Health Care Reit, Inc. (HCN) announced that achieved 4Q08 normalized funds from operations (FFO) of $0.83 per share, up 4% and had normalized FFO of $3.38 per share, up 8% for the full year 2008. The company completed a total of $1.0 billion in new net investments of which 85% related to preferred investments which are a combination of senior housing and customer focused medical facilities. The company recognized $163.9 million of gains on sales of property, generating $287.0 million in net proceeds. The company noted in its conference call that same store revenue for the senior housing and specialty care portfolio increased 2.9% in the fourth quarter versus last year and that assisted living occupancy rose 110 basis points year-over-year in the third quarter to 88.9% and has remained flat during the first two months of the fourth quarter. On the conference call, Scott Estes, Chief Financial Officer & Executive Vice President, noted that for its communities that require a buy-in / entrance fee:
“The fourth quarter saw even less activity when the economy worsened considerably. We spent some time working with our operators to reforecast 2009 budgets and what we have done is we have decreased our sales forecasts by roughly 20% for existing campuses and 33% for new campuses. Assuming our operators are able to meet our revised budgets, we believe there should be sufficient liquidity and little to no impact on our forecasted yields. At this point, we believe the next 12 to 24 months are really a crucial period for sales and deposits at our entrance fee facilities.”
HCN is providing its 2009 guidance and expects to report net income available to common stockholders in a range of $1.59 to $1.69 per diluted share; normalized FFO in a range of $3.20 to $3.30 per diluted share; and normalized FAD in a range of $3.08 to $3.18 per diluted share. In preparing its guidance for 2009, the company made the following significant assumptions:
- Gross investments comprised of funded new development totaling $600 million with the investment balance capitalized at the company’s average cost of debt (approximately 5.7%) and recorded as a reduction in interest expense until completion. No acquisitions are assumed in the gross investment forecast.
- Dispositions of $200 to $300 million at average yields of 10% to 11%.
- Net investments of $300 million to $400 million.
- Development conversions of approximately $537 million heavily weighted toward the latter half of the year.
- General and administrative expenses of approximately $46 million for the full year 2009. Our G&A forecast includes $2.9 million of anticipated expensing of accelerated stock-based compensation in 1Q09 but excludes $3.9 million in connection with the departure of Raymond Braun in 1Q09.
- 5.8 million shares of common stock issued on February 3, 2009 for approximately $211 million in net proceeds in connection with the company’s inclusion in the S&P 500 Index.
“In one of the toughest years on record for both REITs and the broader equity markets, we generated a positive 0.5% total return for our shareholders in 2008,” commented George L. Chapman, chief executive officer and president of Health Care REIT, Inc. “In addition, we raised over $775 million of opportunistic equity capital and completed in excess of $1.0 billion of net real estate investments, concentrated in combination senior housing properties and high-quality medical facilities. As we enter 2009, we remain focused on preserving liquidity, but we intend to take advantage of what we believe will be increasingly attractive investment opportunities over time.”
For the full earnings release, click here.
For the conference call transcript, click here.