TOLEDO, Ohio--(BUSINESS WIRE)--Nov. 6, 2007--Health Care REIT, Inc. (NYSE:HCN) today announced operating results for its third quarter ended September 30, 2007.
Recent Highlights.
- Completed net new investments year-to-date totaling $791 million
- Increased 2007 net investment guidance to a range of $950 million to $1.1 billion, from $800 million to $1.1 billion
- Reported 3Q07 normalized FFO growth of 8% per share
- Reported 3Q07 normalized FAD growth of 6% per share
- Issued $400 million of 4.75% convertible senior unsecured notes in July
- Expanded and extended unsecured line of credit to $1.15 billion in August
Key Performance Indicators.
3Q07 3Q06 Change 2007 2006 Change
----------------------------------------------------------------------
Net income available to common
stockholders (NICS) per diluted
share $0.30 $0.34 -12% $0.94 $1.04 -10%
----------------------------------------------------------------------
Normalized FFO per diluted share $0.79 $0.73 8% $2.32 $2.18 6%
----------------------------------------------------------------------
Normalized FAD per diluted share $0.75 $0.71 6% $2.18 $2.11 3%
----------------------------------------------------------------------
Dividends per common share $0.66 $0.64 3% $1.96 $1.90 3%
----------------------------------------------------------------------
Normalized FFO Payout Ratio 84% 88% 84% 87%
----------------------------------------------------------------------
Normalized FAD Payout Ratio 88% 90% 90% 90%
----------------------------------------------------------------------
3Q07 Earnings. The following table summarizes certain items impacting NICS, FFO and FAD:
NICS FFO
------------------ ------------------
3Q07 3Q06 Change 3Q07 3Q06 Change
----------------------------------------------------------------------
Per diluted share $0.30 $0.34 -12% $0.79 $0.73 8%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of real
property(1) $0.01 $0.00
----------------------------------------------------------------------
Cash receipts -
prepaid/straight-line
rent(2)
----------------------------------------------------------------------
Per diluted share -
normalized(a) $0.79 $0.73 8%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $766,000 and $108,000 of gains for 3Q07 and 3Q06, respectively.
(2) $5,881,000 and $3,256,000 of receipts for 3Q07 and 3Q06,
respectively.
FAD
-------------------
3Q07 3Q06 Change
----------------------------------------------------------------------
Per diluted share $0.82 $0.76 8%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of real property(1)
----------------------------------------------------------------------
Cash receipts - prepaid/straight-line rent(2) $0.07 $0.05
----------------------------------------------------------------------
Per diluted share - normalized(a) $0.75 $0.71 6%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $766,000 and $108,000 of gains for 3Q07 and 3Q06, respectively.
(2) $5,881,000 and $3,256,000 of receipts for 3Q07 and 3Q06,
respectively.
2007 Year-To-Date Earnings. The following table summarizes certain items impacting NICS, FFO and FAD:
NICS FFO
-------------------------------------
2007 2006 Change 2007 2006 Change
----------------------------------------------------------------------
Per diluted share $0.94 $1.04 -10% $2.30 $2.18 6%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of real
property (1) $0.04 $0.04
----------------------------------------------------------------------
One-time acquisition finders'
fees (2) ($0.02) ($0.02)
----------------------------------------------------------------------
Cash receipts -
prepaid/straight-line rent (3)
----------------------------------------------------------------------
Per diluted share - normalized
(a) $2.32 $2.18 6%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $2,775,000 and $2,590,000 of gains for 2007 and 2006,
respectively.
(2) $1,750,000 of one-time acquisition finders' fees for 2007.
(3) $10,791,000 and $16,276,000 of receipts for 2007 and 2006,
respectively.
FAD
-------------------
2007 2006 Change
----------------------------------------------------------------------
Per diluted share $2.29 $2.37 -3%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of real property (1)
----------------------------------------------------------------------
One-time acquisition finders' fees (2) ($0.02)
----------------------------------------------------------------------
Cash receipts - prepaid/straight-line rent (3) $0.14 $0.27
----------------------------------------------------------------------
Per diluted share - normalized (a) $2.18 $2.11 3%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $2,775,000 and $2,590,000 of gains for 2007 and 2006,
respectively.
(2) $1,750,000 of one-time acquisition finders' fees for 2007.
(3) $10,791,000 and $16,276,000 of receipts for 2007 and 2006,
respectively.
Dividends for Third Quarter 2007. As previously announced, the Board of Directors declared a dividend for the quarter ended September 30, 2007 of $0.66 per share, as compared to $0.64 per share for the same period in 2006. The dividend will be payable November 20, 2007 to stockholders of record on November 2, 2007 and will be the company's 146th consecutive dividend payment.
Outlook for 2007. The company is increasing its investment guidance to a range of $1.1 billion to $1.2 billion from the prior range of $1.0 billion to $1.2 billion for 2007. Acquisition guidance has been increased to a range of $850 to $950 million from $750 to $950 million, while development funding remains unchanged at $250 million. In addition, the company expects $100 to $150 million of dispositions, resulting in net investments of $950 million to $1.1 billion.
The company is refining its 2007 guidance for net income available to common stockholders to a range of $1.27 to $1.29 per diluted share, from $1.27 to $1.33 per diluted share. The company is refining its 2007 normalized FFO guidance to a range of $3.11 to $3.13 per diluted share, from $3.09 to $3.15 per diluted share. The company is increasing its 2007 FAD guidance to a range of $3.01 to $3.03 per diluted share, from $2.91 to $2.97 per diluted share primarily due to cash receipts of $5.9 million during the third quarter.
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, November 7, 2007 at 9:00 a.m. Eastern Time to discuss its third quarter 2007 results, industry trends, portfolio performance and outlook for the remainder of 2007. Telephone access will be available by dialing 888-211-9994 or 913-312-0717 (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 November 22, 2007. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 6488985. 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 Web sites. This earnings release is posted on the company's Web site 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 the 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 certain real estate properties such as medical office buildings. 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 our medical office buildings 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 our medical office buildings.
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 REIT to invest exclusively in health care facilities. As of September 30, 2007, the company's broadly diversified portfolio consisted of 631 properties in 38 states. The company also offers a full array of property management and development services. 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)
September 30,
-------------------------
2007 2006
-------------------------
Assets
Real estate investments:
Real property owned
Land and land improvements $ 440,365 $ 276,480
Buildings and improvements 4,165,573 2,815,206
Acquired lease intangibles 129,533 0
Real property held for sale, net of
accumulated depreciation 6,908 27,678
Construction in progress 229,134 98,675
------------ ------------
4,971,513 3,218,039
Less accumulated depreciation and
intangible amortization (449,831) (332,925)
------------ ------------
Total real property owned 4,521,682 2,885,114
Loans receivable 271,985 216,870
Less allowance for losses on loans
receivable (7,406) (7,156)
------------ ------------
264,579 209,714
------------ ------------
Net real estate investments 4,786,261 3,094,828
Other assets:
Equity investments 4,617 5,070
Deferred loan expenses 32,082 12,309
Cash and cash equivalents 31,440 15,490
Receivables and other assets 117,427 73,132
------------ ------------
185,566 106,001
------------ ------------
Total assets $ 4,971,827 $ 3,200,829
============ ============
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 145,000 $ 276,000
Senior unsecured notes 1,890,344 1,196,897
Secured debt 513,058 130,405
Liability to subsidiary trust issuing
preferred securities 52,184 0
Accrued expenses and other liabilities 105,629 50,558
------------ ------------
Total liabilities 2,706,215 1,653,860
Minority interests 4,928 0
Stockholders' equity:
Preferred stock 338,993 276,875
Common stock 81,253 63,005
Capital in excess of par value 2,200,030 1,469,491
Treasury stock (3,952) (2,714)
Cumulative net income 1,025,309 909,894
Cumulative dividends (1,386,899) (1,171,302)
Accumulated other
comprehensive income 3,302 0
Other equity 2,648 1,720
------------ ------------
Total stockholders' equity 2,260,684 1,546,969
------------ ------------
Total liabilities and stockholders' equity $ 4,971,827 $ 3,200,829
============ ============
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------
2007 2006 2007 2006
------------------ ------------------
Revenues:
Rental income $117,930 $73,328 $332,907 $214,032
Interest income 5,947 4,436 17,673 13,178
Other income 1,199 1,019 3,935 3,049
---------- ------- --------- --------
Gross revenues 125,076 78,783 354,515 230,259
Expenses:
Interest expense 34,869 23,290 99,570 68,482
Property operating expenses 10,426 0 26,251 0
Depreciation and amortization 39,933 22,947 108,434 66,839
General and administrative
expenses 8,626 5,010 28,304 15,788
Loan expense 1,504 782 4,006 2,199
Provision for loan losses 0 250 0 750
---------- ------- --------- --------
Total expenses 95,358 52,279 266,565 154,058
---------- ------- --------- --------
Income from continuing operations
before minority interests 29,718 26,504 87,950 76,201
Minority interests (121) 0 (407) 0
---------- ------- --------- --------
Income from continuing operations 29,597 26,504 87,543 76,201
Discontinued operations:
Gain (loss) on sales of
properties 766 108 2,775 2,590
Income (loss) from discontinued
operations, net 483 201 2,138 1,000
---------- ------- --------- --------
1,249 309 4,913 3,590
---------- ------- --------- --------
Net income 30,846 26,813 92,456 79,791
Preferred dividends 6,317 5,333 18,952 15,998
---------- ------- --------- --------
Net income available to common
stockholders $ 24,529 $21,480 $ 73,504 $ 63,793
========== ======= ========= ========
Average number of common shares
outstanding:
Basic 80,710 62,524 77,686 60,766
Diluted 81,163 62,866 78,234 61,102
Net income available to common
stockholders per share:
Basic $ 0.30 $ 0.34 $ 0.95 $ 1.05
Diluted 0.30 0.34 0.94 1.04
Common dividends per share $ 0.66 $ 0.64 $ 1.6191 $ 1.90
HEALTH CARE REIT, INC.
Financial Supplement - September 30, 2007
Portfolio Composition Exhibit 1
------------------------------------
($000's except Investment per Bed/Unit/Sq. Ft.)
Balance Sheet #
Data Properties Balance % Balance
------------------------------------------------------
Real Property 594 $4,521,682 94%
Loans
Receivable
(1) 37 271,985 6%
------------------------------------------------------
Totals 631 $4,793,667 100%
Investment # Investment
Balances Properties (2) % Investment
------------------------------------------------------
Independent/
CCRCs 57 $ 678,145 14%
Assisted
Living
Facilities 201 1,002,599 21%
Skilled
Nursing
Facilities 234 1,544,271 32%
Medical Office
Buildings 117 1,233,327 26%
Specialty Care
Facilities 22 337,775 7%
------------------------------------------------------
Totals 631 $4,796,117 100%
#
Committed # Beds/Units Committed Investment
Investments Properties or Sq. Ft. Balance (3) per metric
------------------------------------------------------
Independent/
CCRCs 57 6,615 units $1,021,974 $154,493 unit
Assisted
Living
Facilities 201 12,052 units 1,125,080 93,352 unit
Skilled
Nursing
Facilities 234 31,680 beds 1,557,942 49,177 bed
Medical Office
Buildings 117 4,837,991 sq. ft. 1,306,558 270 sq. ft.
Specialty Care
Facilities 22 1,541 beds 377,991 245,289 bed
------------------------------------------------------
Totals 631 -na- $5,389,545 -na-
Notes: (1) Includes $799,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$4,793,667,000 and $2,450,000, respectively.
(3) Committed Balance includes gross real estate investments,
credit enhancements 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 92% 96% 3% 1% 1.46x 1.26x
Assisted Living
Facilities 88% 85% 0% 15% 1.59x 1.37x
Skilled Nursing
Facilities 84% 19% 30% 51% 2.21x 1.60x
Medical Office
Buildings 90% 100% 0% 0% -na- -na-
Specialty Care
Facilities 58% 25% 58% 17% 2.57x 2.01x
---------------------
Weighted Averages 1.96x 1.52x
Notes: Data as of June 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 $356,553 7%
Brookdale Senior Living
Inc. 84 260,544 5%
Life Care Centers of
America, Inc. 26 255,774 5%
Home Quality Management,
Inc. 35 219,043 5%
Merrill Gardens L.L.C. 13 178,881 4%
Remaining portfolio 423 3,525,322 74%
------------- ------------- ------------
Totals 631 $4,796,117 100%
Concentration by Region # %
Properties Investment Investment
------------- ------------- ------------
South 379 $2,524,301 53%
West 88 899,708 19%
Midwest 81 732,505 15%
Northeast 83 639,603 13%
------------- ------------- ------------
Totals 631 $4,796,117 100%
# %
Concentration by State Properties Investment Investment
------------- ------------- ------------
Florida 88 $768,265 16%
Texas 84 625,828 13%
Massachusetts 41 349,033 7%
California 24 343,247 7%
Ohio 31 278,448 6%
Remaining portfolio 363 2,431,296 51%
------------- ------------- ------------
Totals 631 $4,796,117 100%
NOI Reconciliation ($000's) Exhibit 4
----------------------------------
Property
Gross Operating Net Operating
Revenues (1) Expenses Income
------------- ----------- --------------
Current Quarter
Independent/
CCRCs $ 11,765 9% $ 11,765 10%
Assisted Living
Facilities 28,734 23% 28,734 25%
Skilled Nursing
Facilities 40,970 33% 40,970 35%
Medical Office
Buildings 30,984 25% $10,296 99% 20,688 18%
Specialty Care
Facilities 6,377 5% 130 1% 6,247 5%
Interest income 5,947 5% 5,947 5%
Other income 1,199 0% 1,199 2%
----------------- --------------- ------------------
Totals $ 125,976 100% $10,426 100% $ 115,550 100%
Year-To-Date
Independent/
CCRCs $ 33,060 9% $ 33,060 10%
Assisted Living
Facilities 86,314 24% 86,314 26%
Skilled Nursing
Facilities 118,007 33% 118,007 35%
Medical Office
Buildings 81,332 23% $26,044 99% 55,288 17%
Specialty Care
Facilities 18,581 5% 207 1% 18,374 6%
Interest income 17,673 5% 17,673 5%
Other income 3,935 1% 3,935 1%
----------------- --------------- ------------------
Totals $ 358,902 100% $26,251 100% $ 332,651 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
Revenue Maturities ($000's) Exhibit 5
----------------------------------
Investment Operating
Properties Properties
Rental Rental Interest Total % of
Year Income (1) Income (1) Income (1) Revenues Total
----------------------------------------------------------------------
2007 $ 967 $ 3,119 $ 1,777 $ 5,863 1%
2008 423 12,541 3,532 16,496 4%
2009 930 7,439 3,227 11,596 2%
2010 578 9,886 2,500 12,964 3%
2011 6,921 8,061 1,478 16,460 4%
Thereafter 336,756 53,164 13,793 403,713 86%
-----------------------------------------------------------
Totals $ 346,575 $ 94,210 $ 26,307 $ 467,092 100%
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 ($000's) Exhibit 6
-------------------------------------------------------
Trust
Secured Preferred
Senior Debt Liability
Year Line of Credit Notes (1) (1) (1) Total
----------------------------------------------------------------------
2007 $ 0 $ 0 $ 2,133 $51,000(2) $ 53,133
2008 0 42,330 27,719 0 70,049
2009 0 0 53,541 0 53,541
2010 0 0 15,230 0 15,230
2011 145,000 0 52,371 0 197,371
2012 0 250,000 23,809 0 273,809
2013 0 300,000 52,237 0 352,237
Thereafter 0 1,295,000 284,996 0 1,579,996
----------------------------------------------------------------------
Totals $145,000 $1,887,330 $512,036 $51,000 $2,595,366
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.
(2) Trust preferred securities were repurchased on November 6,
2007.
Fill-Up Concentrations ($000's) Exhibit 7
-------------------------------------------
# Investment %
Facility Type Properties # Beds/Units Balance Investment
-------------------------------------------------
Independent/
CCRCs 9 1,615 $230,121 5%
Assisted Living
Facilities 19 1,093 152,958 3%
Skilled Nursing
Facilities 9 1,067 81,439 2%
Specialty Care
Facilities 1 62 15,235 0%
-------------------------------------------------
Totals 38 3,837 $479,753 10%
# Average Months Revenues
Occupancy Properties in Operation (1) % Revenues
-------------------------------------------------
0% - 50% 7 4 $ 1,012 1%
50% - 70% 11 7 2,178 2%
70% + 20 14 6,910 6%
-------------------------------------------------
Totals 38 10 $ 10,100 8%
Notes:(1) Revenues include gross revenues and revenues from
discontinued operations for the three months ended
September 30, 2007.
Investment Activity ($000's) Exhibit 8
--------------------------------
Three Months Ended Nine Months Ended
September 30, 2007 September 30, 2007
------------------ ------------------
Funding by Investment Type
Real Property $198,811 86% $769,210 86%
Loans Receivable 31,205 14% 122,596 14%
------------------ ------------------
Totals $230,016 100% $891,806 100%
Funding by Facility Type
Independent/CCRCs $ 95,609 42% $168,450 19%
Assisted Living Facilities 15,503 7% 72,896 8%
Skilled Nursing Facilities 33,451 15% 193,914 22%
Medical Office Buildings 55,549 24% 375,852 42%
Specialty Care Facilities 29,904 12% 80,694 9%
------------------ ------------------
Totals $230,016 100% $891,806 100%
Development Activity ($000's) Exhibit 9
-----------------------------------
Balance
at Balance at
Dec. 31, 2007 YTD 2007 YTD Sept. 30, Committed
Facility Type 2006 Fundings Conversions 2007 Balances
------------- --------- ----------- ----------- ---------- -----------
Independent/
CCRCs $ 61,709 $ 83,414 $(24,496) $ 120,627 $464,456
Assisted
Living
Facilities 55,197 35,132 (56,556) 33,773 156,255
Skilled
Nursing
Facilities 14,852 15,427 (16,557) 13,722 27,393
Medical
Office
Buildings 0 10,405 0 10,405 83,638
Specialty
Care
Facilities 6,464 44,143 0 50,607 90,820
--------- ----------- ----------- ---------- ---------
Totals $ 138,222 $188,521 $(97,609) $ 229,134 $822,562
Development Funding Projections for Existing Projects ($000's)
--------------------------------------------------------------------
Projected Future
Fundings
----------------------
#
Beds/Units 2007 Fundings Unfunded
Facility Type Projects or Sq. Ft. Fundings Thereafter Commitments
------------- --------- ----------- ----------- ---------- -----------
Independent/
CCRCs 12 1,746 $ 35,531 $ 308,298 $343,829
Assisted
Living
Facilities 7 772 7,398 115,084 122,482
Skilled
Nursing
Facilities 2 193 1,650 12,021 13,671
Medical
Office
Buildings 1 234,221 0 73,233 73,233
Specialty
Care
Facilities 5 258 10,376 29,837 40,213
--------- ----------- ---------- ---------
Totals 27 $ 54,955 $ 538,473 $593,428
Project Conversion Projections ($000's)
-----------------------------------------------
2007 Quarterly Conversions Annual Projections
---------------------------------- ----------------------------------
Projected
Projected Average
Average Initial
Initial Yields
Quarter Amount Yields (1) Year Amount (1)
------------ --------- ----------------------- ---------- -----------
2007
1Q07 actual $ 6,921 9.06% projected $ 170,394 9.33%
2008
2Q07 actual 67,300 9.35% projected 270,443 9.22%
2009
3Q07 actual 23,388 9.36% projected 128,725 9.91%
4Q07 2010+
projected 72,785 9.33% projected 350,609 9.37%
--------- ----------- ---------- ---------
Totals $ 170,394 9.33% Totals $ 920,171 9.43%
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 Nine Months Ended
September 30, 2007 September 30, 2007
------------------ ------------------
Dispositions by Investment
Type
Real Property $40,992 83% $ 63,165 62%
Loans Receivable 8,229 17% 38,095 38%
------------------ ------------------
Totals $49,221 100% $101,260 100%
Dispositions by Facility
Type
Assisted Living Facilities $40,992 83% $ 68,467 68%
Skilled Nursing Facilities 8,229 17% 15,607 15%
Independent/CCRCs 17,186 17%
------------------ ------------------
Totals $49,221 100% $101,260 100%
Discontinued Operations ($000's) Exhibit 11
----------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2007 2006 2007 2006
--------- -------- -------- --------
Revenues
Rental income $ 900 $ 2,976 $ 4,387 $ 9,924
Expenses
Interest expense 213 984 1,138 3,117
Depreciation and amortization 204 1,579 1,111 5,078
General and administrative 0 212 0 729
--------- -------- -------- --------
Income (loss) from discontinued
operations, net $ 483 $ 201 $ 2,138 $ 1,000
Exhibit 12
Current Capitalization ($000's except Leverage & Performance
share price) Ratios
----------------------------------------- ----------------------------
Balance % Balance
--------------------
Borrowings Under Bank
Lines $ 145,000 3% Debt/Total Book Cap 53%
Long-Term Debt
Obligations 2,403,402 49%
Trust Preferred Debt/Undepreciated
Liability 52,184 1% Book Cap 49%
Stockholders' Equity 2,260,684 47%
--------------------
Total Book Debt/Total Market
Capitalization $4,861,270 100% Cap 40%
Common Shares Interest 2.81x 3rd Qtr.
Outstanding (000's) 81,384 Coverage
Period-End Share 2.82x YTD
Price $ 44.24
----------
Common Stock Market Interest 2.85x 3rd Qtr.
Value $3,600,428 55% Coverage
Preferred Stock 338,993 5% - adjusted 2.87x YTD
Borrowings Under Bank Fixed Charge 2.31x 3rd Qtr.
Lines 145,000 2% Coverage
Trust Preferred 2.30x YTD
Liability 52,184 1%
Long-Term Debt Fixed Charge 2.34x 3rd Qtr.
Obligations 2,403,402 37% Coverage
--------------------
Total Market - adjusted 2.34x YTD
Capitalization $6,540,007 100%
EBITDA Reconciliation ($000's) Exhibit 13
-------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2007 2006 2007 2006
---------- -------- --------- ---------
Net income $ 30,846 $26,813 $ 92,456 $ 79,791
Interest expense (1) 35,082 24,274 100,708 71,599
Tax expense (benefit) (23) 70 (81) 82
Depreciation and
amortization (1) 40,137 24,526 109,545 71,917
Amortization of deferred
loan expenses 1,504 782 4,006 2,199
---------- -------- --------- ---------
EBITDA 107,546 76,465 306,634 225,588
Stock-based
compensation
expense 1,301 839 5,753 4,191
Provision for loan losses 0 250 0 750
---------- -------- --------- ---------
EBITDA - adjusted $108,847 $77,554 $312,387 $230,529
Interest Coverage Ratio
Interest expense (1) $ 35,082 $24,274 $100,708 $ 71,599
Capitalized interest 3,162 1,384 8,058 2,494
---------- -------- --------- ---------
Total interest 38,244 25,658 108,766 74,093
EBITDA $107,546 $76,465 $306,634 $225,588
---------- -------- --------- ---------
Interest coverage ratio 2.81x 2.98x 2.82x 3.04x
EBITDA - adjusted $108,847 $77,554 $312,387 $230,529
---------- -------- --------- ---------
Interest coverage ratio -
adjusted 2.85x 3.02x 2.87x 3.11x
Fixed Charge Coverage
Ratio
Total interest (1) $ 38,244 $25,658 $108,766 $ 74,093
Secured debt principal
amortization 2,022 773 5,816 2,184
Preferred dividends 6,317 5,333 18,952 15,998
---------- -------- --------- ---------
Total fixed charges 46,583 31,764 133,534 92,275
EBITDA $107,546 $76,465 $306,634 $225,588
---------- -------- --------- ---------
Fixed charge coverage
ratio 2.31x 2.41x 2.30x 2.44x
EBITDA - adjusted $108,847 $77,554 $312,387 $230,529
---------- -------- --------- ---------
Fixed charge coverage
ratio - adjusted 2.34x 2.44x 2.34x 2.50x
Notes: (1) Depreciation and amortization and interest expense include
depreciation and amortization and interest expense from
discontinued operations.
Exhibit 14
Funds Available For Distribution Reconciliation
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income available to common
stockholders $24,529 $21,480 $ 73,504 $ 63,793
Depreciation and amortization
(1) 40,137 24,526 109,545 71,917
Loss (gain) on sales of
properties (766) (108) (2,775) (2,590)
Minority interests 85 0 (2) 0
Gross straight-line rental
income (4,555) (1,904) (12,664) (6,520)
Prepaid/straight-line rent
receipts 5,881 3,256 10,791 16,276
Amortization related to
above/(below) market
leases, net 268 0 (656) 0
Amortization of deferred loan
expenses 1,504 782 4,006 2,199
Cap Ex, tenant improvements,
lease commissions (704) 0 (2,529) 0
--------- -------- --------- ---------
Funds available for distribution 66,379 48,032 179,220 145,075
One-time acquisition finder's
fees 0 0 1,750 0
Prepaid/straight-line rent
receipts (5,881) (3,256) (10,791) (16,276)
--------- -------- --------- ---------
Funds available for
distribution - normalized $60,498 $44,776 $170,179 $128,799
Average common shares
outstanding:
Basic 80,710 62,524 77,686 60,766
Diluted 81,163 62,866 78,234 61,102
Per share data:
Net income available to common
stockholders
Basic $ 0.30 $ 0.34 $ 0.95 $ 1.05
Diluted 0.30 0.34 0.94 1.04
Funds available for distribution
Basic $ 0.82 $ 0.77 $ 2.31 $ 2.39
Diluted 0.82 0.76 2.29 2.37
Funds available for
distribution - normalized
Basic $ 0.75 $ 0.72 $ 2.19 $ 2.12
Diluted 0.75 0.71 2.18 2.11
FAD Payout Ratio
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.96 $ 1.90
FAD per diluted share $ 0.82 $ 0.76 $ 2.29 $ 2.37
--------- -------- --------- ---------
FAD payout ratio 80% 84% 86% 80%
FAD Payout Ratio - Normalized
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.96 $ 1.90
FAD per diluted share -
normalized $ 0.75 $ 0.71 $ 2.18 $ 2.11
--------- -------- --------- ---------
FAD payout ratio - normalized 88% 90% 90% 90%
Notes: (1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
(2) Includes $0.3409 prorated dividend paid on December 28,
2006 in connection with the Windrose merger.
Funds From Operations Reconciliation Exhibit 15
-----------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income available to common
stockholders $24,529 $21,480 $ 73,504 $ 63,793
Depreciation and amortization
(1) 40,137 24,526 109,545 71,917
Loss (gain) on sales of
properties (766) (108) (2,775) (2,590)
Minority interests (70) 0 (256) 0
--------- -------- --------- ---------
Funds from operations $63,830 $45,898 $180,018 $133,120
One-time acquisition finder's
fees 0 0 1,750 0
--------- -------- --------- ---------
Funds from operations -
normalized $63,830 $45,898 $181,768 $133,120
Average common shares
outstanding:
Basic 80,710 62,524 77,686 60,766
Diluted 81,163 62,866 78,234 61,102
Per share data:
Net income available to common
stockholders
Basic $ 0.30 $ 0.34 $ 0.95 $ 1.05
Diluted 0.30 0.34 0.94 1.04
Funds from operations
Basic $ 0.79 $ 0.73 $ 2.32 $ 2.19
Diluted 0.79 0.73 2.30 2.18
Funds from operations -
normalized
Basic $ 0.79 $ 0.73 $ 2.34 $ 2.19
Diluted 0.79 0.73 2.32 2.18
FFO Payout Ratio
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.96 $ 1.90
FFO per diluted share $ 0.79 $ 0.73 $ 2.30 $ 2.18
--------- -------- --------- ---------
FFO payout ratio 84% 88% 85% 87%
FFO Payout Ratio - Normalized
Dividends per share (2) $ 0.66 $ 0.64 $ 1.96 $ 1.90
FFO per diluted share -
normalized $ 0.79 $ 0.73 $ 2.32 $ 2.18
--------- -------- --------- ---------
FFO payout ratio - normalized 84% 88% 84% 87%
Notes:(1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
(2) Includes $0.3409 prorated dividend paid on December 28, 2006
in connection with the Windrose merger.
Outlook Reconciliations Exhibit 16
------------------------------
(Amounts in 000's except per
share data)
Previous Outlook Current Outlook
Year Ended Year Ended
December 31, 2007 December 31, 2007
----------------------------------------
Low High Low High
--------- --------- --------- ---------
FFO Reconciliation:
------------------------------
Net income available to
common stockholders $101,610 $106,410 $101,825 $103,425
Loss (gain) on sales of
properties (2,010) (2,010) (2,775) (2,775)
Depreciation and amortization
(1) 146,000 146,000 148,000 148,000
--------- --------- --------- ---------
Funds from operations 245,600 250,400 247,050 248,650
One-time acquisition finders'
fees 1,750 1,750 1,750 1,750
--------- --------- --------- ---------
Funds from operations -
normalized $247,350 $252,150 $248,800 $250,400
Average common shares
outstanding (diluted) 80,000 80,000 80,000 80,000
Per share data (diluted):
Net income available to
common stockholders $ 1.27 $ 1.33 $ 1.27 $ 1.29
Funds from operations 3.07 3.13 3.09 3.11
Funds from operations -
normalized 3.09 3.15 3.11 3.13
FAD Reconciliation:
------------------------------
Net income available to
common stockholders $101,610 $106,410 $101,825 $103,425
Loss (gain) on sales of
properties (2,010) (2,010) (2,775) (2,775)
Depreciation and amortization
(1) 146,000 146,000 148,000 148,000
Gross straight-line rental
income (16,000) (16,000) (17,000) (17,000)
Prepaid/straight-line rent
receipts 4,910 4,910 10,791 10,791
Amortization related to
above/below market leases (2,000) (2,000) (1,000) (1,000)
Amortization of deferred loan
expenses 6,000 6,000 6,000 6,000
Cap Ex, tenant improvements,
lease commissions (6,000) (6,000) (5,000) (5,000)
--------- --------- --------- ---------
Funds available for
distribution 232,510 237,310 240,841 242,441
One-time acquisition finders'
fees 1,750 1,750 1,750 1,750
Prepaid/straight-line rent
receipts (4,910) (4,910) (10,791) (10,791)
--------- --------- --------- ---------
Funds available for
distribution - normalized $229,350 $234,150 $231,800 $233,400
Average common shares
outstanding (diluted) 80,000 80,000 80,000 80,000
Per share data (diluted):
Net income available to
common stockholders $ 1.27 $ 1.33 $ 1.27 $ 1.29
Funds available for
distribution 2.91 2.97 3.01 3.03
Funds available for
distribution - normalized 2.87 2.93 2.90 2.92
Notes:(1) Depreciation and amortization includes depreciation and
amortization from discontinued operations.
CONTACT: Health Care REIT, Inc.
Scott Estes, 419-247-2800
Mike Crabtree, 419-247-2800
SOURCE: Health Care REIT, Inc.