 25,823 18,829
Other income 6,099 876 10,035 3,924
--------- -------- --------- ---------
Gross revenues 133,532 85,368 486,022 313,449
Expenses:
Interest expense 35,466 24,399 134,680 92,436
Property operating expenses 11,224 1,115 37,475 1,115
Depreciation and amortization 39,444 23,727 145,893 88,433
General and administrative
expenses 9,349 10,220 37,653 26,004
Loan expense 1,971 1,056 5,977 3,255
Loss (gain) on extinguishment
of debt (1,081) 0 (1,081) 0
Provision for loan losses 0 250 0 1,000
--------- -------- --------- ---------
Total expenses 96,373 60,767 360,597 212,243
--------- -------- --------- ---------
Income from continuing
operations before minority
interests 37,159 24,601 125,425 101,206
Minority interests 169 (13) (238) (13)
--------- -------- --------- ---------
Income from continuing
operations 37,328 24,588 125,187 101,193
Discontinued operations:
Gain (loss) on sales of
properties 11,662 (1,324) 14,437 1,267
Income (loss) from
discontinued operations, net (43) (306) 1,778 290
--------- -------- --------- ---------
11,619 (1,630) 16,215 1,557
--------- -------- --------- ---------
Net income 48,947 22,958 141,402 102,750
Preferred dividends 6,179 5,464 25,130 21,463
--------- -------- --------- ---------
Net income available to common
stockholders $ 42,768 $17,494 $116,272 $ 81,287
========= ======== ========= =========
Average number of common shares
outstanding:
Basic 82,346 64,277 78,861 61,661
Diluted 82,784 64,687 79,409 62,045
Net income available to common
stockholders
per share:
Basic $ 0.52 $ 0.27 $ 1.47 $ 1.32
Diluted 0.52 0.27 1.46 1.31
Common dividends per share $ 0.66 $0.9809 $ 2.2791 $ 2.8809
HEALTH CARE REIT, INC.
Financial Supplement - December 31, 2007
Portfolio Composition Exhibit 1
-------------------------
($000's except Investment per Bed/Unit/Sq. Ft.)
Balance Sheet
Data # Properties Balance % Balance
---------------------------------------------------------
Real
Property 601 $ 4,638,632 92%
Loans
Receivable
(1) 37 381,394 8%
---------------------------------------------------------
Totals 638 $ 5,020,026 100%
Investment
Balances # Properties Investment % Investment
---------------------------------------------------------
Independent/
CCRCs 62 $ 777,349 15%
Assisted
Living
Facilities 206 1,043,467 21%
Skilled
Nursing
Facilities 227 1,592,035 32%
Medical
Office
Buildings 121 1,248,264 25%
Specialty
Care
Facilities 22 358,911 7%
---------------------------------------------------------
Totals 638 $ 5,020,026 100%
Committed
Committed # Beds/Units Balance Investment
Investments # Properties or Sq. Ft. (2) per metric
---------------------------------------------------------
Independent/
CCRCs 62 7,509 units $ 1,183,148 $157,564 unit
Assisted
Living
Facilities 206 12,750 units 1,250,603 98,087 unit
Skilled
Nursing
Facilities 227 30,647 beds 1,616,688 52,752 bed
Medical
Office
Buildings 121 5,032,333 sq. ft. 1,387,622 276 sq. ft.
Specialty
Care
Facilities 22 1,541 beds 382,662 248,321 bed
---------------------------------------------------------
Totals 638 -na- $ 5,820,723 -na-
Notes: (1) Includes $799,000 of loans on non-accrual.
(2) Committed Balance includes gross real estate investments
and unfunded construction commitments for which initial
funding had commenced.
Selected Facility Data Exhibit 2
-----------------------
Coverage Data
--------------------
% Payor Mix - Revenues
------------------------- Before After
Census Private Medicare Medicaid Mgt. Fees Mgt. Fees
-----------------------------------------------------
Independent/CCRCs 93% 96% 3% 1% 1.47x 1.26x
Assisted Living
Facilities 89% 85% 0% 15% 1.57x 1.35x
Skilled Nursing
Facilities 85% 19% 28% 53% 2.25x 1.65x
Medical Office
Buildings 90% 100% 0% 0% -na- -na-
Specialty Care
Facilities 56% 24% 60% 16% 2.72x 2.16x
--------------------
Weighted Averages 1.99x 1.55x
Notes: Data as of September 30, 2007. Payor mix represents percentage
of facility/operator revenues.
Investment Concentrations ($000's) Exhibit 3
------------------------------------------
Concentration by Customer # Properties Investment % Investment
-------------- ------------- -------------
Emeritus Corporation 50 $ 355,147 7%
Signature Healthcare LLC 34 325,744 6%
Brookdale Senior Living,
Inc. 84 258,990 5%
Life Care Centers of
America, Inc. 25 255,168 5%
Senior Living Communities,
LLC 8 187,437 4%
Remaining portfolio 437 3,637,540 73%
-------------- ------------- -------------
Totals 638 $5,020,026 100%
Concentration by Region # Properties Investment % Investment
-------------- ------------- -------------
South 384 $2,675,763 53%
West 91 942,132 19%
Midwest 81 758,019 15%
Northeast 82 644,112 13%
-------------- ------------- -------------
Totals 638 $5,020,026 100%
Concentration by State # Properties Investment % Investment
-------------- ------------- -------------
Florida 89 $ 773,069 15%
Texas 85 631,267 13%
Massachusetts 38 346,977 7%
California 24 340,845 7%
Tennessee 33 307,672 6%
Remaining portfolio 369 2,620,196 52%
-------------- ------------- -------------
Totals 638 $5,020,026 100%
NOI Reconciliation ($000's) Exhibit 4
--------------------------------
Property Net
Total Operating Operating
Revenues (1) Expenses Income
------------ ---------- ----------
Current Quarter
Independent/CCRCs $ 12,443 9% $ 12,443 10%
Assisted Living
Facilities 28,646 21% 28,646 23%
Skilled Nursing
Facilities 41,025 31% 41,025 33%
Medical Office
Buildings 31,482 23% $11,133 99% 20,349 17%
Specialty Care
Facilities 6,904 5% 91 1% 6,813 6%
Interest income 8,151 6% 8,151 7%
Other income 5,602 5% 5,602 4%
------------------ -------------- ---------------
Totals $134,253 100% $11,224 100% $123,029 100%
Year-To-Date
Independent/CCRCs $ 45,502 9% $ 45,502 10%
Assisted Living
Facilities 114,961 23% 114,961 25%
Skilled Nursing
Facilities 159,033 32% 159,033 35%
Medical Office
Buildings 112,814 23% $37,177 99% 75,637 17%
Specialty Care
Facilities 25,484 5% 298 1% 25,186 6%
Interest income 25,823 5% 25,823 6%
Other income 9,538 3% 9,538 1%
------------------ -------------- ---------------
Totals $493,155 100% $37,475 100% $455,680 100%
Notes: (1) Total revenues include gross revenues and revenues from
discontinued operations.
Revenue Maturities Exhibit 5
($000's)
---------------------
Investment Operating
Properties Properties
Rental Rental Interest Total % of
Year Income (1) Income (1) Income (1) Revenues Total
--------------------- ---------- ------------ --------- ------
2008 $ 437 $12,863 $ 4,133 $ 17,433 4%
2009 930 7,497 3,487 11,914 2%
2010 578 9,701 2,447 12,726 3%
2011 6,921 8,457 1,584 16,962 4%
2012 16,048 10,378 2,442 28,868 6%
Thereafter 321,830 44,563 25,080 391,473 81%
---------- ---------- ------------ --------- ------
Totals $346,744 $93,459 $ 39,173 $479,376 100%
Notes: (1) Annualized revenue impact by year. Reflects contract rate
of interest for loans, annual straight-line rent for
leases with fixed escalators or annual cash rent for
leases with contingent escalators, net of collectibility
reserves if applicable.
Debt Maturities and Principal Payments Exhibit 6
($000's)
-------------------------------------------
Senior Notes Secured Debt
Year Line of Credit (1) (1) Total
----------------------------------------------------------------------
2008 $ 0 $ 42,330 $ 27,941 $ 70,271
2009 0 0 53,752 53,752
2010 0 0 15,480 15,480
2011 307,000 0 52,641 359,641
2012 0 250,000 21,841 271,841
2013 0 300,000 54,780 354,780
2014 0 0 123,399 123,399
Thereafter 0 1,295,000 157,139 1,452,139
--------------------------------------------------------
Totals $307,000 $1,887,330 $506,973 $2,701,303
Notes: (1) Amounts above represent principal amounts due and do not
reflect unamortized premiums/discounts or other fair value
adjustments as reflected on the balance sheet.
Fill-Up Concentrations ($000's) Exhibit 7
--------------------------------------------
Investment
Facility Type # Properties # Beds/Units Balance % Investment
------------ ------------ ------------ ------------
Independent/CCRCs 10 1,585 $222,345 4%
Assisted Living
Facilities 20 1,206 173,658 3%
Skilled Nursing
Facilities 6 752 58,268 1%
Specialty Care
Facilities 3 124 50,678 1%
------------ ------------ ------------ ------------
Totals 39 3,667 $504,949 10%
Average
Months
Occupancy # Properties in Operation Revenues (1) % Revenues
------------ ------------ ------------ ------------
0% - 50% 11 5 $ 2,844 2%
50% - 70% 6 9 1,578 1%
70% + 22 16 6,716 5%
------------ ------------ ------------ ------------
Totals 39 12 $ 11,138 8%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations for the three months ended
December 31, 2007.
Investment Activity ($000's) Exhibit 8
----------------------------
Three Months Ended Year Ended
December 31, 2007 December 31, 2007
------------------- ------------------
Funding by Investment Type
Real Property $ 183,111 62% $ 952,320 80%
Loans Receivable 114,555 38% 237,152 20%
------------------- ------------------
Totals $ 297,666 100% $1,189,472 100%
Funding by Facility Type
Independent/CCRCs $ 72,525 24% $ 240,975 20%
Assisted Living Facilities 45,345 15% 118,242 10%
Skilled Nursing Facilities 125,547 42% 319,460 27%
Medical Office Buildings 35,248 12% 411,100 35%
Specialty Care Facilities 19,001 7% 99,695 8%
------------------- ------------------
Totals $ 297,666 100% $1,189,472 100%
Development Activity ($000's) Exhibit 9
--------------------------------
Balance
at Balance at
December 2007 YTD 2007 YTD December Committed
Facility Type 31, 2006 Fundings Conversions 31, 2007 Balances
--------------------------------------------------------- ------------
Independent/
CCRCs $ 61,709 $154,648 $ (25,090) $191,267 $ 638,785
Assisted
Living
Facilities 55,197 55,929 (56,599) 54,527 217,962
Skilled
Nursing
Facilities 14,852 21,924 (16,568) 20,208 46,843
Medical
Office
Buildings 0 14,688 0 14,688 154,046
Specialty
Care
Facilities 6,464 60,326 (33,771) 33,019 56,770
--------- --------- ------------ ----------- ------------
Totals $138,222 $307,515 $(132,028) $313,709 $1,114,406
Development Funding Projections for Existing Projects ($000's)
----------------------------------------------------------------------
Projected Future
Fundings
------------------------
# Beds/
Units
or Sq. 2008 Fundings Unfunded
Facility Type Projects Ft. Fundings Thereafter Commitments
---------------------- --------- ------------ ----------- ------------
Independent/
CCRCs 16 2,426 $252,199 $195,319 $447,518
Assisted
Living
Facilities 13 1,223 114,929 48,506 163,435
Skilled
Nursing
Facilities 3 313 23,632 3,003 26,635
Medical
Office
Buildings 2 459,260 33,453 105,905 139,358
Specialty
Care
Facilities 3 146 15,968 7,783 23,751
--------- ------------ ----------- ------------
Totals 37 $440,181 $360,516 $800,697
Project Conversion Projections ($000's)
---------------------------------------------
2007 Quarterly Conversions Annual Projections
-------------------------------- -------------------------------------
Projected Projected
Average Average
Initial Initial
Quarter Amount Yields (1) Year Amount Yields (1)
-------------------- ----------- ------------ ----------- ------------
2008
1Q07 actual$ 6,923 9.06% projected $ 360,447 9.12%
2009
2Q07 actual 67,539 9.36% projected 400,350 8.70%
2010
3Q07 actual 23,411 9.36% projected 326,939 9.37%
2011+
4Q07 actual 34,155 9.81% projected 26,670 10.58%
--------- ----------- ----------- ------------
Totals $132,028 9.46% Totals $1,114,406 9.08%
Notes: All amounts include both cash advances and non-cash additions
such as capitalized interest.
(1) Actual initial yields may be higher if the underlying
market rates increase.
Disposition Activity ($000's) Exhibit 10
-------------------------------
Three Months Ended Year Ended
December 31, 2007 December 31, 2007
------------------- -----------------
Dispositions by Investment Type
Real Property $ 20,711 84% $ 83,877 67%
Loans Receivable 3,934 16% 42,028 33%
------------------- -----------------
Totals $ 24,645 100% $125,905 100%
Dispositions by Facility Type
Assisted Living Facilities $ 1,563 6% $ 70,030 56%
Skilled Nursing Facilities 17,737 72% 33,343 26%
Independent/CCRCs 5,345 22% 22,532 18%
------------------- -----------------
Totals $ 24,645 100% $125,905 100%
Discontinued Operations ($000's) Exhibit 11
-----------------------------------
Three Months Ended Year Ended
December 31, December 31,
----------------- --------------
2007 2006 2007 2006
--------- ------- ------ -------
Revenues
Rental income $ 721 $2,838 $7,133 $14,939
Expenses
Interest expense 127 836 1,622 4,398
Depreciation and amortization 637 1,918 3,733 9,131
General and administrative 0 390 0 1,120
--------- ------- ------ -------
Income (loss) from discontinued
operations, net $ (43) $ (306) $1,778 $ 290
Exhibit 12
Current Capitalization ($000's except
share price) Leverage & Performance Ratios
------------------------------------- --------------------------------
Balance % Balance
--------------------
Borrowings Under
Bank Lines $ 307,000 6% Debt/Total Book Cap 53%
Long-Term Debt Debt/Undepreciated Book
Obligations 2,397,668 47% Cap 48%
Stockholders'
Equity 2,404,356 47% Debt/Total Market Cap 39%
--------------------
Total Book
Capitalization $5,109,024 100%
Interest Coverage 3.17x 3rd Qtr.
Common Shares 2.91x YTD
Outstanding
(000's) 85,496
Period-End Share Interest Coverage
Price $ 44.69 -adjusted 3.17x 3rd Qtr.
----------
Common Stock 2.95x YTD
Market Value $3,820,816 56%
Fixed Charge 2.62x 3rd Qtr.
Preferred Stock 330,243 5% Coverage
Borrowings Under 2.38x YTD
Bank Lines 307,000 4%
Fixed Charge
Long-Term Debt Coverage
Obligations 2,397,668 35% -adjusted 2.63x 3rd Qtr.
--------------------
Total Market 2.42x YTD
Capitalization $6,855,727 100%
EBITDA Reconciliation ($000's) Exhibit 13
-------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
-------------------------------------
2007 2006 2007 2006
---------- ------- --------- --------
Net income $ 48,947 $22,958 $141,402 $102,750
Interest expense (1) 35,593 25,235 136,302 96,834
Tax expense (benefit) 269 0 188 82
Depreciation and amortization
(1) 40,081 25,645 149,626 97,564
Amortization of deferred loan
expenses 1,971 1,056 5,977 3,255
---------- ------- --------- --------
EBITDA 126,861 74,894 433,495 300,485
Stock-based compensation
expense 1,298 2,789 7,050 6,980
Provision for loan losses 0 250 0 1,000
Loss/(gain) on extinguishment
of debt (1,081) 0 (1,081) 0
---------- ------- --------- --------
EBITDA - adjusted $127,078 $77,933 $439,464 $308,465
Interest Coverage Ratio
Interest expense (1) $ 35,593 $25,235 $136,302 $ 96,834
Capitalized interest 4,468 1,976 12,526 4,470
---------- ------- --------- --------
Total interest 40,061 27,211 148,828 101,304
EBITDA $126,861 $74,894 $433,495 $300,485
---------- ------- --------- --------
Interest coverage ratio 3.17x 2.75x 2.91x 2.97x
EBITDA - adjusted $127,078 $77,933 $439,464 $308,465
---------- ------- --------- --------
Interest coverage ratio 3.17x 2.86x 2.95x 3.04x
- adjusted
Fixed Charge Coverage Ratio
Total interest (1) $ 40,061 $27,211 $148,828 $101,304
Secured debt principal
amortization 2,147 849 7,961 3,033
Preferred dividends 6,179 5,464 25,130 21,463
---------- ------- --------- --------
Total fixed charges 48,387 33,524 181,919 125,800
EBITDA $126,861 $74,894 $433,495 $300,485
---------- ------- --------- --------
Fixed charge coverage 2.62x 2.23x 2.38x 2.39x
ratio
EBITDA - adjusted $127,078 $77,933 $439,464 $308,465
---------- ------- --------- --------
Fixed charge coverage 2.63x 2.32x 2.42x 2.45x
ratio - adjusted
Notes: (1) Depreciation and amortization and interest expense include
depreciation and amortization and interest expense,
respectively, from discontinued operations.
Funds Available For Distribution Reconciliation Exhibit 14
-------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income available to
common stockholders $ 42,768 $17,494 $116,272 $ 81,287
Depreciation and
amortization (1) 40,081 25,645 149,626 97,564
Loss/(gain) on sales of
properties (11,662) 1,324 (14,437) (1,267)
Minority interests (8) (2) (10) (2)
Gross straight-line
rental income (4,365) (2,912) (17,029) (9,432)
Prepaid/straight-line
rent receipts 6,678 4,285 17,469 20,561
Amortization related to
above/(below) market
leases, net (136) (60) (792) (60)
Amortization of deferred
loan expenses 1,971 1,056 5,977 3,255
Cap Ex, tenant
improvements, lease
commissions (1,763) (21) (4,292) (21)
--------- -------- --------- ---------
Funds available for
distribution 73,564 46,809 252,784 191,885
One-time acquisition
finder's fees 0 0 1,750 0
Loss/(gain) on
extinguishment of debt (1,081) 0 (1,081) 0
Additional other income (3,900) 0 (3,900) 0
Merger-related expenses 0 5,213 0 5,213
Prepaid/straight-line
rent receipts (6,678) (4,285) (17,469) (20,561)
--------- -------- --------- ---------
Funds available for
distribution -
normalized $ 61,905 $47,737 $232,084 $176,537
Average common shares
outstanding:
Basic 82,346 64,277 78,861 61,661
Diluted 82,784 64,687 79,409 62,045
Per share data:
Net income available to
common stockholders
Basic $ 0.52 $ 0.27 $ 1.47 $ 1.32
Diluted 0.52 0.27 1.46 1.31
Funds available for
distribution
Basic $ 0.89 $ 0.73 $ 3.21 $ 3.11
Diluted 0.89 0.72 3.18 3.09
Funds available for
distribution -
normalized
Basic $ 0.75 $ 0.74 $ 2.94 $ 2.86
Diluted 0.75 0.74 2.92 2.85
FAD Payout Ratio
Dividends per common
share (2) $ 0.66 $ 0.64 $ 2.62 $ 2.54
FAD per diluted share $ 0.89 $ 0.72 $ 3.18 $ 3.09
--------- -------- --------- ---------
FAD payout ratio 74% 89% 82% 82%
FAD Payout Ratio -
Normalized
Dividends per common
share (2) $ 0.66 $ 0.64 $ 2.62 $ 2.54
FAD per diluted share -
normalized $ 0.75 $ 0.74 $ 2.92 $ 2.85
--------- -------- --------- ---------
FAD payout ratio -
normalized 88% 86% 90% 89%
Notes: (1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
(2) The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been excluded from
4Q06 and 2006 and included in 2007.
Funds From Operations Reconciliation Exhibit 15
-----------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income available to
common stockholders $ 42,768 $17,494 $116,272 $ 81,287
Depreciation and
amortization (1) 40,081 25,645 149,626 97,564
Loss/(gain) on sales of
properties (11,662) 1,324 (14,437) (1,267)
Minority interests (88) (4) (344) (4)
--------- -------- --------- ---------
Funds from operations $ 71,099 $44,459 $251,117 $177,580
One-time acquisition
finder's fees 0 0 1,750 0
Loss/(gain) on
extinguishment of debt (1,081) 0 (1,081) 0
Additional other income (3,900) 0 (3,900) 0
Merger-related expenses 0 5,213 0 5,213
--------- -------- --------- ---------
Funds from operations -
normalized $ 66,118 $49,672 $247,886 $182,793
Average common shares
outstanding:
Basic 82,346 64,277 78,861 61,661
Diluted 82,784 64,687 79,409 62,045
Per share data:
Net income available to
common stockholders
Basic $ 0.52 $ 0.27 $ 1.47 $ 1.32
Diluted 0.52 0.27 1.46 1.31
Funds from operations
Basic $ 0.86 $ 0.69 $ 3.18 $ 2.88
Diluted 0.86 0.69 3.16 2.86
Funds from operations -
normalized
Basic $ 0.80 $ 0.77 $ 3.14 $ 2.96
Diluted 0.80 0.77 3.12 2.95
FFO Payout Ratio
Dividends per common share
(2) $ 0.66 $ 0.64 $ 2.62 $ 2.54
FFO per diluted share $ 0.86 $ 0.69 $ 3.16 $ 2.86
--------- -------- --------- ---------
FFO payout ratio 77% 93% 83% 89%
FFO Payout Ratio -
Normalized
Dividends per share (2) $ 0.66 $ 0.64 $ 2.62 $ 2.54
FFO per diluted share -
normalized $ 0.80 $ 0.77 $ 3.12 $ 2.95
--------- -------- --------- ---------
FFO payout ratio -
normalized 83% 83% 84% 86%
Notes: (1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
(2) The $0.3409 prorated dividend paid on December 28, 2006 in
connection with the Windrose merger has been excluded from
4Q06 and 2006 and included in 2007.
Outlook Reconciliations Exhibit 16
----------------------------------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2008
-------------------
Low High
--------- ---------
FFO Reconciliation:
----------------------------------------------
Net income available to common stockholders $143,000 $152,000
Depreciation and amortization (1) 158,000 158,000
--------- ---------
Funds from operations $301,000 $310,000
Average common shares outstanding (diluted) 92,000 92,000
Per share data (diluted):
Net income available to common stockholders $ 1.55 $ 1.65
Funds from operations 3.27 3.37
FAD Reconciliation:
----------------------------------------------
Net income available to common stockholders $143,000 $152,000
Depreciation and amortization (1) 158,000 158,000
Gross straight-line rental income (22,500) (22,500)
Amortization related to above/below market
leases (1,000) (1,000)
Amortization of deferred loan expenses 7,250 7,250
Cap Ex, tenant improvements, lease
commissions (7,500) (7,500)
--------- ---------
Funds available for distribution $277,250 $286,250
Average common shares outstanding (diluted) 92,000 92,000
Per share data (diluted):
Net income available to common stockholders $ 1.55 $ 1.65
Funds available for distribution 3.01 3.11
Notes: (1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
SOURCE: Health Care REIT, Inc.
Health Care REIT, Inc.
Scott Estes, 419-247-2800
Mike Crabtree, 419-247-2800