HIGHLIGHTS
-- FFO per share was $0.75; FAD per share was $0.63; and EPS was
$0.56
-- Achieved year-over-year three-month Cash NOI SPP growth of
4.2%
-- Expanding relationship with Brookdale by creating a $1.2
billion CCRC joint venture and amending existing Emeritus
leases
-- Completed $162 million of additional investment
transactions
-- Executed several significant life science and medical office
leases totaling 187,000 sq. ft.
-- Increased revolving credit facility to $2 billion, with
improved pricing and extended term
-- Raised $350 million of 4.2% senior unsecured notes due
2024
-- Earned four ENERGY STAR certifications, bringing our total to
134 ENERGY STAR certifications
HCP (the “Company” or “we”) (NYSE:HCP) announced results for the
quarter ended March 31, 2014 as follows (in thousands, except per
share amounts):
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2013
Per Share Amount
Per Share Amount Per Share
Change
FFO $ 343,139 $ 0.75 $ 339,529 $ 0.74 $ 0.01
FAD $ 287,021 $ 0.63 $ 283,382 $ 0.62 $ 0.01
EPS $
258,047 $ 0.56 $ 230,107 $ 0.51 $ 0.05
FFO, FAD and EPS for the quarter ended March 31, 2013 include
$0.02 per share of gain from sales of marketable securities. EPS
for the quarter ended March 31, 2014 includes $0.06 per share of
gain from sales of real estate.
FFO and FAD are supplemental non-GAAP financial measures that we
believe are useful in evaluating the operating performance of real
estate investment trusts. See the “Funds From Operations” and
“Funds Available for Distribution” sections of this release for
additional information regarding these non-GAAP financial
measures.
EXPANDING RELATIONSHIP WITH BROOKDALE BY CREATING A $1.2
BILLION CCRC JOINT VENTURE AND AMENDING EXISTING EMERITUS
LEASES
On April 23, 2014, HCP and Brookdale Senior Living (“Brookdale”)
agreed to create a new $1.2 billion strategic joint venture to own
and operate entry fee continuing care retirement communities (“CCRC
JV”), representing 14 CCRC campuses with 7,000 units, at closing.
HCP and Brookdale will own 49% and 51%, respectively, of the CCRC
JV based on each company’s respective contributions. Brookdale will
continue to manage all properties under a long-term management
agreement.
Further, all existing Emeritus Corporation (“Emeritus”) purchase
options encompassing 49 HCP properties will be cancelled; in
exchange, all triple-net leases between HCP and Emeritus covering
202 senior housing properties will be amended, resulting in two
portfolios: (i) RIDEA Portfolio – 49 non-stabilized properties will
be contributed into a RIDEA joint venture, with Brookdale managing
the communities and acquiring a 20% ownership interest; and (ii)
NNN–leased Portfolio – Brookdale and HCP will amend the
triple-net master leases for the remaining 153 properties, all
guaranteed by Brookdale. These leases will have an average initial
term of 15 years, plus two 10-year extension options and provide
total base rent in 2014 of $158 million, unchanged from the
existing rent, but contain reduced future rent payments and
escalations compared to those currently in-place. HCP will fund up
to $100 million for capital improvements through 2017 to upgrade
the portfolio, earning additional rent at a market yield as funding
occurs.
All transactions described above are contingent upon the closing
of Brookdale’s pending merger with Emeritus. For additional
information, see the April 2014 presentation titled “New $1.2
billion CCRC JV with Brookdale and Amendment of Emeritus Leases”,
which is available on the Company’s website in the “Presentations”
section of the “Investor Relations” tab.
INVESTMENT TRANSACTIONS
Through May 2014, we completed $162 million of additional
investment transactions as follows:
- During the quarter ended March 31,
2014, the Company: (i) made a $32 million investment for a medical
office building (“MOB”); (ii) acquired an 85 percent interest in a
$51 million 180-unit senior housing community development project;
and (iii) funded $53 million for construction and other
capital projects, primarily in our life science, medical office and
senior housing segments.
- On May 1, 2014, we acquired two MOBs
totaling 148,000 square feet for $26 million. The properties,
located in the historic Coconut Grove neighborhood of Miami, are on
the campus of HCA’s Mercy Hospital.
During the quarter ended March 31, 2014, we sold two skilled
nursing facilities for $22 million and a hospital for $17
million.
SIGNIFICANT LEASING TRANSACTIONS
Through May 2014, we executed several significant new leases
totaling 187,000 square feet as follows:
- In February 2014, we executed two
11-year leases totaling 102,000 square feet: (i) 51,000 sq. ft.
with the University Medical Center of Southern Nevada that anchors
85% of our Las Vegas medical office redevelopment project; and (ii)
51,000 sq. ft. for an entire building at our Hayward, California
life science campus, which commences in August 2014.
- During March and April 2014, we
executed three seven-year leases (expected to commence in the
fourth quarter of 2014) totaling 85,000 square feet, which fully
leases our South San Francisco Oyster Point life science
campus.
FINANCING ACTIVITIES
On February 21, 2014, we issued $350 million of 4.2% senior
unsecured notes due 2024. The notes priced at 99.537% of the
principal amount with an effective yield-to-maturity of 4.257%.
On March 31, 2014, we amended our revolving credit facility by:
(i) increasing its capacity to $2 billion from $1.5 billion; (ii)
improving our funded interest cost by 17.5 basis points; and (iii)
extending the maturity date to March 31, 2018. Based on our current
credit ratings, the amended credit facility bears interest annually
at LIBOR plus 92.5 basis points and has a facility fee of 15 basis
points. Other terms of the amended facility were substantially
unchanged, including a one-year extension option at our discretion,
and the ability to increase the commitments by an aggregate amount
of up to $500 million, subject to customary conditions.
SUSTAINABILITY
During the quarter, we earned four ENERGY STAR awards in our
medical office and life science segments. As of March 31, 2014, we
have been awarded 134 ENERGY STAR and 10 LEED certifications. More
information about HCP’s sustainability efforts can be found on our
website at www.hcpi.com/sustainability.
DIVIDEND
On May 1, 2014, our Board of Directors declared a quarterly cash
dividend of $0.545 per common share. The dividend will be paid on
May 27, 2014 to stockholders of record as of the close of business
on May 12, 2014.
OUTLOOK
For full year 2014, we expect: FFO to range between $2.96 and
$3.02 per share; FAD to range between $2.47 and $2.53 per share;
and EPS to range between $2.04 and $2.10 per share. These estimates
do not reflect the potential impact of future acquisitions or the
announced CCRC JV and lease amendment with Brookdale, which closing
is subject to the completion of the pending merger, including
shareholder approval, between Brookdale and Emeritus. See the
“Projected Future Operations” section of this release for
additional information regarding these estimates.
COMPANY INFORMATION
HCP has scheduled a conference call and webcast for Tuesday, May
6, 2014 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 March 31, 2014. The conference call
is accessible by dialing (877) 363-5049 (U.S.) or (760) 536-8594
(International). The participant passcode is 26345444. The webcast
is accessible via the Company’s website at www.hcpi.com. This link
can be found on the “Event Calendar” page, which is under the
“Investor Relations” tab. Through May 21, 2014, an archive of the
webcast will be available on our website, and a telephonic replay
can be accessed by calling (855) 859-2056 (U.S.) or (404) 537-3406
(International) and entering passcode 26345444. 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. is a fully integrated real estate investment trust
(REIT) that invests primarily in real estate serving the healthcare
industry in the United States. The Company's portfolio of assets is
diversified among five distinct sectors: senior housing,
post-acute/skilled nursing, life science, medical office and
hospital. A publicly traded company since 1985, HCP: (i) was the
first healthcare REIT selected to the S&P 500 index; (ii) has
increased its dividend per share for 29 consecutive years; (iii) is
the only REIT included in the S&P 500 Dividend Aristocrats
index; and (iv) is a global leader in sustainability as a member of
the CDP, Dow Jones and FTSE4Good sustainability leadership indices,
and the Global and North American healthcare sector leader for
GRESB. For more information regarding HCP, 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, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements include, among other things, the Company’s
expectations with respect to (i) net income applicable to common
shares on a diluted basis, FFO and FAD applicable to common shares
on a diluted basis for the full year of 2014; (ii) the payment of
the regular quarterly dividend; (iii) cash NOI SPP growth for the
full year of 2014; and (iv) anticipated outcomes relating to the
proposed CCRC JV and the Brookdale and Emeritus merger transaction
and the potential benefits of an expanded relationship and joint
ventures between HCP and Brookdale. 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 the Company and its
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: the Company’s ability
to complete the transactions described in this release related to
the Brookdale and Emeritus merger on the currently proposed terms
or at all; risks relating to the merger of Brookdale and Emeritus,
including in respect of the satisfaction of closing conditions to
the merger, unanticipated difficulties relating to the merger, the
risk that regulatory approvals required for the merger are not
obtained or are obtained subject to unanticipated conditions,
uncertainties as to the timing of the merger, litigation relating
to the merger, the impact of the transaction on each party’s
relationships with its residents, employees and third parties, and
the parties’ inability to obtain, or delays in obtaining, cost
savings and synergies from the merger; changes in global, national
and local economic conditions, including a prolonged period of weak
economic growth; volatility or uncertainty in the capital markets,
including changes in the availability and cost of capital (impacted
by changes in interest rates and the value of our common stock),
which may adversely impact our ability to consummate transactions
or reduce the earnings from potential transactions; the Company’s
ability to manage its indebtedness level and changes in the terms
of such indebtedness; the effect on healthcare providers, including
Brookdale and Emeritus, of the recently enacted and pending
Congressional legislation addressing entitlement programs and
related services, including Medicare and Medicaid, which may result
in future reductions in reimbursements; the ability of operators,
tenants and borrowers, including Brookdale and Emeritus, to conduct
their respective businesses in a manner sufficient to maintain or
increase their revenues and to generate sufficient income to make
rent and loan payments to the Company and the Company’s ability to
recover investments made, if applicable, in their operations; the
financial weakness of some operators and tenants (potentially
including Brookdale and Emeritus), including potential bankruptcies
and downturns in their businesses, which results in uncertainties
regarding the Company’s ability to continue to realize the full
benefit of such operators’ and/or tenants’ leases; changes in
federal, state or local laws and regulations, including those
affecting the healthcare industry that affect the Company’s costs
of compliance or increase the costs, or otherwise affect the
operations of operators, tenants and borrowers, including Brookdale
and Emeritus; the potential impact of future litigation matters,
including the possibility of larger than expected litigation costs,
adverse results and related developments; competition for tenants
and borrowers, including with respect to new leases and mortgages
and the renewal or rollover of existing leases; the Company’s
ability to negotiate the same or better terms with new tenants or
operators if existing leases are not renewed or the Company
exercises its right to replace an existing operator or tenant upon
default; availability of suitable properties to acquire at
favorable prices and the competition for the acquisition and
financing of those properties; the financial, legal, regulatory and
reputational difficulties of significant operators of the Company’s
properties, potentially including Brookdale and Emeritus; the risk
that the Company may not be able to achieve the benefits of
investments including with respect to the CCRC JV and the Brookdale
and Emeritus merger transaction, within expected time-frames or at
all, or within expected cost projections; the ability to obtain
financing necessary to consummate acquisitions on favorable terms;
risks associated with the Company’s investments in joint ventures
(including the proposed CCRC JV) and unconsolidated entities,
including its lack of sole decision-making authority and its
reliance on its joint venture partners’ financial condition and
continued cooperation; changes in the credit ratings on U.S.
government debt securities or default or delay in payment by the
U.S. of its obligations; and other risks and uncertainties
described from time to time in the Company’s Securities and
Exchange Commission filings, including its 2013 Annual Report on
Form 10-K. 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.
Consolidated Balance Sheets
In thousands, except share and per
share data
(Unaudited)
March 31,
December 31, 2014 2013
Assets Real estate: Buildings and
improvements $ 10,570,071 $ 10,544,110 Development costs and
construction in progress 211,181 225,869 Land 1,827,137 1,822,862
Accumulated depreciation and amortization (2,015,034 )
(1,965,592 ) Net real estate 10,593,355 10,627,249
Net investment in direct financing leases 7,190,400 7,153,399 Loans
receivable, net 371,172 366,001 Investments in and advances to
unconsolidated joint ventures 193,930 196,576 Accounts receivable,
net of allowance of $1,897 and $1,529, respectively 28,539 27,494
Cash and cash equivalents 49,738 300,556 Restricted cash 30,296
37,229 Intangible assets, net 472,058 489,842 Real estate assets
held for sale, net — 9,819 Other assets, net 929,190
867,705 Total assets $ 19,858,678 $ 20,075,870
Liabilities and equity Term loan $ 228,269 $ 226,858 Senior
unsecured notes 6,912,812 6,963,375 Mortgage debt 1,235,169
1,396,485 Other debt 74,097 74,909 Intangible liabilities, net
94,615 98,810 Accounts payable and accrued liabilities 276,342
318,427 Deferred revenue 67,801 65,872 Total
liabilities 8,889,105 9,144,736 Common
stock, $1.00 par value: 750,000,000 shares authorized; 458,043,744
and 456,960,648 shares issued and outstanding, respectively 458,044
456,961 Additional paid-in capital 11,362,581 11,334,041 Cumulative
dividends in excess of earnings (1,044,302 ) (1,053,215 )
Accumulated other comprehensive loss (14,570 )
(14,487 ) Total stockholders’ equity 10,761,753
10,723,300 Joint venture partners 23,788 23,729 Non-managing
member unitholders 184,032 184,105 Total
noncontrolling interests 207,820 207,834 Total
equity 10,969,573 10,931,134 Total liabilities
and equity $ 19,858,678 $ 20,075,870
HCP, Inc.
Consolidated Statements of
Income
In thousands, except per share
data
(Unaudited)
Three Months Ended
March 31,
2014 2013
Revenues: Rental and
related revenues $ 284,823 $ 281,539 Tenant recoveries 25,434
24,202 Resident fees and services 38,053 35,746 Income from direct
financing leases 164,537 156,870 Interest income 16,696 12,386
Investment management fee income 449 443 Total
revenues 529,992 511,186
Costs and
expenses: Interest expense 106,638 109,110 Depreciation and
amortization 107,388 103,179 Operating 75,707 72,686 General and
administrative 21,394 20,656 Total costs and expenses
311,127 305,631 Other income, net 1,930
12,112
Income before income taxes and equity
income from unconsolidated joint ventures 220,795 217,667
Income taxes (1,446 ) (916 ) Equity income from unconsolidated
joint ventures 14,528 14,801
Income from
continuing operations 233,877 231,552
Discontinued operations: Income before gain on sales of real
estate, net of income taxes 1,736 2,232 Gain on sales of real
estate, net of income taxes 28,010 — Total
discontinued operations 29,746 2,232
Net
income 263,623 233,784 Noncontrolling interests’ share in
earnings (4,512 ) (3,199 )
Net income attributable
to HCP, Inc. 259,111 230,585 Participating securities’ share in
earnings (1,064 ) (478 )
Net income
applicable to common shares $ 258,047 $ 230,107
Basic
earnings per common share: Continuing operations $ 0.50 $ 0.50
Discontinued operations 0.06 0.01 Net income
applicable to common shares $ 0.56 $ 0.51
Diluted
earnings per common share: Continuing operations $ 0.50 $ 0.50
Discontinued operations 0.06 0.01 Net income
applicable to common shares $ 0.56 $ 0.51
Weighted
average shares used to calculate earnings per common share:
Basic 457,294 453,651 Diluted 457,674
454,613
HCP, Inc.
Consolidated Statements of Cash
Flows
In thousands
(Unaudited)
Three Months Ended March 31,
2014 2013
Cash flows from operating
activities: Net income $ 263,623 $ 233,784 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and
other intangibles: Continuing operations 107,388 103,179
Discontinued operations — 1,538 Amortization of above and below
market lease intangibles, net (168 ) (78 ) Amortization of deferred
compensation 4,890 5,430 Amortization of deferred financing costs,
net 4,965 4,644 Straight-line rents (13,968 ) (18,793 ) Loan and
direct financing lease interest accretion (21,503 ) (24,266 )
Deferred rental revenues (145 ) 1,257 Equity income from
unconsolidated joint ventures (14,528 ) (14,801 ) Distributions of
earnings from unconsolidated joint ventures 2,430 803 Gain on sales
of real estate (28,010 ) — Marketable securities and other gains
(losses), net 63 (11,082 ) Changes in: Accounts receivable, net
(1,045 ) 1,967 Other assets (8,942 ) (8,699 ) Accounts payable and
accrued liabilities (47,869 ) (60,533 ) Net cash provided by
operating activities 247,181 214,350
Cash flows from investing
activities: Acquisitions of real estate (5,473 ) (25,654 )
Development of real estate (33,983 ) (38,749 ) Leasing costs and
tenant and capital improvements (12,405 ) (8,959 ) Proceeds from
sales of real estate, net 36,753 — Distributions in excess of
earnings from unconsolidated joint ventures 772 568 Proceeds from
the sales of marketable securities — 28,030 Principal repayments on
loans receivable 3,133 2,188 Investments in loans receivable and
other (42,281 ) (14,957 ) Decrease in restricted cash 6,933 173 Net
cash used in investing activities (46,551 ) (57,360 )
Cash flows
from financing activities: Net borrowings under bank line of
credit — 14,000 Issuance of senior unsecured notes 350,000 —
Repayments of senior unsecured notes (400,000 ) (150,000 )
Repayments of mortgage debt (162,739 ) (12,135 ) Deferred financing
costs (9,239 ) — Issuance of common stock and exercise of options
32,728 32,942 Repurchase of common stock (8,068 ) (689 ) Dividends
paid on common stock (250,198 ) (238,467 ) Issuance of
noncontrolling interests 41 987 Distributions to noncontrolling
interests (3,975 ) (3,754 ) Net cash used in financing activities
(451,450 ) (357,116 ) Effect of foreign exchange on cash and cash
equivalents 2 — Net decrease in cash and cash equivalents (250,818
) (200,126 ) Cash and cash equivalents, beginning of period 300,556
247,673 Cash and cash equivalents, end of period $ 49,738 $ 47,547
HCP, Inc.
Funds From Operations(1)
In thousands, except per share
data
(Unaudited)
Three Months Ended
March 31,
2014 2013
Net income applicable to
common shares $ 258,047 $ 230,107 Depreciation and amortization
of real estate, in-place lease and other intangibles: Continuing
operations 107,388 103,179 Discontinued operations — 1,538 Direct
financing lease (“DFL”) depreciation 3,846 3,429 Gain on sales of
real estate (28,010 ) — Equity income from unconsolidated joint
ventures (14,528 ) (14,801 ) FFO from unconsolidated joint ventures
16,961 17,541 Noncontrolling interests’ and participating
securities’ share in earnings 5,576 3,677 Noncontrolling interests’
and participating securities’ share in FFO (6,141 )
(5,141 ) FFO applicable to common shares $ 343,139 $ 339,529
Distributions on dilutive convertible units 3,420
3,328
Diluted FFO applicable to common shares $ 346,559 $
342,857 Diluted FFO per common share $ 0.75 $ 0.74
Weighted average shares used to calculate diluted FFO per share
463,661 460,650
________________________________________
(1) We believe Funds From Operations (“FFO”) is an important
supplemental measure of operating performance for a REIT. Because
the historical cost accounting convention used for real estate
assets utilizes 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 REIT that use historical
cost accounting for depreciation could be less informative. The
term FFO was developed by the REIT industry to address this issue.
FFO as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”) is net income applicable to common
shares (computed in accordance with U.S. generally accepted
accounting principles or “GAAP”), excluding gains from dispositions
of depreciable real estate or related interests, impairments of, or
related to, depreciable real estate, plus real estate and DFL
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 determined in accordance with GAAP, is not necessarily
indicative of cash available to fund cash needs and should not be
considered an alternative to net income. Our computation of FFO may
not be comparable to FFO reported by other REITs that do not define
the term in accordance with the current NAREIT definition or that
have a different interpretation of the current NAREIT definition
from ours.
HCP, Inc.
Funds Available for
Distribution(1)
In thousands, except per share
data
(Unaudited)
Three Months Ended
March 31,
2014 2013
FFO applicable to common
shares $ 343,139 $ 339,529 Amortization of above and below
market lease intangibles, net (168 ) (78 ) Amortization of deferred
compensation 4,890 5,430 Amortization of deferred financing costs,
net 4,965 4,644 Straight-line rents (13,968 ) (18,793 ) DFL
accretion(2) (21,422 ) (24,170 ) DFL depreciation (3,846 ) (3,429 )
Deferred revenues – tenant improvement related (482 ) (444 )
Deferred revenues – additional rents 337 1,701 Leasing costs and
tenant and capital improvements (12,405 ) (8,959 ) Joint venture
and other FAD adjustments(2) (14,019 ) (12,049 ) FAD
applicable to common shares $ 287,021 $ 283,382
Distributions on dilutive convertible units 2,251
3,328
Diluted FAD applicable to common shares $
289,272 $ 286,710 Diluted FAD per common share $ 0.63 $ 0.62
Weighted average shares used to calculate diluted FAD per
common share 461,804 460,650
________________________________________
(1) Funds Available for Distribution (“FAD”) is defined as
FFO after excluding the impact of the following: (i) amortization
of acquired above/below market lease intangibles, net; (ii)
amortization of deferred compensation expense; (iii) amortization
of deferred financing costs, net; (iv) straight-line rents; (v)
accretion and depreciation related to DFLs; and (vi) deferred
revenues. Also, FAD is computed after deducting recurring capital
expenditures, including leasing costs and second generation tenant
and capital improvements and includes adjustments to compute our
share of FAD from our unconsolidated joint ventures that are
similar to those in FFO. Other REITs or real estate companies may
use different methodologies for calculating FAD, and accordingly,
our FAD may not be comparable to those reported by other REITs.
Although our FAD computation may not be comparable to that of other
REITs, management believes FAD provides a meaningful supplemental
measure of our ability to fund our ongoing dividend payments. In
addition, management believes that in order to further understand
and analyze our liquidity, FAD should be compared with net cash
flows from operating activities as presented in our consolidated
financial statements prepared in accordance with GAAP. FAD does not
represent cash generated from operating activities determined in
accordance with GAAP, and FAD should not be considered as an
alternative to net income (determined in accordance with GAAP) as
an indication of our performance, as an alternative to net cash
flows from operating activities (determined in accordance with
GAAP), or as a measure of our liquidity. (2) For the three
months ended March 31, 2014 and 2013, DFL accretion reflects an
elimination of $15.6 million and $15.9 million, respectively. Our
ownership interest in HCR ManorCare, Inc. (“HCR ManorCare”) is
accounted for using the equity method, which requires an ongoing
elimination of DFL income that is proportional to our ownership in
HCR ManorCare. Further, our share of earnings from HCR ManorCare
(equity income) increases for the corresponding elimination of
related lease expense recognized at the HCR ManorCare level, which
we present as a non-cash joint venture FAD adjustment.
HCP, Inc.
Net Operating Income and Same Property
Performance(1)(2)
Dollars in thousands
(Unaudited)
Three Months Ended
March 31,
2014 2013
Net income $ 263,623 $
233,784 Interest income (16,696 ) (12,386 ) Investment management
fee income (449 ) (443 ) Interest expense 106,638 109,110
Depreciation and amortization 107,388 103,179 General and
administrative 21,394 20,656 Other income, net (1,930 ) (12,112 )
Income taxes 1,446 916 Equity income from unconsolidated joint
ventures (14,528 ) (14,801 ) Total discontinued operations
(29,746 ) (2,232 )
NOI $ 437,140 $ 425,671
Straight-line rents (13,968 ) (18,793 ) DFL accretion (21,422 )
(24,170 ) Amortization of above and below market lease intangibles,
net (168 ) (78 ) Lease termination fees (578 ) — NOI adjustments
related to discontinued operations (11 ) (5 )
Cash
(Adjusted) NOI $ 400,993 $ 382,625 Non-SPP cash (adjusted) NOI
(1,276 ) 817
Same property portfolio cash
(adjusted) NOI(2) $ 399,717 $
383,442 Cash (Adjusted) NOI % change – SPP(2)
4.2%
________________________________________
(1) We believe Net Operating Income from Continuing
Operations (“NOI”) provides investors relevant and useful
information because it reflects only income and operating expense
items that are incurred at the property level and presents them on
an unleveraged basis. We use NOI and adjusted NOI to make decisions
about resource allocations, to assess and compare property level
performance, and evaluate SPP. We believe that net income is the
most directly comparable GAAP measure to NOI. NOI should not be
viewed as an alternative measure of operating performance to net
income (determined in accordance with GAAP) since it excludes
certain components from net income. Further, our NOI may not be
comparable to that of other REITs or real estate companies, as they
may use different methodologies for calculating NOI. NOI is
defined as rental and related revenues, including tenant
recoveries, resident fees and services, and income from DFLs, less
property level operating expenses. NOI excludes interest income,
investment management fee income, interest expense, depreciation
and amortization, general and administrative expenses, impairments,
impairment recoveries, other income, net, income taxes, equity
income from unconsolidated joint ventures, and discontinued
operations. Adjusted NOI is calculated as NOI eliminating the
effects of straight-line rents, DFL accretion, amortization of
above and below market lease intangibles, and lease termination
fees. Adjusted NOI is sometimes referred to as “cash NOI.”
(2) Same property portfolio (“SPP”) statistics allow management to
evaluate the performance of our real estate portfolio under a
consistent population, which eliminates the changes in the
composition of our portfolio of properties. We identify our SPP as
stabilized properties that remained in operations and were
consistently reported as leased properties or operating properties
(RIDEA) for the duration of the year-over-year comparison periods
presented. Accordingly, it takes a stabilized property a minimum of
12 months in operations under a consistent reporting structure to
be included in our SPP. SPP NOI excludes certain non-property
specific operating expenses that are allocated to each operating
segment on a consolidated basis.
HCP, Inc.
Projected Future
Operations(1)
(Unaudited)
Full Year 2014 Low
High Diluted earnings per common share
$
2.04
$
2.10
Real estate depreciation and amortization 0.94 0.94 DFL
depreciation 0.03 0.03 Gain on sales of real estate (0.06 ) (0.06 )
Joint venture FFO adjustments 0.01 0.01
Diluted FFO per common share $ 2.96 $
3.02 Amortization of net below market lease intangibles and
deferred revenues (0.01 ) (0.01 ) Amortization of deferred
compensation 0.05 0.05 Amortization of deferred financing costs,
net 0.04 0.04 Straight-line rents (0.09 ) (0.09 ) DFL accretion(2)
(0.17 ) (0.17 ) DFL depreciation (0.03 ) (0.03 ) Leasing costs and
tenant and capital improvements (0.15 ) (0.15 ) Joint venture and
other FAD adjustments(2) (0.13 ) (0.13 )
Diluted
FAD per common share $ 2.47 $
2.53
________________________________________
(1) Except as otherwise noted above, the foregoing
projections reflect management's view of current and future market
conditions, including assumptions with respect to rental rates,
occupancy levels, development items and the earnings impact of the
events referenced in this release. Except as otherwise noted, these
estimates do not reflect the potential impact of future
acquisitions, including the pending CCRC JV with Brookdale and
related Emeritus lease amendment transactions, dispositions, other
impairments or recoveries, the future bankruptcy or insolvency of
our operators, lessees, borrowers or other obligors, the effect of
any future restructuring of our contractual relationships with such
entities, gains or losses on marketable securities, ineffectiveness
related to our cash flow hedges, or existing and future litigation
matters including the possibility of larger than expected
litigation costs and related developments. There can be no
assurance that our actual results will not differ materially from
the estimates set forth above. The aforementioned ranges represent
management’s best estimates based upon the underlying assumptions
as of the date of this press release. Except as otherwise required
by law, management assumes no, and hereby disclaims any, obligation
to update any of the foregoing projections as a result of new
information or new or future developments. (2) Our ownership
interest in HCR ManorCare OpCo is accounted for using the equity
method, which requires an ongoing elimination of DFL income that is
proportional to our ownership in HCR ManorCare OpCo. Further, our
share of earnings from HCR ManorCare OpCo (equity income) increases
for the corresponding elimination of related lease expense
recognized at the HCR ManorCare OpCo level, which we present as a
non-cash joint venture FAD adjustment.
HCP, Inc.Timothy M. SchoenExecutive Vice President and Chief
Financial Officer562-733-5309
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