Health Care REIT: Unstoppable Forces Driving Senior Housing Demand

Health Care REIT, Inc. (NYSE: HCN) today reported record operating results for the quarter and year ended December 31, 2013, driven by “unstoppable forces” that will continue to benefit its senior housing portfolio.

The company completed a record quarter of earnings with normalized Funds from Operations (FFO) per share of $0.99, a 16% increase from the fourth quarter of 2012.

For the year, Health Care REIT generated a normalized FFO of $3.81 per share, up 8% from 2012.


“The outstanding 16% increase in FFO and FAD this quarter demonstrates the power of our platform and its earnings potential,” said George L. Chapman, chairman and CEO of Health Care REIT in a statement.

Further, the company’s executives pointed to continued favorable forces in senior housing as bolstering its performance in the sector.

“Demand for senior housing benefits from unstoppable forces, such as the growth in the senior population, increased product awareness, and a decline in family caregiver ratio,” said Executive Vice President of Investments Scott Brinker during an earnings call Wednesday. “The short and long-term outlook is attractive.”


Health Care REIT attributed its fourth quarter and full year performance to $5.7 billion of investments completed during the year, including $277.5 million completed during the quarter.

For the fourth quarter, senior housing investment activity was headlined by $99 million of acquisitions with company’s fourth largest operating partner, Benchmark Senior Living, Brinker said. The acquisitions include three senior housing properties at a blended yield of 6.7%.

Other investment activity for the quarter included the purchase of three senior housing triple-net leased properties for $52.5 million, and six medical office buildings for $126 million.

Health Care REIT also attributed its earnings performance to a 3.5% average 2013 same store cash NOI growth, including 7.4% growth for its senior housing operating portfolio.

The company’s triple-net leased senior housing portfolio also saw some NOI growth, rising 2.9% during the quarter and 2.8% for the full year, respectively.

Senior housing now represents 60% of the REIT’s income as performance in the operating portfolio continues to exceed expectations, Brinker said during Wednesday’s call.

“Senior housing fundamentals remain favorable. Demand has been growing faster than supply and is expected to continue doing so in 2014,” he said.

Given the company’s performance in 2013 and increasing potential for future investment activity, Health Care REIT has raised its guidance for 2014.

Looking forward, the company forecasts net income attributable to common stockholders in a range of $1.09 to $1.19 per diluted share.

Additionally, the company also expects normalized FFO in a range of $3.93 to $4.03 per diluted share, representing a 3% to 6% increase.

The guidance includes the company’s recent recapitalization of Sunrise Senior Living, noted HCN’s Executive Vice President and Chief Financial Officer Scott Estes.

“We see continued opportunity. We’re one of the largest owners in the sector, yet our market share is in the low single digits” Brinker said. “As we move into 2014, expect us to be active in the U.S., the U.K. and Canada.”

In efforts to enhance the company’s disclosure, Estes also discussed that HCN will launch a new website this year on February 24 that will include an interactive property map that will provide investors with a clearer understanding of the company’s specific locations by property type in the U.S., Canada and the U.K.

“We are always looking for opportunities to enhance our transparency,” Estes said. “We believe it will provide a more logical, user-friendly interface, providing quick and efficient access to key portfolio information.”

Written by Jason Oliva

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