Health Care REIT, Inc. (NYSE:HCN) Friday reported record-high operating results for the quarter ended June 30, 2014, attributing its performance to partnerships with best-in-class seniors housing and post-acute operators and strong regional health systems.
The real estate investment trust completed a record quarter of earnings with normalized Funds from Operations (FFO) per share of $1.06, representing a 14% year-over-year increase from the second quarter of 2013.
Its overall portfolio saw 7.7% NOI growth, with several properties acquired in the second quarter. The REIT sees its growth opportunities mainly through existing operator partnerships, rather than new ones, its executives said during a call with analysts to discuss the results.
“There are a handful of operators in the U.S., UK and Canada that we’d like to add to the portfolio, but its not a huge number and most of our growth is going to be with existing partners,” said Scott Brinker, Health Care REIT executive vice president of investments. “And I think that tells you another thing, which is that it is very difficult to reproduce the market position that we are in. We feel strongly that the high quality operators are a scarce asset.”
The company has recently improved its capital position through the closing of a $3.23 billion credit facility—a benefit to existing operating partners, said Health Care REIT CEO Tom DeRosa.
“We have unparalleled, and for some time now, uninterrupted access to capital,” said DeRosa, who took the CEO post in April. “This is our covenant with our operating partners to deliver the most flexible capital to help grow their businesses.”
Previously, the REIT anticipated a second quarter acquisition pipeline of about $414 million total, but the company overshot its projections by about $41 million, completing $455 million in acquisitions.
In total, Health Care REIT completed $579 million of gross investments for the quarter, including its acquisition pipeline of $455 million, as well as $44 million in development funding, $76 million in loan advances and $4 million in capital improvements.
The company also continues to benefit from recent acquisitions in the senior housing space.
Last year, the company completed its acquisition of Sunrise Senior Living—a deal valued, at the time, at $4.3 billion. Today, the market value amounts to about $6 billion.
“The Sunrise Investment has been a tremendous success,” Brinker said. “When we announced the merger in late 2012, we told the market to expect a 6% initial yield. Just 18 months later our initial yield – our yield on investment is 7%.”
Written by Emily Study and Elizabeth Ecker
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