HCP, INC. (ticker: HCP, exchange: NYSE Archipelago Exchange (.N))
News Release -
29-Jul-2004
Health Care Property Investors, Inc. Reports Results for the Quarter Ended June 30, 2004 LONG BEACH, Calif.--(BUSINESS WIRE)--July 29, 2004--Health Care
Property Investors, Inc. (NYSE:HCP), a health care real estate
investment trust ("REIT"), today announced operating results for the
quarter ended June 30, 2004. Net income applicable to common shares
for the quarter ended June 30, 2004, totaled $36.3 million, or $0.27
per diluted share of common stock. This compares with net income
applicable to common shares of $20.3 million, or $0.17 per diluted
share of common stock, for the quarter ended June 30, 2003.
Funds From Operations ("FFO") was $58.0 million, or $0.44 per
diluted share of common stock, for the quarter ended June 30, 2004.
This compares with FFO of $40.0 million, or $0.33 per diluted share of
common stock, for the quarter ended June 30, 2003. Prior to asset
impairment charges, FFO was $0.45 and $0.35 per diluted share for the
quarters ended June 30, 2004 and 2003, respectively.
The Company has revised its presentation of FFO for all periods to
include the effect of asset impairment charges, consistent with recent
clarifications from the National Association of Real Estate Investment
Trusts ("NAREIT"). For the second quarter of 2004 and 2003, asset
impairments reduced FFO by $2.5 million and $2.8 million,
respectively. FFO is a supplemental non-GAAP financial measurement
used to evaluate the operating performance of real estate investment
trusts.
SECOND QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS
-- On June 1, 2004, the Company acquired two long-term care
facilities with a total of 234 beds for approximately $16
million. As previously announced, on April 30, 2004, the
Company acquired seven long-term care facilities with a total
of 700 beds for approximately $47 million. The nine
facilities, all leased to the same operator, have an initial
lease term of five years, with three five-year renewal
options. The initial annual lease rate is approximately 9.3%,
with annual rent escalators of 2%.
-- On June 10, 2004, the Company acquired a 79,000-square-foot
medical office building located in Las Vegas, for a
purchase price of approximately $22 million at a
capitalization rate of 9.7%. The medical office building is
100% occupied.
-- On July 15, 2004, the Company acquired substantially all of
American Retirement Corporation's ("ARC") interest in three
continuing care retirement communities and one assisted living
facility for $113 million, including transaction costs. The
transaction was structured as a sale lease-back with ARC using
a portion of the proceeds to repay its existing $82.6 million
mezzanine loan to the Company. These facilities have an
initial lease term of ten years, with three ten-year renewal
options. The annual lease rate is 9%, with additional rents
contingent on facility revenue exceeding certain thresholds.
Additionally, the Company provided ARC with a new $5.7 million
two-year mortgage loan at 9%, secured by three properties, and
maintained its minority equity investment in two other ARC
assets. The Company's cash investment in ARC-related entities,
after transaction costs, increased by $36 million.
-- On July 23, 2004, the Company announced that its Board of
Directors declared a quarterly common stock cash dividend of
$0.4175 per share. The common stock dividend will be paid on
August 19, 2004, to stockholders of record as of the close of
business on August 4, 2004. This most recent dividend equals
$1.67 on an annualized basis.
-- On July 28, 2004, the Company agreed to acquire 11 assisted
living facilities from Emeritus Corporation for $84 million,
including $56 million of assumed debt, through a sale
lease-back transaction. These facilities have an initial lease
term of 15 years, with two ten-year renewal options. The
initial annual lease rate is approximately 9.25%, with
CPI-based escalators not exceeding 3% annually. These
properties will be added to an existing master lease presently
comprised of 25 properties. As part of this transaction, nine
existing property leases will be extended by five years. The
debt to be assumed currently bears interest at 6.5% and is
based on LIBOR plus 4.15%, with a 6.5% floor, and contains a
prepayment fee that declines over time. Emeritus will use $17
million of the proceeds to repay mezzanine and other debt to
the Company.
-- The Company and GE Commercial Finance have agreed, subject to
final documentation, to increase the size of their joint
venture from $600 million to $1.1 billion total
capitalization.
FUTURE OPERATIONS
For the full year 2004, the Company presently expects net income
applicable to common shares to range between $1.14 and $1.17 per
diluted share, and expects FFO to range between $1.74 and $1.79 per
diluted share, including the impact of impairment charges through June
30, 2004, but excluding the impact of future impairments, if any.
Excluding asset impairment charges, the Company continues to expect
FFO to range between $1.76 and $1.81 per diluted share. Asset
impairment charges reduced FFO by $0.02 for the six months ended June
30, 2004.
COMPANY INFORMATION
Health Care Property Investors, Inc. has scheduled a conference
call and webcast today, Thursday, July 29, 2004, at 9:00 a.m. Pacific
Time (12:00 p.m. Eastern Time) in order to present the Company's
performance and operating results for the quarter ended June 30, 2004.
The conference call is accessible by dialing 800-901-5231 (U.S.) and
617-786-2961 (International). The participant pass code is 42411448.
The webcast is accessible via the Company's Internet web site at
www.hcpi.com. A webcast replay of the conference call will be
available after 2:00 p.m. Pacific Time on July 29, 2004, through
August 12, 2004, on the Company's web site.
Health Care Property Investors, Inc. (NYSE:HCP) is a
self-administered real estate investment trust ("REIT") that invests
directly or through joint ventures in health care facilities. As of
June 30, 2004, the Company's portfolio of properties, including
investments through joint ventures and mortgage loans, included 538
properties in 43 states and consisted of 30 hospitals, 178 long-term
care facilities, 121 assisted living and continuing care retirement
communities ("CCRCs"), 185 medical office buildings and 24 other
health care facilities. For more information on Health Care Property
Investors, Inc., visit the Company's web site at www.hcpi.com.
Statements in this news release and the supplement that are not
historical may contain forward-looking statements subject to risks and
uncertainties, such as competition for the acquisition and financing
of health care facilities, competition for lessees and mortgagors
(including with respect to new leases and mortgages and the renewal or
roll-over of existing leases); continuing operational difficulties in
the long-term care and assisted living sectors; the Company's ability
to acquire, sell or lease facilities and the timing of acquisitions,
sales and leasings; changes in health care laws and regulations and
other changes in the health care industry which affect the operations
of the Company's lessees or mortgagors; changes in management; costs
of compliance with building regulations; changes in tax laws and
regulations; changes in the financial position of the Company's
lessees and mortgagors; changes in rules governing financial
reporting, including new accounting pronouncements; and changes in
economic conditions, including changes in interest rates and the
availability and cost of capital, which affect opportunities for
profitable investments. Some of these risks are described from time to
time in the SEC reports filed by the Company.
HEALTH CARE PROPERTY INVESTORS, INC.
Summary Information (Unaudited)
In Thousands, Except Per Share Data
Quarter Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenue $107,186 $92,417 $204,808 $177,730
Net income applicable to
common shares $36,302 $20,295 $77,854 $41,734
Basic earnings per share $0.28 $0.17 $0.59 $0.35
Diluted earnings per share $0.27 $0.17 $0.59 $0.34
Shares used to calculate
diluted earnings per share 132,856 122,436 132,778 121,240
Funds from operations(1) $57,998 $39,989 $111,975 $78,843
Diluted funds from operations
per share(1) $0.44 $0.33 $0.84 $0.65
Impairments $2,462 $2,800 $3,437 $11,652
Per share impact of impairments
on diluted funds from
operations $0.01 $0.02 $0.02 $0.10
(1) The Company believes that Funds From Operations (FFO) and Diluted
Funds From Operations per share are important supplemental
measures of operating performance for a real estate investment
trust. Because the historical cost accounting convention used for
real estate assets requires straight-line depreciation (except on
land), such accounting presentation implies that the value of real
estate assets diminishes predictably over time. Since real estate
values instead have historically risen and fallen with market
conditions, presentations of operating results for a real estate
investment trust that uses historical cost accounting for
depreciation could be less informative. The term FFO was designed
by the real estate investment trust industry to address this
issue.
The Company defines FFO as net income applicable to common shares
(computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from real estate
dispositions, plus real estate depreciation and amortization, and
after adjustments for unconsolidated joint ventures. Adjustments
for unconsolidated joint ventures are calculated to reflect FFO on
the same basis. FFO does not represent cash generated from
operating activities in accordance with generally accepted
accounting principles, is not necessarily indicative of cash
available to fund cash needs, and should not be considered as an
alternative to net income. A reconciliation of net income
applicable to common shares to FFO is provided herein.
HEALTH CARE PROPERTY INVESTORS, INC.
Consolidated Statements of Income (Unaudited)
In Thousands, Except Per Share Data
Quarter Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenues
Rental income $95,350 $82,724 $182,581 $157,895
Equity income from
unconsolidated joint ventures 849 22 2,086 164
Interest and other income 10,987 9,671 20,141 19,671
107,186 92,417 204,808 177,730
Expenses
Interest 20,618 22,411 42,466 43,688
Real estate depreciation and
amortization 21,076 18,390 41,558 36,610
Operating expenses from medical
office buildings 10,192 7,415 19,241 14,735
General and administrative 8,394 5,662 15,698 10,904
Impairments 1,216 - 1,216 -
61,496 53,878 120,179 105,937
Income from operations 45,690 38,539 84,629 71,793
Minority interests (3,289) (2,264) (6,153) (4,259)
Income from continuing
operations 42,401 36,275 78,476 67,534
Discontinued operations
Operating income from
discontinued operations 143 3,011 1,895 5,679
Gain (loss) on real estate
dispositions and impairments (960) (2,372) 8,048 (8,635)
(817) 639 9,943 (2,956)
Net income 41,584 36,914 88,419 64,578
Dividends to preferred
stockholders (5,282) (4,848) (10,565) (11,073)
Preferred stock redemption
charges - (11,771) - (11,771)
Net Income applicable to common
shares $36,302 $20,295 $77,854 $41,734
Basic earnings per share
Income from continuing
operations applicable to
common shares $0.28 $0.16 $0.52 $0.37
Discontinued operations - 0.01 0.07 (0.02)
Net Income applicable to
common shares $0.28 $0.17 $0.59 $0.35
Diluted earnings per share
Income from continuing
operations applicable to
common shares $0.28 $0.16 $0.51 $0.37
Discontinued operations (0.01) 0.01 0.08 (0.03)
Net Income applicable to
common shares $0.27 $0.17 $0.59 $0.34
Shares used to calculate
earnings per share
Basic 131,653 121,456 131,196 120,307
Diluted 132,856 122,436 132,778 121,240
HEALTH CARE PROPERTY INVESTORS, INC.
Funds From Operations Information (Unaudited)
In Thousands, Except Per Share Data
QUARTERLY RESULTS: Quarter Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net income applicable to common
shares $36,302 $20,295 $77,854 $41,734
Real estate depreciation and
amortization 21,076 18,390 41,558 36,610
Gain on real estate dispositions (286) (428) (10,269) (3,017)
Depreciation and amortization
included in discontinued
operations 102 1,386 918 2,929
Joint venture FFO adjustments 804 346 1,914 587
Funds from operations(1) $57,998 $39,989 $111,975 $78,843
Dividend on convertible
partnership units 2,195 -- 2,195 --
Dilutive funds from operations $60,193 $39,989 $114,170 $78,843
Diluted funds from operations per
share(1) $0.44 $0.33 $0.84 $0.65
Shares used to calculate diluted
FFO 138,115 122,436 135,407 121,240
Impairments $2,462 $2,800 $3,437 $11,652
Per share impact of impairments on
diluted funds from operations $0.01 $0.02 $0.02 $0.10
FUTURE OPERATIONS: Full Year 2004
Low High
Diluted earnings per share $1.14 $1.17
Gain on sale (0.08) (0.08)
Real estate depreciation and amortization 0.66 0.68
Joint venture adjustments 0.03 0.03
Dilutive impact of operating partnership
units (0.01) (0.01)
Diluted funds from operations per share $1.74 $1.79
Impairments per share(2) 0.02 0.02
Diluted funds from operations per share,
excluding impairment charges 1.76 1.81
(1) The Company believes that Funds From Operations (FFO) and Diluted
Funds From Operations per share are important supplemental
measures of operating performance for a real estate investment
trust. Because the historical cost accounting convention used for
real estate assets requires straight-line depreciation (except on
land), such accounting presentation implies that the value of real
estate assets diminishes predictably over time. Since real estate
values instead have historically risen and fallen with market
conditions, presentations of operating results for a real estate
investment trust that uses historical cost accounting for
depreciation could be less informative. The term FFO was designed
by the real estate investment trust industry to address this
issue.
The Company defines FFO as Net Income applicable to common shares
(computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from real estate
dispositions, plus real estate depreciation and amortization, and
after adjustments for unconsolidated joint ventures. Adjustments
for unconsolidated joint ventures are calculated to reflect FFO on
the same basis. FFO does not represent cash generated from
operating activities in accordance with generally accepted
accounting principles, is not necessarily indicative of cash
available to fund cash needs and should not be considered as an
alternative to net income.
(2) Represents actual impairment charges through June 30, 2004. Future
impairments, if any, are excluded because they cannot by
projected.
HEALTH CARE PROPERTY INVESTORS, INC.
Consolidated Balance Sheets (Unaudited)
In Thousands
June 30, December 31,
2004 2003
Assets
Real estate investments:
Buildings and improvements $2,745,553 $2,682,206
Accumulated depreciation (512,906) (486,421)
2,232,647 2,195,785
Construction in progress 35,589 64,303
Land 277,835 283,352
2,546,071 2,543,440
Loans receivable, net 168,569 184,360
Loans to joint venture partners 80,380 83,253
Investments in and advances to
unconsolidated joint ventures 72,339 172,450
Accounts receivable, net 17,077 16,471
Cash and cash equivalents 11,549 17,768
Other assets 22,839 18,215
Total Assets $2,918,824 $3,035,957
Liabilities and Stockholders' Equity
Bank notes payable $154,000 $198,000
Senior notes payable 1,013,902 1,050,476
Mortgage notes payable 124,769 158,808
Accounts payable and accrued
expenses 54,813 55,055
Deferred revenue 14,735 16,080
Minority interests in joint
ventures 13,714 12,931
Minority interests convertible
into common stock 103,473 103,990
Stockholders' equity:
Preferred stock 285,173 285,173
Common stock 132,631 131,040
Additional paid-in capital 1,384,437 1,355,299
Cumulative net income 1,267,468 1,179,049
Cumulative dividends (1,618,241) (1,497,727)
Other equity (12,050) (12,217)
Total Stockholders' Equity 1,439,418 1,440,617
Total Liabilities and
Stockholders' Equity $2,918,824 $3,035,957
HEALTH CARE PROPERTY INVESTORS, INC.
Supplemental Financial and Operating Information
As of June 30, 2004
INVESTMENTS
During the quarter and six months ended June 30, 2004, the Company
acquired properties with an aggregate cost of approximately $85
million and $133 million, respectively.
As of June 30, 2004, the Company's total undepreciated investment
in properties, including investments through joint ventures and
mortgage loans, was approximately $3.3 billion.
OTHER INFORMATION
The following summarizes certain information for the six months
ended June 30, 2004 and 2003 (In thousands):
Quarter Ended Six Months Ended
June 30, 2004 June 30, 2004
2004 2003 2004 2003
Capitalized interest $707 $120 $881 $281
Amortization of deferred
financing costs 688 701 1,655 1,321
Income from straight line
rents and interest 1,854 954 3,693 1,726
Lease commissions and
tenant and capital
improvements on
medical office buildings 193 1,454 1,318 2,808
Quarter Ended Six Months Ended
June 30, 2004 June 30, 2004
2004 2003 2004 2003
Rental Income:
Triple net $67,920 $62,403 $130,563 $117,222
Medical office buildings 27,430 20,321 52,018 40,673
$95,350 $82,724 $182,581 $157,895
HEALTH CARE PROPERTY INVESTORS, INC.
Supplementary Financial Information -
Portfolio Overview as of June 30, 2004 (Unaudited)
Dollars In Thousands, Except Investment Per Bed/Unit/Square Foot
PORTFOLIO OVERVIEW(1)
Hospitals Long-Term Assisted
Care Living &
CCRCs
Investment(3) $795,934 $733,986 $815,459
Number of properties 30 178 121
Assets held for sale - 4 -
Number of beds/units/square feet(4)(5) 3,483 21,545 13,072
Beds Beds Units
Investment per bed/unit/square foot(6) $229,000 $34,000 $62,000
Occupancy data:(4)(7)
Current quarter 63% 81% 82%
First quarter 2004 61% 80% 80%
Cash flow coverage after management
fees(4)(7)(8)(9) 2.4x 1.3x 1.2x
Medical Other HCP Medical
Office Office
Building Portfolio,
MOP.(Excl. LLC ("HCP
HCP) MOP")(2)
Investment(3) $732,392 $210,266 $52,932
Number of properties 89 24 96
Assets held for sale - 3 1
Number of beds/units/square
feet(4)(5) 5,141,000 1,441,000 5,244,000
Sq Ft Sq Ft Sq Ft
Investment per bed/unit/square
foot(6) $144 $146 $89
Occupancy data:(4)(7)
Current quarter 91% 100% 87%
First quarter 2004 94% 100% 87%
Cash flow coverage after management
fees(4)(7)(8)(9) N/A N/A N/A
(1) All amounts exclude assets held for sale unless otherwise
indicated.
(2) The Company is the managing member of HCP Medical Office
Portfolio, LLC, an unconsolidated joint venture, and has a 33%
interest therein.
(3) Represents the historical cost of the Company's real estate
investments and the net book value of our unconsolidated joint
ventures and secured loans receivable.
(4) Information for the Company's hospital, long-term care, and
assisted and retirement living facilities was derived from
information provided by its lessees without verification.
(5) Hospital and long-term care facilities are measured by bed count.
Assisted and retirement living facilities are apartment-like
facilities and are stated in units (studio, one or two bedroom
apartments). Medical office buildings and other health care
facilities are measured in square feet.
(6) Excludes facilities under construction.
(7) Excludes facilities under construction, newly completed facilities
under start up, vacant facilities and facilities where data is not
available or meaningful.
(8) Results exclude data related to nine hospitals leased to
HealthSouth until greater assurances about HealthSouth's financial
information is received.
(9) Includes imputed management fees of 2% to 5%.
TENANT OVERVIEW(1)
PORTFOLIO BY OPERATOR/TENANT:
Six Months Ended
June 30, 2004
Operator/Tenant Percentage of Revenue
Less Operating
Expenses(2)
Tenet Healthcare 14.3%
American Retirement Corp. 9.7%
Emeritus Corporation 5.9%
HealthSouth Corporation 4.9%
Kindred Healthcare, Inc. 4.3%
HCA Inc. 3.6%
Not-for-profit investment grade tenants 1.4%
Other publicly traded operators or guarantors 10.6%
Other non-public operators and tenants 45.3%
100.0%
SAME PROPERTY OVERVIEW(1)
SAME PROPERTY GROWTH:
Comparable Facilities for the Six Months Ended June 30, 2004
vs. June 30, 2003
Investment properties, excluding medical office buildings
Number of same properties 284
Revenue percentage increase 1.0%
Medical office buildings, excluding HCP MOP
Number of same properties 71
Occupancy percentage at June 30, 2004 94%
Revenue percentage decrease -0.3%
(1) All amounts exclude assets sold and assets held for sale.
(2) Since the tenant is responsible for operating expenses under a
triple-net lease, management believes revenues are not comparable
between property types without deducting operating expenses for
properties leased under gross or modified gross leases. Revenue
excludes non-property specific revenue and equity income from
unconsolidated joint ventures.
CONTACT: Health Care Property Investors, Inc.
Talya Nevo-Hacohen/Laura Catalino, 562-733-5100
SOURCE: Health Care Property Investors, Inc.
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HCP, INC.
