Exhibit 99.2
CELEBRATING 20 YEARS AS A PUBLIC COMPANY
SUPPLEMENTAL INFORMATION
JUNE 30, 2005
(UNAUDITED)
[LOGO]
[LOGO]
Table of Contents
2
About the Company
Health Care Property Investors, Inc., a Maryland corporation organized in 1985, is a real estate investment trust (“REIT”) that, together with its consolidated subsidiaries and joint ventures, invests in healthcare related properties located throughout the United States. The Company acquires healthcare facilities and leases them to healthcare providers. Additionally, the Company provides mortgage financing on healthcare facilities. References herein to “HCP,” the “Company,” “we,” “us” and “our” include Health Care Property Investors, Inc. and our consolidated subsidiaries and joint ventures, unless the context otherwise requires.
The Company is organized to invest in income-producing healthcare related facilities. Our primary goal is to increase shareholder value through profitable growth. Our investment strategy to achieve this goal is based on three principles – opportunistic investing, portfolio diversification and conservative financing.
Opportunistic Investing. The Company makes real estate investments that are expected to drive profitable growth and create long-term shareholder value. We attempt to position ourselves to create and take advantage of situations where we believe the opportunities meet our goals and investment criteria. We invest in properties directly and through joint ventures, and provide secured financing, depending on the nature of the investment opportunity.
Portfolio Diversification. The Company believes in maintaining a portfolio of healthcare related real estate diversified by sector, geography, operator and investment product. Diversification within the healthcare industry reduces the likelihood that a single event would materially harm our business. This allows us to take advantage of opportunities in different markets based on individual market dynamics. While pursuing our strategy of attaining diversification in our portfolio, there are no specific limitations on the percentage
of our total assets that may be invested in any one property, property type, geographic location or in the number of properties in which we may invest, lease or lend to a single operator.
Conservative Financing. The Company believes a conservative balance sheet provides the ability to execute our opportunistic investing approach and portfolio diversification principles. We maintain our conservative balance sheet by actively managing our debt to equity levels and maintaining available sources of liquidity. Our debt is primarily fixed rate, which reduces the impact of rising interest rates on our operations. Generally, we attempt to match the long-term duration of our leases with long-term fixed rate financing.
As of June 30, 2005, the Company’s portfolio of properties, excluding assets held for sale but including investments through joint ventures and mortgage loans, included 529 properties in 42 states and consisted of:
• 28 hospitals
• 165 skilled nursing facilities
• 121 assisted living and continuing care retirement communities
• 191 medical office buildings
• 24 other healthcare facilities
The information in this supplemental information package should be read in conjunction with the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and other information filed with the Securities and Exchange Commission (“SEC”). The Reporting Definitions and Supplemental Financial Disclosures are an integral part of the information presented herein.
You can access, free of charge, a copy of the periodic and current reports we file with the SEC on our website at www.hcpi.com. Our periodic and current reports are made available on our website as soon as reasonably practicable after these reports are filed with the SEC.
For more information, contact Talya Nevo-Hacohen, Senior Vice President – Strategic Development and Treasurer at (562) 733-5100.
4
Company Information
Board of Directors
Mary A. Cirillo
Former Chairman and Chief Executive
Officer, OPCENTER
Compensation Committee
Nominating and Corporate
Governance Committee
Robert R. Fanning, Jr.
Chief Operating Officer, Saint Vincent
Catholic Medical Centers of New York
Audit Committee
James F. Flaherty III
Chairman and Chief Executive Officer
Health Care Property Investors, Inc.
David B. Henry
Vice Chairman and Chief Investment
Officer, Kimco Realty Corporation
Audit Committee
Nominating and Corporate
Governance Committee
Michael D. McKee
Vice Chairman and Chief Operating
Officer, The Irvine Company
Chairperson, Compensation Committee
Harold M. Messmer, Jr.
Chairman and Chief Executive Officer
Robert Half International, Inc.
Compensation Committee
Nominating and Corporate
Governance Committee
Peter L. Rhein
Partner
Sarlot & Rhein
Chairperson, Audit Committee
Kenneth B. Roath
Chairman Emeritus
Health Care Property Investors, Inc.
Richard M. Rosenberg
Chairman and Chief Executive Officer
(Retired), Bank of America
Lead Director
Chairperson, Nominating and
Corporate Governance Committee
Joseph P. Sullivan
Former Chairman and Chief Executive
Officer, Protocare, Inc.
Audit Committee
Senior Management
Charles A. Elcan
Executive Vice President
Medical Office Properties
James F. Flaherty III
Chairman and
Chief Executive Officer
Paul F. Gallagher
Executive Vice President
Portfolio Strategy
Edward J. Henning
Senior Vice President
General Counsel and
Corporate Secretary
F. Scott Kellman
Senior Vice President
Business Development
Thomas M. Klaritch
Senior Vice President
Medical Office Properties
Stephen R. Maulbetsch
Executive Vice President
Acquisitions and Dispositions
Talya Nevo-Hacohen
Senior Vice President
Strategic Development and Treasurer
Mark A. Wallace
Senior Vice President
Chief Financial Officer
Company Information
Corporate Headquarters
3760 Kilroy Airport Way
Suite 300
Long Beach, CA 90806-2473
(562) 733-5100
Nashville Office
3100 West End Avenue
Suite 800
Nashville, TN 37203
(615) 324-6900
Senior Debt Ratings
Moody’s | | Baa2 |
Standard & Poor’s | | BBB+ |
Fitch | | BBB+ |
Stock Exchange Listing
NYSE (US Dollar)
Trading Symbol
HCP | | (Common Stock) |
HCP_pe | | (Series E Preferred) |
HCP_pf | | (Series F Preferred) |
5
Quarterly Highlights (1)
REAL ESTATE TRANSACTIONS
Year-to-date through August 1, 2005, the Company has made secured loans and acquired interests in properties aggregating $441 million, including the following:
On July 22, 2005, the Company acquired twelve independent and assisted living facilities for approximately $252 million, including assumed debt valued at approximately $52 million, through a sale-leaseback transaction. These facilities have an initial lease term of 15 years, with three ten-year renewal options. The initial annual lease rate is approximately 7.1% with annual escalators based on the Consumer Price Index (“CPI”) that have a floor of 3%. Eleven of the facilities have an average occupancy of 91%. One facility will be placed into service in August 2005 and is currently 34% pre-leased.
On July 1, 2005, the Company acquired an assisted living facility for approximately $16 million through a sale-leaseback transaction. The facility has an initial lease term of 15 years, with two ten-year renewal options. The initial annual lease rate is approximately 8.75% with annual CPI-based escalators that have a floor of 2.75%. The property is currently 96% occupied and a 60-unit expansion is planned.
As previously announced, on April 28, 2005, the Company acquired five medical office buildings for approximately $81 million, including assumed debt valued at $29 million. The initial yield is 7.0% with two properties currently in lease-up. The yield following lease-up is expected to be 8.2%. The medical office buildings include approximately 537,000 rentable square feet.
As previously announced, on April 20, 2005, the Company acquired five assisted living facilities for $58 million through a sale-leaseback transaction. These facilities have an initial lease term of 15 years, with two ten-year renewal options. The initial annual lease rate is approximately 9.0% with annual CPI-based escalators that have a floor of 2.75%. These properties are included in a new master lease along with five other properties currently leased to the operator.
Year-to-date through August 1, 2005, the Company sold interests in ten properties for approximately $48 million and recognized a gain of approximately $9 million. During the quarter ended June 30, 2005, the Company sold interests in six properties for approximately $13 million and recognized a gain of approximately $4 million.
CAPITAL MARKETS TRANSACTIONS
On June 15, 2005, the Company repaid $10 million of maturing Medium Term Notes which accrued interest at a rate of 7.55%. These notes were repaid with funds available under the Company’s bank line of credit.
On June 3, 2005, the Remarketing Dealer exercised its option to redeem the Company’s $200 million principal amount of 6.875% Mandatory Par Put Remarketed Securities (“MOPPRS”). The Remarketing Dealer redeemed the securities from the holders at par plus accrued interest, and reissued ten-year senior notes with a coupon of 7.072%.
On April 27, 2005, the Company issued $250 million of 5 5/8% senior unsecured notes due 2017. The notes were priced at 99.585% of the principal amount for an effective yield of 5.673%. The Company received proceeds of $247 million, which were used to repay borrowings under the bank line of credit and for general corporate purposes.
OTHER EVENTS
On July 27, 2005, the Company announced that its Board declared a quarterly cash dividend of $0.42 per share of common stock. The common stock cash dividend will be paid on August 19, 2005, to stockholders of record as of the close of business on August 8, 2005.
On May 16, 2005, the Company announced the election of James F. Flaherty III, President and Chief Executive Officer, as Chairman of the Board of Directors. Flaherty succeeded Kenneth B. Roath who became Chairman Emeritus andremained a director of the Company.
On May 12, 2005, the Company announced the promotion of Stephen R. Maulbetsch to Executive Vice President – Acquisitions and Dispositions. Maulbetsch has been with the Company for 20 years, most recently as Senior Vice President – Acquisitions and Dispositions.
On April 27, 2005, the Company announced the addition of F. Scott Kellman as Senior Vice President – Business Development effective June 1, 2005. Kellman joined the Company and its senior management team to assist in furtherimplementing growth initiatives at HCP.
(1) Includes events subsequent to the current quarter-end through the date of the most recent quarterly earning press release issuance.
6
Consolidated Information
Consolidated Information
7
Consolidated Balance Sheets
In thousands
| | June 30, | | December 31, | |
| | 2005 | | 2004 | |
ASSETS | | | | | |
Real estate: | | | | | |
Buildings and improvements | | $ | 3,141,240 | | $ | 3,025,707 | |
Developments in process | | 13,590 | | 25,777 | |
Land | | 306,761 | | 299,461 | |
Less accumulated depreciation and amortization | | 565,559 | | 533,764 | |
Net real estate | | 2,896,032 | | 2,817,181 | |
| | | | | |
Loans receivable, net: | | | | | |
Joint venture partners | | 7,006 | | 6,473 | |
Others | | 140,643 | | 139,919 | |
Investments in and advances to unconsolidated joint ventures | | 48,694 | | 60,506 | |
Accounts receivable, net of allowances | | 13,629 | | 14,834 | |
Cash and cash equivalents | | 18,890 | | 16,962 | |
Restricted cash | | 16,904 | | 3,593 | |
Intangibles, net | | 19,725 | | 18,872 | |
Other assets, net | | 26,237 | | 24,294 | |
Total assets | | $ | 3,187,760 | | $ | 3,102,634 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Bank line of credit | | $ | 115,300 | | $ | 300,100 | |
Senior unsecured notes | | 1,284,476 | | 1,046,690 | |
Mortgage debt | | 165,933 | | 139,416 | |
Accounts payable and accrued liabilities | | 62,764 | | 59,905 | |
Deferred revenue | | 18,430 | | 15,300 | |
Total liabilities | | 1,646,903 | | 1,561,411 | |
| | | | | |
Minority interests | | 120,436 | | 121,781 | |
Stockholders’ equity: | | | | | |
Preferred stock | | 285,173 | | 285,173 | |
Common stock | | 135,630 | | 133,658 | |
Additional paid-in capital | | 1,440,380 | | 1,403,335 | |
Cumulative net income | | 1,434,594 | | 1,348,089 | |
Cumulative dividends | | (1,863,313 | ) | (1,739,859 | ) |
Other equity | | (12,043 | ) | (10,954 | ) |
Total stockholders’ equity | | 1,420,421 | | 1,419,442 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 3,187,760 | | $ | 3,102,634 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
8
Consolidated Statements of Income
In thousands, except per share data
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
Revenues and other income: | | | | | | | | | |
Rental revenues | | $ | 112,465 | | $ | 93,097 | | $ | 215,268 | | $ | 178,140 | |
Equity income from unconsolidated joint ventures | | 88 | | 849 | | 299 | | 2,086 | |
Interest and other income | | 5,989 | | 9,980 | | 11,196 | | 18,503 | |
| | 118,542 | | 103,926 | | 226,763 | | 198,729 | |
Costs and expenses: | | | | | | | | | |
Interest | | 25,372 | | 19,743 | | 48,610 | | 40,957 | |
Depreciation and amortization | | 27,253 | | 20,457 | | 50,997 | | 40,318 | |
Operating | | 15,419 | | 9,894 | | 28,742 | | 19,139 | |
General and administrative | | 8,827 | | 8,554 | | 16,146 | | 15,405 | |
Impairments | | — | | 1,216 | | — | | 1,216 | |
| | 76,871 | | 59,864 | | 144,495 | | 117,035 | |
| | | | | | | | | |
Income before minority interests | | 41,671 | | 44,062 | | 82,268 | | 81,694 | |
Minority interests | | (3,031 | ) | (3,289 | ) | (6,178 | ) | (6,153 | ) |
| | | | | | | | | |
Income from continuing operations | | 38,640 | | 40,773 | | 76,090 | | 75,541 | |
| | | | | | | | | |
Discontinued operations: | | | | | | | | | |
Operating income | | 241 | | 1,771 | | 1,511 | | 4,830 | |
Gain (loss) on sales of real estate, net of impairments | | 4,166 | | (960 | ) | 8,904 | | 8,048 | |
| | 4,407 | | 811 | | 10,415 | | 12,878 | |
| | | | | | | | | |
Net income | | 43,047 | | 41,584 | | 86,505 | | 88,419 | |
Preferred stock dividends | | (5,283 | ) | (5,282 | ) | (10,566 | ) | (10,565 | ) |
| | | | | | | | | |
Net income applicable to common shares | | $ | 37,764 | | $ | 36,302 | | $ | 75,939 | | $ | 77,854 | |
| | | | | | | | | |
Basic earnings per common share (EPS): | | | | | | | | | |
Continuing operations | | $ | 0.25 | | $ | 0.27 | | $ | 0.49 | | $ | 0.50 | |
Discontinued operations | | 0.03 | | 0.01 | | 0.08 | | 0.09 | |
Net income applicable to common shares | | $ | 0.28 | | $ | 0.28 | | $ | 0.57 | | $ | 0.59 | |
| | | | | | | | | |
Diluted earnings per common share: | | | | | | | | | |
Continuing operations | | $ | 0.25 | | $ | 0.27 | | $ | 0.49 | | $ | 0.49 | |
Discontinued operations | | 0.03 | | — | | 0.07 | | 0.10 | |
Net income applicable to common shares | | $ | 0.28 | | $ | 0.27 | | $ | 0.56 | | $ | 0.59 | |
| | | | | | | | | |
Weighted average shares used to calculate EPS: | | | | | | | | | |
Basic | | 134,445 | | 131,653 | | 133,968 | | 131,196 | |
| | | | | | | | | |
Diluted | | 135,214 | | 132,856 | | 134,871 | | 132,778 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
9
Consolidated Funds From Operations
In thousands, except per share data
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Net income applicable to common shares | | $ | 37,764 | | $ | 36,302 | | $ | 75,939 | | $ | 77,854 | |
Real estate depreciation and amortization: | | | | | | | | | |
Continuing operations | | 27,253 | | 20,457 | | 50,997 | | 40,318 | |
Discontinued operations | | 141 | | 720 | | 381 | | 2,158 | |
Gain on real estate dispositions | | (4,166 | ) | (286 | ) | (8,904 | ) | (10,269 | ) |
Equity income from unconsolidated joint ventures | | (88 | ) | (849 | ) | (299 | ) | (2,086 | ) |
FFO from unconsolidated joint ventures | | 3,708 | | 1,954 | | 5,730 | | 4,491 | |
Minority interests | | 3,031 | | 3,289 | | 6,178 | | 6,153 | |
Minority interests in FFO | | (3,349 | ) | (3,589 | ) | (6,814 | ) | (6,644 | ) |
| | | | | | | | | |
FFO applicable to common shares | | $ | 64,294 | | $ | 57,998 | | $ | 123,208 | | $ | 111,975 | |
| | | | | | | | | |
Distributions on convertible units | | $ | 2,113 | | $ | 2,195 | | $ | 4,233 | | $ | 2,195 | |
| | | | | | | | | |
Diluted FFO applicable to common shares | | $ | 66,407 | | $ | 60,193 | | $ | 127,441 | | $ | 114,170 | |
| | | | | | | | | |
Basic FFO per common share | | $ | 0.48 | | $ | 0.44 | | $ | 0.92 | | $ | 0.85 | |
| | | | | | | | | |
Diluted FFO per common share | | $ | 0.47 | | $ | 0.44 | | $ | 0.91 | | $ | 0.84 | |
| | | | | | | | | |
Weighted average shares used to calculate diluted FFO per common share | | 140,246 | | 138,115 | | 139,903 | | 135,407 | |
| | | | | | | | | |
Dividends declared per common share | | $ | 0.4200 | | $ | 0.4175 | | $ | 0.8400 | | $ | 0.8350 | |
| | | | | | | | | |
FFO payout ratio per common share | | 89.4 | % | 94.9 | % | 92.3 | % | 99.4 | % |
| | | | | | | | | |
Selected supplemental cash flow information | | | | | | | | | |
Consolidated: | | | | | | | | | |
Impairments | | $ | — | | $ | 2,462 | | $ | — | | $ | 3,437 | |
Capitalized interest | | 65 | | 707 | | 372 | | 881 | |
Amortization of deferred compensation and debt issuance costs | | 2,590 | | 2,368 | | 4,771 | | 4,041 | |
Amortization of other lease intangibles | | 1,405 | | — | | 1,427 | | — | |
Straight-line rents | | 1,113 | | 309 | | 2,742 | | 769 | |
Lease commissions and tenant and capital improvements | | 1,064 | | 193 | | 1,464 | | 1,318 | |
| | | | | | | | | |
HCP’s share of HCP MOP: | | | | | | | | | |
Amortization of deferred financing costs | | $ | 92 | | $ | 131 | | $ | 202 | | $ | 131 | |
Amortization of other lease intangibles | | 626 | | 328 | | 692 | | 647 | |
Straight-line rents | | 28 | | 82 | | 138 | | 190 | |
Lease commissions and tenant and capital improvements | | 592 | | 241 | | 1,332 | | 875 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
10
Adjusted Fixed Charge Coverage
In thousands
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Net income | | $ | 43,047 | | $ | 41,584 | | $ | 86,505 | | $ | 88,419 | |
Interest expense: | | | | | | | | | |
Continuing operations | | 25,372 | | 19,743 | | 48,610 | | 40,957 | |
Discontinued operations | | — | | — | | — | | 351 | |
Income taxes | | 168 | | 849 | | 150 | | 993 | |
Depreciation and amortization: | | | | | | | | | |
Continuing operations | | 27,253 | | 20,457 | | 50,997 | | 40,318 | |
Discontinued operations | | 141 | | 720 | | 381 | | 2,158 | |
Equity income from unconsolidated joint ventures | | (88 | ) | (849 | ) | (299 | ) | (2,086 | ) |
EBITDA from HCP MOP | | 4,106 | | 3,925 | | 7,525 | | 7,639 | |
| | | | | | | | | |
EBITDA | | $ | 99,999 | | $ | 86,429 | | $ | 193,869 | | $ | 178,749 | |
| | | | | | | | | |
Interest expense: | | | | | | | | | |
Continuing operations | | $ | 25,372 | | $ | 19,743 | | $ | 48,610 | | $ | 40,957 | |
Discontinued operations | | — | | — | | — | | 351 | |
Interest expense from HCP MOP | | 1,621 | | 1,542 | | 3,230 | | 2,689 | |
Capitalized interest | | 65 | | 707 | | 372 | | 881 | |
Preferred stock dividends | | 5,283 | | 5,282 | | 10,566 | | 10,565 | |
| | | | | | | | | |
Adjusted fixed charges | | $ | 32,341 | | $ | 27,274 | | $ | 62,778 | | $ | 55,443 | |
| | | | | | | | | |
Adjusted fixed charge coverage | | 3.1 | x | 3.2 | x | 3.1 | x | 3.2 | x |
See Reporting Definitions and Supplemental Financial Measures Disclosures
11
Net Cash Provided by Operating Activities to EBITDA Reconciliation
In thousands
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Net cash provided by operating activities | | $ | 67,671 | | $ | 54,471 | | $ | 140,157 | | $ | 124,178 | |
Changes in: | | | | | | | | | |
Accounts payable, accrued liabilities and deferred revenue | | 940 | | 8,896 | | (3,573 | ) | 2,492 | |
Other assets | | 1,363 | | 6,393 | | 324 | | 6,348 | |
Accounts receivable | | (596 | ) | 426 | | (1,205 | ) | 606 | |
Net gain on sales of real estate | | 4,166 | | 286 | | 8,904 | | 10,269 | |
Minority interests | | (3,031 | ) | (3,288 | ) | (6,178 | ) | (6,153 | ) |
Distributions of earnings from unconsolidated joint ventures | | (88 | ) | (849 | ) | (299 | ) | (2,086 | ) |
Equity income from unconsolidated joint ventures | | 88 | | 849 | | 299 | | 2,086 | |
Straight-line rents | | 1,113 | | 309 | | 2,742 | | 769 | |
Provision for loan losses | | — | | 98 | | 56 | | (136 | ) |
Amortization of deferred compensation and debt issuance costs | | (2,590 | ) | (2,368 | ) | (4,771 | ) | (4,041 | ) |
Impairments | | — | | (2,462 | ) | — | | (3,437 | ) |
Amortization of other lease intangibles | | 1,405 | | — | | 1,427 | | — | |
Depreciation and amortization: | | | | | | | | | |
Continuing operations | | (27,253 | ) | (20,457 | ) | (50,997 | ) | (40,318 | ) |
Discontinued operations | | (141 | ) | (720 | ) | (381 | ) | (2,158 | ) |
| | | | | | | | | |
Net income | | 43,047 | | 41,584 | | 86,505 | | 88,419 | |
| | | | | | | | | |
Interest expense: | | | | | | | | | |
Continuing operations | | 25,372 | | 19,743 | | 48,610 | | 40,957 | |
Discontinued operations | | — | | — | | — | | 351 | |
Income taxes | | 168 | | 849 | | 150 | | 993 | |
Depreciation and amortization: | | | | | | | | | |
Continuing operations | | 27,253 | | 20,457 | | 50,997 | | 40,318 | |
Discontinued operations | | 141 | | 720 | | 381 | | 2,158 | |
Equity income from unconsolidated joint ventures | | (88 | ) | (849 | ) | (299 | ) | (2,086 | ) |
EBITDA from HCP MOP | | 4,106 | | 3,925 | | 7,525 | | 7,639 | |
| | | | | | | | | |
EBITDA | | $ | 99,999 | | $ | 86,429 | | $ | 193,869 | | $ | 178,749 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
12
Consolidated Indebtedness
In thousands
Debt Maturities and Scheduled Principal Repayments June 30, 2005 | |
Year | | Total | | Bank Line
of Credit | | Senior
Unsecured
Notes | | Mortgage
Debt | |
| | | | | | | | | |
2005 | | $ | 34,962 | | $ | — | | $ | 21,000 | | $ | 13,962 | |
2006 | | 139,707 | | — | | 135,000 | | 4,707 | |
2007 | | 260,386 | | 115,300 | | 140,000 | | 5,086 | |
2008 | | 8,262 | | — | | — | | 8,262 | |
2009 | | 5,763 | | — | | — | | 5,763 | |
2010 | | 71,728 | | — | | 6,421 | | 65,307 | |
2011 | | 15,086 | | — | | — | | 15,086 | |
2012 | | 257,660 | | — | | 250,000 | | 7,660 | |
2013 | | 19,349 | | — | | — | | 19,349 | |
2014 | | 88,251 | | — | | 87,000 | | 1,251 | |
Thereafter | | 669,500 | | — | | 650,000 | | 19,500 | |
| | | | | | | | | |
Subtotal | | 1,570,654 | | 115,300 | | 1,289,421 | | 165,933 | |
| | | | | | | | | |
Discounts and premiums, net | | (4,945 | ) | — | | (4,945 | ) | — | |
| | | | | | | | | |
Consolidated debt (1) | | $ | 1,565,709 | | $ | 115,300 | | $ | 1,284,476 | | $ | 165,933 | |
| | | | | | | | | |
Weighted average interest rate | | 6.34 | % | 4.02 | % | 6.41 | % | 7.38 | % |
| | | | | | | | | |
Weighted average maturity in years | | 7.12 | | 2.33 | | 7.58 | | 6.91 | |
| | June 30, | | December 31, | |
| | 2005 | | 2004 | |
| | | | | |
Fixed rate debt: | | | | | |
Senior unsecured notes | | $ | 1,259,476 | | $ | 1,021,690 | |
Mortgage debt | | 154,268 | | 127,506 | |
| | 1,413,744 | | 1,149,196 | |
| | | | | |
Variable rate debt: | | | | | |
Bank line of credit | | 115,300 | | 300,100 | |
Senior unsecured notes | | 25,000 | | 25,000 | |
Mortgage debt | | 11,665 | | 11,910 | |
| | 151,965 | | 337,010 | |
| | | | | |
Consolidated debt | | $ | 1,565,709 | | $ | 1,486,206 | |
| | | | | |
Percent of consolidated debt: | | | | | |
Fixed rate | | 90.3 | % | 77.3 | % |
Variable rate | | 9.7 | % | 22.7 | % |
| | 100.0 | % | 100.0 | % |
| | | | | |
Unsecured | | 89.4 | % | 90.6 | % |
Secured | | 10.6 | % | 9.4 | % |
| | 100.0 | % | 100.0 | % |
(1) Consolidated debt reflects book value.
See Reporting Definitions and Supplemental Financial Measures Disclosures
13
Consolidated Capitalization
In thousands, except per share data
Market Equity
| | | | June 30, 2005 | | December 31, 2004 | |
| | Dividend | | Shares/ | | | | | | Shares/ | | | | | |
Security | | Rate | | Units | | Price | | Value | | Units | | Price | | Value | |
Common stock and
convertible units: | | | | | | | | | | | | | | | |
Common stock | | N/A | | 135,630 | | $ | 27.04 | | $ | 3,667,435 | | 133,658 | | $ | 27.69 | | $ | 3,700,990 | |
Convertible partnership units (1) | | N/A | | 2,516 | | 54.08 | | 136,065 | | 2,526 | | 55.38 | | 139,890 | |
| | | | | | | | 3,803,500 | | | | | | 3,840,880 | |
Preferred stock: | | | | | | | | | | | | | | | |
Series E | | 7.25 | % | 4,000 | | 25.79 | | 103,160 | | 4,000 | | 26.25 | | 105,000 | |
Series F | | 7.10 | % | 7,820 | | 25.52 | | 199,566 | | 7,820 | | 25.26 | | 197,533 | |
| | | | | | | | 302,726 | | | | | | 302,533 | |
| | | | | | | | | | | | | | | |
Total market equity | | | | | | | | $ | 4,106,226 | | | | | | $ | 4,143,413 | |
| | | | | | | | | | | | | | | | | | | |
Capitalization Ratios
| | June 30, | | December 31, | |
| | 2005 | | 2004 | |
Consolidated debt (2): | | | | | |
Bank line of credit | | $ | 115,300 | | $ | 300,100 | |
Senior unsecured notes | | 1,284,476 | | 1,046,690 | |
Mortgage debt | | 165,933 | | 139,416 | |
| | $ | 1,565,709 | | $ | 1,486,206 | |
| | | | | |
Undepreciated book value: | | | | | |
Buildings and improvements | | $ | 3,141,240 | | $ | 3,025,707 | |
Developments in process | | 13,590 | | 25,777 | |
Land | | 306,761 | | 299,461 | |
Intangibles | | 22,777 | | 19,681 | |
| | $ | 3,484,368 | | $ | 3,370,626 | |
| | | | | |
Consolidated debt/Undepreciated book value | | 44.9 | % | 44.1 | % |
| | | | | |
Total market capitalization: | | | | | |
Consolidated debt | | $ | 1,565,709 | | $ | 1,486,206 | |
Total market equity | | 4,106,226 | | 4,143,413 | |
| | $ | 5,671,935 | | $ | 5,629,619 | |
| | | | | |
Consolidated debt/Total market capitalization | | 27.6 | % | 26.4 | % |
| | | | | |
Total book capitalization: | | | | | |
Consolidated debt | | $ | 1,565,709 | | $ | 1,486,206 | |
Total stockholders’ equity | | 1,420,421 | | 1,419,442 | |
| | $ | 2,986,130 | | $ | 2,905,648 | |
| | | | | |
Consolidated debt/Total book capitalization | | 52.4 | % | 51.1 | % |
(1) Each convertible partnership unit is exchangeable for an amount of cash approximating the market value of two shares of the Company’s common stock at time of conversion or, at the Company’s option, two shares of the Company’s common stock.
(2) Consolidated debt reflects book value.
See Reporting Definitions and Supplemental Financial Measures Disclosures
14
Consolidated Portfolio Overview
As of and for the six months ended June 30, 2005
Dollars and square feet in thousands
Owned Property and Secured Loan Portfolios - Overview by property type
| | Property | | | | | | Square | | Facility Occupancy % | | Number | |
Sector | | Count | | Beds/Units | | Feet | | 06/30/05 | | 03/31/05 | | of States | |
Hospital | | 28 | | 3,383 | | Beds | | 3,511 | | 63 | | 59 | | 16 | |
Skilled nursing | | 165 | | 20,015 | | Beds | | 6,458 | | 80 | | 80 | | 32 | |
ALF & CCRC | | 117 | | 12,209 | | Units | | 12,011 | | 86 | | 86 | | 33 | |
MOB | | 97 | | N/A | | | | 5,987 | | 94 | | 95 | | 19 | |
Other | | 24 | | N/A | | | | 1,463 | | 100 | | 100 | | 7 | |
Total | | 431 | | | | | | 29,430 | | | | | | | |
| | | | | | | | | | | | | | | | |
Owned Property and Secured Loan Portfolios - Operator concentration
| | Property | | Investment | | Net Operating | | Interest | | Total | |
Operator | | Count | | Amount | | % | | Income | | Income | | Amount | | % | |
Tenet Healthcare Corporation | | 8 | | $ | 423,497 | | 12 | | $ | 25,676 | | $ | — | | $ | 25,676 | | 13 | |
American Retirement Corporation | | 15 | | 399,051 | | 11 | | 20,706 | | — | | 20,706 | | 11 | |
Emeritus Corporation | | 37 | | 248,840 | | 7 | | 13,382 | | 172 | | 13,554 | | 7 | |
HealthSouth Corporation | | 9 | | 108,301 | | 3 | | 7,501 | | — | | 7,501 | | 4 | |
Summerville Healthcare Group | | 10 | | 97,671 | | 3 | | 2,812 | | 689 | | 3,501 | | 2 | |
Trilogy Health Services | | 14 | | 81,877 | | 2 | | 4,923 | | — | | 4,923 | | 3 | |
Kindred Healthcare, Inc. | | 20 | | 79,554 | | 2 | | 8,325 | | — | | 8,325 | | 4 | |
Pioneer Valley Hospital Inc. | | 2 | | 70,165 | | 2 | | 3,596 | | — | | 3,596 | | 2 | |
Beverly Enterprises, Inc. | | 19 | | 67,723 | | 2 | | 2,339 | | 1,770 | | 4,109 | | 2 | |
HCA Inc. | | 7 | | 66,992 | | 2 | | 3,387 | | — | | 3,387 | | 2 | |
Tandem Health Care Inc. | | 9 | | 63,093 | | 2 | | 3,135 | | — | | 3,135 | | 2 | |
Other Public Companies | | 25 | | 238,618 | | 7 | | 11,362 | | 3,037 | | 14,399 | | 7 | |
Other Operators | | 256 | | 1,653,930 | | 45 | | 79,382 | | 1,814 | | 81,196 | | 41 | |
Total | | 431 | | $ | 3,599,312 | | 100 | | $ | 186,526 | | $ | 7,482 | | $ | 194,008 | | 100 | |
Reconciliation of Net Income to NOI
Net income | | $ | 86,505 | |
Equity income from unconsolidated joint ventures | | (299 | ) |
Interest and other income | | (11,196 | ) |
Interest expense | | 48,610 | |
Depreciation and amortization | | 50,997 | |
General and administrative | | 16,146 | |
Minority interests | | 6,178 | |
Total discontinued operations | | (10,415 | ) |
Net operating income (NOI) | | $ | 186,526 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
15
As of and for the six months ended June 30, 2005
Dollars and square feet in thousands
Owned Property Portfolio - Overview by type
| | Property
Count | | Investment | | Beds/Units | | Square
Feet | |
Facility Occupancy %
| | Cash
Flow
Coverage | | Rental
Revenues | | Less
Operating
Expenses | | | |
Sector | | | | | | 06/30/05 | | 03/31/05 | | | | | NOI | |
Hospital | | 26 | | $ | 713,391 | | 3,269 | | Beds | | 3,272 | | 63 | | 58 | | 2.1 | x | $ | 43,932 | | $ | — | | $ | 43,932 | |
Skilled nursing | | 152 | | 650,294 | | 18,165 | | Beds | | 5,918 | | 80 | | 80 | | 1.3 | x | 43,673 | | — | | 43,673 | |
ALF & CCRC | | 108 | | 963,593 | | 11,672 | | Units | | 11,604 | | 86 | | 86 | | 1.2 | x | 50,481 | | 3,781 | | 46,700 | |
MOB | | 97 | | 922,854 | | N/A | | 5,987 | | 94 | | 95 | | N/A | | 63,469 | | 22,468 | | 41,001 | |
Other | | 24 | | 213,424 | | N/A | | 1,463 | | 100 | | 100 | | N/A | | 13,713 | | 2,493 | | 11,220 | |
Total | | 407 | | $ | 3,463,556 | | | | 28,244 | | | | | | | | $ | 215,268 | | $ | 28,742 | | $ | 186,526 | |
Owned Property Portfolio - Overview by state
| | Total | | Hospital | | Skilled Nursing | | ALF & CCRC | | MOB | | Other | |
State | | No. | | No. | | Beds | | No. | | Beds | | No. | | Units | | No. | | Square
Feet | | No. | | Square
Feet | |
TX | | 48 | | 4 | | 326 | | 9 | | 1,079 | | 25 | | 2,634 | | 10 | | 905 | | — | | — | |
IN | | 48 | | — | | — | | 32 | | 3,768 | | 3 | | 233 | | 13 | | 672 | | — | | — | |
CA | | 34 | | 3 | | 745 | | 9 | | 918 | | 8 | | 629 | | 11 | | 608 | | 3 | | 421 | |
FL | | 33 | | 2 | | 312 | | 8 | | 930 | | 19 | | 2,715 | | 4 | | 138 | | — | | — | |
UT | | 31 | | 1 | | 139 | | 1 | | 120 | | — | | — | | 21 | | 896 | | 8 | | 510 | |
TN | | 21 | | — | | — | | 14 | | 2,161 | | 1 | | 60 | | 4 | | 418 | | 2 | | 101 | |
OH | | 16 | | — | | — | | 12 | | 1,543 | | 3 | | 374 | | 1 | | 37 | | — | | — | |
AZ | | 15 | | 2 | | 94 | | 3 | | 286 | | 3 | | 550 | | 7 | | 253 | | — | | — | |
KY | | 13 | | — | | — | | 7 | | 532 | | 1 | | 251 | | 5 | | 566 | | — | | — | |
Other | | 148 | | 14 | | 1,653 | | 57 | | 6,828 | | 45 | | 4,226 | | 21 | | 1,494 | | 11 | | 431 | |
Total | | 407 | | 26 | | 3,269 | | 152 | | 18,165 | | 108 | | 11,672 | | 97 | | 5,987 | | 24 | | 1,463 | |
Secured Loan Portfolio - Overview by type
| | Property
Count | | | | | | Square
Feet | |
Facility Occupancy %
| | Debt
Service
Coverage | | Interest
Income | |
Sector | | | Investment | | Beds/Units | | | 06/30/05 | | 03/31/05 | | | |
Hospital | | 2 | | $ | 57,194 | | 114 | Beds | | 239 | | 74 | | 68 | | 4.1 x | | $ | 3,036 | |
Skilled nursing | | 13 | | 51,734 | | 1,850 | Beds | | 540 | | 77 | | 77 | | 2.2 x | | 2,928 | |
ALF & CCRC | | 9 | | 26,828 | | 537 | Units | | 407 | | 81 | | 81 | | 1.4 x | | 1,518 | |
Total | | 24 | | $ | 135,756 | | | | | 1,186 | | | | | | | | $ | 7,482 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
16
Same Property Performance
Dollars and square feet in thousands
| | | | | | Skilled | | ALF��& | | | | | |
| | Total | | Hospital | | Nursing | | CCRC | | MOB | | Other | |
Owned Property Portfolio | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Property count | | 407 | | 26 | | 152 | | 108 | | 97 | | 24 | |
Investment | | $ | 3,463,556 | | $ | 713,391 | | $ | 650,294 | | $ | 963,593 | | $ | 922,854 | | $ | 213,424 | |
| | | | | | | | | | | | | |
Same Property Portfolio | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Property count | | 350 | | 26 | | 134 | | 88 | | 79 | | 23 | |
Investment | | $ | 2,731,360 | | $ | 713,391 | | $ | 543,950 | | $ | 671,869 | | $ | 630,005 | | $ | 172,145 | |
| | | | | | | | | | | | | |
Percent of Owned Property Portfolio (by investment) | | 79 | % | 100 | % | 84 | % | 70 | % | 68 | % | 81 | % |
| | | | | | | | | | | | | |
Square feet | | 22,797 | | 3,272 | | 5,110 | | 8,725 | | 4,457 | | 1,233 | |
| | | | | | | | | | | | | |
Facility occupancy at June 30, 2005 | | | | 63 | % | 79 | % | 86 | % | 95 | % | 100 | % |
| | | | | | | | | | | | | |
Facility occupancy at June 30, 2004 | | | | 63 | % | 79 | % | 83 | % | 95 | % | 100 | % |
| | | | | | | | | | | | | |
NOI for the six months ended June 30, 2005 | | $ | 158,221 | | $ | 43,932 | | $ | 37,780 | | $ | 35,121 | | $ | 32,240 | | $ | 9,148 | |
| | | | | | | | | | | | | |
NOI for the six months ended June 30, 2004 | | $ | 154,503 | | $ | 43,828 | | $ | 35,775 | | $ | 34,198 | | $ | 31,804 | | $ | 8,898 | |
| | | | | | | | | | | | | |
Same property change in NOI | | 2.4 | % | 0.2 | % | 5.6 | % | 2.7 | % | 1.4 | % | 2.8 | % |
| | | | | | | | | | | | | |
NOI for the six months ended June 30, 2005 | | $ | 158,221 | | $ | 43,932 | | $ | 37,780 | | $ | 35,121 | | $ | 32,240 | | $ | 9,148 | |
Straight-line rents (1) | | (1,893 | ) | (428 | ) | (114 | ) | (1,260 | ) | (91 | ) | — | |
Amortization of other lease intangibles (2) | | (1,257 | ) | — | | — | | — | | (1,257 | ) | — | |
NOI, as adjusted, for the six months ended June 30, 2005 | | $ | 155,071 | | $ | 43,504 | | $ | 37,666 | | $ | 33,861 | | $ | 30,892 | | $ | 9,148 | |
| | | | | | | | | | | | | |
NOI for the six months ended June 30, 2004 | | $ | 154,503 | | $ | 43,828 | | $ | 35,775 | | $ | 34,198 | | $ | 31,804 | | $ | 8,898 | |
Straight-line rents | | (752 | ) | (507 | ) | (198 | ) | — | | (47 | ) | — | |
NOI, as adjusted, for the six months ended June 30, 2004 | | 153,751 | | $ | 43,321 | | $ | 35,577 | | $ | 34,198 | | $ | 31,757 | | $ | 8,898 | |
| | | | | | | | | | | | | |
Same property change in NOI, as adjusted | | 0.9 | % | 0.4 | % | 5.9 | % | -1.0 | % | -2.7 | % | 2.8 | % |
(1) Straight-line rents for ALF & CCRCs include the impact of straight-line rent recognized for ARC beginning in the fourth quarter of 2004.
(2) Amortization of other lease intangibles includes the impact of HCP’s purchase price allocation related to its 2003 acquisition of certain properties acquired from MedCap Properties, LLC.
See Reporting Definitions and Supplemental Financial Measures Disclosures
17
Lease Expirations
In thousands
| | | | Expiration Year (1) | |
Sector | | Totals | | 2005 | | 2006 | | 2007 | | 2008 | | 2009 | |
| | | | | | | | | | | | | |
Owned Property Portfolio | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Hospital: | | | | | | | | | | | | | |
Leases | | 11 | | — | | — | | 3 | | 1 | | 7 | |
Annualized expiring rents | | $ | 47,148 | | $ | — | | $ | — | | $ | 3,359 | | $ | 1,945 | | $ | 41,844 | |
| | | | | | | | | | | | | |
Skilled nursing: | | | | | | | | | | | | | |
Leases | | 58 | | 4 | | 12 | | 3 | | 26 | | 13 | |
Annualized expiring rents | | $ | 30,489 | | $ | 2,044 | | $ | 6,194 | | $ | 962 | | $ | 13,045 | | $ | 8,244 | |
| | | | | | | | | | | | | |
ALF & CCRC: | | | | | | | | | | | | | |
Leases | | 5 | | — | | 4 | | — | | 1 | | — | |
Annualized expiring rents | | $ | 1,403 | | $ | — | | $ | 1,338 | | $ | — | | $ | 65 | | $ | — | |
| | | | | | | | | | | | | |
MOB: | | | | | | | | | | | | | |
Leases | | 747 | | 177 | | 144 | | 140 | | 153 | | 133 | |
Annualized expiring rents | | $ | 56,098 | | $ | 9,241 | | $ | 8,050 | | $ | 10,899 | | $ | 14,655 | | $ | 13,253 | |
| | | | | | | | | | | | | |
Other: | | | | | | | | | | | | | |
Leases | | 4 | | — | | — | | 1 | | 1 | | 2 | |
Annualized expiring rents | | $ | 8,355 | | $ | — | | $ | — | | $ | 3,672 | | $ | 3,224 | | $ | 1,459 | |
| | | | | | | | | | | | | |
Total: | | | | | | | | | | | | | |
Leases | | 825 | | 181 | | 160 | | 147 | | 182 | | 155 | |
Annualized expiring rents | | $ | 143,493 | | $ | 11,285 | | $ | 15,582 | | $ | 18,892 | | $ | 32,934 | | $ | 64,800 | |
(1) Lease expirations over the next five years only.
See Reporting Definitions and Supplemental Financial Measures Disclosures
18
HCP MOP
Unconsolidated Joint Venture
HCP MOP Balance Sheets
In thousands
| | June 30,
2005 | | December 31,
2004 | |
ASSETS | | | | | |
Real estate: | | | | | |
Buildings and improvements | | $ | 403,944 | | $ | 402,078 | |
Developments in process | | 5,881 | | 586 | |
Land | | 52,855 | | 53,077 | |
Less accumulated depreciation and amortization | | 20,404 | | 13,950 | |
Net real estate | | 442,276 | | 441,791 | |
| | | | | |
Accounts receivable, net of allowances | | 5,170 | | 2,610 | |
Cash and cash equivalents | | 10,578 | | 18,026 | |
Intangible lease assets, net | | 16,915 | | 23,592 | |
Other assets, net | | 7,511 | | 8,177 | |
Total assets | | $ | 482,450 | | $ | 494,196 | |
| | | | | |
LIABILITIES AND MEMBERS’ CAPITAL | | | | | |
Mortgage debt | | $ | 320,575 | | $ | 322,559 | |
Accounts payable and accrued liabilities | | 10,584 | | 10,553 | |
Intangible lease liabilities, net | | 7,944 | | 9,973 | |
Deferred revenue | | 1,347 | | 1,694 | |
Total liabilities | | 340,450 | | 344,779 | |
| | | | | |
GE’s capital | | 95,140 | | 100,109 | |
HCP’s capital | | 46,860 | | 49,308 | |
| | | | | |
Total liabilities and members’ capital | | $ | 482,450 | | $ | 494,196 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
19
HCP MOP Statements of Operations and EBITDA
In thousands
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
Revenues: | | | | | | | | | |
Rental revenues | | $ | 23,235 | | $ | 21,297 | | $ | 44,617 | | $ | 42,451 | |
Interest and other income | | 395 | | 225 | | 694 | | 555 | |
| | 23,630 | | 21,522 | | 45,311 | | 43,006 | |
Costs and expenses: | | | | | | | | | |
Interest | | 4,876 | | 4,661 | | 9,742 | | 8,132 | |
Depreciation and amortization | | 7,677 | | 4,746 | | 13,113 | | 9,448 | |
Operating | | 9,261 | | 8,588 | | 18,555 | | 17,066 | |
General and administrative | | 2,366 | | 2,088 | | 4,379 | | 4,027 | |
| | 24,180 | | 20,083 | | 45,789 | | 38,673 | |
| | | | | | | | | |
Income (loss) from continuing operations | | (550 | ) | 1,439 | | (478 | ) | 4,333 | |
| | | | | | | | | |
Discontinued operations: | | | | | | | | | |
Operating income (loss) | | (38 | ) | 104 | | (77 | ) | 223 | |
Gain on real estate dispositions | | 440 | | 872 | | 440 | | 872 | |
| | 402 | | 976 | | 363 | | 1,095 | |
| | | | | | | | | |
Net income (loss) | | $ | (148 | ) | $ | 2,415 | | $ | (115 | ) | $ | 5,428 | |
| | | | | | | | | |
HCP’s equity income (loss) | | $ | (49 | ) | $ | 779 | | $ | (38 | ) | $ | 1,753 | |
| | | | | | | | | |
Fees earned by HCP | | $ | 776 | | $ | 776 | | $ | 1,551 | | $ | 1,551 | |
| | | | | | | | | |
Distributions received by HCP | | $ | 335 | | $ | 1,071 | | $ | 3,382 | | $ | 93,506 | |
| | | | | | | | | |
Net income (loss) | | $ | (148 | ) | $ | 2,415 | | $ | (115 | ) | $ | 5,428 | |
Interest expense: | | | | | | | | | |
Continuing operations | | 4,876 | | 4,661 | | 9,742 | | 8,132 | |
Discontinued operations | | 36 | | 12 | | 45 | | 17 | |
Depreciation and amortization: | | | | | | | | | |
Continuing operations | | 7,677 | | 4,746 | | 13,113 | | 9,448 | |
Discontinued operations | | — | | 60 | | 17 | | 123 | |
| | | | | | | | | |
EBITDA | | $ | 12,441 | | $ | 11,894 | | $ | 22,802 | | $ | 23,148 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
20
HCP MOP Funds From Operations
In thousands
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Net income (loss) | | $ | (148 | ) | $ | 2,415 | | $ | (115 | ) | $ | 5,428 | |
Real estate depreciation and amortization: | | | | | | | | | |
Continuing operations | | 7,677 | | 4,746 | | 13,113 | | 9,448 | |
Discontinued operations | | — | | 60 | | 17 | | 123 | |
Gain on real estate dispositions | | (440 | ) | (872 | ) | (440 | ) | (872 | ) |
| | | | | | | | | |
Funds from operations (FFO) | | $ | 7,089 | | $ | 6,349 | | $ | 12,575 | | $ | 14,127 | |
| | | | | | | | | |
Selected supplemental cash flow information | | | | | | | | | |
Amortization of deferred financing costs | | $ | 280 | | $ | 398 | | $ | 612 | | $ | 398 | |
Amortization of other lease intangibles | | 1,896 | | 995 | | 2,098 | | 1,961 | |
Straight-line rents | | 85 | | 247 | | 419 | | 576 | |
Lease commissions and tenant and capital improvements | | 1,793 | | 729 | | 4,036 | | 2,652 | |
See Reporting Definitions and Supplemental Financial Measures Disclosures
21
HCP MOP Indebtedness
In thousands
Debt Maturities and Scheduled Principal Repayments
June 30, 2005
Year | | Mortgage
Debt | |
| | | |
2005 | | $ | 1,878 | |
2006 | | 37,329 | |
2007 | | 4,244 | |
2008 | | 4,458 | |
2009 | | 95,716 | |
2010 | | 3,308 | |
2011 | | 3,508 | |
2012 | | 9,428 | |
2013 | | 3,742 | |
2014 | | 156,964 | |
| | | |
Total debt (1) | | $ | 320,575 | |
| | | |
Weighted average interest rate | | 5.57 | % |
| | | |
Weighted average maturity in years | | 6.20 | |
| | June 30,
2005 | | December 31,
2004 | |
| | | | | |
HCP MOP debt: | | | | | |
Fixed rate | | $ | 287,251 | | $ | 276,153 | |
Variable rate | | 33,324 | | 46,406 | |
| | $ | 320,575 | | $ | 322,559 | |
| | | | | |
Percent of HCP MOP debt: | | | | | |
Fixed rate | | 89.6 | % | 85.6 | % |
Variable rate | | 10.4 | % | 14.4 | % |
| | 100.0 | % | 100.0 | % |
(1) Total debt reflects book value.
See Reporting Definitions and Supplemental Financial Measures Disclosures
22
HCP MOP Portfolio Overview and Lease Expirations
As of and for the six months ended June 30, 2005
Dollars and square feet in thousands
Portfolio overview
| | Property | | | | Square | | Facility Occupancy% | | Rental | | Less
Operating | | | |
Sector | | Count | | Investment | | Feet | | 06/30/05 | | 03/31/05 | | Revenues | | Expenses | | NOI | |
MOB | | 94 | | $ | 487,748 | | 5,364 | | 87 | | 88 | | $ | 44,617 | | $ | 18,555 | | $ | 26,062 | |
| | | | | | | | | | | | | | | | | | | | | |
Lease expiration summary
| | | | Expiration Year (1) | |
| | Totals | | 2005 | | 2006 | | 2007 | | 2008 | | 2009 | |
| | | | | | | | | | | | | |
Leases | | 1,091 | | 289 | | 256 | | 242 | | 203 | | 101 | |
Annualized expiring rents | | $ | 55,416 | | $ | 11,952 | | $ | 12,456 | | $ | 13,716 | | $ | 11,364 | | $ | 5,928 | |
| | | | | | | | | | | | | | | | | | | |
(1) Lease expirations over the next five years only.
See Reporting Definitions and Supplemental Financial Measures Disclosures
23
HCP MOP Same Property Performance
Dollars and square feet in thousands
| | MOB | |
HCP MOP Portfolio | | | |
| | | |
Property count | | 94 | |
Investment | | $ | 487,748 | |
| | | |
HCP MOP Same Property Portfolio | | | |
| | | |
Property count | | 92 | |
Investment | | $ | 469,647 | |
| | | |
Percent of HCP MOP Portfolio (by investment) | | 96 | % |
| | | |
Square feet | | 5,176 | |
| | | |
Facility occupancy at June 30, 2005 | | 87 | % |
| | | |
Facility occupancy at June 30, 2004 | | 87 | % |
| | | |
NOI for the six months ended June 30, 2005 | | $ | 24,959 | |
| | | |
NOI for the six months ended June 30, 2004 | | $ | 25,385 | |
| | | |
Same property change in NOI | | -1.7 | % |
| | | |
NOI for the six months ended June 30, 2005 | | $ | 24,959 | |
Straight-line rents | | (372 | ) |
Amortization of other lease intangibles | | (1,749 | ) |
NOI, as adjusted, for the six months ended June 30, 2005 | | $ | 22,838 | |
| | | |
NOI for the six months ended June 30, 2004 | | $ | 25,385 | |
Straight-line rents | | (576 | ) |
Amortization of other lease intangibles | | (1,961 | ) |
NOI, as adjusted, for the six months ended June 30, 2004 | | $ | 22,848 | |
| | | |
Same property change in NOI, as adjusted | | 0.0 | % |
See Reporting Definitions and Supplemental Financial Measures Disclosures
24
Reporting Definitions
ALF. Assisted living facility.
Annualized Debt Service. The most recent monthly interest and principal amortization due to HCP as of period end annualized for twelve months. The Company uses Annualized Debt Service for purposes of determining Debt Service Coverage.
Annualized Expiring Rent. The annualized future minimum rents due to HCP in the year of lease expiration.
Annualized Rent. The most recent monthly base rent due to HCP as of period end annualized for twelve months plus additional rents received by HCP over the most recent twelve month period as of period end. The Company uses Annualized Rent for purposes of determining property level Cash Flow Coverage.
Assets Held for Sale. Assets of discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Beds/Units/Square Feet. Hospitals and skilled nursing facilities are measured by licensed bed count. ALFs and CCRCs are stated in units (e.g., studio, one or two bedroom units). MOBs and other healthcare facilities are measured in square feet.
Book Value. The carrying amount as reported in the Company’s financial statements.
Cash Flow Coverage. Facility level EBITDAR of the property’s operator (not the Company) for the most recent twelve months of available data divided by the Annualized Rent. Cash Flow Coverage is a supplemental measure of the property’s ability to generate cash flow to meet related rent and other obligations to the Company. However, its usefulness is limited by, among other things, the same factors that limit the usefulness of EBITDAR. The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. Results exclude data related to hospitals leased to HealthSouth until HealthSouth provides assurance about its financial information. Results also exclude data related to ALFs leased to Emeritus since the operator has elected not to allocate the cost of a recent liability judgment to each of the facilities until the ultimate outcome of that judgment is clear.
CCRC. Continuing care retirement community.
Debt Service. The periodic payment of interest expense and principal amortization on secured loans.
Debt Service Coverage. Facility level EBITDAR of the property’s operator (not the Company) for the most recent twelve months of available data divided by the Annualized Debt Service. Debt Service Coverage is a supplemental measure of the property’s ability to generate sufficient cash flow to meet related obligations to the Company under loan agreements. However, its usefulness is limited by the same factors that limit the usefulness of EBITDAR. The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. Results exclude data related to one ALF that secures a loan to Emeritus since the operator has elected not to allocate the cost of a recent liability judgment to this facility until the ultimate outcome of that judgment is clear.
Facility EBITDAR. Earnings before interest, taxes, depreciation, amortization and rent for a particular facility accruing to the operator of the property (not the Company). The Company uses Facility EBITDAR in determining Debt Service Coverage and Cash Flow Coverage. EBITDAR as an analytical tool has limitations similar to EBITDA. However, the Company receives periodic financial information from operators regarding the performance of the Company’s facilities under the operator’s management. The Company utilizes Facility EBITDAR as a supplemental measure of the ability of those properties to generate sufficient liquidity to meet related obligations to the Company. Facility EBITDAR includes an imputed management fee of 2% for acute care hospitals and 5% for skilled nursing facilities, ALFs and CCRCs which the Company believes represents typical management fees in their respective industries. All facility financial performance data was derived solely from information provided by lessees and borrowers without verification by the Company.
Facility Occupancy. For MOBs and other healthcare properties, facility occupancy represents the percentage of rentable square feet occupied. For hospitals, skilled nursing facilities, ALFs and CCRCs, facility occupancy represents the facilities’ operating occupancy for each quarter based on the most recent quarter of available data. The percentages are calculated based on licensed beds, available beds and units for hospitals, skilled nursing facilities, ALFs and CCRCs, respectively. The percentages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. All facility financial performance data were derived solely from information provided by lessees and borrowers.
25
Future Minimum Rents. Future minimum lease payments to be received by HCP, excluding operating expense reimbursements, from tenants under non-cancelable operating leases as of period end.
GAAP. U.S. generally accepted accounting principles.
HCP MOP. HCP Medical Office Portfolio, LLC, an unconsolidated joint venture formed between the Company and an affiliate of General Electric Company (“GE”), for which the Company is managing member and has a 33% interest therein.
Investment. The carrying amount of real estate assets, including intangibles, after adding back accumulated depreciation and amortization and the carrying amount of mortgage loans receivable. Excludes assets held for sale and classified as discontinued operations.
Market Equity. The total number of outstanding shares of the Company’s common stock and convertible partnership units multiplied by the closing price per share of its common stock on the New York Stock Exchange as of period end plus the total number of outstanding shares of the Company’s preferred stock multiplied by the closing price of its preferred stock on the New York Stock Exchange as of period end.
MOB. Medical office building.
“Other” Property Type. Physician group practice clinics, healthcare laboratory and laboratory research facilities, and health and wellness centers.
Same Property Performance (“SPP”). An important component of the Company’s evaluation of the operating performance of its properties. The Company defines its same property portfolio each quarter as those properties that have been in operation throughout the current year and the prior year and that were also in operation at January 1st of the prior year. Newly acquired assets, developments in process and assets held for sale are excluded from the same property portfolio. Accordingly, when a property is disposed of to a third party, it will be removed from the same property portfolio for the current and prior year reporting periods, but previously presented quarterly information will not be changed. Same property statistics allow management to evaluate the NOI of its real estate portfolio as a consistent population from period to period and eliminates the effects of changes in the composition of the properties on performance measures.
Secured Debt. Mortgage debt secured by real estate.
Square Feet Owned. The square footage for properties either owned directly by the Company or which the Company has a controlling interest (e.g., consolidated joint ventures) and excludes square footage for development properties prior to completion.
Total Book Capitalization. The carrying amount of consolidated debt plus the carrying amount of stockholders’ equity.
Total Market Capitalization. Consolidated debt at Book Value plus total Market Equity.
Undepreciated Book Value. The carrying amount of the Company’s real estate assets, including intangibles, after adding back accumulated depreciation and amortization.
26
Supplemental Financial Measures Disclosures
Adjusted Fixed Charges. Total interest expense plus capitalized interest plus preferred stock dividends. The Company uses Adjusted Fixed Charges to measure its interest payments on outstanding debt and dividends to its preferred shareholders for purposes of presenting Adjusted Fixed Charge Coverage. However, the usefulness of Adjusted Fixed Charges is limited as, among other things, it does not include all contractual obligations. The Company’s computation of Adjusted Fixed Charges should not be considered an alternative to fixed charges as defined by Item 503(d) of Regulation S-K and may not be comparable to fixed charges reported by other companies.
Adjusted Fixed Charge Coverage. EBITDA divided by Adjusted Fixed Charges. The Company uses Adjusted Fixed Charge Coverage to measure its liquidity. The Company believes Adjusted Fixed Charge Coverage provides investors, particularly fixed income investors, relevant and useful information because it measures the Company’s ability to meet its interest payments on outstanding debt and pay dividends to its preferred shareholders. The Company’s various debt agreements contain covenants that require the Company to maintain ratios similar to Adjusted Fixed Charge Coverage and credit rating agencies utilize similar ratios in evaluating and determining the credit rating on certain debt instruments of the Company. However, since this ratio is derived from EBITDA and Adjusted Fixed Charges, its usefulness is limited by the same factors that limit the usefulness of EBITDA and Adjusted Fixed Charges. Further, the Company’s computation of Adjusted Fixed Charge Coverage may not be comparable to similar fixed charge coverage ratios reported by other companies.
EBITDA. The real estate industry uses earnings before interest, taxes, depreciation and amortization (“EBITDA”) to measure both operating performance and liquidity. The Company’s presentation of EBITDA herein is solely as a non-GAAP liquidity measure in connection with the presentation of Adjusted Fixed Charge Coverage. As a liquidity measure, the Company believes that EBITDA helps investors analyze the Company’s ability to meet its interest payments on outstanding debt and to make preferred dividend payments. The Company’s various debt agreements contain covenants that require the Company to maintain ratios similar to Adjusted Fixed Charge Coverage and credit rating agencies utilize similar ratios in evaluating and determining the credit rating on certain debt instruments of the Company. The Company believes investors should consider EBITDA in conjunction with cash flow from operating activities, and other required measures under GAAP, to improve their understanding of the Company’s liquidity. EBITDA has limitations as an analytical tool and should be used in conjunction with the Company’s required GAAP presentations. EBITDA does not reflect the Company’s historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. Also, EBITDA does not reflect the cash required to make interest and principal payments on the Company’s outstanding debt. The Company believes cash flow from operating activities is the most directly comparable GAAP measure to EBITDA. EBITDA does not represent net income or cash flow from operations as defined by GAAP and should not be considered an alternative to those indicators. Further, the Company’s computation of EBITDA may not be comparable to similar measures reported by other companies.
Funds From Operations (“FFO”). The Company believes that net income as defined by GAAP is the most appropriate earnings measure. The Company also believes that Funds From Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and Basic and Diluted FFO per common share are important non-GAAP supplemental measures of operating performance for a real estate investment trust. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a real estate investment trust that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, with adjustments to derive the Company’s pro rata share of FFO from consolidated and unconsolidated joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. The Company believes that the use of FFO, combined with the required GAAP presentations, improves the understanding of operating results of real estate investment trusts among investors and makes comparisons of operating results among such companies more meaningful. The Company considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help investors compare the operating performance of a real estate investment trust between periods or as compared to other companies. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. FFO also does not consider the costs associated with capital expenditures related to the Company’s real estate assets nor is FFO necessarily indicative of cash available to fund the Company’s future cash requirements. Further, the Company’s computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently from the Company.
27
FFO Payout Ratio per Common Share. Dividends declared per common share divided by Diluted FFO per common share for a given period. The Company believes the FFO Payout Ratio provides investors relevant and useful information because it measures the portion of FFO being declared as dividends to common shareholders.
Net Operating Income from Continuing Operations (“NOI”). A supplemental financial measure used to evaluate the operating performance of real estate properties and same property performance, or “SPP.” The Company defines NOI from continuing operations as rental revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses and interest expense. The Company believes NOI provides investors relevant and useful information because it measures the operating performance of the Company’s real estate at the property level on an unleveraged basis, independent of related secured debt. NOI, as adjusted, is calculated as NOI eliminating the effects of straight-line rents, amortization of other lease intangibles and lease termination fees. The Company uses NOI and NOI, as adjusted, to make decisions about resource allocations, to assess and compare property level performance, and evaluate SPP. The company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP since it does not reflect the aforementioned excluded items. Further, NOI may not be comparable to that of other real estate investment trusts, as they may use different methodologies for calculating NOI.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this supplemental information package and the conference call to be held in connection therewith, which are not historical facts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include competition for the acquisition and financing of health care facilities, competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); continuing operational difficulties in the skilled nursing and assisted living sectors; the Company’s ability to acquire, sell or lease facilities and the timing of acquisitions, sales and leasings; changes in healthcare laws and regulations and other changes in the healthcare industry which affect the operations of the Company’s lessees or mortgagors; changes in management; costs of compliance with building regulations; changes in tax laws and regulations; changes in the financial position of the Company’s lessees and mortgagors; changes in rules governing financial reporting, including new accounting pronouncements; and changes in economic conditions, including changes in interest rates and the availability and cost of capital, which affect opportunities for profitable investments. Some of these risks, and other risks, are described from time to time in Health Care Property Investors, Inc.’s Securities and Exchange Commission filings.
28
