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HCP Announces Third Quarter 2008 Results
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HCP, Inc.:
| HIGHLIGHTS
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| -- $0.71 FFO per diluted share of common stock |
| -- Raised over $900 million during the quarter ended September 30, 2008: |
| -- $116 million from asset dispositions |
| -- $312 million from debt financing |
| -- $481 million from equity issuance |
| -- Completed Tenet settlement and sale of Tarzana hospital |
| -- Completed $200 million unsecured term loan on October 24, 2008 |
FFO applicable to common shares for the quarter ended September 30, 2008 includes the impact of $0.17 per diluted share of common stock of the following i) lease termination fees of $0.07 per diluted share of common stock resulting from the early termination of three leases in our life science segment and a related impairment of $0.01 per diluted share of common stock; and ii) income of $0.11 per diluted share of common stock related to the settlement of various disputes with Tenet Healthcare Corporation ("Tenet"). FFO applicable to common shares for the quarter ended September 30, 2007 includes the impact of $0.01 per diluted share of common stock of the following i) merger-related charges of $0.05 per diluted share of common stock; and ii) straight-line rental income of $0.04 per diluted share of common stock, resulting from our change in estimate related to the collectibility of straight-line rental income. FFO is a supplemental non-GAAP financial measure that the Company believes is helpful in evaluating the operating performance of real estate investment trusts.
Net income applicable to common shares for the quarter ended September 30, 2008 was $120.1 million, or $0.49 per diluted share of common stock, compared to net income applicable to common shares of $316.9 million, or $1.53 per diluted share of common stock, in the year ago period. Net income applicable to common shares for the quarter ended September 30, 2008 includes gain on sales of real estate of $27.4 million, compared to gain on sales of real estate of $286.2 million in the year ago period.
INVESTMENT TRANSACTIONS
During the quarter ended September 30, 2008, we sold three hospitals valued at $116 million and made investments aggregating $89 million through the purchase of debt securities and a joint venture interest, and funding of construction and other capital projects.
During the quarter ended September 30, 2008, two of our life science facilities located in South San Francisco were placed into service representing 147,000 square feet.
FINANCING TRANSACTIONS
On August 11, 2008, we issued 14.95 million shares of our common stock. We received net proceeds of $481 million, which were used to repay a portion of our outstanding indebtedness under our bridge loan facility.
In September 2008, we placed mortgage financing on senior housing assets through Fannie Mae aggregating $319 million, which was comprised of $140 million of five-year mortgage financing on four assets and $179 million of eight-year financing on 12 assets. The assets are cross-collateralized and the debt has a weighted-average fixed interest rate of 6.39%. We received net proceeds aggregating $312 million, which were used to repay our outstanding indebtedness under our revolving line of credit facility.
On October 24, 2008, we entered into a credit agreement with a syndicate of banks for a $200 million unsecured term loan. The term loan accrues interest at a rate of LIBOR plus 2.00%, based on our current debt ratings, and matures in August 2011. The net proceeds of $197 million received by us from the term loan were used to repay a portion of our outstanding indebtedness under our bridge loan facility, reducing the outstanding balance to $320 million.
OTHER EVENTS
On July 30, 2008, we received and recognized lease termination fees of $18 million from a tenant in connection with the early termination of three leases representing 149,000 square feet in our life science segment. Upon termination of the leases, we recognized an impairment of $4 million related to intangible assets associated with these leases, which resulted in a net FFO impact of $14 million.
On September 19, 2008, we completed the restructuring of our hospital portfolio leased to Tenet and settled various disputes. The settlement provided for, among other things, the sale of our hospital in Tarzana, California, valued at $89 million, the purchase of Tenet's minority interest in a joint venture valued at $29 million and the extension of the terms of three other hospitals leased by us to Tenet. As a result of the sale of our hospital in Tarzana, California and the settlement of our legal disputes with Tenet, we recognized income of $47 million, of which $29 million, or $0.11 per diluted share of common stock, was included in FFO.
DIVIDEND
On October 30, 2008, we announced that our Board of Directors declared a quarterly common stock cash dividend of $0.455 per share. The dividend will be paid on November 21, 2008 to stockholders of record as of the close of business on November 10, 2008.
FUTURE OPERATIONS
For the full year 2008, we presently expect net income applicable to common shares to range between $1.88 and $1.92 per diluted common share, FFO applicable to common shares to range between $2.31 and $2.35 per diluted common share, and FFO applicable to common shares, before giving effect to merger-related charges and impairments, to range between $2.38 and $2.42 per diluted common share.
COMPANY INFORMATION
HCP has scheduled a conference call and webcast for Tuesday, November 4, 2008 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 September 30, 2008. The conference call is accessible by dialing (866) 713-8307 (U.S.) or (617) 597-5307 (International). The participant passcode is 15288842. The webcast is accessible via the Company's website at www.hcpi.com. The link can be found on the "Event Calendar" page, which is under the "Investor Relations" tab. A webcast replay of the conference call will be available after 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) on November 4, 2008 through November 18, 2008 on the Company's website and a telephonic replay can be accessed by calling (888) 286-8010 (U.S.) or (617) 801-6888 (International) and entering passcode 85554892. The Company's supplemental information package for the current period will also be available on the Company's website in the "Presentations" section of the "Investor Relations" tab.
ABOUT HCP
HCP, Inc., an S&P 500 company, is a real estate investment trust (REIT) that, together with its consolidated subsidiaries, invests primarily in real estate serving the healthcare industry in the United States. As of September 30, 2008, the Company's portfolio of properties, excluding assets held for sale but including mortgage loans and properties owned by unconsolidated joint ventures, totaled 704 properties among the following segments: 267 senior housing, 107 life science, 254 medical office, 25 hospital and 51 skilled nursing. For more information, visit the Company's website at www.hcpi.com.
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 and Section 21E of the Securities Exchange Act of 1934. These statements include among other things net income applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis before giving effect to merger-related charges and impairments, gain on sales of real estate, real estate depreciation and amortization, joint venture adjustments, merger-related charges and impairments for the full year of 2008. These statements are made as of the date hereof and are subject to known and unknown risks, uncertainties, assumptions and other factors-many of which are out of the Company's control and difficult to forecast-that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include but are not limited to: the Company's ability to access external sources of capital when desired and on reasonable terms; the Company's ability to manage its indebtedness levels; the Company's ability to maintain its credit ratings; the Company's ability to achieve its expected benefits from acquisitions, including integrating and preserving the goodwill of those companies; competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); continuing reimbursement uncertainty in the skilled nursing segment; competition in the senior housing segment specifically and in the healthcare industry in general; the Company's ability to acquire, sell or lease facilities and the timing of acquisitions, sales and leasings; the Company's ability to realize the benefits of its mezzanine investments; changes in the financial condition of the Company's lessees and obligors; changes in healthcare laws and regulations and other changes in the healthcare industry which affect the operations of the Company's lessees or obligors; changes in the Company's management; litigation claims and developments; costs of compliance with building regulations; changes in tax laws and regulations; changes in rules governing financial reporting, including new accounting pronouncements; changes in economic conditions, including changes in interest rates and the availability and cost of capital, which affect opportunities for profitable investments; and other risks described from time to time in the Company's Securities and Exchange Commission filings. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.
| HCP, Inc.
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| Summary of Information
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| In thousands, except per share data
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| (Unaudited)
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| Three Months Ended September 30,
| Â | Nine Months Ended September 30,
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| 2008 | Â | 2007 | 2008 | Â | 2007 | ||||||
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| Revenues | $ | 269,938 | $ | 243,579 | $ | 767,433 | $ | 658,039 | |||
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| Net income applicable to common shares | $ | 120,135 | $ | 316,866 | $ | 392,276 | $ | 522,872 | |||
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| Basic earnings per common share | $ | 0.49 | $ | 1.54 | $ | 1.69 | $ | 2.55 | |||
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| Diluted earnings per common share | $ | 0.49 | $ | 1.53 | $ | 1.68 | $ | 2.53 | |||
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| Weighted average shares used to calculate diluted earnings per common share | Â | 245,906 | Â | 207,070 | Â | 233,391 | Â | 206,672 | |||
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| Funds from operations applicable to common shares (1) | $ | 175,063 | $ | 109,007 | $ | 416,783 | $ | 331,850 | |||
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| Diluted funds from operations applicable to common shares (1) | $ | 179,055 | $ | 111,613 | $ | 427,938 | $ | 341,937 | |||
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| Basic funds from operations per common share (1) | $ | 0.72 | $ | 0.53 | $ | 1.79 | $ | 1.62 | |||
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| Diluted funds from operations per common share (1) | $ | 0.71 | $ | 0.52 | $ | 1.78 | $ | 1.60 | |||
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| Weighted average shares used to calculate diluted funds from operations per common share (1) | Â | 253,956 | Â | 212,920 | Â | 240,988 | Â | 213,947 | |||
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| Impact of merger-related charges and impairments: | |||||||||||
| Merger-related charges (2) | $ | 843 | $ | 9,078 | $ | 3,173 | $ | 18,057 | |||
| Impairments | Â | 3,710 | Â | - | Â | 13,425 | Â | - | |||
| $ | 4,553 | $ | 9,078 | $ | 16,598 | $ | 18,057 | ||||
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| Per common share impact of merger-related charges and impairments on diluted funds from operations | $ | 0.01 | $ | 0.05 | $ | 0.06 | $ | 0.08 | |||
FFO is defined as net income applicable to common shares (computed in accordance with U.S. generally accepted accounting principles), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, with adjustments for joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. FFO does not represent cash generated from operating activities in accordance with U.S. generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income. The Company's computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current National Association of Real Estate Investment Trusts' ("NAREIT") definition or that have a different interpretation of the current NAREIT definition from the Company. A reconciliation of net income applicable to common shares to FFO applicable to common shares is provided herein.
(2) Merger-related charges in the periods ended September 30, 2008 and 2007 include the amortization of fees associated with our acquisition financing for Slough Estates USA Inc. ("SEUSA"), as well as other SEUSA integration costs. Merger-related charges in the periods ended September 30, 2007 also include the amortization and write-off of fees associated with our acquisition financing for CNL Retirement Properties, Inc. ("CRP"), severance and retention-related compensation, as well as other CRP integration costs.
| HCP, Inc.
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| Consolidated Statements of Income
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| In thousands, except per share data
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| (Unaudited)
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| Three Months Ended September 30,
| Nine Months Ended September 30,
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| 2008 | 2007 | 2008 | 2007 | |||||||||
| Revenues: | ||||||||||||
| Rental and related revenues | $ | 233,632 | $ | 205,585 | $ | 657,484 | $ | 554,031 | ||||
| Tenant recoveries | 20,240 | 17,560 | 61,855 | 42,909 | ||||||||
| Income from direct financing leases | 14,543 | 18,832 | 43,646 | 49,037 | ||||||||
| Investment management fee income | Â | 1,523 | Â | 1,602 | Â | 4,448 | Â | 12,062 | ||||
| Total revenues | Â | 269,938 | Â | 243,579 | Â | 767,433 | Â | 658,039 | ||||
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| Costs and expenses: | ||||||||||||
| Depreciation and amortization | 77,659 | 70,418 | 233,920 | 184,132 | ||||||||
| Operating | 49,846 | 49,914 | 146,506 | 127,457 | ||||||||
| General and administrative | 17,541 | 16,499 | 56,913 | 53,894 | ||||||||
| Impairments | Â | 3,710 | Â | - | Â | 13,425 | Â | - | ||||
| Total costs and expenses | Â | 148,756 | Â | 136,831 | Â | 450,764 | Â | 365,483 | ||||
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| Other income (expense): | ||||||||||||
| Gain on sale of real estate interest | - | - |
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