/C O R R E C T I O N — HCP, Inc./
In the news release, HCP Announces Results for the Quarter Ended
HCP Announces Results for the Quarter Ended June 30, 2017
SECOND QUARTER 2017 AND RECENT HIGHLIGHTS
– EPS, FFO and FFO as adjusted per share, were
– Achieved year-over-year three- and six-month SPP Cash NOI growth of 2.1% and 3.1%, respectively
– Completed or under contract on
– Announced
– Repurchased
– Entered into a definitive agreement to sell our Tandem debt investment for
– Enhanced corporate governance by opting out of the Maryland Unsolicited Takeovers Act (MUTA) and adopting majority standard voting
– Announced
– Reaffirmed full-year 2017 FFO as adjusted and SPP Cash NOI guidance ranges
HCP (NYSE:HCP) announced results for the quarter ended
Three Months Ended |
Three Months Ended |
|||||||||||||
(in thousands, except per share amounts) |
Amount |
Diluted |
Amount |
Diluted |
Per Share |
|||||||||
Net income |
$ |
19,283 |
$ |
0.04 |
$ |
301,375 |
$ |
0.64 |
$ |
(0.60) |
||||
FFO |
$ |
164,650 |
$ |
0.35 |
$ |
333,218 |
$ |
0.71 |
$ |
(0.36) |
||||
Other impairment(1) |
56,682 |
0.12 |
— |
— |
0.12 |
|||||||||
Transaction-related items |
840 |
— |
14,658 |
0.03 |
(0.03) |
|||||||||
Other(2) |
2,598 |
0.01 |
— |
— |
0.01 |
|||||||||
FFO as adjusted |
$ |
224,770 |
$ |
0.48 |
$ |
347,876 |
$ |
0.74 |
$ |
(0.26) |
||||
FFO as adjusted from QCP |
— |
— |
(101,637) |
(0.21) |
0.21 |
|||||||||
Comparable FFO as adjusted(3) |
$ |
224,770 |
$ |
0.48 |
$ |
246,239 |
$ |
0.53 |
$ |
(0.05) |
||||
FAD |
$ |
200,157 |
$ |
337,866 |
_______________________________________
(1) |
Relates to the impairment of our Tandem Health Care Loan. |
(2) |
Includes: (i) $3.4 million of litigation costs and (ii) $0.8 million of foreign currency remeasurement gains. |
(3) |
Represents FFO as adjusted excluding FFO as adjusted from QCP and interest expense related to debt repaid using proceeds from the spin-off, assuming these transactions occurred at the beginning of the earliest period presented. Comparable FFO as adjusted allows management to evaluate the performance of our remaining real estate portfolio following the completion of the QCP spin-off. |
FFO, FFO as adjusted, FAD, Comparable FFO as adjusted, SPP Cash NOI and SPP NOI are supplemental non-GAAP financial measures that we believe are useful in evaluating the operating performance of real estate investment trusts. See "Discussion and Reconciliation of Non-GAAP Financial Measures" for the quarter ended
SAME PROPERTY PORTFOLIO OPERATING SUMMARY
The table below outlines the three-month same property portfolio operating results for the second quarter:
Year-Over-Year |
|||||||
Occupancy |
SPP Growth |
||||||
2Q17 |
2Q16 |
NOI |
Cash NOI |
||||
Senior housing triple-net |
86.1% |
86.6% |
1.6% |
2.6% |
|||
Senior housing operating portfolio ("SHOP")(1) |
86.8% |
88.7% |
(3.8)% |
(1.6)% |
|||
Life science |
96.5% |
98.5% |
2.1% |
3.7% |
|||
Medical office |
92.0% |
92.0% |
1.8% |
2.6% |
|||
Other non-reportable segments ("Other")(2) |
N/A |
N/A |
3.8% |
1.5% |
|||
Total Portfolio |
1.0% |
2.1% |
_______________________________________
(1) |
SHOP SPP Cash NOI growth consists of the following components: Assisted Living / Independent Living (0.5%) and CCRC JV (9.1%). |
(2) |
Other primarily includes our hospitals and |
TRANSACTION ACTIVITY
ACQUISITIONS
During the second quarter and through
- In June, we acquired Wateridge, a 124,000 square foot campus in the Sorrento Mesa submarket of
San Diego for$26 million . Upon acquisition, we commenced repositioning one of the buildings into class-A lab space following an office-to-lab conversion strategy. - In July, we acquired a portfolio of three medical office buildings in
Texas for$49 million .
LOAN REPAYMENTS AND DISPOSITIONS
During the second quarter we received
- In June, the
HC-One mezzanine loan was repaid generating$367 million of proceeds. We have now exited substantially all of ourU.K. debt investments. - As previously disclosed, in April, we sold a land parcel in
San Diego, California for$27 million .
DEVELOPMENT AND REDEVELOPMENT
At quarter end, our development pipeline totaled
Our redevelopment pipeline totals
During the second quarter and through July, we added
- Commenced
$22 million of redevelopment projects at two recently-acquired life science assets in the Sorrento Mesa submarket ofSan Diego . - Commenced a
$40 million redevelopment of a medical office building located in the University City submarket inPhiladelphia near theUniversity of Pennsylvania . - Entered into a joint venture agreement and commenced development on a 111 unit senior housing facility in
Otay Ranch ,California (San Diego MSA) for$31 million . Our share of the total construction cost is approximately$28 million with an estimated completion in the second half of 2018. - In July, commenced development on a 79 unit senior housing facility in
Waldwick, New Jersey (New York MSA) for$31 million . Our share of the total construction costs is approximately$26 million with an estimated completion in late 2018.
BALANCE SHEET AND DEBT TENDER
During the quarter, we made tangible progress towards meeting our balance sheet targets of net debt to adjusted EBITDA in the low-to-mid six-times range and financial leverage in the 43% to 44% range by the end of 2017. As previously disclosed, we repaid
As of
As previously announced, in July, we repurchased
In connection with the tender offer, we expect to incur an extinguishment of debt charge of approximately
TANDEM DEBT INVESTMENT UPDATE
During the second quarter, continued challenges in the post-acute/skilled nursing operating environment and tenant-specific headwinds contributed to a decline in the financial performance of the assets underlying our Tandem debt investment. As a result, the fair value of our collateral, net of the senior mortgage debt, fell below the carrying value of our investment. As part of our quarterly review process, we recorded a
On
CORPORATE GOVERNANCE ENHANCEMENTS
On
EXECUTIVE LEADERSHIP
In
In
DIVIDEND
On
SUSTAINABILITY
For the sixth consecutive year, we were named as a constituent to the FTSE4Good Index Series, an equity index series designed to facilitate investment in companies that meet globally recognized environmental, social and governance criteria. More information about HCP's sustainability efforts can be found on our website at www.hcpi.com/sustainability.
OUTLOOK
For full-year 2017, we expect EPS to range between
Projected Full Year 2017 |
|||||||
SPP NOI |
SPP Cash NOI |
||||||
Low |
High |
Low |
High |
||||
Senior housing triple-net |
2.0% |
3.0% |
5.0% |
6.0% |
|||
SHOP |
(3.9)% |
(0.9)% |
(3.0)% |
—% |
|||
Life science |
2.0% |
3.0% |
3.5% |
4.5% |
|||
Medical office |
1.8% |
2.8% |
2.5% |
3.5% |
|||
Other(1) |
2.0% |
3.0% |
0.8% |
1.8% |
|||
SPP Growth |
1.2% |
2.2% |
2.5% |
3.5% |
_______________________________________
(1) |
Other primarily includes our hospitals and |
COMPANY INFORMATION
HCP has scheduled a conference call and webcast for
ABOUT HCP
HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests primarily in real estate serving the healthcare industry in
FORWARD-LOOKING STATEMENTS
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, (i) all statements under the heading "Outlook," including without limitation with respect to expected EPS, FFO per share, FFO as adjusted per share, Comparable FFO per share, SPP NOI, SPP Cash NOI and other financial projections and assumptions, including those in the "Projected SPP NOI and Cash NOI" sections of this release, as well as comparable statements included in other sections of this release; (ii) statements regarding the payment of a quarterly cash dividend; (iii) statements regarding timing, outcomes and other details relating to current, pending or contemplated acquisitions, dispositions, developments, joint venture transactions, capital recycling and financing activities, and other transactions discussed in this release, including without limitation those described under the heading "Development and Redevelopment,"'; (iv) the incurrence of debt extinguishment charges in connection with the tender offer; and (v) the executive leadership updates described under the heading "Executive Leadership." These statements are made as of the date hereof, are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of our and our management's control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our reliance on a concentration of a small number of tenants and operators for a significant percentage of our revenues, with our concentration in
CONTACT
949-407-0400
HCP, Inc. |
|||||||
Consolidated Balance Sheets |
|||||||
In thousands, except share and per share data |
|||||||
(unaudited) |
|||||||
|
|
||||||
Assets |
|||||||
Real Estate: |
|||||||
Buildings and improvements |
$ |
11,114,139 |
$ |
11,692,654 |
|||
Development costs and construction in progress |
444,528 |
400,619 |
|||||
Land |
1,765,305 |
1,881,487 |
|||||
Accumulated depreciation and amortization |
(2,672,489) |
(2,648,930) |
|||||
Net real estate |
10,651,483 |
11,325,830 |
|||||
Net investment in direct financing leases |
711,777 |
752,589 |
|||||
Loans receivable, net |
393,575 |
807,954 |
|||||
Investments in and advances to unconsolidated joint ventures |
829,231 |
571,491 |
|||||
Accounts receivable, net of allowance of |
36,969 |
45,116 |
|||||
Cash and cash equivalents |
391,965 |
94,730 |
|||||
Restricted cash |
61,481 |
42,260 |
|||||
Intangible assets, net |
414,404 |
479,805 |
|||||
Assets held for sale, net |
— |
927,866 |
|||||
Other assets, net |
611,690 |
711,624 |
|||||
Total assets |
$ |
14,102,575 |
$ |
15,759,265 |
|||
Liabilities and Equity |
|||||||
Bank line of credit |
$ |
136,311 |
$ |
899,718 |
|||
Term loans |
218,832 |
440,062 |
|||||
Senior unsecured notes |
6,889,045 |
7,133,538 |
|||||
Mortgage debt |
146,337 |
623,792 |
|||||
Other debt |
94,801 |
92,385 |
|||||
Intangible liabilities, net |
51,463 |
58,145 |
|||||
Liabilities of assets held for sale, net |
— |
3,776 |
|||||
Accounts payable and accrued liabilities |
389,690 |
417,360 |
|||||
Deferred revenue |
147,155 |
149,181 |
|||||
Total liabilities |
8,073,634 |
9,817,957 |
|||||
Commitments and contingencies |
|||||||
Common stock, |
468,879 |
468,081 |
|||||
Additional paid-in capital |
8,216,781 |
8,198,890 |
|||||
Cumulative dividends in excess of earnings |
(2,956,324) |
(3,089,734) |
|||||
Accumulated other comprehensive loss |
(27,289) |
(29,642) |
|||||
Total stockholders' equity |
5,702,047 |
5,547,595 |
|||||
Joint venture partners |
149,456 |
214,377 |
|||||
Non-managing member unitholders |
177,438 |
179,336 |
|||||
Total noncontrolling interests |
326,894 |
393,713 |
|||||
Total equity |
6,028,941 |
5,941,308 |
|||||
Total liabilities and equity |
$ |
14,102,575 |
$ |
15,759,265 |
HCP, Inc. |
|||||||||||||||
Consolidated Statements of Operations |
|||||||||||||||
In thousands, except per share data |
|||||||||||||||
(unaudited) |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||||||
Revenues: |
|||||||||||||||
Rental and related revenues |
$ |
263,820 |
$ |
292,168 |
$ |
550,038 |
$ |
582,548 |
|||||||
Tenant recoveries |
35,259 |
33,531 |
68,934 |
64,906 |
|||||||||||
Resident fees and services |
125,416 |
164,202 |
265,648 |
329,965 |
|||||||||||
Income from direct financing leases |
13,564 |
15,647 |
27,276 |
30,557 |
|||||||||||
Interest income |
20,869 |
32,787 |
39,200 |
50,816 |
|||||||||||
Total revenues |
458,928 |
538,335 |
951,096 |
1,058,792 |
|||||||||||
Costs and expenses: |
|||||||||||||||
Interest expense |
77,788 |
121,333 |
164,506 |
243,395 |
|||||||||||
Depreciation and amortization |
130,751 |
139,919 |
267,305 |
279,774 |
|||||||||||
Operating |
153,163 |
179,080 |
312,244 |
355,037 |
|||||||||||
General and administrative |
21,286 |
22,779 |
43,764 |
48,230 |
|||||||||||
Acquisition and pursuit costs |
867 |
823 |
1,924 |
3,298 |
|||||||||||
Impairment |
56,682 |
— |
56,682 |
— |
|||||||||||
Total costs and expenses |
440,537 |
463,934 |
846,425 |
929,734 |
|||||||||||
Other income: |
|||||||||||||||
Gain on sales of real estate, net |
412 |
119,614 |
317,670 |
119,614 |
|||||||||||
Other income, net |
71 |
2,340 |
51,279 |
3,632 |
|||||||||||
Total other income, net |
483 |
121,954 |
368,949 |
123,246 |
|||||||||||
Income before income taxes and equity income (loss) from unconsolidated joint ventures |
18,874 |
196,355 |
473,620 |
252,304 |
|||||||||||
Income tax benefit (expense) |
2,987 |
2,179 |
9,149 |
(1,525) |
|||||||||||
Equity income (loss) from unconsolidated joint ventures |
240 |
(1,067) |
3,509 |
(1,975) |
|||||||||||
Income from continuing operations |
22,101 |
197,467 |
486,278 |
248,804 |
|||||||||||
Discontinued operations: |
|||||||||||||||
Income before income taxes |
— |
107,551 |
— |
225,293 |
|||||||||||
Income taxes |
— |
(176) |
— |
(49,510) |
|||||||||||
Total discontinued operations |
— |
107,375 |
— |
175,783 |
|||||||||||
Net income |
22,101 |
304,842 |
486,278 |
424,587 |
|||||||||||
Noncontrolling interests' share in earnings |
(2,718) |
(3,125) |
(5,750) |
(6,751) |
|||||||||||
Net income attributable to HCP, Inc. |
19,383 |
301,717 |
480,528 |
417,836 |
|||||||||||
Participating securities' share in earnings |
(100) |
(342) |
(674) |
(651) |
|||||||||||
Net income applicable to common shares |
$ |
19,283 |
$ |
301,375 |
$ |
479,854 |
$ |
417,185 |
|||||||
Earnings per common share: |
|||||||||||||||
Basic |
$ |
0.04 |
$ |
0.65 |
$ |
1.02 |
$ |
0.89 |
|||||||
Diluted |
$ |
0.04 |
$ |
0.64 |
$ |
1.02 |
$ |
0.89 |
|||||||
Weighted average shares used to calculate earnings per common share: |
|||||||||||||||
Basic |
468,646 |
467,084 |
468,474 |
466,579 |
|||||||||||
Diluted |
468,839 |
471,425 |
473,366 |
466,777 |
HCP, Inc. |
||||||||||||||||
Funds From Operations |
||||||||||||||||
In thousands, except per share data |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
2017 |
2016 |
2017 |
2016 |
|||||||||||||
Net income applicable to common shares |
$ |
19,283 |
$ |
301,375 |
$ |
479,854 |
$ |
417,185 |
||||||||
Real estate related depreciation and amortization |
130,751 |
141,386 |
267,305 |
282,708 |
||||||||||||
Other depreciation and amortization(1) |
2,347 |
2,974 |
5,358 |
5,936 |
||||||||||||
Gain on sales of real estate, net |
(412) |
(119,614) |
(317,670) |
(119,614) |
||||||||||||
Taxes associated with real estate dispositions(2) |
1 |
— |
(5,498) |
53,177 |
||||||||||||
Equity (income) loss from unconsolidated joint ventures |
(240) |
1,067 |
(3,509) |
1,975 |
||||||||||||
FFO from unconsolidated joint ventures |
16,554 |
11,172 |
34,862 |
21,550 |
||||||||||||
Noncontrolling interests' and participating securities' share in earnings |
2,818 |
3,467 |
6,424 |
7,402 |
||||||||||||
Noncontrolling interests' and participating securities' share in FFO |
(6,452) |
(8,609) |
(14,244) |
(17,836) |
||||||||||||
FFO applicable to common shares |
$ |
164,650 |
$ |
333,218 |
$ |
452,882 |
$ |
652,483 |
||||||||
Distributions on dilutive convertible units and other |
— |
3,525 |
3,654 |
7,109 |
||||||||||||
Diluted FFO applicable to common shares |
$ |
164,650 |
$ |
336,743 |
$ |
456,536 |
$ |
659,592 |
||||||||
Diluted FFO per common share |
$ |
0.35 |
$ |
0.71 |
$ |
0.96 |
$ |
1.40 |
||||||||
Weighted average shares used to calculate diluted FFO per common share |
468,839 |
473,149 |
473,366 |
472,667 |
||||||||||||
Impact of adjustments to FFO: |
||||||||||||||||
Transaction-related items(3) |
$ |
840 |
$ |
14,658 |
$ |
1,896 |
$ |
17,176 |
||||||||
Other impairment, net(4) |
56,682 |
— |
5,787 |
— |
||||||||||||
Litigation costs |
3,366 |
— |
5,205 |
— |
||||||||||||
Foreign currency remeasurement gains |
(768) |
— |
(845) |
— |
||||||||||||
$ |
60,120 |
$ |
14,658 |
$ |
12,043 |
$ |
17,176 |
|||||||||
FFO as adjusted applicable to common shares |
$ |
224,770 |
$ |
347,876 |
$ |
464,925 |
$ |
669,659 |
||||||||
Distributions on dilutive convertible units and other |
1,738 |
3,503 |
3,632 |
7,083 |
||||||||||||
Diluted FFO as adjusted applicable to common shares |
$ |
226,508 |
$ |
351,379 |
$ |
468,557 |
$ |
676,742 |
||||||||
Per common share impact of adjustments on diluted FFO |
$ |
0.13 |
$ |
0.03 |
$ |
0.03 |
$ |
0.03 |
||||||||
Diluted FFO as adjusted per common share |
$ |
0.48 |
$ |
0.74 |
$ |
0.99 |
$ |
1.43 |
||||||||
Weighted average shares used to calculate diluted FFO as adjusted per common share |
473,528 |
473,149 |
473,366 |
472,667 |
||||||||||||
FFO as adjusted from QCP |
$ |
— |
$ |
101,637 |
$ |
— |
$ |
199,845 |
||||||||
Diluted Comparable FFO as adjusted applicable to common shares(5) |
$ |
226,508 |
$ |
249,742 |
$ |
468,557 |
$ |
476,897 |
||||||||
FFO as adjusted from QCP per common share |
$ |
— |
$ |
(0.21) |
$ |
— |
$ |
(0.42) |
||||||||
Diluted Comparable FFO as adjusted per common share |
$ |
0.48 |
$ |
0.53 |
$ |
0.99 |
$ |
1.01 |
_______________________________________
(1) |
Other depreciation and amortization includes DFL depreciation and lease incentive amortization (reduction of straight-line rents) for the consideration given to terminate the 30 purchase options on the 153-property amended lease portfolio in the 2014 Brookdale transaction. |
(2) |
For the six months ended |
(3) |
On |
(4) |
For the three months ended |
(5) |
Excludes FFO as adjusted from QCP and interest expense related to debt repaid using proceeds from the spin-off, assuming these transactions occurred at the beginning of the earliest period presented. Comparable FFO as adjusted allows management to evaluate the performance of our remaining real estate portfolio following the completion of the QCP spin-off. |
HCP, Inc. |
|||||||||||||||
Funds Available for Distribution |
|||||||||||||||
In thousands |
|||||||||||||||
(unaudited) |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||||||
FFO as adjusted applicable to common shares |
$ |
224,770 |
$ |
347,876 |
$ |
464,925 |
$ |
669,659 |
|||||||
Amortization of deferred compensation |
3,327 |
4,160 |
7,092 |
9,505 |
|||||||||||
Amortization of deferred financing costs |
3,843 |
5,281 |
7,702 |
10,561 |
|||||||||||
Straight-line rents |
(3,168) |
(3,541) |
(8,176) |
(11,117) |
|||||||||||
Other depreciation and amortization |
(2,347) |
(2,974) |
(5,358) |
(5,935) |
|||||||||||
Leasing costs and tenant and capital improvements(1) |
(27,834) |
(21,872) |
(51,121) |
(42,354) |
|||||||||||
Lease restructure payments |
314 |
6,318 |
854 |
12,612 |
|||||||||||
CCRC entrance fees(2) |
4,713 |
6,046 |
8,362 |
11,549 |
|||||||||||
Deferred income taxes |
(4,342) |
(2,604) |
(6,716) |
(5,546) |
|||||||||||
Other FAD adjustments |
881 |
(824) |
1,138 |
(2,028) |
|||||||||||
FAD applicable to common shares |
$ |
200,157 |
$ |
337,866 |
$ |
418,702 |
$ |
646,906 |
|||||||
Distributions on dilutive convertible units and other |
1,738 |
3,525 |
— |
7,109 |
|||||||||||
Diluted FAD applicable to common shares |
$ |
201,895 |
$ |
341,391 |
$ |
418,702 |
$ |
654,015 |
_______________________________________
(1) |
Includes our share of leasing costs and tenant and capital improvements from unconsolidated joint ventures. |
(2) |
Represents our 49% share of non-refundable entrance fees as the fees are collected by our CCRC JV, net of reserves and CCRC JV entrance fee amortization. |
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