TOLEDO, Ohio--(BW HealthWire)--Oct. 19, 1999--Health Care REIT, Inc. (NYSE:HCN)
Third Quarter Results Year-to-Date Highlights --------------------- ----------------------- -- $34 million gross income -- $1.3 billion total assets -- $0.70 per diluted share FFO -- $241 million new investments -- $0.57 per share dividends -- 28% asset growth -- 81% FFO payout ratio -- 8% per diluted share FFO growth
Health Care REIT, Inc. (NYSE:HCN) today announced record operating results for the third quarter of 1999 and nine months ending September 30, 1999.
Funds from operations (FFO), the generally accepted measure of operating performance for the real estate investment trust industry, achieved a record level of $19.9 million, or $0.70 per diluted share, for the three months ended September 30, 1999, a 6 percent per share increase from $16.9 million, or $0.66 per diluted share, for the same period in 1998. Revenues for the quarter increased 32 percent to $34.2 million from $25.8 million for the three months ended September 30, 1998. Net income available to common shareholders for the third quarter of 1999 totaled $16.2 million, or $0.57 per diluted share as compared with net income available to common shareholders of $14.4 million, or $0.56 per diluted share, for the same period in 1998.
For the nine months ended September 30, 1999, FFO achieved a record level of $58.5 million, or $2.06 per diluted share, an 8 percent per share increase from $48.4 million, or $1.91 per diluted share, for the same period in 1998. Revenues for the nine month period increased 36 percent to $95.5 million from $70.2 million a year ago. Net income available to common shareholders for the nine months ended September 30, 1999, totaled $48.2 million, or $1.70 per diluted share as compared with net income available to common shareholders of $41.7 million, or $1.65 per diluted share, for the same period in 1998.
In addition, the company announced that upon a review of its operating results and financial condition, the Board of Directors voted to declare a dividend for the quarter ended September 30, 1999, of $0.575 per share as compared with $0.555 per share for the same period in 1998. The dividend is a one-half cent increase from the dividend paid for the second quarter of 1999 and represents the 114th consecutive dividend payment. The dividend will be payable November 22, 1999, to shareholders of record on November 2, 1999.
Revenue growth was generated primarily by new investment activity in 1998 and the first nine months of 1999, of $397.5 million and $240.7 million, respectively. Investment activity contributed to a 28 percent increase in total assets, which at September 30, 1999, totaled $1.3 billion as compared with total assets of $985.4 million at September 30, 1998.
Dividend payments to common shareholders for the nine months ended September 30, 1999, totaled $47.9 million, or $1.695 per share, as compared with dividend payments of $40.9 million, or $1.635 per share for the same period in 1998. Correspondingly, the FFO payout ratio for the nine month period for 1999 was 82 percent as compared with a FFO payout ratio of 86 percent for the nine months ended September 30, 1998, evidence of the company's commitment to reduce its FFO payout ratio to a level below 80 percent during the next 12 months.
"Results for the first nine months of 1999 were excellent, and exceeded consensus estimates. We are pleased with the 8 percent per share FFO growth and the 82 percent FFO payout ratio demonstrates significant dividend coverage and increased retained earnings for the company. We are confident the company will meet consensus estimates in the fourth quarter," commented George L. Chapman, chairman and chief executive officer. "However, like many health care REITs, our stock price has not reflected the outstanding operating results, the current and historical performance of the company's portfolio, or the underlying value of our assets.
"The inability of certain publicly owned nursing home and assisted living companies to meet performance expectations and maintain quality credit profiles has impaired the stock valuations of all health care REITs," added Chapman. "As a result, the health care REIT sector is capital constrained. External financing is limited and expensive. Continuation of a constrained capital market would limit year-2000 asset and revenue growth. Accordingly, many investment analysts have revised year-2000 FFO per share estimates for the health care REITs to reflect this restricted growth environment. We agree with the market sentiment and have revised our expectations for year-2000 FFO to $2.83 per share, which represents 3 percent year-to-year growth from the 1999 consensus estimates.
"Our adjusted year-2000 FFO per share goal assumes property sales of approximately $200 million and limited new investment activity. We have reached agreement with several operators regarding the disposition of specific properties. The estimated level of asset sales reflects the company's on-going effort to redeploy capital to stabilized properties operated by our best performing tenants. The proceeds derived from the sales, anticipated to be completed during the next 12 to 15 months, will be used to reduce outstanding debt and provide limited funding to our strongest operators.
"The planned property sales will generate significant liquidity, enhancing the current strength of the company's balance sheet, and will reduce the proportion of properties in our portfolio that are in the development stage. We believe this is the appropriate response to current market conditions and the correct long-term strategic initiative for the company. While current market conditions require a pause in investment activities, execution of this initiative should position the company for attractive growth opportunities in the future.
"The company's fundamentals are outstanding, and we believe the future prospects for the long-term care industry are excellent. As investor sentiment improves for the health care REITs, we believe we will be among the initial group of companies able to raise external capital and renew the company's investment strategy of providing growth capital to local and regional health care operators."
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care facilities, primarily nursing homes, assisted living facilities and retirement centers. At September 30, 1999, the company had investments in 239 health care facilities in 34 states and had total assets of approximately $1.3 billion. For more information on Health Care REIT, Inc., via facsimile at no cost, dial 1-800-PRO-INFO and enter the company code - HCN. More information is available on the Internet at http://www.hcreit.com.
FINANCIAL SCHEDULES FOLLOW
This document and supporting schedules may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in the future to differ materially from expected results. These risks and uncertainties include, among others, competition in the financing of health care facilities, the availability of capital, and regulatory and other changes in the health care sector, as described in the company's filings with the Securities and Exchange Commission.
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(Amounts in thousands)
September 30
-------------------------
1999 1998
-------------------------
Assets
Real estate investments:
Real property owned:
Land $ 63,627 $ 42,357
Buildings & improvements 687,429 414,709
Construction in progress 77,717 105,634
----------- -----------
828,773 562,700
Less accumulated depreciation (32,113) (17,742)
----------- -----------
Total real property owned 796,660 544,958
Loans receivable 411,842 396,222
Direct financing leases 6,776
---------- -----------
1,208,502 947,956
Less allowance for losses on
loans receivable (5,437) (4,837)
----------- -----------
Net real estate investments 1,203,065 943,119
Other assets:
Direct investments 28,555 24,658
Marketable securities 1,257 2,967
Deferred loan expenses 3,342 2,407
Cash and cash equivalents 7,779 1,473
Receivables and other assets 17,861 10,730
----------- -----------
58,794 42,235
----------- -----------
Total assets $1,261,859 $ 985,354
----------- -----------
----------- -----------
Liabilities and shareholders' equity
Liabilities:
Borrowings under line of
credit obligations $ 178,100 $ 143,800
Senior unsecured notes 290,000 240,000
Secured debt 61,364 7,450
Accrued expenses and other liabilities 24,269 21,971
----------- -----------
Total liabilities $ 553,733 $ 413,221
Shareholders' equity:
Preferred Stock, $1.00 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 6,000,000
in 1999 and 3,000,000 in 1998 150,000 75,000
Common Stock, $1.00 par value:
Authorized - 75,000,000 shares
Issued and outstanding - 28,413,350
in 1999 and 25,540,734 in 1998 28,413 25,541
Capital in excess of par value 522,057 462,294
Undistributed net income 10,642 9,528
Accumulated other
comprehensive income 875 2,973
Unamortized restricted stock (3,861) (3,203)
----------- -----------
Total shareholders' equity $ 708,126 $ 572,133
----------- -----------
Total liabilities and
shareholders' equity $1,261,859 $ 985,354
----------- -----------
----------- -----------
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands except per share data)
Three months ended Nine months ended
September 30 September 30
-------------------- ------------------
1999 1998 1999 1998
-------------------- ------------------
Revenues:
Operating lease rents $19,554 $12,213 $51,828 $29,482
Interest income 12,419 11,625 36,502 36,000
Loan and commitment fees 1,204 1,425 4,350 3,937
Other income 76 153 548 382
Prepayment fees 907 421 1,565 421
Gain on sale of properties 703
------- ------- ------- -------
$34,160 $25,837 $95,496 $70,222
Expenses:
Interest expense $ 7,733 $4,878 $18,682 $13,579
Provision for depreciation 4,608 2,964 12,614 7,126
General and administrative 1,881 1,640 5,427 4,357
Loan expense 242 176 660 533
Provision for losses 150 150 450 450
------- ------- ------- -------
14,614 9,808 37,833 26,045
------- ------- ------- -------
Net Income 19,546 16,029 57,663 44,177
Preferred stock dividends 3,351 1,664 9,462 2,496
------- ------- ------- -------
Net Income Available to
Common Shareholders $16,195 $14,365 $48,201 $41,681
------- ------- ------- -------
------- ------- ------- -------
Average number of common
shares outstanding:
Basic 28,196 25,356 28,141 24,966
Diluted 28,418 25,637 28,403 25,301
Net income per share:
Basic $ 0.57 $ 0.57 $ 1.71 $ 1.67
Diluted 0.57 0.56 1.70 1.65
Funds from operations $19,896 $16,908 $58,547 $48,386
Funds from operations
per share:
Basic $ 0.71 $ 0.67 $ 2.08 $ 1.94
Diluted 0.70 0.66 2.06 1.91
Dividends per share $ 0.570 $0.550 $ 1.695 $1.635
HEALTH CARE REIT, INC.
Financial Supplement - September 30, 1999
Portfolio Composition ($000's) Exhibit 1
------------------------------
Balance Sheet Data No. No.
Properties Beds/Units Balance (1) % Balance
-----------------------------------------------
Real Property 165 12,968 $ 796,660 65%
Loans Receivable &
Other 74 7,428 411,842 33%
Direct Investments -na- -na- 28,555 2%
-----------------------------------------------
Total Investments 239 20,396 $1,237,057 100%
Investment Data No. No. Investment %
Properties Beds/Units (2) Investment
-----------------------------------------------
Assisted Living
Facilities 167 11,177 $ 761,765 62%
Nursing Homes 49 6,957 288,906 24%
Retirement Centers 15 1,273 73,506 6%
Specialty Care
Facilities 6 695 84,022 7%
Behavioral Care 2 294 9,228 1%
-----------------------------------------------
Real Estate Investments 239 20,396 $1,217,427 100%
Investment by Owner No. No. Investment %
Type Properties Beds/Units (2) Investment
-----------------------------------------------
Publicly Traded 83 5,674 $ 355,824 29%
Key Private 110 10,553 688,081 57%
Privately Held 46 4,169 173,522 14%
-----------------------------------------------
Real Estate Investments 239 20,396 $1,217,427 100%
Notes: (1) Total Investments include gross real estate investments
and direct investments which amounted to $1,208,502,000
and $28,555,000, respectively.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$1,208,502,000 and $8,925,000, respectively.
Revenue Composition ($000's) Exhibit 2
----------------------------
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
------------------- -------------------
Revenue by Investment Type
Real Property $20,508 60% $55,799 58%
Loans Receivable & Other 12,903 38% 37,644 40%
Direct Investments 749 2% 2,053 2%
------------------- -------------------
Total $34,160 100% $95,496 100%
Revenue by Facility Type
Assisted Living Facilities $19,895 58% $53,792 56%
Nursing Homes 8,996 26% 27,176 28%
Specialty Care Facilities 3,025 9% 9,126 10%
Retirement Centers 2,244 7% 5,402 6%
Behavioral Care 0 0% 0 0%
------------------- -------------------
Total $34,160 100% $95,496 100%
Revenue by Owner Type
Publicly Traded $11,543 34% $29,769 31%
Key Private 17,352 51% 50,185 53%
Privately Held 5,265 15% 15,542 16%
------------------- -------------------
Total $34,160 100% $95,496 100%
Revenue Composition (Continued) ($000's) Exhibit 3
----------------------------------------
Operating Lease Expirations & Loan Maturities
Current
Current Lease Interest Interest and % of
Year Revenue (1) Revenue (1) Lease Revenue Total
-------------------------------------------------------------------
1999 $ 1,260 $ 0 $ 1,260 1%
2000 0 1,274 1,274 1%
2001 0 1,010 1,010 1%
2002 672 1,392 2,064 2%
2003 3,408 2,327 5,735 4%
Thereafter 84,742 37,725 122,467 91%
-------------------------------------------------------
Total $90,082 $43,728 $133,810 100%
Notes: (1) Revenue impact by year, annualized
Committed Investment Balances Exhibit 4
-----------------------------
($000's except Investment per Bed/Unit)
Investment
No. No. Committed per
Properties Beds/Units Balance (1) Bed/Unit
-----------------------------------------------
Assisted Living
Facilities 167 11,177 $ 841,778 $ 75,313
Nursing Homes 49 6,957 300,360 43,174
Retirement Centers 15 1,273 77,122 60,583
Specialty Care
Facilities 6 695 84,022 120,895
Behavioral Care 2 294 9,227 31,384
-----------------------------------------------
Total 239 20,396 $1,312,509 n/a
Notes: (1) Committed Balance includes real estate investments,
credit enhancements and unfunded commitments for which
initial funding had commenced.
Operator Concentration ($000's) Exhibit 5
-------------------------------
Concentration by Investment No. Properties Investment % Investment
------------------------------------------
CareMatrix Corp. 8 $ 93,667 8%
Atria Senior Quarters 11 93,518 8%
Alterra Healthcare 38 86,988 7%
Life Care Centers of
America, Inc. 13 84,901 7%
Olympus Healthcare
Group, Inc. 11 80,808 6%
Remaining Operators 158 777,545 64%
------------------------------------------
Total 239 $1,217,427 100%
Concentration by Revenue No. Properties Revenue (1) % Revenue
------------------------------------------
Atria Senior Quarters 11 $ 7,538 8%
Olympus Healthcare
Group, Inc. 11 6,884 7%
Alterra Healthcare 38 6,147 6%
Life Care Centers of
America, Inc. 13 5,970 6%
CareMatrix Corp. 8 5,620 6%
Remaining Operators 158 63,337 67%
------------------------------------------
Total 239 $ 95,496 100%
Notes: (1) Nine months ended September 30, 1999
Selected Facility Data Exhibit 6
----------------------
Coverage Data
-------------------
% Payor Mix Before After
---------------------- Mgt. Mgt.
Census Private Medicare Fees Fees
----------------------------------------------------
Nursing Homes 83% 21% 13% 2.02x 1.48x
Assisted Living
Facilities 92% 100% 0% 1.34x 1.15x
Retirement Centers 92% 100% 0% 1.58x 1.38x
Specialty Care
Facilities 53% 23% 31% 3.35x 2.82x
Behavioral Care n/a 14% 86% 3.46x 2.17x
-------------------
Weighted Averages 1.94x 1.54x
Notes: Data as of June 30, 1999
Security Deposits & Other Credit Support ($000's) Exhibit 7
-------------------------------------------------
Balance % Investment
----------------------
Cross Defaulted $1,120,610 92% of gross real estate investments
Cross Collateralized 395,077 96% of mortgage loans
Bank Letters of
Credit & Cash 46,571 4% of investment balance
Current
Capitalization Leverage & Performance
($000's) Balance % Balance Ratios
-------------- --------------------- -----------------------
Borrowings Under Bank Debt/Total
Lines $ 178,100 14% Mkt. Cap 42%
Long-Term Debt Debt/Mkt. Cap 74%
Obligations 351,634 28%
Equity Market
Capitalization 718,260 58% Interest 3.53x Q3-99
--------------------- Coverage 3.76x YTD
Total Market
Capitalization $1,247,994 100% FFO Payout
Ratio 81% 3rd Qtr.
82% YTD
Debt Maturities and Principal Payments ($000's) Exhibit 8
-----------------------------------------------
Lines of
Year Credit (1) Senior Notes Secured Debt Total
-------------------------------------------------------------------
1999 $ 0 $ 0 $ 25 $ 25
2000 20,000 35,000 99 55,099
2001 175,000 10,000 109 185,109
2002 0 20,000 121 20,121
2003 0 35,000 133 35,133
2004 0 40,000 54,186 94,186
2005 0 0 549 549
Thereafter 0 150,000 6,142 156,142
-------------------------------------------------------
Total $195,000 $290,000 $ 61,364 $546,364
Notes: (1) Lines of Credit reflect 100% capacity
Investment Activity ($000's) Exhibit 9
----------------------------
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
-------------------- --------------------
Funding by Investment Type
Real Property $ 5,208 13% $ 79,531 33%
Mortgage & Other
Loans 2,224 5% 14,735 6%
Construction
Advances 32,962 79% 140,585 59%
Direct Investments 1,146 3% 5,896 2%
-------------------- --------------------
Total $41,540 100% $240,747 100%
Real Estate Investments
Assisted Living
Facilities $26,970 67% $191,100 81%
Nursing Homes 8,231 20% 25,427 11%
Retirement Centers 5,193 13% 18,324 8%
Behavioral Care 0 0% 0 0%
Specialty Care
Facilities 0 0% 0 0%
-------------------- --------------------
Total $40,394 100% $234,851 100%
Geographic Concentration ($000's) Exhibit 10
---------------------------------
Concentration by Region No. Properties Investment % Investment
------------------------------------------
South 140 $ 619,759 51%
Northeast 39 293,324 24%
West 32 174,696 14%
Midwest 28 129,648 11%
------------------------------------------
Total 239 $1,217,427 100%
Concentration by State No. Properties Investment % Investment
------------------------------------------
Texas 48 $ 191,915 16%
Florida 29 142,785 12%
Massachusetts 14 101,452 8%
North Carolina 18 85,964 7%
Pennsylvania 14 81,146 7%
Remaining States 116 614,165 50%
------------------------------------------
Total 239 $1,217,427 100%
Revenue by State No. Properties Revenue (1) % Revenue
------------------------------------------
Texas 48 $ 15,832 17%
Florida 29 9,159 10%
Massachusetts 14 8,497 9%
Pennsylvania 14 7,073 7%
North Carolina 18 6,014 6%
Remaining States 116 48,921 51%
------------------------------------------
Total 239 $ 95,496 100%
Notes: (1) Nine months ended September 30, 1999