Investor Relations

HCP Announces Results for the Quarter Ended March 31, 2017

IRVINE, Calif., May 2, 2017 /PRNewswire/ --

FIRST QUARTER 2017 AND RECENT HIGHLIGHTS

--    EPS, FFO and FFO as adjusted per share, were $0.97, $0.61 and $0.51, respectively

--    Year-over-year three-month SPP Cash NOI growth of 4.0%

--    Completed the previously announced sale of 64 triple-net assets leased to Brookdale Senior Living, Inc. ("Brookdale") and the sale and related financing of a 40% interest in our RIDEA II senior housing joint venture generating combined proceeds of $1.6 billion

--    Repaid $1.1 billion of our debt during the quarter and remain on track to meet our previously disclosed balance sheet targets

--    Sold our debt investments in Four Seasons generating proceeds of $136 million

--    Signed a 67,000 square foot lease at Phase I of The Cove life science development in South San Francisco, CA, bringing Phases I and II to 100% leased

--    Peter Scott joined HCP as EVP and Chief Financial Officer

--    Announced Justin Hutchens to leave the company to become CEO of U.K.-based operator HC-One

--    Reaffirmed full-year 2017 FFO as adjusted and SPP Cash NOI guidance ranges

IRVINE, CA, May 2, 2017 -- HCP (NYSE:HCP) announced results for the quarter ended March 31, 2017.

 

Three Months Ended

March 31, 2017

 

Three Months Ended

March 31, 2016

 

Per Share

 

(in thousands, except per share amounts)

Amount

 

Per Share

 

Amount

 

Per Share

 

Change

 

Net income

$

460,375

 

$

0.97

 

$

115,762

 

$

0.25

 

$

0.72

 

FFO

$

288,249

 

$

0.61

 

$

319,266

 

$

0.68

 

$

(0.07)

 

   Other impairment recovery(1)

 

(50,895)

   

(0.10)

   

   

   

(0.10)

 

   Transaction-related items

 

1,057

   

   

2,518

   

0.01

   

(0.01)

 

   Other(2)

 

1,761

   

   

   

   

 

FFO as adjusted

$

240,172

 

$

0.51

 

$

321,784

 

$

0.69

 

$

(0.18)

 

   FFO as adjusted from QCP

 

   

   

(98,207)

   

(0.21)

   

0.21

 

Comparable FFO as adjusted(3)

$

240,172

 

$

0.51

 

$

223,577

 

$

0.48

 

$

0.03

 

FAD

$

218,555

       

$

309,038

             

________________________________________

   

(1)

Relates to the sale of our Four Seasons senior notes ("Four Seasons Notes").

(2)

Includes: (i) $1.8 million of litigation provision and (ii) $0.1 million of foreign currency remeasurement gains.

(3)

Represents FFO as adjusted excluding FFO as adjusted from Quality Care Properties, Inc. ("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.

In addition to the items discussed above, first quarter 2017 net income included net gain on sales of real estate of $0.67 per share.

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 March 31, 2017 for definitions, discussions of their uses and inherent limitations, and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP on the Investor Relations section of our website at http://ir.hcpi.com/financial-reconciliation.

SAME PROPERTY PORTFOLIO OPERATING SUMMARY

The table below outlines the three-month same-property portfolio operating results for the first quarter:

 

Year-Over-Year

 
 

Occupancy

 

SPP Growth

 
 

1Q17

 

1Q16

 

NOI

 

Cash NOI

 

Senior housing triple-net ("SH NNN")

86.5%

 

87.0%

 

0.7%

 

5.1%

 

Senior housing operating ("SHOP")

88.1%

 

89.4%

 

2.9%

 

2.9%

 

Life science

97.3%

 

97.8%

 

4.0%

 

4.7%

 

Medical office

92.3%

 

92.0%

 

3.2%

 

4.4%

 

Other non-reportable segments ("Other")(1)

N/A

 

N/A

 

2.1%

 

0.5%

 

      Total Portfolio

       

2.6%

 

4.0%

 

________________________________________

   

(1)

Other primarily includes our hospitals and U.K. real estate investments. See our Supplemental Report for additional details.

BROOKDALE TRANSACTIONS, FOUR SEASONS DEBT INVESTMENT SALE, AND OTHER DISPOSITIONS

BROOKDALE ASSET SALES & TRANSITIONS

On March 29, 2017, we completed the sale of a portfolio of 64 triple-net assets leased to Brookdale at the previously announced aggregate sales price of $1.125 billion. Proceeds from the transaction were used to repay debt and for general corporate purposes.

In January, we completed the previously announced sale of a 40% interest in our RIDEA II senior housing joint venture and the related financing of the venture, generating $480 million of proceeds, which were used to pay down our revolving credit facility.

We continue to market an additional 25 communities triple-net leased to Brookdale and expect to sell or transition these assets during the remainder of 2017. 

Combined, these transactions reduce Brookdale concentration while improving lease coverage and strengthening our balance sheet and credit profile.

FOUR SEASONS DEBT INVESTMENT SALE

In March, we sold our Four Seasons Notes for £83 million ($101 million), which generated a £42 million ($51 million) recovery of impairment as the sales price was above the carrying value of £41 million ($50 million).

In March, we also sold our Four Seasons senior secured term loan at its par value plus accrued interest for £29 million ($35 million).

Combined, the two dispositions generated cash proceeds of £112 million ($136 million) which were used to repay GBP-denominated debt.

OTHER DISPOSITIONS

During the first quarter, we completed $121 million of additional dispositions. Significant transactions in the quarter included:

  • As previously disclosed, in January 2017, we sold four life science facilities in Salt Lake City, Utah for $76 million to the current tenant.
  • In March, we sold a hospital in Palm Beach Gardens, Florida for $43 million to the current tenant.
  • Subsequent to the first quarter, we sold a land parcel in San Diego, California for $27 million.

THE COVE AT OYSTER POINT

During the first quarter, we signed a 10-year lease with Global Blood Therapeutics, Inc., a biotechnology company, for 67,000 square feet at Phase I of The Cove. The lease is projected to commence in December 2017 and brings Phases I and II of The Cove to 100% leased.

Construction has commenced on the $211 million development of Phase III of The Cove, which adds two Class A buildings representing up to 336,000 square feet, with an expected delivery by the fourth quarter of 2018. Visit our website for additional information, including a link to view our development progress at The Cove, at www.hcpi.com/portfolio-diversification/life-science.

BALANCE SHEET

We repaid $1.1 billion of debt during the first quarter using proceeds generated from the Brookdale transactions and other dispositions. We remain on track with our previously disclosed deleveraging plan and continue to target net debt to EBITDA in the low-to-mid six-times range with a target financial leverage in the 43% to 44% range by the end of 2017.

As of March 31, 2017, we had $2.3 billion of liquidity from a combination of cash and availability under our $2.0 billion credit facility.

We repaid $131 million on our credit facility in early April and $250 million of senior notes on May 1. We currently have no major senior note or secured debt maturities until early 2019.

EXECUTIVE LEADERSHIP  

In February, Peter Scott joined the company as Executive Vice President and Chief Financial Officer. Mr. Scott joined HCP following a 15-year career in real estate investment banking.

On April 3, 2017, we announced that our President, Justin Hutchens, will leave HCP to become the Chief Executive Officer of HC-One, one of the largest care home providers in the United Kingdom. Mr. Hutchens will remain in his current role at HCP through June 1st to ensure a smooth transition of his duties. We have initiated the process of recruiting a new Chief Investment Officer.

DIVIDEND

On April 27, 2017, our Board declared a quarterly cash dividend of $0.37 per common share. The dividend will be paid on May 23, 2017 to stockholders of record as of the close of business on May 8, 2017.

SUSTAINABILITY

In April, we published our 6th annual Corporate Sustainability Report highlighting the environmental, social, and governance aspects of our operations. 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 $1.43 and $1.49; FFO per share to range between $1.99 and $2.05; and FFO as adjusted per share to range between $1.89 and $1.95. In addition, we expect 2017 SPP Cash NOI to increase between 2.5% and 3.5%. These estimates do not reflect the potential impact from unannounced future transactions other than capital recycling activities. For additional detail and information regarding these estimates, refer to the "Projected SPP Cash NOI" section of this release, and the 2017 Guidance section of our corresponding Supplemental Report, available in the Investor Relations section of our website at http://ir.hcpi.com.

 

Projected Full Year 2017
SPP NOI

 

Projected Full Year 2017
SPP Cash NOI

 

Low

 

High

 

Low

 

High

Senior housing triple-net

1.1%

 

2.1%

 

3.9%

 

4.9%

Senior housing operating

2.0%

 

3.0%

 

2.0%

 

3.0%

Life science

0.4%

 

1.4%

 

2.5%

 

3.5%

Medical office

1.3%

 

2.3%

 

2.0%

 

3.0%

Other(1)

1.8%

 

2.8%

 

0.8%

 

1.8%

SPP growth

1.2%

 

2.2%

 

2.5%

 

3.5%

________________________________________

   

(1)

Other primarily includes our hospitals and U.K. real estate investments. See our Supplemental Report for additional details.

COMPANY INFORMATION

HCP has scheduled a conference call and webcast for Tuesday, May 2, 2017 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) to present its performance and operating results for the quarter ended March 31, 2017. The conference call is accessible by dialing (888) 317-6003 (U.S.) or (412) 317-6061 (International). The conference ID number is 6517031. You may also access the conference call via webcast at www.hcpi.com. This link can be found in the "News and Events" section, which is under "Investor Relations". Through May 17, 2017, an archive of the webcast will be available on our website, and a telephonic replay can be accessed by dialing (877) 344-7529 (U.S.) or (412) 317-0088 (International) and entering conference ID number 10104309. Our Supplemental Report for the current period is available, with this earnings release, on our website in the "Financial Information" section under "Investor Relations". 

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. HCP owns a large-scale portfolio diversified across multiple sectors, led by senior housing, life science and medical office. Recognized as a global leader in sustainability, HCP has been a publicly-traded company since 1985 and was the first healthcare REIT selected to the S&P 500 index. For more information regarding HCP, visit 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, (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; and (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 "The Cove at Oyster Point." 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 Brookdale increasing as a result of the consummation of the spin-off of QCP on October 31, 2016; the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants' and operators' leases and borrowers' loans; the ability of our existing and future tenants, operators and borrowers 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 us and our ability to recover investments made, if applicable, in their operations; competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases; our concentration in the healthcare property sector, particularly in life sciences, medical office buildings and hospitals, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; availability of suitable properties to acquire at favorable prices, the competition for the acquisition and financing of those properties, and the costs of associated property development; our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to foreclose on loan collateral or replace an existing tenant or operator upon default; the risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners' financial condition and continued cooperation; our ability to achieve the benefits of acquisitions and other investments, including those discussed above, within expected time frames or at all, or within expected cost projections; operational risks associated with third party management contracts, including the additional regulation and liabilities of our RIDEA lease structures; the potential impact on us and our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments; the effect on our tenants and operators of legislation, executive orders and other legal requirements, including the Affordable Care Act and licensure, certification and inspection requirements, as well as laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements; changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations, of our tenants and operators; volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions; changes in global, national and local economic or other conditions, including currency exchange rates; our ability to manage our indebtedness level and changes in the terms of such indebtedness; competition for skilled management and other key personnel; the ability to maintain our qualification as a real estate investment trust; and other risks and uncertainties described from time to time in our Securities and Exchange Commission filings. You should not place undue reliance on any forward-looking statements. We assume no, and hereby disclaim 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.

CONTACT

Andrew Johns
Vice President – Finance and Investor Relations
949-407-0400

HCP, Inc.

Consolidated Balance Sheets

In thousands, except share and per share data

(unaudited)

 
   

March 31,

 

December 31,

 
   

2017

 

2016

 

Assets

         

Real estate:

             

Buildings and improvements

 

$

11,008,771

 

$

11,692,654

 

Development costs and construction in progress

   

430,007

   

400,619

 

Land

   

1,772,174

   

1,881,487

 

Accumulated depreciation and amortization

   

(2,577,248)

   

(2,648,930)

 

Net real estate

   

10,633,704

   

11,325,830

 
               

Net investment in direct financing leases ("DFLs")

   

712,540

   

752,589

 

Loans receivable, net

   

788,486

   

807,954

 

Investments in and advances to unconsolidated joint ventures

   

827,202

   

571,491

 

Accounts receivable, net of allowance of $3,941 and $4,459, respectively

   

31,500

   

45,116

 

Cash and cash equivalents

   

764,114

   

94,730

 

Restricted cash

   

60,806

   

42,260

 

Intangible assets, net

   

432,109

   

479,805

 

Assets held for sale, net

   

   

927,866

 

Other assets, net

   

605,407

   

711,624

 
               

Total assets

 

$

14,855,868

 

$

15,759,265

 
               

Liabilities and equity

             

Bank line of credit

 

$

492,421

 

$

899,718

 

Term loans

   

274,103

   

440,062

 

Senior unsecured notes

   

7,136,336

   

7,133,538

 

Mortgage debt

   

147,329

   

623,792

 

Other debt

   

91,263

   

92,385

 

Intangible liabilities, net

   

54,472

   

58,145

 

Liabilities of assets held for sale, net

   

   

3,776

 

Accounts payable and accrued liabilities

   

344,908

   

417,360

 

Deferred revenue

   

141,561

   

149,181

 

Total liabilities

   

8,682,393

   

9,817,957

 
               
               

Common stock, $1.00 par value: 750,000,000 shares authorized; 468,446,208 and 468,081,489 shares issued and outstanding, respectively

   

468,446

   

468,081

 

Additional paid-in capital

   

8,203,778

   

8,198,890

 

Cumulative dividends in excess of earnings

   

(2,802,218)

   

(3,089,734)

 

Accumulated other comprehensive loss

   

(28,658)

   

(29,642)

 

Total stockholders' equity

   

5,841,348

   

5,547,595

 
               

Joint venture partners

   

154,161

   

214,377

 

Non-managing member unitholders

   

177,966

   

179,336

 

Total noncontrolling interests

   

332,127

   

393,713

 
               

Total equity

   

6,173,475

   

5,941,308

 
               

Total liabilities and equity

 

$

14,855,868

 

$

15,759,265

 

 

 

HCP, Inc.

Consolidated Statements of Operations

In thousands, except per share data

(unaudited)

 
   

Three Months Ended

March 31,

 
   

2017

 

2016

 
       
               

Revenues:

             

Rental and related revenues

 

$

286,218

 

$

290,380

 

Tenant recoveries

   

33,675

   

31,375

 

Resident fees and services

   

140,232

   

165,763

 

Income from direct financing leases

   

13,712

   

14,910

 

Interest income

   

18,331

   

18,029

 

Total revenues

   

492,168

   

520,457

 
               

Costs and expenses:

             

Interest expense

   

86,718

   

122,062

 

Depreciation and amortization

   

136,554

   

139,855

 

Operating

   

159,081

   

175,957

 

General and administrative

   

22,478

   

25,451

 

Acquisition and pursuit costs

   

1,057

   

2,475

 

Total costs and expenses

   

405,888

   

465,800

 
               

Other income (expense):

             

Gain on sales of real estate, net

   

317,258

   

 

Other income, net

   

51,208

   

1,292

 

Total other income, net

   

368,466

   

1,292

 
               

Income before income taxes and equity income (loss) from unconsolidated joint ventures

   

454,746

   

55,949

 

Income tax benefit (expense)

   

6,162

   

(3,704)

 

Equity income (loss) from unconsolidated joint ventures

   

3,269

   

(908)

 

Income from continuing operations

   

464,177

   

51,337

 
               

Discontinued operations:

             

Income before income taxes

   

   

117,742

 

Income taxes

   

   

(49,334)

 

Total discontinued operations

   

   

68,408

 
               

Net income

   

464,177

   

119,745

 

Noncontrolling interests' share in earnings 

   

(3,032)

   

(3,626)

 
               

Net income attributable to HCP, Inc.

   

461,145

   

116,119

 

Participating securities' share in earnings

   

(770)

   

(357)

 
               

Net income applicable to common shares

 

$

460,375

 

$

115,762

 
               

Earnings per common share:

             

Basic

 

$

0.98

 

$

0.25

 
               

Diluted

 

$

0.97

 

$

0.25

 
               

Weighted average shares used to calculate earnings per common share:

             

Basic

   

468,299

   

466,074

 
               

Diluted

   

475,173

   

466,262

 

 

 

HCP, Inc.

Consolidated Statements of Cash Flows

In thousands

(unaudited)

 
   

Three Months Ended

March 31,

 
   

2017

 

2016

 

Cash flows from operating activities:

         

Net income

 

$

464,177

 

$

119,745

 

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

 

136,554

 

139,855

 

Discontinued operations

 

 

1,467

 

Amortization of deferred compensation

 

3,765

 

5,345

 

Amortization of deferred financing costs

 

3,858

 

5,280

 

Straight-line rents

 

(5,007)

 

(7,576)

 

Equity (income) loss from unconsolidated joint ventures

 

(3,269)

 

908

 

Distributions of earnings from unconsolidated joint ventures

 

7,842

 

1,589

 

Gain on sales of real estate, net

 

(317,258)

 

 

Deferred income tax (benefit) expense

 

(8,130)

 

49,156

 

Foreign exchange and other gains, net

 

(77)

 

(89)

 

Gain on sale of marketable securities

 

(50,895)

 

 

Other non-cash items

 

(583)

 

(922)

 

Changes in:

         

Accounts receivable, net

 

3,467

 

3,705

 

Other assets, net

 

(2,331)

 

(6,847)

 

Accounts payable and accrued liabilities

 

(38,984)

 

(42,999)

 

Net cash provided by operating activities

 

193,129

 

268,617

 

Cash flows from investing activities:

         

Acquisitions of real estate

 

 

(94,271)

 

Development of real estate

 

(75,166)

 

(99,096)

 

Leasing costs and tenant and capital improvements

 

(22,693)

 

(19,964)

 

Proceeds from sales of real estate, net

 

1,166,265

 

 

Contributions to unconsolidated joint ventures

 

(8,109)

 

(10,136)

 

Distributions in excess of earnings from unconsolidated joint ventures

 

870

 

5,336

 

Net proceeds from the sale and recapitalization of RIDEA II

 

480,613

 

 

Proceeds from the sales of Four Seasons investments

 

135,538

 

 

Principal repayments on DFLs, loans receivable and other

 

49,826

 

155,320

 

Investments in loans receivable and other

 

(15,000)

 

(117,282)

 

Decrease in restricted cash

 

3,073

 

14,336

 

Net cash provided by (used in) investing activities

 

1,715,217

 

(165,757)

 

Cash flows from financing activities:

         

Net (repayments) borrowings under bank line of credit

 

(375,812)

 

422,897

 

Repayments under bank line of credit

 

(37,032)

 

 

Repayment of term loan

 

(169,113)

 

 

Repayments of senior unsecured notes

 

 

(500,000)

 

Repayments of mortgage and other debt

 

(478,314)

 

(36,918)

 

Issuance of common stock and exercise of options

 

3,472

 

34,122

 

Repurchase of common stock

 

(3,532)

 

(3,628)

 

Dividends paid on common stock

 

(173,629)

 

(268,186)

 

Issuance of noncontrolling interests

 

650

 

2,200

 

Distributions to noncontrolling interests

 

(5,659)

 

(4,889)

 

Net cash used in financing activities

 

(1,238,969)

 

(354,402)

 

Effect of foreign exchange on cash and cash equivalents

 

7

 

(293)

 

Net increase (decrease) in cash and cash equivalents

 

669,384

 

(251,835)

 

Cash and cash equivalents, beginning of period

 

94,730

 

346,500

 

Cash and cash equivalents, end of period

 

$

764,114

 

$

94,665

 

Less: cash and cash equivalents of discontinued operations

   

   

(3,578)

 

Cash and cash equivalents of continuing operations, end of period

 

$

764,114

 

$

91,087

 

 

HCP, Inc.

Funds From Operations

In thousands, except per share data

(Unaudited)

 
   

Three Months Ended

March 31,

 
   

2017

 

2016

 
               

Net income applicable to common shares

 

$

460,375

 

$

115,762

 

Depreciation and amortization

   

136,554

   

141,322

 

Other depreciation and amortization(1)

   

3,010

   

2,962

 

Gain on sales of real estate, net

   

(317,258)

   

 

Taxes associated with real estate dispositions(2)

   

(5,499)

   

53,177

 

Equity (income) loss from unconsolidated joint ventures

   

(3,269)

   

908

 

FFO from unconsolidated joint ventures

   

18,308

   

10,378

 

Noncontrolling interests' and participating securities' share in earnings

   

3,802

   

3,983

 

Noncontrolling interests' and participating securities' share in FFO

   

(7,774)

   

(9,226)

 

FFO applicable to common shares

 

$

288,249

 

$

319,266

 

Distributions on dilutive convertible units

   

2,803

   

3,583

 

Diluted FFO applicable to common shares

 

$

291,052

 

$

322,849

 
               

Diluted FFO per common share

 

$

0.61

 

$

0.68

 
               

Weighted average shares used to calculate diluted FFO per share

   

475,173

   

472,186

 
               

Impact of adjustments to FFO:

             

Other impairment recovery(3)

 

$

(50,895)

 

$

 

Transaction-related items(4)

   

1,057

   

2,518

 

Litigation provision

   

1,838

   

 

Foreign currency remeasurement gains

   

(77)

   

 
   

$

(48,077)

 

$

2,518

 
               

FFO as adjusted applicable to common shares

 

$

240,172

 

$

321,784

 

Distributions on dilutive convertible units and other

   

2,877

   

3,579

 

Diluted FFO as adjusted applicable to common shares

 

$

243,049

 

$

325,363

 

Per common share impact of adjustments on diluted FFO

 

$

(0.10)

 

$

0.01

 
               

Diluted FFO as adjusted per common share

 

$

0.51

 

$

0.69

 
               

Weighted average shares used to calculate diluted FFO as adjusted per share

   

475,173

   

472,186

 
               

FFO as adjusted from QCP

 

$

 

$

98,207

 

Diluted Comparable FFO as adjusted applicable to common shares(5)

 

$

243,049

 

$

227,156

 

FFO as adjusted from QCP per common share

 

$

 

$

0.21

 
               

Diluted Comparable FFO as adjusted per common share

 

$

0.51

 

$

0.48

 

_______________________________________

(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 three months ended March 31, 31 2017, represents income tax benefit associated with the disposition of real estate assets in our RIDEA II transaction. For the three months ended March 31, 2016, represents income tax expense associated with state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCR ManorCare, Inc. real estate portfolio.

(3)      

Relates to the sale of our Four Seasons Notes.

(4)

On January 1, 2017, we early adopted the FASB ASU No. 2017-01, Clarifying the Definition of a Business, which prospectively results in recognizing the majority of our real estate acquisitions as asset acquisitions rather than business combinations. Acquisition and pursuit costs relating to completed asset acquisitions are capitalized, including those costs incurred prior to January 1, 2017. Real estate acquisitions completed prior to January 1, 2017 were deemed business combinations and the related acquisition and pursuit costs were expense as incurred.

(5)

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.

 

HCP, Inc.

Funds Available for Distribution

In thousands

(Unaudited)

 
   

Three Months Ended

March 31,

 
   

2017

 

2016

 
               

FFO as adjusted applicable to common shares

 

$

240,172

 

$

321,784

 

Amortization of deferred compensation

   

3,765

   

5,345

 

Amortization of deferred financing costs

   

3,858

   

5,280

 

Straight-line rents

   

(5,007)

   

(7,576)

 

Other depreciation and amortization

   

(3,010)

   

(2,962)

 

Leasing costs and tenant and capital improvements(1)

   

(23,287)

   

(20,482)

 

Lease restructure payments

   

540

   

6,294

 

CCRC entrance fees(2)

   

3,649

   

5,502

 

Deferred income taxes

   

(2,374)

   

(2,942)

 

Other FAD adjustments

   

249

   

(1,205)

 

FAD applicable to common shares

 

$

218,555

 

$

309,038

 

Distributions on dilutive convertible units

   

2,803

   

3,583

 
               

Diluted FAD applicable to common shares 

 

$

221,358

 

$

312,621

 

________________________________________

(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 CCRC JV entrance fee amortization.

 

HCP, Inc.

Projected SPP NOI and Cash NOI(1)

Dollars in thousands

(Unaudited)

 

For the projected full year 2017 (low): 

 
   

SH NNN

 

SHOP

 

Life Science

 

Medical

Office

 

Other

 

Total

 

Cash NOI

 

$

322,500

 

$

259,600

 

$

275,000

 

$

290,200

 

$

114,200

 

$

1,261,500

 

Interest income

   

   

   

   

   

47,800

   

47,800

 

Cash NOI plus interest income

   

322,500

   

259,600

   

275,000

   

290,200

   

162,000

   

1,309,300

 

Interest income

   

   

   

   

   

(47,800)

   

(47,800)

 

Adjustments to cash NOI(2)

   

400

   

(18,200)

   

(400)

   

4,100

   

4,200

   

(9,900)

 

NOI

   

322,900

   

241,400

   

274,600

   

294,300

   

118,400

   

1,251,600

 

Non-SPP NOI

   

(39,700)

   

(49,050)

   

(35,400)

   

(41,500)

   

(8,600)

   

(174,250)

 

SPP NOI

   

283,200

   

192,350

   

239,200

   

252,800

   

109,800

   

1,077,350

 

Adjustments to SPP NOI(2)

   

5,600

   

   

5,100

   

1,200

   

(4,100)

   

7,800

 

SPP cash NOI

 

$

288,800

 

$

192,350

 

$

244,300

 

$

254,000

 

$

105,700

   

1,085,150

 

Addback adjustments(3)

                                 

166,450

 

Other income and expenses(4)

                                 

377,400

 

Costs and expenses(5)

                                 

(947,700)

 

Net income

                               

$

681,300

 
                                       

For the projected full year 2017 (high): 

 
   

SH NNN

 

SHOP

 

Life Science

 

Medical

Office

 

Other

 

Total

 

Cash NOI

 

$

326,600

 

$

262,300

 

$

277,900

 

$

292,900

 

$

115,400

 

$

1,275,100

 

Interest income

   

   

   

   

   

48,700

   

48,700

 

Cash NOI plus interest income

   

326,600

   

262,300

   

277,900

   

292,900

   

164,100

   

1,323,800

 

Interest income

   

   

   

   

   

(48,700)

   

(48,700)

 

Adjustments to cash NOI(2)

   

500

   

(18,400)

   

(400)

   

4,100

   

4,200

   

(10,000)

 

NOI

   

327,100

   

243,900

   

277,500

   

297,000

   

119,600

   

1,265,100

 

Non-SPP NOI

   

(41,100)

   

(49,700)

   

(35,900)

   

(41,700)

   

(8,700)

   

(177,100)

 

SPP NOI

   

286,000

   

194,200

   

241,600

   

255,300

   

110,900

   

1,088,000

 

Adjustments to SPP NOI(2)

   

5,600

   

   

5,100

   

1,200

   

(4,150)

   

7,750

 

SPP cash NOI

 

$

291,600

 

$

194,200

 

$

246,700

 

$

256,500

 

$

106,750

   

1,095,750

 

Addback adjustments(3)

                                 

169,350

 

Other income and expenses(4)

                                 

384,900

 

Costs and expenses(5)

                                 

(940,200)

 

Net income

                               

$

709,800

 
                                       

For the year ended December 31, 2016:

 
   

SH NNN

 

SHOP

 

Life Science

 

Medical

Office

 

Other

 

Total

 

Cash NOI

 

$

408,842

 

$

263,828

 

$

289,051

 

$

270,437

 

$

119,629

 

$

1,351,787

 

Interest income

   

   

   

   

   

88,808

   

88,808

 

Cash NOI plus interest income

   

408,842

   

263,828

   

289,051

   

270,437

   

208,437

   

1,440,595

 

Interest income

   

   

   

   

   

(88,808)

   

(88,808)

 

Adjustments to cash NOI(2)

   

7,566

   

(20,076)

   

3,006

   

3,557

   

3,016

   

(2,931)

 

NOI

   

416,408

   

243,752

   

292,057

   

273,994

   

122,645

   

1,348,856

 

Non-SPP NOI

   

(136,315)

   

(55,213)

   

(53,805)

   

(24,404)

   

(14,759)

   

(284,496)

 

SPP NOI

   

280,093

   

188,539

   

238,252

   

249,590

   

107,886

   

1,064,360

 

Adjustments to SPP NOI(2)

   

(2,107)

   

   

114

   

(547)

   

(2,977)

   

(5,517)

 

SPP cash NOI

 

$

277,986

 

$

188,539

 

$

238,366

 

$

249,043

 

$

104,909

   

1,058,843

 

Addback adjustments(3)

                                 

290,013

 

Other income and expenses(4)

                                 

217,278

 

Costs and expenses(5)

                                 

(1,191,963)

 

Discontinued operations

                                 

265,755

 

Net income

                               

$

639,926

 

 

Projected SPP NOI change for the full year 2017:

 
   

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical

Office

 

Other

 

Total

 

Low

 

1.1%

 

2.0%

 

0.4%

 

1.3%

 

1.8%

 

1.2%

 

High

 

2.1%

 

3.0%

 

1.4%

 

2.3%

 

2.8%

 

2.2%

 
 

Projected SPP cash (adjusted) NOI change for the full year 2017:

 
   

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical

Office

 

Other

 

Total

 

Low

 

3.9%

 

2.0%

 

2.50%

 

2.0%

 

0.8%

 

2.5%

 

High

 

4.9%

 

3.0%

 

3.50%

 

3.0%

 

1.8%

 

3.5%

 

________________________________________

(1)

The foregoing projections reflect management's view as of May 2, 2017 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. These projections do not reflect the impact of unannounced future transactions, except as described herein, 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 larger than expected litigation settlements and related expenses related to existing or future litigation matters. Our actual results may differ materially from the projections 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)

Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, lease termination fees and non-refundable entrance fees as the fees are collected by our CCRC JV, net of CCRC JV entrance fee amortization.

(3)

Represents non-SPP NOI and adjustments to SPP NOI.

(4)

Represents interest income, gain on sales of real estate, net, other income, net, income taxes and equity income (loss) from unconsolidated joint ventures, excluding NOI.

(5)

Represents interest expense, depreciation and amortization, general and administrative expenses, acquisition and pursuit costs, and loss on debt extinguishments.

 

 

 

SOURCE HCP, Inc.