Investor Relations

HCP Announces Results for the Quarter Ended September 30, 2017

IRVINE, Calif., Nov. 2, 2017 /PRNewswire/ -- HCP, Inc. (NYSE:HCP) announced results for the quarter ended September 30, 2017.

 THIRD QUARTER 2017 AND RECENT HIGHLIGHTS

–      EPS, FFO and FFO as adjusted per share, were ($0.02), $0.33 and $0.48, respectively
–      Achieved year-over-year three-month SPP Cash NOI growth of 3.2%, including 5.3% in the SHOP portfolio
–      Entered into transactions which provide a path to reduce Brookdale concentration to approximately 15.7% 
–      Reentering the Boston life science market with $228 million acquisition of the Hayden Research Campus, bringing our year-to-date announced acquisitions and developments to $447 million 
–      Announced launch of sales process for remaining UK holdings
–      As previously announced, repurchased $500 million of our 5.375% senior notes due 2021
–      Promoted Tom Klaritch to Chief Operating Officer and appointed Shawn Johnston as Chief Accounting Officer  
–      Increased 2017 FFO as adjusted guidance range and reaffirmed aggregate 2017 SPP Cash NOI growth guidance

   

Three Months Ended
September 30, 2017

 

Three Months Ended
September 30, 2016

   

(in thousands, except per share amounts)

 

Amount

 

Diluted
Per Share

 

Amount

 

Diluted
Per Share

 

Per Share
Change

Net income (loss)

 

$

(7,788)

   

$

(0.02)

   

$

150,924

   

$

0.32

   

$

(0.34)

 

FFO

 

$

155,248

   

$

0.33

   

$

304,387

   

$

0.65

   

$

(0.32)

 

Other impairments (recoveries), net(1)

 

2,738

   

0.01

   

   

   

0.01

 

Severance and related charges(2)

 

3,889

   

0.01

   

14,464

   

0.03

   

(0.02)

 

Loss on debt extinguishments(3)

 

54,227

   

0.11

   

   

   

0.11

 

Transaction-related items

 

580

   

   

17,568

   

0.04

   

(0.04)

 

Casualty-related charges (recoveries), net(4)

 

8,925

   

0.02

   

   

   

0.02

 

Other(5)

 

2,162

   

   

94

   

   

 

FFO as adjusted

 

$

227,769

   

$

0.48

   

$

336,513

   

$

0.72

   

$

(0.24)

 

FFO as adjusted from QCP

 

   

   

(101,549)

   

(0.22)

   

0.22

 

Comparable FFO as adjusted(6)

 

$

227,769

   

$

0.48

   

$

234,964

   

$

0.50

   

$

(0.02)

 

FAD

 

$

202,407

       

$

317,540

         
 

_______________________________________

   

(1)

Relates to the impairment of our Tandem Health Care Loan.

(2)

For the three months ended September 30, 2017, primarily relates to the departure of our former Executive Vice President and Chief Accounting Officer. For the three months ended September 30, 2016, primarily relates to the departure of our former President and Chief Executive Officer.

(3)

Represents the premium associated with the prepayment of $500 million of senior unsecured notes.

(4)

Includes $11 million of casualty-related charges and a $2 million deferred income tax benefit.

(5)

Includes $2 million of litigation costs.

(6)

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 September 30, 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 quarter:

   

Year-Over-Year

   

Occupancy

 

SPP Growth

   

3Q17

 

3Q16

 

NOI

 

Cash NOI

Senior housing triple-net

 

85.5%

 

87.1%

 

3.0%

 

2.7%

Senior housing operating portfolio ("SHOP")(1)

 

86.3%

 

88.8%

 

3.9%

 

5.3%

Life science

 

96.3%

 

97.1%

 

2.2%

 

4.0%

Medical office

 

91.7%

 

92.2%

 

1.5%

 

2.5%

Other non-reportable segments ("Other")(2)

 

N/A

 

N/A

 

1.7%

 

1.3%

Total Portfolio

         

2.5%

 

3.2%

 

_______________________________________

   

(1)

SHOP SPP Cash NOI growth consists of the following components: Assisted Living / Independent Living 4.4% and CCRC joint venture 12.0%.

(2)

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

BROOKDALE TRANSACTIONS

We have reached agreements to sell six assets to Brookdale Senior Living, Inc. ("Brookdale") for $275 million and purchase Brookdale's 10% interest in two joint ventures for $99 million. Additionally, HCP and Brookdale have agreed to terminate management agreements on 36 senior housing operating properties and leases on 32 triple-net leased communities. Brookdale has agreed to waive fees on all management agreement terminations and we have agreed to modify the rent on the remaining Brookdale triple-net portfolio, providing a $5 million annual rent reduction. We intend to either transition to other operators or sell the aforementioned 68 properties during 2018. The anticipated sales are expected to generate $600 million to $900 million of net proceeds to us depending on the mix of asset sales versus transitions to new operators.  

We have also agreed to sell our remaining investments in the RIDEA II senior housing joint venture ("RIDEA II") to an investor group led by Columbia Pacific Advisors, LLC ("CPA") for $332 million. RIDEA II owns 49 communities, of which 46 are managed by Brookdale.   

Combined, these transactions provide a path to reduce our Brookdale concentration, on a pro forma basis, from 27.0% of Cash NOI and Interest Income (excluding the previously announced planned sale or transition of 25 Brookdale assets) to approximately 15.7%. We intend to use the proceeds from the dispositions primarily to repay debt and for general corporate purposes. 

A copy of the corresponding press release and investor presentation with additional details is available on the Investor Relations section of our website at http://ir.hcpi.com.  

REENTERING BOSTON LIFE SCIENCE MARKET

In October, we entered into definitive agreements to acquire a $228 million value-add life science campus known as the Hayden Research Campus located in the Boston suburb of Lexington, Massachusetts. The Hayden acquisition allows us to reenter the Boston life science market with immediate scale and align with a leading local developer, owner and operator, King Street Properties ("King Street"). We will own an interest in this campus through a consolidated joint venture with King Street. The campus includes two existing buildings totaling 400,000 square feet and is currently 66% leased, anchored by major life science tenants including Shire US, Inc., a subsidiary of Shire plc, and Merck, Sharp and Dohme, a subsidiary of Merck and Co., Inc. Additionally, King Street is currently seeking approvals for the joint venture to develop 209,000 square feet of life science space on the campus. 

HCP LAUNCHES SALE PROCESS FOR REMAINING UK HOLDINGS

We have launched a formal sales process for our remaining UK holdings. We expect the sale to be completed during the first half of 2018.  

OTHER TRANSACTION ACTIVITY

ACQUISITIONS

During the third quarter, we announced $113 million of additional acquisitions, bringing our year-to-date announced acquisitions and developments to $447 million. Significant acquisition activity during the third quarter includes: 

  • As previously disclosed, in July, we acquired a portfolio of three medical office buildings in Texas for $49 million.
  • In August, we acquired 6000 Shoreline Court, a 139,000 square foot life science office building in South San Francisco, California for $64 million. 6000 Shoreline is adjacent to our Sierra Point development site. 

DISPOSITIONS

During the third quarter, we sold two triple-net senior housing assets leased to Brookdale for $15 million.

DEVELOPMENT UPDATE

During the quarter, we placed $101 million of development in service, including $94 million at Phase II of The Cove. At quarter end, our development pipeline totaled $870 million, which includes $288 million that has been placed in service.

During the third quarter, we added $63 million of new projects to our development and redevelopment pipelines. 

BALANCE SHEET AND NEW CREDIT FACILITY

As previously announced, in July, we repurchased $500 million of our 5.375% senior notes due 2021 using capital recycling proceeds from the HC-One loan repayment and Brookdale 64 disposition. In connection with the tender offer, we incurred an extinguishment of debt charge of approximately $54 million in the third quarter. 

At September 30, 2017, we had $1.5 billion of liquidity from a combination of cash and availability under our $2.0 billion credit facility and no major senior notes or secured debt maturities until early 2019. 

On October 19, 2017, we closed on a new $2.0 billion unsecured revolving credit facility. The new facility reduces our funded interest cost for committed loans by five basis points and has a maturity date of October 19, 2021. Based on our current senior unsecured long-term debt ratings, the facility bears interest annually at LIBOR plus 100 basis points and has a facility fee of 20 basis points. The facility also includes two six-month extension options at our discretion and the ability to increase the commitments by an aggregate amount up to $750 million, subject to customary conditions.

HURRICANE UPDATE 

As a result of Hurricane Harvey and Hurricane Irma during the third quarter of 2017, we recorded $11 million of casualty losses, net of a small insurance recovery. The losses are comprised of $6 million of property damage and $5 million of other associated costs, including storm preparation, clean up, relocation, and other costs.  In addition, we recorded a $2 million deferred tax benefit associated with the casualty-related losses. These items are excluded from FFO as adjusted. 

EXECUTIVE LEADERSHIP

As previously announced, Tom Klaritch was promoted to Chief Operating Officer in August 2017. Mr. Klaritch will oversee our streamlined office platform, with the life science and medical office businesses reporting to him, and will work closely with the respective teams to continue to advance the competitive performance and growth of the specialty office platform. In addition, Mr. Klaritch will manage our development projects and capital expenditures, oversee the IT department focusing on automation and system integration across the platform, and establish consistent operational reporting standards across our verticals. Mr. Klaritch is an 18-year Company veteran with 34 years of operational and financial management experience in the medical office and hospital sectors.   

In August, Shawn Johnston joined HCP as Senior Vice President and Chief Accounting Officer. Mr. Johnston joined HCP from a leading multifamily real estate investment trust, where he was Chief Accounting Officer.  

DIVIDEND

On October 26, 2017, our Board of Directors declared a quarterly cash dividend of $0.37 per common share. The dividend will be paid on November 21, 2017 to stockholders of record as of the close of business on November 6, 2017.

SUSTAINABILITY

HCP's leadership in Environmental, Social and Governance (ESG) standards was again recognized by two influential ESG benchmarking institutions, the Dow Jones Sustainability Indices and Global Real Estate Sustainability Benchmark (GRESB).   

HCP was named to the Dow Jones Sustainability Index (DJSI) North America and the DJSI World, for the fifth and third consecutive years, respectively. In addition, we achieved the "Green Star" designation from GRESB for the sixth year in a row, representing the highest quadrant of achievement in GRESB's annual sustainability survey. 

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 $1.16 and $1.20; FFO per share to range between $1.74 and $1.78; and FFO as adjusted per share to range between $1.92 and $1.96, representing a $0.02 per share increase at the mid-point. In addition, we expect 2017 SPP Cash NOI to increase between 2.5% and 3.5%. EPS and FFO per share guidance do not yet reflect the non-cash accounting impact of the Brookdale transactions. Additionally, 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 Full Year 2017 SPP NOI and SPP Cash NOI" table below, 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

 

SPP Cash NOI

   

Low

 

High

 

Low

 

High

Senior housing triple-net

 

2.0%

 

3.0%

 

5.0%

 

6.0%

SHOP

 

(2.9)%

 

(0.9)%

 

(2.0)%

 

—%

Life science

 

2.0%

 

3.0%

 

3.5%

 

4.5%

Medical office

 

1.4%

 

2.4%

 

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 U.K. real estate investments. See our Supplemental Report for additional details.

COMPANY INFORMATION

HCP has scheduled a conference call and webcast for Thursday, November 2, 2017 at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) to present its performance and operating results for the quarter ended September 30, 2017. The conference call is accessible by dialing (888) 317-6003 (U.S.) or (412) 317-6061 (International). The conference ID number is 0914328. 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 November 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 10112667. 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, SPP NOI, SPP Cash NOI and other financial projections and assumptions, including those in the "Projected Full Year 2017 SPP NOI and SPP Cash NOI" table in 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 Update"'; and (iv) statements with respect to 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 of assets operated by 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 senior housing, 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)

 
   

September 30,
2017

 

December 31,
2016

Assets

       

Real Estate:

       

Buildings and improvements

 

$

11,052,578

   

$

11,692,654

 

Development costs and construction in progress

 

429,459

   

400,619

 

Land

 

1,752,890

   

1,881,487

 

Accumulated depreciation and amortization

 

(2,699,174)

   

(2,648,930)

 

Net real estate

 

10,535,753

   

11,325,830

 

Net investment in direct financing leases

 

715,104

   

752,589

 

Loans receivable, net

 

402,152

   

807,954

 

Investments in and advances to unconsolidated joint ventures

 

822,369

   

571,491

 

Accounts receivable, net of allowance of $4,312 and $4,459, respectively

 

34,571

   

45,116

 

Cash and cash equivalents

 

133,887

   

94,730

 

Restricted cash

 

27,135

   

42,260

 

Intangible assets, net

 

400,867

   

479,805

 

Assets held for sale, net

 

216,074

   

927,866

 

Other assets, net

 

616,169

   

711,624

 

Total assets

 

$

13,904,081

   

$

15,759,265

 
         

Liabilities and Equity

       

Bank line of credit

 

$

605,837

   

$

899,718

 

Term loans

 

226,205

   

440,062

 

Senior unsecured notes

 

6,393,926

   

7,133,538

 

Mortgage debt

 

145,417

   

623,792

 

Other debt

 

94,818

   

92,385

 

Intangible liabilities, net

 

53,427

   

58,145

 

Liabilities of assets held for sale, net

 

8,653

   

3,776

 

Accounts payable and accrued liabilities

 

381,189

   

417,360

 

Deferred revenue

 

140,378

   

149,181

 

Total liabilities

 

8,049,850

   

9,817,957

 

Commitments and contingencies

       

Common stock, $1.00 par value: 750,000,000 shares authorized; 469,034,877 and 468,081,489 shares issued and outstanding, respectively

 

469,035

   

468,081

 

Additional paid-in capital

 

8,224,531

   

8,198,890

 

Cumulative dividends in excess of earnings

 

(3,137,642)

   

(3,089,734)

 

Accumulated other comprehensive income (loss)

 

(24,491)

   

(29,642)

 

Total stockholders' equity

 

5,531,433

   

5,547,595

 
         

Joint venture partners

 

145,496

   

214,377

 

Non-managing member unitholders

 

177,302

   

179,336

 

Total noncontrolling interests

 

322,798

   

393,713

 

Total equity

 

5,854,231

   

5,941,308

 
         

Total liabilities and equity

 

$

13,904,081

   

$

15,759,265

 

 

 

 

HCP, Inc.

Consolidated Statements of Operations

In thousands, except per share data

(unaudited)

 
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2017

 

2016

 

2017

 

2016

Revenues:

               

Rental and related revenues

 

$

266,109

   

$

290,280

   

$

816,147

   

$

872,828

 

Tenant recoveries

 

36,860

   

34,809

   

105,794

   

99,715

 

Resident fees and services

 

126,040

   

170,752

   

391,688

   

500,717

 

Income from direct financing leases

 

13,240

   

14,234

   

40,516

   

44,791

 

Interest income

 

11,774

   

20,482

   

50,974

   

71,298

 

Total revenues

 

454,023

   

530,557

   

1,405,119

   

1,589,349

 
                 

Costs and expenses:

               

Interest expense

 

71,328

   

117,860

   

235,834

   

361,255

 

Depreciation and amortization

 

130,588

   

141,407

   

397,893

   

421,181

 

Operating

 

155,338

   

187,714

   

467,582

   

542,751

 

General and administrative

 

23,523

   

34,781

   

67,287

   

83,011

 

Acquisition and pursuit costs

 

580

   

2,763

   

2,504

   

6,061

 

Impairments (recoveries), net

 

25,328

   

   

82,010

   

 

Total costs and expenses

 

406,685

   

484,525

   

1,253,110

   

1,414,259

 

Other income (expense):

               

Gain (loss) on sales of real estate, net

 

5,182

   

(9)

   

322,852

   

119,605

 

Loss on debt extinguishments

 

(54,227)

   

   

(54,227)

   

 

Other income (expense), net

 

(10,556)

   

1,432

   

40,723

   

5,064

 

Total other income (expense), net

 

(59,601)

   

1,423

   

309,348

   

124,669

 
                 

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

 

(12,263)

   

47,455

   

461,357

   

299,759

 

Income tax benefit (expense)

 

5,481

   

424

   

14,630

   

(1,101)

 

Equity income (loss) from unconsolidated joint ventures

 

1,062

   

(2,053)

   

4,571

   

(4,028)

 

Income (loss) from continuing operations

 

(5,720)

   

45,826

   

480,558

   

294,630

 
                 

Discontinued operations:

               

Income (loss) before transaction costs and income taxes

 

   

121,229

   

   

360,226

 

Transaction costs

 

   

(14,805)

   

   

(28,509)

 

Income tax benefit (expense)

 

   

1,789

   

   

(47,721)

 

Total discontinued operations

 

   

108,213

   

   

283,996

 
                 

Net income (loss)

 

(5,720)

   

154,039

   

480,558

   

578,626

 

Noncontrolling interests' share in earnings

 

(1,937)

   

(2,789)

   

(7,687)

   

(9,540)

 

Net income (loss) attributable to HCP, Inc.

 

(7,657)

   

151,250

   

472,871

   

569,086

 

Participating securities' share in earnings

 

(131)

   

(326)

   

(560)

   

(977)

 

Net income (loss) applicable to common shares

 

$

(7,788)

   

$

150,924

   

$

472,311

   

$

568,109

 
                 

Earnings per common share:

               

Basic

 

$

(0.02)

   

$

0.32

   

$

1.01

   

$

1.22

 

Diluted

 

$

(0.02)

   

$

0.32

   

$

1.01

   

$

1.22

 
                 

Weighted average shares used to calculate earnings per common share:

               

Basic

 

468,975

   

467,628

   

468,642

   

466,931

 

Diluted

 

468,975

   

467,835

   

468,828

   

467,132

 

 

 

 

HCP, Inc.

Funds From Operations

In thousands, except per share data

(unaudited)

 
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2017

 

2016

 

2017

 

2016

Net income (loss) applicable to common shares

 

$

(7,788)

   

$

150,924

   

$

472,311

   

$

568,109

 

Real estate related depreciation and amortization

 

130,588

   

142,874

   

397,893

   

425,582

 

Real estate related depreciation and amortization on unconsolidated joint ventures

 

16,358

   

12,607

   

47,711

   

36,347

 

Real estate related depreciation and amortization on noncontrolling interests and other

 

(3,678)

   

(5,270)

   

(11,711)

   

(15,708)

 

Other depreciation and amortization(1)

 

2,360

   

2,986

   

7,718

   

8,922

 

Loss (gain) on sales of real estate, net

 

(5,182)

   

9

   

(322,852)

   

(119,605)

 

Loss (gain) on sales of real estate, net on unconsolidated joint ventures

 

   

   

   

(215)

 

Loss (gain) on sales of real estate, net on noncontrolling interests

 

   

   

   

(2)

 

Taxes associated with real estate dispositions(2)

 

   

257

   

(5,498)

   

53,434

 

Impairments (recoveries) of real estate, net(3)

 

22,590

   

   

22,590

   

 

FFO applicable to common shares

 

$

155,248

   

$

304,387

   

$

608,162

   

$

956,864

 

Distributions on dilutive convertible units and other

 

   

2,376

   

5,250

   

10,622

 

Diluted FFO applicable to common shares

 

$

155,248

   

$

306,763

   

$

613,412

   

$

967,486

 

Diluted FFO per common share

 

$

0.33

   

$

0.65

   

$

1.30

   

$

2.05

 

Weighted average shares used to calculate diluted FFO per common share

 

469,156

   

471,994

   

473,519

   

473,011

 

Impact of adjustments to FFO:

               

    Transaction-related items(4)

 

$

580

   

$

17,568

   

$

2,476

   

$

34,570

 

  Other impairments (recoveries), net(5)

 

2,738

   

   

8,526

   

 

  Severance and related charges(6)

 

3,889

   

14,464

   

3,889

   

14,464

 

  Loss on debt extinguishments(7)

 

54,227

   

   

54,227

   

 

  Litigation costs

 

2,303

   

   

7,507

   

 

Casualty-related charges (recoveries), net(8)

 

8,925

   

   

8,925

   

 

Foreign currency remeasurement losses (gains)

 

(141)

   

94

   

(986)

   

268

 
   

$

72,521

   

$

32,126

   

$

84,564

   

$

49,302

 

FFO as adjusted applicable to common shares

 

$

227,769

   

$

336,513

   

$

692,726

   

$

1,006,166

 

Distributions on dilutive convertible units and other

 

1,493

   

3,467

   

5,095

   

10,549

 

Diluted FFO as adjusted applicable to common shares

 

$

229,262

   

$

339,980

   

$

697,821

   

$

1,016,715

 

Per common share impact of adjustments on diluted FFO

 

$

0.15

   

$

0.07

   

$

0.17

   

$

0.10

 

Diluted FFO as adjusted per common share

 

$

0.48

   

$

0.72

   

$

1.47

   

$

2.15

 

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

 

473,836

   

473,692

   

473,519

   

473,011

 

FFO as adjusted from QCP

 

$

   

$

101,549

   

$

   

$

301,393

 

Diluted Comparable FFO as adjusted applicable to common shares(9)

 

$

229,262

   

$

238,431

   

$

697,821

   

$

715,322

 

FFO as adjusted from QCP per common share

 

$

   

$

(0.22)

   

$

   

$

(0.64)

 

Diluted Comparable FFO as adjusted per common share

 

$

0.48

   

$

0.50

   

$

1.47

   

$

1.51

 
 

_______________________________________

   

(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 nine months ended September 30, 2017, represents income tax benefit associated with the disposition of real estate assets in our RIDEA II transaction. For the nine months ended September 30, 2016, represents income tax expense associated with the state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCRMC real estate portfolio.

(3)

Represents impairments on 11 senior housing triple-net facilities.

(4)

On January 1, 2017, we early adopted the Financial Accounting Standards Board Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business ("ASU 2017-01") 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 expensed as incurred. For the three and nine months ended September 30, 2016, primarily relates to the QCP spin-off. 

(5)

For the three months ended September 30, 2017, relates to the impairment of our Tandem Mezzanine Loan. For the nine months ended September 30, 2017, relates to the impairments of our Tandem Mezzanine Loan, net of the impairment recovery upon the sale of our Four Seasons Notes in the first quarter of 2017.

(6)

For the three months ended September 30, 2017, primarily relates to the departure of our former Executive Vice President and Chief Accounting Officer. For the three months ended September 30, 2016, primarily relates to the departure of our former President and Chief Executive Officer.

(7)

Represents the premium associated with the prepayment of $500 million of senior unsecured notes.

(8)

Includes $11 million of casualty-related charges and a $2 million deferred income tax benefit.

(9)

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
September 30,

 

Nine Months Ended
September 30,

 

2017

 

2016

 

2017

 

2016

FFO as adjusted applicable to common shares

$

227,769

   

$

336,513

   

$

692,726

   

$

1,006,166

 

Amortization of deferred compensation(1)

3,237

   

3,389

   

10,329

   

12,894

 

Amortization of deferred financing costs

3,439

   

5,037

   

11,141

   

15,598

 

Straight-line rents

(4,060)

   

(3,295)

   

(12,236)

   

(14,412)

 

Other depreciation and amortization

(2,360)

   

(2,986)

   

(7,718)

   

(8,921)

 

Leasing costs, tenant improvements, and recurring capital expenditures(2)

(28,783)

   

(23,822)

   

(79,903)

   

(66,176)

 

Lease restructure payments

311

   

1,868

   

1,165

   

14,480

 

CCRC entrance fees(3)

6,074

   

4,975

   

14,436

   

16,524

 

Deferred income taxes(4)

(3,807)

   

(3,431)

   

(10,523)

   

(8,977)

 

Other FAD adjustments

587

   

(708)

   

1,692

   

(2,739)

 

FAD applicable to common shares

$

202,407

   

$

317,540

   

$

621,109

   

$

964,437

 

Distributions on dilutive convertible units and other

1,596

   

3,513

   

5,250

   

10,622

 

Diluted FAD applicable to common shares

$

204,003

   

$

321,053

   

$

626,359

   

$

975,059

 
 

 _______________________________________

   

(1)

Excludes $0.5 million related to the acceleration of deferred compensation for restricted stock units that vested upon the departure of our former Executive Vice President and Chief Accounting Officer, which is included in the severance and related charges for the three and nine months ended September 30, 2017. Excludes $6 million related to the acceleration of deferred compensation for restricted stock units and stock options that vested upon the departure of our former President and Chief Executive Officer, which is included in severance and related charges for the three and nine months ended September 30, 2016.

(2)

Includes our share of leasing costs and tenant and capital improvements from unconsolidated joint ventures.

(3)

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.

(4)

Excludes $2 million of deferred tax benefit from the casualty-related charges, which is included in casualty-related charges (recoveries), net for the three and nine months ended September 30, 2017.

 

 

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SOURCE HCP, Inc.