TOLEDO, Ohio, Aug 07, 2007 (BUSINESS WIRE) -- Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its second quarter ended June 30, 2007.
Recent Highlights.
- Completed net new investments year-to-date totaling $610 million
- Acquired 17 medical office buildings and Paramount Real Estate Services for approximately $292 million during the second quarter
- Reported 2Q07 normalized FFO growth of 5%
- Issued $400 million of 4.75% convertible senior unsecured notes in July
- Received debt upgrade to BBB from Fitch Ratings
- Expanded and extended existing unsecured lines of credit to $1.15 billion
Key Performance Indicators.
2Q07 2Q06 Change 2007 2006 Change
----------------------------------------------------------------------
Net income available to common
stockholders (NICS) per diluted
share $0.32 $0.37 -14% $0.64 $0.70 -9%
----------------------------------------------------------------------
Normalized FFO per diluted share $0.78 $0.74 5% $1.54 $1.45 6%
----------------------------------------------------------------------
Normalized FAD per diluted share $0.73 $0.72 1% $1.43 $1.40 2%
----------------------------------------------------------------------
Dividends per common share $0.66 $0.64 3% $1.30 $1.26 3%
----------------------------------------------------------------------
Normalized FFO Payout Ratio 85% 86% 84% 87%
----------------------------------------------------------------------
Normalized FAD Payout Ratio 90% 89% 91% 90%
----------------------------------------------------------------------
2Q07 Earnings. The following table summarizes certain items impacting NICS, FFO and FAD:
NICS FFO
------------------------------------------
2Q07 2Q06 Change 2Q07 2Q06 Change
----------------------------------------------------------------------
Per diluted share $0.32 $0.37 -14% $0.75 $0.74 1%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of
real property (1) $0.01 $0.02 -50%
----------------------------------------------------------------------
One-time acquisition
finders' fees (2) ($0.02) ($0.02)
----------------------------------------------------------------------
Cash receipts -
prepaid/straight-line
rent (3)
----------------------------------------------------------------------
Per diluted share -
normalized (a) $0.78 $0.74 5%
----------------------------------------------------------------------
FAD
----------------------------------------
2Q07 2Q06 Change
----------------------------------------------------------------------
Per diluted share $0.74 $0.76 -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) $0.04 $0.04 0%
----------------------------------------------------------------------
Per diluted share - normalized
(a) $0.73 $0.72 1%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $1,033,000 and $929,000 of gains for 2Q07 and 2Q06,
respectively.
(2) $1,750,000 of one-time acquisition finders' fees for 2Q07.
(3) $2,832,000 and $2,710,000 of receipts for 2Q07 and 2Q06,
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 $0.64 $0.70 -9% $1.51 $1.45 4%
----------------------------------------------------------------------
Includes impact of:
----------------------------------------------------------------------
Gain (loss) on sales of
real property (1) $0.03 $0.04 -25%
----------------------------------------------------------------------
One-time acquisition
finders' fees (2) ($0.02) ($0.02)
----------------------------------------------------------------------
Cash receipts -
prepaid/straight-line
rent (3)
----------------------------------------------------------------------
Per diluted share -
normalized (a) $1.54 $1.45 6%
----------------------------------------------------------------------
FAD
--------------------
2007 2006 Change
----------------------------------------------------------------------
Per diluted share $1.47 $1.61 -9%
----------------------------------------------------------------------
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)$0.06 $0.22 -73%
----------------------------------------------------------------------
Per diluted share - normalized (a) $1.43 $1.40 2%
----------------------------------------------------------------------
(a) Amounts may not sum due to rounding
(1) $2,010,000 and $2,482,000 of gains for 2007 and 2006,
respectively.
(2) $1,750,000 of one-time acquisition finders' fees for 2007.
(3) $4,910,000 and $13,020,000 of receipts for 2007 and 2006,
respectively.
Dividends for Second Quarter 2007. As previously announced, the Board of Directors declared a dividend for the quarter ended June 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 August 20, 2007 to stockholders of record on August 3, 2007 and will be the company's 145th consecutive dividend payment.
Outlook for 2007. The company is affirming its investment guidance of $1.0 billion to $1.2 billion for 2007. Acquisition guidance has been increased to a range of $750 to $950 million from $700 to $800 million, while development funding is now projected to be approximately $250 million versus the prior range of $300 to $400 million. The decline in funded development projection is due to estimated timing of fundings as the company's overall development pipeline remains strong. In addition, the company expects $100 to $200 million of dispositions, resulting in net investments of $800 million to $1.1 billion.
The company is adjusting its 2007 guidance for net income available to common stockholders to a range of $1.27 to $1.33 per diluted share from $1.18 to $1.26 per diluted share primarily due to the increase in acquisition guidance, expected interest savings from the $400 million convertible debt offering completed in July 2007, a reduction in projected depreciation and amortization to $146 million from $151 million and $1.0 million in gains on sales of real property in the second quarter. The company is increasing its 2007 normalized FFO guidance to a range of $3.09 to $3.15 per diluted share, from $3.06 to $3.14 per diluted share primarily due to the increase in acquisition guidance and the interest savings noted above. The company is increasing its 2007 FAD guidance to a range of $2.91 to $2.97 per diluted share, from $2.82 to $2.90 per diluted share primarily due to the increase in acquisition guidance, the interest savings noted above, cash receipts during the second quarter of $2.8 million and a reduction in expected capital expenditures, tenant improvements and lease commissions totaling $6 million from $7 million, offset in part by the $1.75 million in one-time acquisition finders' fees paid during the second quarter.
FFO and FAD for the quarter ended June 30, 2007 have been adjusted for $1.75 million of one-time acquisition finders' fees paid to former Windrose management in connection with the closing of the Rendina/Paramount transaction. These fees relate to services rendered prior to the completion of the Windrose merger in December 2006. Due to the recipients' current employment status with the company, the fees have been expensed as compensation rather than included in the purchase price of the acquisition, as is typical with such fees. These fees are excluded from the company's normalized FFO guidance for 2007.
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, August 8, 2007 at 9:00 a.m. Eastern Time to discuss its second quarter results, industry trends, portfolio performance and outlook for 2007. Telephone access will be available by dialing 800-811-8845 or 913-981-4905 (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 August 22, 2007. To access the rebroadcast, dial 888-203-1112 or 719-457-0820 (international). The conference ID number is 2934492. 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 a self-administered, 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. As of June 30, 2007, the company's broadly diversified portfolio consisted of 617 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)
June 30,
-------------------------
2007 2006
-------------------------
Assets
Real estate investments:
Real property owned
Land and land improvements $ 403,460 $ 270,810
Buildings and building improvements 4,086,599 2,758,358
Acquired lease intangibles 136,589 0
Real property held for sale, net of
accumulated depreciation 24,520 0
Construction in progress 173,408 75,822
------------ ------------
4,824,576 3,104,990
Less accumulated depreciation and
intangible amortization (414,628) (317,869)
------------ ------------
Total real property owned 4,409,948 2,787,121
Loans receivable 250,238 178,282
Less allowance for losses on loans receivable (7,406) (6,961)
------------ ------------
242,832 171,321
------------ ------------
Net real estate investments 4,652,780 2,958,442
Other assets:
Equity investments 4,700 5,070
Deferred loan expenses 19,036 11,523
Cash and cash equivalents 38,472 15,200
Receivables and other assets 109,816 71,877
------------ ------------
172,024 103,670
------------ ------------
Total assets $ 4,824,804 $ 3,062,112
============ ============
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of
credit arrangements $ 364,400 $ 146,000
Senior unsecured notes 1,539,155 1,193,355
Secured debt 500,811 131,178
Liability to subsidiary trust issuing
preferred securities 52,195 0
Accrued expenses and other liabilities 98,545 45,641
------------ ------------
Total liabilities 2,555,106 1,516,174
Minority interests 2,294 0
Stockholders' equity:
Preferred stock 338,993 276,875
Common stock 80,752 62,446
Capital in excess of par value 2,181,830 1,450,531
Treasury stock (3,941) (2,714)
Cumulative net income 994,463 883,082
Cumulative dividends (1,327,018) (1,125,810)
Accumulated other comprehensive
income (135) 0
Other equity 2,460 1,528
------------ ------------
Total stockholders' equity 2,267,404 1,545,938
------------ ------------
Total liabilities and stockholders' equity $ 4,824,804 $ 3,062,112
============ ============
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2007 2006 2007 2006
--------- -------- ---------- --------
Revenues:
Rental income $111,532 $71,757 $216,670 $142,396
Interest income 6,576 4,480 11,725 8,742
Other income 1,144 1,665 2,737 2,030
--------- ------- --------- --------
Gross revenues 119,252 77,902 231,132 153,168
Expenses:
Interest expense 33,457 22,325 65,138 45,597
Property operating expenses 8,657 0 15,825 0
Depreciation and
amortization 35,341 22,788 68,995 44,407
General and administrative
expenses 9,888 4,798 19,680 10,773
Loan expense 1,236 707 2,503 1,418
Provision for loan losses 0 250 0 500
--------- ------- --------- --------
Total expenses 88,579 50,868 172,141 102,695
--------- ------- --------- --------
Income from continuing
operations before minority
interests 30,673 27,034 58,991 50,473
Minority interests (161) 0 (286) 0
--------- ------- --------- --------
Income from continuing
operations 30,512 27,034 58,705 50,473
Discontinued operations:
Gain (loss) on sales of
properties 1,033 929 2,010 2,482
Income (loss) from
discontinued operations,
net 392 38 895 24
--------- ------- --------- --------
1,425 967 2,905 2,506
--------- ------- --------- --------
Net income 31,937 28,001 61,610 52,979
Preferred dividends 6,317 5,333 12,634 10,666
--------- ------- --------- --------
Net income available to common
stockholders $ 25,620 $22,668 $ 48,976 $ 42,313
========= ======= ========= ========
Average number of common
shares outstanding:
Basic 79,060 61,548 76,159 59,871
Diluted 79,546 61,868 76,714 60,201
Net income available to common
stockholders per share:
Basic $ 0.32 $ 0.37 $ 0.64 $ 0.71
Diluted 0.32 0.37 0.64 0.70
Common dividends per share $ 0.66 $ 0.64 $ 0.9591 $ 1.26
HEALTH CARE REIT, INC.
Financial Supplement - June 30, 2007
Portfolio Composition Exhibit 1
------------------------
($000's except Investment per Bed/Unit/Sq. Ft.)
Balance Sheet #
Data Properties Balance % Balance
---------------------------------------------------------
Real
Property 585 $4,409,948 95%
Loans
Receivable
(1) 32 250,238 5%
---------------------------------------------------------
Totals 617 $4,660,186 100%
Investment # Investment
Balances Properties (2) % Investment
---------------------------------------------------------
Independent/
CCRCs 50 $ 588,241 13%
Assisted
Living
Facilities 206 1,032,430 22%
Skilled
Nursing
Facilities 232 1,535,795 33%
Medical
Office
Buildings 109 1,202,284 26%
Specialty
Care
Facilities 20 303,886 6%
---------------------------------------------------------
Totals 617 $4,662,636 100%
# Committed
Committed # Beds/Units Balance Investment
Investments Properties or Sq. Ft. (3) per metric
---------------------------------------------------------
Independent/
CCRCs 50 6,037 units $ 876,957 $145,264 unit
Assisted
Living
Facilities 206 12,516 units 1,132,955 90,521 unit
Skilled
Nursing
Facilities 232 31,446 beds 1,542,352 49,048 bed
Medical
Office
Buildings 109 4,275,776 sq. ft. 1,202,284 281 sq. ft.
Specialty
Care
Facilities 20 1,508 beds 339,200 224,934 bed
---------------------------------------------------------
Totals 617 -na- $5,093,748 -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
$4,660,186,000 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% 1.42x 1.22x
Assisted Living
Facilities 88% 85% 0% 15% 1.59x 1.38x
Skilled Nursing
Facilities 85% 19% 30% 51% 2.20x 1.58x
Medical Office
Buildings 91% 100% 0% 0% -na- -na-
Specialty Care
Facilities 60% 21% 61% 18% 2.64x 2.09x
--------------------
Weighted Averages 1.96x 1.52x
Notes: Data as of March 31, 2007. Payor mix represents percentage
of facility/operator revenues.
Investment Concentrations ($000's) Exhibit 3
------------------------------------------
Concentration by Customer # Properties Investment % Investment
-------------- ------------- ------------
Emeritus Corporation 50 $ 350,273 8%
Brookdale Senior Living
Inc. 87 279,699 6%
Life Care Centers of
America, Inc. 26 252,144 5%
Home Quality Management,
Inc. 35 229,039 5%
Merrill Gardens L.L.C. 13 180,490 4%
Remaining portfolio 406 3,370,991 72%
-------------- ------------- ------------
Totals 617 $4,662,636 100%
Concentration by Region # Properties Investment % Investment
-------------- ------------- ------------
South 378 $2,506,404 54%
West 87 886,444 19%
Midwest 81 704,372 15%
Northeast 71 565,416 12%
-------------- ------------- ------------
Totals 617 $4,662,636 100%
Concentration by State # Properties Investment % Investment
-------------- ------------- ------------
Florida 90 $ 733,707 16%
Texas 79 614,743 13%
California 24 344,779 7%
Massachusetts 37 326,399 7%
Ohio 31 272,884 6%
Remaining portfolio 356 2,370,124 51%
-------------- ------------- ------------
Totals 617 $4,662,636 100%
NOI Reconciliation ($000's) Exhibit 4
-------------------------------------
Gross Property Net
Revenues Operating Operating
(1) Expenses Income
---------- ----------- -----------
Current Quarter
Independent/CCRCs $ 10,914 9% $ 10,914 10%
Assisted Living
Facilities 26,287 22% 26,287 24%
Skilled Nursing
Facilities 47,964 40% 47,964 43%
Medical Office
Buildings 26,289 22% $ 8,597 99% 17,692 16%
Specialty Care
Facilities 7,419 6% 60 1% 7,359 7%
Other income 1,144 1% 1,144 0%
-------------- --------------- ---------------
Totals $120,017 100% $ 8,657 100% $111,360 100%
Year-To-Date
Independent/CCRCs $ 21,137 9% $ 21,137 10%
Assisted Living
Facilities 52,815 23% 52,815 24%
Skilled Nursing
Facilities 91,458 39% 91,458 42%
Medical Office
Buildings 50,076 21% $15,748 100% 34,328 16%
Specialty Care
Facilities 14,703 6% 77 0% 14,626 7%
Other income 2,737 2% 2,737 1%
-------------- --------------- ---------------
Totals $232,926 100% $15,825 100% $217,101 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
Revenue Maturities ($000's) Exhibit 5
------------------------------------
Investment Operating
Properties Properties Interest
Rental Rental Income Total % of
Year Income (1) Income (1) (1) Revenues Total
----------------------------------------------------------------------
2007 $ 2,525 $ 5,543 $ 2,364 $ 10,432 2%
2008 367 11,738 2,272 14,377 3%
2009 939 7,475 2,435 10,849 2%
2010 578 7,833 3,744 12,155 3%
2011 7,251 7,098 400 14,749 3%
Thereafter 318,630 50,273 11,136 380,039 87%
-----------------------------------------------
Totals $330,290 $89,960 $22,351 $442,601 100%
Notes: (1) Revenue impact by year, annualized.
Debt Maturities and Principal Payments Exhibit 6
($000's)
-------------------------------------------
Trust
Lines of Senior Secured Preferred
Year Credit (1) Notes (2) Debt (2) Liability (2) Total
----------------------------------------------------------------------
2007 $ 0 $ 52,500 $ 4,070 $ 0 $ 56,570
2008 14,400 42,330 27,456 0 84,186
2009 350,000 0 53,260 0 403,260
2010 0 0 14,933 0 14,933
2011 0 0 52,056 0 52,056
2012 0 250,000 23,478 0 273,478
2013 0 300,000 51,884 0 351,884
Thereafter 0 895,000 273,298 51,000 1,219,298
------------------------------------------------------------
Totals $ 364,400 $1,539,830 $500,435 $ 51,000 $2,455,665
Notes: (1) Subsequent to June 30, 2007, the lines of credit have
been combined and the maturity extended to 2011.
(2) 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 Exhibit 7
($000's)
-----------------------------
Investment
Facility Type # Properties # Beds/Units Balance % Investment
------------ -------------- ---------- --------------
Independent/
CCRCs 8 1,549 $192,183 4%
Assisted Living
Facilities 18 1,040 153,728 3%
Skilled Nursing
Facilities 11 1,229 82,848 2%
Specialty Care
Facilities 1 62 13,266 0%
-----------------------------------------------------
Totals 38 3,880 $442,025 9%
Occupancy Average Months Revenues
# Properties in Operation (1) % Revenues
------------ -------------- ---------- --------------
0% - 50% 12 4 $ 2,376 1%
50% - 70% 3 7 1,561 1%
70% + 23 13 12,992 6%
-----------------------------------------------------
Totals 38 9 $ 16,929 7%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations for the six months ended
June 30, 2007.
Investment Activity ($000's) Exhibit 8
----------------------------
Three Months Ended Six Months Ended
June 30, 2007 June 30, 2007
------------------ ------------------
Funding by Investment Type
Real Property $407,169 97% $570,399 86%
Loans Receivable 10,964 3% 91,391 14%
---------- ------ ---------- ------
Totals $418,133 100% $661,790 100%
Funding by Facility Type
Independent/CCRCs $ 40,036 10% $ 72,841 11%
Assisted Living Facilities 15,042 4% 57,393 9%
Skilled Nursing Facilities 14,294 3% 160,463 24%
Medical Office Buildings 312,304 75% 320,302 48%
Specialty Care Facilities 36,457 8% 50,791 8%
---------- ------ ---------- ------
Totals $418,133 100% $661,790 100%
Development Activity ($000's) Exhibit 9
----------------------------------
Balance
at Balance at
December 2007 YTD 2007 YTD June 30, Committed
Facility Type 31, 2006 Fundings Conversions 2007 Balances
------------- --------- ---------- ------------ ---------- -----------
Independent/
CCRCs $ 61,709 $ 47,125 $(23,857) $ 84,977 $ 373,693
Assisted
Living
Facilities 55,197 27,061 (42,454) 39,804 140,329
Skilled
Nursing
Facilities 14,852 7,849 (7,910) 14,791 21,348
Specialty
Care
Facilities 6,464 27,372 0 33,836 69,150
--------- ---------- ------------ ---------- -----------
Totals $ 138,222 $109,407 $(74,221) $ 173,408 $ 604,520
Development Funding Projections for Existing
Projects ($000's)
-----------------------------------------------
Projected Future
Fundings
-----------------------
# 2007 Fundings Unfunded
Facility Type Projects Beds/Units Fundings Thereafter Commitments
------------- --------- ---------- ------------ ---------- -----------
Independent/
CCRCs 9 1,343 $ 54,742 $ 233,974 $ 288,716
Assisted
Living
Facilities 8 869 17,023 83,502 100,525
Skilled
Nursing
Facilities 2 175 5,643 914 6,557
Specialty
Care
Facilities 4 212 25,159 10,155 35,314
--------- ---------- ------------ ---------- -----------
Totals 23 2,599 $102,567 $ 328,545 $ 431,112
Project Conversion Projections ($000's)
-----------------------------------------------
2007 Quarterly Conversions Annual Projections
---------------------------------- -----------------------------------
Projected
Average Projected
Initial Average
Yields Initial
Quarter Amount (1) Year Amount Yields (1)
------------- --------- ---------- ------------ ---------- -----------
2007
1Q07 actual $ 6,921 9.06% projected $ 163,936 9.31%
2008
2Q07 actual 67,300 9.35% projected 232,336 9.39%
3Q07 2009
projected 16,630 9.63% projected 111,319 10.00%
4Q07 2010
projected 73,085 9.23% projected 171,150 9.77%
--------- ---------- ---------- -----------
Totals $ 163,936 9.31% Totals $ 678,741 9.57%
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 Six Months Ended
June 30, 2007 June 30, 2007
------------------ ----------------
Dispositions by Investment Type
Real Property $11,613 43% $22,173 43%
Loans Receivable 15,683 57% 29,865 57%
----------- ------ --------- ------
Totals $27,296 100% $52,038 100%
Dispositions by Facility Type
Assisted Living Facilities $ 5,140 19% $27,475 53%
Skilled Nursing Facilities 7,377 27% 7,377 14%
Independent/CCRCs 14,779 54% 17,186 33%
----------- ------ --------- ------
Totals $27,296 100% $52,038 100%
Discontinued Operations ($000's) Exhibit 11
---------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
2007 2006 2007 2006
--------- --------- -------- --------
Revenues
Rental income $ 765 $ 2,434 $ 1,794 $ 5,255
Expenses
Interest expense 167 762 486 1,728
Depreciation and amortization 206 1,343 413 2,985
General and administrative 0 291 0 518
--------- --------- -------- --------
Income (loss) from discontinued
operations, net $ 392 $ 38 $ 895 $ 24
Exhibit 12
Current Capitalization ($000's except Leverage & Performance
share price) Ratios
------------------------------------------ ---------------------------
Balance % Balance
--------------------
Borrowings Under Bank Debt/Total
Lines $ 364,400 8% Book Cap 52%
Long-Term Debt
Obligations 2,039,966 43%
Trust Preferred Debt/Undepreciated
Liability 52,195 1% Book Cap 48%
Stockholders' Equity 2,267,404 48%
--------------------
Total Book Debt/Total
Capitalization $4,723,965 100% Market Cap 41%
Common Shares Interest
Outstanding (000's) 80,882 Coverage 2.83x 2nd Qtr.
Period-End Share
Price $ 40.36 2.82x YTD
----------
Common Stock Market Interest
Value $3,264,398 54% Coverage 2.86x 2nd Qtr.
Preferred Stock 338,993 5% - adjusted 2.89x YTD
Borrowings Under Bank Fixed Charge
Lines 364,400 6% Coverage 2.30x 2nd Qtr.
Trust Preferred
Liability 52,195 1% 2.29x YTD
Long-Term Debt Fixed Charge
Obligations 2,039,966 34% Coverage 2.33x 2nd Qtr.
--------------------
Total Market - adjusted 2.34x YTD
Capitalization $6,059,952 100%
EBITDA Reconciliation ($000's) Exhibit 13
------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income $ 31,937 $28,001 $ 61,610 $ 52,979
Interest expense (1) 33,624 23,087 65,624 47,325
Tax expense (benefit) (69) 12 (58) 12
Depreciation and
amortization (1) 35,547 24,131 69,408 47,392
Amortization of deferred
loan expenses 1,236 707 2,503 1,418
--------- -------- --------- ---------
EBITDA 102,275 75,938 199,087 149,126
Stock-based compensation
expense 1,276 838 4,453 3,351
Provision for loan losses 0 250 0 500
--------- -------- --------- ---------
EBITDA - adjusted $103,551 $77,026 $203,540 $152,977
Interest Coverage Ratio
Interest expense (1) $ 33,624 $23,087 $ 65,624 $ 47,325
Capitalized interest 2,570 909 4,896 1,111
--------- -------- --------- ---------
Total interest 36,194 23,996 70,520 48,436
EBITDA $102,275 $75,938 $199,087 $149,126
--------- -------- --------- ---------
Interest coverage ratio 2.83x 3.16x 2.82x 3.08x
EBITDA - adjusted $103,551 $77,026 $203,540 $152,977
--------- -------- --------- ---------
Interest coverage ratio -
adjusted 2.86x 3.21x 2.89x 3.16x
Fixed Charge Coverage Ratio
Total interest (1) $ 36,194 $23,996 $ 70,520 $ 48,436
Secured debt principal
amortization 1,894 768 3,788 1,411
Preferred dividends 6,317 5,333 12,634 10,666
--------- -------- --------- ---------
Total fixed charges 44,405 30,097 86,942 60,513
EBITDA $102,275 $75,938 $199,087 $149,126
--------- -------- --------- ---------
Fixed charge coverage
ratio 2.30x 2.52x 2.29x 2.46x
EBITDA - adjusted $103,551 $77,026 $203,540 $152,977
--------- -------- --------- ---------
Fixed charge coverage
ratio - adjusted 2.33x 2.56x 2.34x 2.53x
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 Six Months Ended
June 30, June 30,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
Net income available to common
stockholders $25,620 $22,668 $ 48,976 $ 42,313
Depreciation and amortization
(1) 35,547 24,131 69,408 47,392
Loss (gain) on sales of
properties (1,033) (929) (2,010) (2,482)
Minority interests (82) 0 (87) 0
Gross straight-line rental
income (3,878) (2,216) (8,109) (4,616)
Prepaid/straight-line rent
receipts 2,832 2,710 4,910 13,020
Rental income related to
above/(below) market leases,
net (464) 0 (924) 0
Amortization of deferred loan
expenses 1,236 707 2,503 1,418
Cap Ex, tenant improvements,
lease commissions (762) 0 (1,825) 0
--------- -------- --------- ---------
Funds available for
distribution 59,016 47,071 112,842 97,045
One-time acquisition finder's
fees 1,750 0 1,750 0
Prepaid/straight-line rent
receipts (2,832) (2,710) (4,910) (13,020)
--------- -------- --------- ---------
Funds available for
distribution - normalized $57,934 $44,361 $109,682 $ 84,025
Average common shares
outstanding:
Basic 79,060 61,548 76,159 59,871
Diluted 79,546 61,868 76,714 60,201
Per share data:
Net income available to common
stockholders
Basic $ 0.32 $ 0.37 $ 0.64 $ 0.71
Diluted 0.32 0.37 0.64 0.70
Funds available for
distribution
Basic $ 0.75 $ 0.76 $ 1.48 $ 1.62
Diluted 0.74 0.76 1.47 1.61
Funds available for
distribution - normalized
Basic $ 0.73 $ 0.72 $ 1.44 $ 1.40
Diluted 0.73 0.72 1.43 1.40
FAD Payout Ratio
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.30 $ 1.26
FAD per diluted share $ 0.74 $ 0.76 $ 1.47 $ 1.61
--------- -------- --------- ---------
FAD payout ratio 89% 84% 88% 78%
FAD Payout Ratio - Normalized
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.30 $ 1.26
FAD per diluted share -
normalized $ 0.73 $ 0.72 $ 1.43 $ 1.40
--------- -------- --------- ---------
FAD payout ratio -
normalized 90% 89% 91% 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.
Exhibit 15
Funds From Operations Reconciliation
----------------------------------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
--------- -------- --------- --------
Net income available to common
stockholders $25,620 $22,668 $ 48,976 $42,313
Depreciation and amortization
(1) 35,547 24,131 69,408 47,392
Loss (gain) on sales of
properties (1,033) (929) (2,010) (2,482)
Minority interests (155) 0 (187) 0
--------- -------- --------- --------
Funds from operations $59,979 $45,870 $116,187 $87,223
One-time acquisition finder's
fees 1,750 0 1,750 0
--------- -------- --------- --------
Funds from operations -
normalized $61,729 $45,870 $117,937 $87,223
Average common shares
outstanding:
Basic 79,060 61,548 76,159 59,871
Diluted 79,546 61,868 76,714 60,201
Per share data:
Net income available to common
stockholders
Basic $ 0.32 $ 0.37 $ 0.64 $ 0.71
Diluted 0.32 0.37 0.64 0.70
Funds from operations
Basic $ 0.76 $ 0.75 $ 1.53 $ 1.46
Diluted 0.75 0.74 1.51 1.45
Funds from operations -
normalized
Basic $ 0.78 $ 0.75 $ 1.55 $ 1.46
Diluted 0.78 0.74 1.54 1.45
FFO Payout Ratio
Dividends per common share (2) $ 0.66 $ 0.64 $ 1.30 $ 1.26
FFO per diluted share $ 0.75 $ 0.74 $ 1.51 $ 1.45
--------- -------- --------- --------
FFO payout ratio 88% 86% 86% 87%
FFO Payout Ratio - Normalized
Dividends per share (2) $ 0.66 $ 0.64 $ 1.30 $ 1.26
FFO per diluted share -
normalized $ 0.78 $ 0.74 $ 1.54 $ 1.45
--------- -------- --------- --------
FFO payout ratio - normalized 85% 86% 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 $ 94,777 $101,177 $101,610 $106,410
Loss (gain) on sales of
properties (977) (977) (2,010) (2,010)
Depreciation and amortization
(1) 151,000 151,000 146,000 146,000
--------- --------- --------- ---------
Funds from operations 244,800 251,200 245,600 250,400
One-time acquisition finders'
fees 1,750 1,750
--------- --------- --------- ---------
Funds from operations -
normalized $244,800 $251,200 $247,350 $252,150
Average common shares
outstanding (diluted) 80,000 80,000 80,000 80,000
Per share data (diluted):
Net income available to common
stockholders $ 1.18 $ 1.26 $ 1.27 $ 1.33
Funds from operations 3.06 3.14 3.07 3.13
Funds from operations -
normalized 3.06 3.14 3.09 3.15
FAD Reconciliation:
-------------------------------
Net income available to common
stockholders $ 94,777 $101,177 $101,610 $106,410
Loss (gain) on sales of
properties (977) (977) (2,010) (2,010)
Depreciation and amortization
(1) 151,000 151,000 146,000 146,000
Gross straight-line rental
income (16,000) (16,000) (16,000) (16,000)
Prepaid/straight-line rent
receipts 2,078 2,078 4,910 4,910
Rental income related to
above/below market leases (2,000) (2,000) (2,000) (2,000)
Amortization of deferred loan
expenses 4,000 4,000 6,000 6,000
Cap Ex, tenant improvements,
lease commissions (7,000) (7,000) (6,000) (6,000)
--------- --------- --------- ---------
Funds available for
distribution 225,878 232,278 232,510 237,310
One-time acquisition finders'
fees 1,750 1,750
Prepaid/straight-line rent
receipts (2,078) (2,078) (4,910) (4,910)
--------- --------- --------- ---------
Funds available for
distribution - normalized $223,800 $230,200 $229,350 $234,150
Average common shares
outstanding (diluted) 80,000 80,000 80,000 80,000
Per share data (diluted):
Net income available to common
stockholders $ 1.18 $ 1.26 $ 1.27 $ 1.33
Funds available for
distribution 2.82 2.90 2.91 2.97
Funds available for
distribution - normalized 2.80 2.88 2.87 2.93
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
or
Mike Crabtree, 419-247-2800