Exhibit 99.1
ITEM 6. Selected Financial Data
Set forth below is our selected financial data as of and for each of the years in the five year period ended December 31, 2005.
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| Year Ended December 31, |
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| 2005 |
| 2004 |
| 2003 |
| 2002 |
| 2001 |
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| (Dollars in thousands, except per share data) |
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Income statement data: |
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Total revenue |
| $ | 458,548 |
| $ | 401,152 |
| $ | 350,676 |
| $ | 302,765 |
| $ | 273,440 |
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Income from continuing operations |
| 143,822 |
| 139,509 |
| 125,853 |
| 110,846 |
| 88,809 |
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Net income applicable to common shares |
| 151,927 |
| 147,910 |
| 121,849 |
| 112,480 |
| 96,266 |
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Income from continuing operations applicable to common shares: |
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Basic earnings per common share |
| 0.91 |
| 0.90 |
| 0.71 |
| 0.75 |
| 0.59 |
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Diluted earnings per common share |
| 0.91 |
| 0.89 |
| 0.71 |
| 0.73 |
| 0.59 |
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Net income applicable to common shares: |
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Basic earnings per common share |
| 1.13 |
| 1.12 |
| 0.98 |
| 0.98 |
| 0.89 |
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Diluted earnings per common share |
| 1.12 |
| 1.11 |
| 0.97 |
| 0.96 |
| 0.89 |
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Balance sheet data: |
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Total assets |
| 3,597,265 |
| 3,104,526 |
| 3,035,957 |
| 2,748,417 |
| 2,431,153 |
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Debt obligations(1) |
| 1,956,946 |
| 1,487,291 |
| 1,407,284 |
| 1,333,848 |
| 1,057,752 |
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Stockholders’ equity |
| 1,399,766 |
| 1,419,442 |
| 1,440,617 |
| 1,280,889 |
| 1,246,724 |
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Other data: |
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Dividends paid |
| 248,389 |
| 243,250 |
| 223,231 |
| 213,349 |
| 190,123 |
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Dividends paid per common share |
| 1.68 |
| 1.67 |
| 1.66 |
| 1.63 |
| 1.55 |
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(1) Includes bank line of credit, senior unsecured notes and mortgage debt.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Language Regarding Forward-Looking Statements
Statements in this report that are not historical factual statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements include, among other things, statements regarding the intent, belief or expectations of Health Care Property Investors, Inc. and its officers and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “should” and other comparable terms or the negative thereof. In addition, we, through our senior management, from time to time make forward-looking oral and written public statements concerning our expected future operations and other developments. Readers are cautioned that, while forward-looking statements reflect our good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties. Actual results may differ materially from the expectations contained in the forward-looking statements as a result of various factors. In addition to the factors set forth under “Risk Factors” in this report, readers should consider the following:
(a) Legislative, regulatory, or other changes in the healthcare industry at the local, state or federal level which increase the costs of or otherwise affect the operations of, our tenants and borrowers;
(b) Changes in the reimbursement available to our tenants and borrowers by governmental or private payors, including changes in Medicare and Medicaid payment levels and the availability and cost of third party insurance coverage;
(c) Competition for tenants and borrowers, including with respect to new leases and mortgages and the renewal or rollover of existing leases;
(d) Availability of suitable healthcare facilities to acquire at favorable prices and the competition for such acquisition and financing of healthcare facilities;
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(e) The ability of our tenants and borrowers to operate our properties in a manner sufficient to maintain or increase revenues and to generate sufficient income to make rent and loan payments;
(f) The financial weakness of some operators, including potential bankruptcies, which results in uncertainties regarding our ability to continue to realize the full benefit of such operators’ leases;
(g) Changes in national or regional economic conditions, including changes in interest rates and the availability and cost of capital;
(h) The risk that we will not be able to sell or lease facilities that are currently vacant;
(i) The potential costs of SB 1953 compliance with respect to our hospital in Tarzana, California;
(j) The financial, legal and regulatory difficulties of two significant operators, Tenet and HealthSouth; and
(k) The potential impact of existing and future litigation matters.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Executive Summary
We are a real estate investment trust (“REIT”) that invests in healthcare related properties located throughout the United States. We develop, acquire and manage healthcare real estate, and provide mortgage financing to healthcare providers. We invest directly, often structuring sale-leaseback transactions, and through joint ventures. At December 31, 2005, our real estate portfolio, including assets held through joint ventures and mortgage loans, consisted of interests in 522 facilities located in 42 states.
Our business strategy is based on three principles: (i) opportunistic investing, (ii) portfolio diversification, and (iii) conservative financing. We actively redeploy capital from investments with lower return potential into assets with higher return potential, and recycle capital from shorter term to longer term investments. We make investments where the expected risk-adjusted return exceeds our cost of capital and strive to leverage our operator and other business relationships.
Our strategy contemplates acquiring and developing properties on favorable terms. We attempt to structure transactions that are tax-advantaged and mitigate risks in our underwriting process. Generally, we prefer larger, more complex private transactions that leverage our management team’s experience and our infrastructure. During 2005, we made gross investments of $647 million. These investments had an average first year yield on cost of just over 7.67%. Our 2005 investments of were allocated among the following healthcare sectors: (i) 62% senior housing facilities; (ii) 32% Medical Office Buildings (“MOBs”); and (iii) 6% hospitals.
We follow a disciplined approach to enhancing the value of our existing portfolio, including the ongoing evaluation of properties for potential disposition that no longer fit our strategy. We sold interests in 20 properties during 2005 for $71 million and had 16 properties with a carrying amount of $98.9 million classified as held for sale at year end.
We primarily generate revenue by leasing healthcare related properties under long-term operating leases. Most of our rents are received under triple-net leases; however, MOB rents are typically structured as gross or modified gross leases. Accordingly, for MOBs we incur certain property operating expenses, such as real estate taxes, repairs and maintenance, property management fees, utilities and insurance. Our growth depends, in part, on our ability to (i) increase rental income by increasing occupancy levels and rental rates, (ii) maximize tenant recoveries given underlying lease structures, and (iii) control operating and other expenses. Our operations are impacted by property specific, market specific, general economic and other conditions.
Access to external capital on favorable terms is critical to the success of our strategy. We attempt to match the long-term duration of our leases with long-term fixed rate financing. At December 31, 2005, 15% of our consolidated debt is at variable interest rates. We intend to maintain an investment grade rating on our fixed income securities and manage various capital ratios and amounts within appropriate parameters. As of December 31, 2005, our senior debt is rated BBB+ by both Standard & Poor’s and Fitch Ratings and Baa2 by Moody’s Investors Service.
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Capital market access impacts our cost of capital and our ability to refinance existing indebtedness as it matures, as well as to fund future acquisitions and development through the issuance of additional securities. Our ability to access capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on our securities, perception of our potential future earnings and cash distributions, and the market price of our capital stock.
2005 Overview
Real Estate Transactions
During 2005, the Company acquired interests in properties and made secured loans aggregating $647 million with an average yield of 7.7%. Our 2005 investments were made in the following healthcare sectors: (i) 62% senior housing facilities; (ii) 32% medical office buildings; and (iii) 6% hospitals. 2005 investments included the following:
· On April 20, 2005, we 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 9.0% with annual escalators based on the Consumer Price Index (“CPI”) that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
· On April 28, 2005, we acquired five medical office buildings for $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.
· On July 1, 2005, we acquired an assisted living facility for $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 8.75% with annual CPI-based escalators that have a floor of 2.75%.
· On July 22, 2005, we acquired twelve independent and assisted living facilities for approximately $252 million, including assumed debt and non-managing member LLC units (“DownREIT units”) valued at $52 million and $19 million, respectively, 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 7.1% with annual CPI-based escalators that have a floor of 3%.
· On August 31, 2005, we acquired five assisted living facilities for $41 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 8.5% with annual CPI-based escalators that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
· On October 19, 2005, we acquired seven medical office buildings for $51 million, including assumed debt and DownREIT units valued at $24 million and $11 million, respectively. The medical office buildings include approximately 351,000 rentable square feet and have an initial yield of 8.2%.
· On December 22, 2005, we acquired two independent and assisted living facilities for $18 million through a sale-leaseback transaction. The facilities have an initial lease term of 15 years, with two ten-year renewal options. The initial annual lease rate is 8.5% with annual CPI-based escalators that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
· On December 23, 2005, we acquired two medical office buildings for $25 million. The medical office buildings include approximately 152,000 rentable square feet and have an initial yield of 7.4%.
· On December 28, 2005, we closed a $40 million loan secured by a hospital in Texas. The note bears interest at 8.75% per annum. Subject to certain performance conditions, we may fund an additional $10 million under the existing loan agreement.
· During 2005, we sold interests in 20 properties for $71 million and recognized gains of $10 million.
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Capital Markets Transactions
· On April 27, 2005, we issued $250 million of 5.625% senior unsecured notes due 2017. The notes were priced at 99.585% of the principal amount with an effective yield of 5.673%. We received proceeds of $247 million, which were used to repay outstanding indebtedness and for general corporate purposes.
· On September 16, 2005, we issued $200 million of 4.875% senior unsecured notes due 2010. The notes were priced at 99.567% of the principal amount with an effective yield of 4.974%. We received net proceeds of $198 million, which were used to repay outstanding indebtedness and for general corporate purposes.
· During the year ended December 31, 2005, we issued approximately 878,000 shares of our common stock under our Dividend Reinvestment and Stock Purchase Plan at an average price per share of $25.80 for proceeds of $23 million.
Other Events
· Quarterly dividends paid during 2005 aggregated to $1.68 per share. On February 6, 2006, we announced that our Board of Directors declared a quarterly common stock cash dividend of $0.425 per share. The common stock dividend will be paid on February 23, 2006, to stockholders of record as of the close of business on February 13, 2006. This dividend equals $1.70 per share on an annualized basis. Our Board of Directors has determined to continue its policy of considering dividend increases on an annual rather than quarterly basis.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Our judgments are based on our experience, interpretation of the facts and circumstances, and on various other estimates and assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain.
Use of Estimates
Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ.
Principles of Consolidation
Our consolidated financial statements include the accounts of HCP, its wholly owned subsidiaries and its controlled, through voting rights or other means, joint ventures. All material intercompany transactions and balances have been eliminated in consolidation.
We have adopted Interpretation No. 46R, Consolidation of Variable Interest Entities, as revised (“FIN 46R”), effective January 1, 2004 for variable interest entities created before February 1, 2003 and effective in fiscal year 2003 for variable interest entities created after January 31, 2003. FIN 46R provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise is the primary beneficiary of the VIE. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional financial support. We consolidate investments in VIEs when it is determined that we are the primary beneficiary of the VIE at either the creation of the variable interest entity or upon the occurrence of a reconsideration event. The adoption of FIN 46R resulted in the consolidation of five joint ventures with aggregate assets of $18.5 million, effective January 1, 2004, that were previously accounted for under the equity
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method. The consolidation of these joint ventures did not have a significant effect on our consolidated financial statements or results of operations.
We adopted Emerging Issues Task Force Issue (“EITF”) 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights (“EITF 04-5”), effective June 2005. The issue concludes as to what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership in accordance with GAAP. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership of limited partnership interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. This EITF also applies to managing members in limited liability companies. The adoption of EITF 04-5 did not have an impact on our consolidated financial position or results of operations.
Investments in entities which we do not consolidate but for which we have the ability to exercise significant influence over operating and financial policies are reported under the equity method. Generally, under the equity method of accounting, our share of the investee’s earnings or loss is included in our operating results.
Revenue Recognition
Rental income from tenants is recognized in accordance with GAAP, including Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). For leases with minimum scheduled rent increases, we recognize income on a straight-line basis over the lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue exceeding amounts contractually due from tenants. Such cumulative excess amounts are included in other assets and were $18.4 million and $11.0 million, net of allowances, at December 31, 2005 and 2004, respectively. In the event we determine that collectibility of straight-line rents is not reasonably assured, we limit future recognition to amounts contractually owed, and, where appropriate, we establish an allowance for estimated losses. Certain leases provide for additional rents based upon a percentage of the facility’s revenue in excess of specified base periods or other thresholds. Such revenue is deferred until the related thresholds are achieved.
We monitor the liquidity and creditworthiness of our tenants and borrowers on an ongoing basis. This evaluation considers industry and economic conditions, property performance, security deposits and guarantees, and other matters. We establish provisions and maintain an allowance for estimated losses resulting from the possible inability of its tenants and borrowers to make payments sufficient to recover recognized assets. For straight-line rent amounts, our assessment is based on income recoverable over the term of the lease. At December 31, 2005 and 2004, we had an allowance of $21.6 million and $15.8 million, respectively, included in other assets, as a result of our determination that collectibility is not reasonably assured for certain straight-line rent amounts.
Real Estate
Real estate, consisting of land, buildings, and improvements, is recorded at cost. We allocate the cost of the acquisition to the acquired tangible and identified intangible assets and liabilities, primarily lease related intangibles, based on their estimated fair values in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations.
We assess fair value based on estimated cash flow projections that utilize appropriate discount and/or capitalization rates, third party appraisals, and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
We record acquired “above and below” market leases at their fair value, using a discount rate which reflects the risks associated with the leases acquired, equal to the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include
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estimates of carrying costs during hypothetical expected lease-up periods, market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider leasing commissions, legal and other related costs.
Real estate assets are periodically reviewed for potential impairment by comparing the carrying amount to the expected undiscounted future cash flows to be generated from the assets. If the sum of the expected future net undiscounted cash flows is less than the carrying amount of the property, we will recognize an impairment loss by adjusting the asset’s carrying amount to its estimated fair value. Fair value for properties to be held and used is based on the present value of the future cash flows expected to be generated from the asset. Properties held for sale are recorded at the lower of carrying amount or fair value less costs to dispose. Our ability to accurately predict future cash flows impacts the determination of fair value, which may significantly impact our reported results of operations.
Results of Operations
Comparison of the year ended December 31, 2005 to the year ended December 31, 2004
Rental and other revenue. MOB rental revenue increased 35% to $126.9 million for the year ended December 31, 2005. The increase in MOB rental revenue of $33.2 million primarily relates to the additive effect of our acquisitions in 2005 and 2004, which contributed $26.7 million to rental revenues year over year.
Triple-net lease rental revenues increased 14% to $306.6 million for the year ended December 31, 2005. The increase in triple-net lease rental revenue of $37.4 million primarily relates to the additive effect of our acquisitions in 2005 and 2004, as detailed below:
| Triple-net lease rental revenue |
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Property Type |
| 2005 |
| 2004 |
| Change |
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| (in thousands) |
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Senior housing facilities |
| $ | 44,980 |
| $ | 14,183 |
| $ | 30,797 |
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Other healthcare facilities |
| 6,091 |
| 5,566 |
| 525 |
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Total |
| $ | 51,071 |
| $ | 19,749 |
| $ | 31,322 |
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We also recognized $5.7 million of rental income during the fourth quarter of 2004 resulting from a change in estimate related to the collectibility of straight-line rental income from ARC. Additionally, included in triple-net lease rental revenues are facility level operating revenues for five senior housing properties that were previously leased on a net basis. Periodically tenants default on their leases, which cause us to take temporary possession of the operations of the facility. We contract with third party managers to manage these properties until a replacement tenant can be identified or the property can be sold. The operating revenues and expenses for these properties are included in triple-net lease rental revenues and operating expenses, respectively. The increase in reported revenues for these facilities of $3.6 million to $7.7 million for the year ended December 31, 2005, was primarily due to us taking possession of two of these properties in 2005 and increases in overall occupancy of such properties.
Equity income (loss). Equity income decreased to a loss of $1.1 million primarily due to our investment in HCP MOP, for which we recorded equity losses of $1.4 million and equity income of $1.5 million for 2005 and 2004, respectively. During the years ended December 31, 2005 and 2004, HCP MOP revised its purchase price allocation and attributed more of the purchase price of the properties acquired from MedCap Properties, LLC to below-market lease intangibles and other intangibles from real estate assets. Lease intangibles generally amortize over a shorter period of time relative to tangible real estate assets. The decrease in the equity income from our investment in HCP MOP was primarily due to the revisions to the purchase price allocations referred to above. Additionally, HCP MOP incurred repairs and other related expenses for damages caused by hurricanes Katrina and Rita of $1.4 million during the year ended December 31, 2005. See Note 7 to the Consolidated Financial Statements for additional information on HCP MOP.
Interest and other income. Interest and other income decreased 27% to $26.2 million for the year ended December 31, 2005. The change reflects a reduced level of loans receivable following an $83 million repayment from ARC and a $17 million repayment from Emeritus during the third quarter of 2004. The decrease in interest and other income was partially offset by gains from the sale of various investments of $4.5 million in 2005. The gains from these investments were primarily
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the result of the sale of securities in 2005, which were acquired in conjunction with real estate and or leasing transactions we completed in previous years. During the year ended December 31, 2005 and 2004, we also recognized management and other fees from HCP MOP of $3.1 million in each period.
Interest expense. Interest expense increased 22% to $107.2 million for the year ended December 31, 2005. The increase was due to the issuance of $450 million of senior notes payable in April and September of 2005, and the assumption of $113.5 million of mortgage notes payable in connection with the acquisitions of real estate properties, which resulted in increased borrowing levels, and an overall increase in short-term variable rates. The table below sets forth information with respect to our debt as of December 31, 2005 and 2004:
| As of December 31, |
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| 2005 |
| 2004 |
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| (dollars in thousands) |
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Balance: |
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Fixed rate |
| $ | 1,663,166 |
| $ | 1,153,012 |
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Variable rate |
| 295,265 |
| 337,010 |
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Total |
| $ | 1,958,431 |
| $ | 1,490,022 |
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Percent of total debt: |
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Fixed rate |
| 85 | % | 77 | % | ||
Variable rate |
| 15 | % | 23 | % | ||
Total |
| 100 | % | 100 | % | ||
Weighted average interest rate at end of period: |
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Fixed rate |
| 6.33 | % | 6.76 | % | ||
Variable rate |
| 4.95 | % | 3.09 | % | ||
Total weighted average rates |
| 6.14 | % | 5.93 | % |
Depreciation and amortization. Real estate depreciation and amortization increased 27% to $103.6 million for the year ended December 31, 2005. The increase in depreciation and amortization of $22.1 million primarily relates to the additive effect of our acquisitions in 2005 and 2004, as detailed below:
| Depreciation and amortization |
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Property Type |
| 2005 |
| 2004 |
| Change |
| |||
|
| (in thousands) |
| |||||||
Senior housing facilities |
| $ | 15,697 |
| $ | 5,258 |
| $ | 10,439 |
|
Medical office buildings |
| 10,981 |
| 651 |
| 10,330 |
| |||
Other healthcare facilities |
| 810 |
| 766 |
| 44 |
| |||
Total |
| $ | 27,488 |
| $ | 6,675 |
| $ | 20,813 |
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Operating expenses. Operating costs increased 39% to $59.0 million for the year ended December 31, 2005. Operating costs are predominantly related to MOB properties that are leased under gross or modified gross lease agreements where we share certain costs with tenants. Additionally, we contract with third party property managers for most of our MOB properties. Accordingly, the number of properties in our MOB portfolio directly impacts operating costs. The increase in operating expenses of $16.5 million primarily relates to the effect of our acquisitions in 2005 and 2004, as detailed below:
| Operating expenses |
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Property Type |
| 2005 |
| 2004 |
| Change |
| |||
|
| (in thousands) |
| |||||||
Medical office buildings |
| $ | 11,796 |
| $ | 662 |
| $ | 11,134 |
|
Other healthcare facilities |
| 2,187 |
| 2,064 |
| 123 |
| |||
Total |
| $ | 13,983 |
| $ | 2,726 |
| $ | 11,257 |
|
Additionally, included in operating expenses are facility level operating expenses for five senior housing properties that were previously leased on a net basis. Periodically tenants default on their leases which cause us to take temporary possession of the operations of the facility. We contract with third party managers to manage these properties until a replacement tenant can be identified or the property can be sold. The revenues and expenses for these properties are included in triple-net lease
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rental revenues and operating expenses, respectively. The increase in reported operating expenses for these facilities of $3.6 million to $8.7 million for the year ended December 31, 2005, was primarily due to us taking possession of two of these properties in 2005 and an increase in the overall occupancy of such properties.
The presentation of expenses between general and administrative and operating expenses is based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expense.
General and administrative expenses. General and administrative expenses decreased 13% to $32.1 million for the year ended December 31, 2005. The decrease was due to higher costs in 2004 primarily resulting from $1.5 million of income tax expense on income from certain assets held in a taxable REIT subsidiary, the implementation of a new information system, considerable resources that were expended towards initial compliance with certain regulatory requirements, principally Section 404 of the Sarbanes-Oxley Act of 2002, $0.7 million in expenses associated with the relocation of our corporate offices to Long Beach, California in 2004 and a charge of $1.6 million related to the settlement of a lawsuit filed against us by our former Executive Vice President and Chief Financial Officer. Offsetting the decrease from 2004 was an increase in compensation related expenses due to an increase in full-time employees from 74 at December 31, 2004, to 83 at December 31, 2005.
Discontinued operations. Income from discontinued operations for the year ended December 31, 2005 was $29.2 million compared to $29.5 million for the comparable period in the prior year. The change is due to a decline in the carrying value of assets disposed from $151 million in 2004 to $54 million in 2005, and resulted in a decrease in the year over year gains on sale of real estate of $10.9 million, and a decline of operating income of $5.1 million associated with discontinued operations. The changes in net gain on sale and operating income were predominantly offset by a year over year reduction of impairment charges of $15.8 million.
Comparison of the year ended December 31, 2004 to the year ended December 31, 2003
Rental and other revenue. MOB rental revenue increased 22% to $93.7 million for the year ended December 31, 2004. The increase in MOB rental revenue of $17.2 million primarily relates to the additive effect of our acquisitions in 2004 and 2003, which contributed $14.7 million to rental revenues year over year.
Triple-net lease rental revenues increased 20% to $269.2 million for the year ended December 31, 2004. The increase in triple-net lease rental revenue of $45.8 million primarily relates to the additive effect of our acquisitions in 2004 and 2003, as detailed below:
| Triple-net lease rental revenue |
| ||||||||
Property Type |
| 2004 |
| 2003 |
| Change |
| |||
|
| (in thousands) |
| |||||||
Senior housing facilities |
| $ | 34,672 |
| $ | 6,016 |
| $ | 28,656 |
|
Other healthcare facilities |
| 5,931 |
| 252 |
| 5,679 |
| |||
Total |
| $ | 40,603 |
| $ | 6,268 |
| $ | 34,335 |
|
We also recognized $5.7 million of rental income during the fourth quarter of 2004 resulting from a change in estimate related to the collectibility of straight-line rental income from ARC. The consolidation of five joint ventures upon the adoption of FIN 46R, effective January 2004, increased reported triple-net lease rental income by approximately $2.8 million.
Equity income (loss). Equity income decreased 25% to $2.2 million primarily due to our acquisition of four retirement living facilities in September 2003 which were accounted for under the equity method. This was offset by higher HCP MOP interest expense following HCP MOP obtaining $288 million of non-recourse mortgage debt in early 2004. During 2004 and 2003, we recognized $1.5 million and $1.7 million of equity income from HCP MOP, respectively. At December 31, 2004, 100 properties were held by unconsolidated joint ventures, including HCP MOP, compared to 115 properties at December 31, 2003.
Interest and other income. Interest and other income decreased 25% to $36.1 million for the year ended December 31, 2004. The change reflects the net effects of (i) $4.6 million of revenue from the recognition of ARC interest income upon the repayment by ARC during 2004 of $83 million of debt and accrued interest thereon, and (ii) a reduced level of loans
8
receivable following the aforementioned repayment from ARC and a $17 million repayment from Emeritus. During 2004 and 2003, we also recognized management and other fees from HCP MOP of $3.1 million and $2.5 million, respectively. Other income in 2003 includes a $3.4 million tax related accrual reversal related to our 1999 acquisition of American Health Properties.
Interest expense. Interest expense decreased 1% to $87.6 million for the year ended December 31, 2004. The change was due to a decrease in overall interest rates, offset by minor increases in borrowing levels. The table below sets forth information with respect to our debt as of December 31, 2004 and 2003:
| As of December 31, |
| |||||
|
| 2004 |
| 2003 |
| ||
|
| (dollars in thousands) |
| ||||
Balance: |
|
|
|
|
| ||
Fixed rate |
| $ | 1,153,012 |
| $ | 1,209,154 |
|
Variable rate |
| 337,010 |
| 202,075 |
| ||
Total |
| $ | 1,490,022 |
| $ | 1,411,229 |
|
Percent of total debt: |
|
|
|
|
| ||
Fixed rate |
| 77 | % | 86 | % | ||
Variable rate |
| 23 | % | 14 | % | ||
Total |
| 100 | % | 100 | % | ||
Weighted average interest rate at end of period: |
|
|
|
|
| ||
Fixed rate |
| 6.76 | % | 7.07 | % | ||
Variable rate |
| 3.09 | % | 2.07 | % | ||
Total weighted average rates |
| 5.93 | % | 6.35 | % |
Depreciation and amortization. Real estate depreciation and amortization increased 20% to $81.4 million for the year ended December 31, 2004. The increase in depreciation and amortization of $13.5 million primarily relates to our acquisitions in 2004 and 2003, as detailed below:
| Depreciation and amortization |
| ||||||||
Property Type |
| 2004 |
| 2003 |
| Change |
| |||
|
| (in thousands) |
| |||||||
Senior housing facilities |
| $ | 11,055 |
| $ | 1,892 |
| $ | 9,163 |
|
Medical office buildings |
| 4,221 |
| 913 |
| 3,308 |
| |||
Other healthcare facilities |
| 894 |
| 96 |
| 798 |
| |||
Total |
| $ | 16,170 |
| $ | 2,901 |
| $ | 13,269 |
|
Operating expenses. Operating costs increased 24% to $42.5 million for the year ended December 31, 2004. Operating costs are predominantly related to MOB properties that are leased under gross or modified gross lease agreements where we share certain costs with tenants. Additionally, we contract with third party property managers for most of our MOB properties. Accordingly, the number of properties in our MOB portfolio directly impacts operating costs. The increase in operating expenses of $8.2 million primarily relates to the effect of our acquisitions in 2004 and 2003, as detailed below:
| Operating expenses |
| ||||||||
Property Type |
| 2004 |
| 2003 |
| Change |
| |||
|
| (in thousands) |
| |||||||
Medical office buildings |
| $ | 6,107 |
| $ | 864 |
| $ | 5,243 |
|
Other healthcare facilities |
| 2,064 |
| — |
| 2,064 |
| |||
Total |
| $ | 8,171 |
| $ | 864 |
| $ | 7,307 |
|
The presentation of expenses between general and administrative and operating expenses is based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expense.
9
General and administrative expenses. General and administrative expenses increased 63% to $36.7 million for the year ended December 31, 2004. The increase was due to higher costs in 2004 primarily resulting from income tax expense of $1.5 million on income from certain assets held in a taxable REIT subsidiary and the implementation of a new information system and considerable resources that were expended towards initial compliance with certain regulatory requirements, principally Section 404 of the Sarbanes-Oxley Act of 2002. Also contributing to the increase was $0.7 million in expenses associated with the move of our corporate offices to Long Beach, California and a charge of $1.6 million related to the settlement of a lawsuit filed against us by our former Executive Vice President and Chief Financial Officer.
Discontinued operations. Income from discontinued operations for the year ended December 31, 2004, was $29.5 million compared to $32.7 million for the comparable period in the prior year. The change is primarily due to an increase in impairment charges of $3.9 million year over year. The year over year increase in gains on sale of $8.9 million was predominantly offset by comparable period decrease in operating income of $8.3 million.
Liquidity and Capital Resources
Our principal liquidity needs are to (i) fund normal operating expenses, (ii) meet debt service requirements, (iii) fund capital expenditures including tenant improvements and leasing costs, (iv) fund acquisition and development activities, and (v) make minimum distributions required to maintain our REIT qualification under the Internal Revenue Code, as amended.
We believe these needs will be satisfied using cash flows generated by operations and provided by financing activities. We intend to repay maturing debt with proceeds from future debt and/or equity offerings and anticipate making future investments dependent on the availability of cost-effective sources of capital. We use the public debt and equity markets as our principal source of financing. As of December 31, 2005, our senior debt is rated BBB+ by both Standard & Poor’s Ratings Group and Fitch Ratings and Baa2 by Moody’s Investors Service.
Net cash provided by operating activities was $282.1 million and $272.5 million for 2005 and 2004, respectively. Cash flow from operations reflects increased revenues offset by higher costs and expenses, and changes in receivables, payables, accruals, and deferred revenue. Our cash flows from operations are dependent upon the occupancy level of multi-tenant buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses, and other factors.
Net cash used in investing activities was $414.8 million during 2005 and principally reflects the net effect of: (i) $64.6 million received from the sale of several facilities, (ii) $447.2 million principally used to fund acquisitions and construction of real estate, (iii) $53.3 million used to fund investments in loans receivable and (iv) $19.1 million in principal repayments received on loans. During 2005 and 2004, we used $7.1 million and $3.4 million to fund lease commissions and tenant and capital improvements, respectively.
Net cash provided by financing activities was $137.1 million for 2005 and includes proceeds of $45.2 million from common stock issuances, and $445.5 million from senior note issuances. These proceeds were partially offset by: (i) the repayment of $31.0 million of senior notes, (ii) net repayment of $41.5 million of our line of credit, (iii) payment of common and preferred dividends aggregating $248.4 million, and (iv) repayments on mortgage debt of $17.9 million. In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income to our shareholders. Accordingly, we intend to continue to make regular quarterly distributions to holders of our common and preferred stock.
At December 31, 2005, we held approximately $11.9 million in deposits and $44.2 million in irrevocable letters of credit from commercial banks securing tenants’ lease obligations and borrowers’ loan obligations. We may draw upon the letters of credit or depository accounts if there are defaults under the related leases or loans. Amounts available under letters of credit could change based upon facility operating conditions and other factors and such changes may be material.
Bank Line of Credit, Mortgage Debt and Senior Unsecured Notes
At December 31, 2005, we had the following outstanding debt:
Bank line of credit. Borrowings under our $500 million three-year bank line of credit were $258.6 million with an interest rate of 5.01% at December 31, 2005. Borrowings under the bank line of credit accrue interest at 65 basis points over the London Inter Bank Offering Rate (“LIBOR”) with a 15 basis point facility fee. In addition, a negotiated rate option, whereby the lenders participating in the credit facility bid on the interest to be charged and which may result in a reduced
10
interest rate, is available for up to 50% of borrowings. The credit facility also contains an “accordion” feature allowing borrowings to be increased by $100 million in certain conditions.
The credit agreement contains certain financial restrictions and requirements customary in transactions of this type. The more significant covenants, using terms defined in the agreement, limit the ratios of (i) Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) Secured Debt to Consolidated Total Asset Value to 30% and (iii) Unsecured Debt to Consolidated Unencumbered Asset Value to 60%. We must also maintain (i) a Fixed Charge Coverage ratio, as defined, of 1.75 times and (ii) a formula-determined Minimum Tangible Net Worth. As of December 31, 2005, we were in compliance with each of these restrictions and requirements.
Mortgage debt. At December 31, 2005, we had $236.1 million in mortgage debt secured by 38 healthcare facilities with a carrying amount of $384.5 million. Interest rates on the mortgage notes ranged from 2.75% to 9.32% with a weighted average rate of 7.05% at December 31, 2005.
The instruments encumbering the properties restrict title transfer of the respective properties subject to the terms of the mortgage, prohibit additional liens, require payment of real estate taxes, maintenance of the properties in good condition and maintenance of insurance on the properties and include a requirement to obtain lender consent to enter into material tenant leases.
Senior unsecured notes. At December 31, 2005 we had $1.5 billion in aggregate principal amount of senior unsecured notes outstanding. Interest rates on the notes ranged from 4.875% to 7.875% with a weighted average rate of 6.23% at December 31, 2005.
On April 27, 2005, we issued $250 million of 5.625% senior unsecured notes due in 2017. The notes were priced at 99.585% of the principal amount with an effective yield of 5.673%. We received proceeds of $247 million, which were used to repay outstanding indebtedness and for general corporate purposes.
Senior unsecured notes at December 31, 2004, included $200 million principal amount of Mandatory Par Put Remarketed Securities (“MOPPRS”), due June 8, 2015. The MOPPRS contained an option (the “MOPPRS Option”) exercisable by the Remarketing Dealer, an investment bank affiliate, which derived its value from the yield on ten-year U.S. Treasury rates relative to a fixed strike rate of 5.565%. Generally, the value of the option to the Remarketing Dealer increased as ten-year Treasury rates declined and the option’s value to the Remarketing Dealer decreased as ten-year Treasury rates increased.
On June 3, 2005, the Remarketing Dealer exercised its option to redeem our $200 million principal amount of 6.875% 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%. The reissued notes are at an effective interest rate which is higher than what would otherwise have been available if we had issued new ten-year notes at par value.
On September 16, 2005, we issued $200 million of 4.875% senior unsecured notes due in 2010. The notes were priced at 99.567% of the principal amount with an effective yield of 4.974%. We received net proceeds of $198 million, which were used to repay outstanding indebtedness and for other general corporate purposes.
During the year ended December 31, 2005, we repaid $31 million of maturing senior unsecured notes which accrued interest at a rate of 7.5%. These notes were repaid with funds available under our bank line of credit.
11
Debt Maturities
The following table summarizes our stated debt maturities and scheduled principal repayments at December 31, 2005 (in thousands):
Year |
| Amount |
| |
2006 |
| $ | 140,228 |
|
2007 |
| 409,362 |
| |
2008 |
| 19,922 |
| |
2009 |
| 10,814 |
| |
2010 |
| 271,595 |
| |
Thereafter |
| 1,106,510 |
| |
|
| $ | 1,958,431 |
|
Equity
At December 31, 2005, we had outstanding 4,000,000 shares of 7.25% Series E cumulative redeemable preferred stock, 7,820,000 shares of 7.10% Series F cumulative redeemable preferred stock, and 136 million shares of common stock.
During the year ended December 31, 2005, we issued approximately 878,000 shares of our common stock under our Dividend Reinvestment and Stock Purchase Plan at an average price per share of $25.80 for proceeds of $22.6 million. We also received $22.9 million in proceeds from stock option exercises. At December 31, 2005, stockholders’ equity totaled $1.4 billion and our equity securities had a market value of $3.9 billion.
As of December 31, 2005, there were a total of 3.4 million DownREIT units outstanding in five limited liability companies in which we are the managing member (i) HCPI/Tennessee, LLC; (ii) HCPI/Utah, LLC; (iii) HCPI/Utah II, LLC; (iv) HCPI/Indiana, LLC; and (v) HCP DR California, LLC. The DownREIT units are exchangeable for an amount of cash approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications). The 3.4 million DownREIT units outstanding at December 31, 2005, are convertible into 6.0 million shares of our common stock.
As of December 31, 2005, we had $1.06 billion available for future issuances of debt and equity securities under a shelf registration statement filed with the Securities and Exchange Commission. These securities may be issued from time to time in the future based on our needs and the then-existing market conditions
Off-Balance Sheet Arrangements
We own interests in certain unconsolidated joint ventures, including HCP MOP, as described under Note 7 to the Consolidated Financial Statements. Except in limited circumstances, our risk of loss is limited to our investment carrying amount and any outstanding loans receivable.
We have no other material off balance sheet arrangements that we expect to materially affect our liquidity and capital resources except these described under “Contractual Obligations.”
Contractual Obligations
The following table summarizes our material contractual payment obligations and commitments at December 31, 2005 (in thousands):
|
| One Year |
| 2007-2008 |
| 2009-2010 |
| More than |
| Total |
| |||||
Unsecured senior notes and mortgage debt |
| $ | 140,228 |
| $ | 170,684 |
| $ | 282,409 |
| $ | 1,106,510 |
| $ | 1,699,831 |
|
Revolving line of credit |
| — |
| 258,600 |
| — |
| — |
| 258,600 |
| |||||
Acquisition and construction commitments |
| 32,561 |
| — |
| — |
| — |
| 32,561 |
| |||||
Operating leases |
| 1,353 |
| 2,777 |
| 2,874 |
| 117,760 |
| 124,764 |
| |||||
Interest payments |
| 98,954 |
| 173,439 |
| 163,837 |
| 319,820 |
| 756,050 |
| |||||
Total |
| $ | 273,096 |
| $ | 605,500 |
| $ | 449,120 |
| $ | 1,544,090 |
| $ | 2,871,806 |
|
12
Inflation
Our leases often provide for either fixed increases in base rents or indexed escalators, based on the Consumer Price Index or other measures, and/or additional rent based on increases in the tenant’s revenue from the facility. Substantially all of our MOB leases require the tenant to pay a share of property operating costs such as real estate taxes, insurance, utilities, etc. We believe that inflationary increases in expenses will be offset, in part, by the tenant expense reimbursements and contractual rent increases described above.
New Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 2005, we are exposed to market risks related to fluctuations in interest rates on $57.3 million of variable rate mortgage notes payable, $258.6 million of variable rate bank debt and $25.0 million of variable rate senior unsecured notes. Of the $57.3 million of variable rate mortgage notes payable outstanding, $45.6 million has been hedged through interest rate swap contracts. We do not have any, and do not plan to enter into, derivative financial instruments for trading or speculative purposes. Of our consolidated debt of $2.0 billion at December 31, 2005, excluding the $45.6 million of variable rate debt where the rates have been hedged to fixed rates, approximately 15% is at variable interest rates.
Fluctuation in the interest rate environment will not affect our future earnings and cash flows on our fixed rate debt until that debt must be replaced or refinanced. However, interest rate changes will affect the fair value of our fixed rate instruments and our hedge contracts. Conversely, changes in interest rates on variable rate debt would change our future earnings and cash flows, but not affect the fair value of those instruments. Assuming a one percentage point increase in the interest rate related to the variable-rate debt and related swap contracts, and assuming no change in the outstanding balance as of December 31, 2005, interest expense for 2005 would increase by approximately $3 million, or $0.02 per common share on a diluted basis.
The principal amount and the average interest rates for our mortgage loans receivable and debt categorized by maturity dates is presented in the table below. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing current rates offered to us for debt of the same type and remaining maturity.
|
| Maturity |
| ||||||||||||||||||||||
|
| 2006 |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| Thereafter |
| Total |
| Fair |
| ||||||||
|
| (dollars in thousands) |
| ||||||||||||||||||||||
Loans Receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Secured loans receivable |
| $ | 64,130 |
| $ | 8,290 |
| $ | 724 |
| $ | 5,480 |
| $ | 45,654 |
| $ | 51,148 |
| $ | 175,426 |
| $ | 202,695 |
|
Weighted average interest rate |
| 11.44 | % | 12.25 | % | 10.50 | % | 12.23 | % | 11.16 | % | 8.64 | % | 10.61 | % |
|
| ||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Variable rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Bank notes payable |
| $ | — |
| $ | 258,600 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 258,600 |
| $ | 258,600 |
|
Weighted average interest rate |
| — |
| 5.01 | % | — |
| — |
| — |
| — |
| 5.01 | % |
|
| ||||||||
Senior notes payable |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 25,000 |
| $ | 25,000 |
| $ | 25,000 |
|
Weighted average interest rate |
| — |
| — |
| — |
| — |
| — |
| 5.39 | % | 5.39 | % |
|
| ||||||||
Mortgage notes payable |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 11,665 |
| $ | 11,665 |
| $ | 11,665 |
|
Weighted average interest rate |
| — |
| — |
| — |
| — |
| — |
| 2.75 | % | 2.75 | % |
|
| ||||||||
Fixed rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Senior notes payable |
| $ | 135,000 |
| $ | 140,000 |
| $ | — |
| $ | — |
| $ | 206,421 |
| $ | 962,000 |
| $ | 1,443,421 |
| $ | 1,466,591 |
|
Weighted average interest rate |
| 6.70 | % | 7.49 | % | — |
| — |
| 4.93 | % | 6.24 | % | 6.22 | % |
|
| ||||||||
Mortgage notes payable |
| $ | — |
| $ | 5,434 |
| $ | 15,391 |
| $ | 5,920 |
| $ | 68,645 |
| $ | 124,355 |
| $ | 219,745 |
| $ | 247,303 |
|
Weighted average interest rate |
| — |
| 8.03 | % | 7.18 | % | 7.17 | % | 8.19 | % | 6.76 | % | 7.08 | % |
|
|
13
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Health Care Property Investors, Inc.
We have audited the accompanying consolidated balance sheets of Health Care Property Investors, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Care Property Investors, Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Health Care Property Investors, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of the Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2006 expressed an unqualified opinion thereon.
| /s/ ERNST & YOUNG LLP |
|
Irvine, California |
| |
February 10, 2006, |
| |
except for Note 2 under “Discontinued Operations”, Note 7 Investments in and Advances to Joint Ventures, Note 18 Segment Disclosures, Note 21 Selected Quarterly Financial Data (Unaudited) and Schedule III: Real Estate and Accumulated Depreciation, as to which the date is January 2, 2007 |
|
|
14
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
|
| December 31, |
| ||||
|
| 2005 |
| 2004 |
| ||
ASSETS |
|
|
|
|
| ||
Real estate: |
|
|
|
|
| ||
Buildings and improvements |
| $ | 3,365,869 |
| $ | 2,842,809 |
|
Developments in process |
| 22,286 |
| 25,529 |
| ||
Land |
| 328,609 |
| 274,551 |
| ||
Less accumulated depreciation and amortization |
| 573,767 |
| 483,372 |
| ||
Net real estate |
| 3,142,997 |
| 2,659,517 |
| ||
Loans receivable, net: |
|
|
|
|
| ||
Joint venture partners |
| 7,006 |
| 6,473 |
| ||
Others |
| 179,825 |
| 139,919 |
| ||
Investments in and advances to unconsolidated joint ventures |
| 48,598 |
| 60,506 |
| ||
Accounts receivable, net of allowance of $1,205 and $1,070, respectively |
| 13,313 |
| 14,834 |
| ||
Cash and cash equivalents |
| 21,342 |
| 16,962 |
| ||
Restricted cash |
| 2,270 |
| 4,678 |
| ||
Intangibles, net |
| 38,804 |
| 19,679 |
| ||
Real estate held for sale, net |
| 98,855 |
| 157,664 |
| ||
Other assets, net |
| 44,255 |
| 24,294 |
| ||
Total assets |
| $ | 3,597,265 |
| $ | 3,104,526 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
Bank line of credit |
| $ | 258,600 |
| $ | 300,100 |
|
Senior unsecured notes |
| 1,462,250 |
| 1,046,690 |
| ||
Mortgage debt |
| 236,096 |
| 140,501 |
| ||
Accounts payable and accrued liabilities |
| 68,718 |
| 59,905 |
| ||
Deferred revenue |
| 22,551 |
| 16,107 |
| ||
Total liabilities |
| 2,048,215 |
| 1,563,303 |
| ||
Minority interests: |
|
|
|
|
| ||
Joint venture partners |
| 20,905 |
| 21,515 |
| ||
Non-managing member unitholders |
| 128,379 |
| 100,266 |
| ||
Total minority interests |
| 149,284 |
| 121,781 |
| ||
Stockholders’ equity: |
|
|
|
|
| ||
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25 per share |
| 285,173 |
| 285,173 |
| ||
Common stock, $1.00 par value: 750,000,000 shares authorized; 136,193,764 and 133,658,318 shares issued and outstanding, respectively |
| 136,194 |
| 133,658 |
| ||
Additional paid-in capital |
| 1,454,813 |
| 1,403,335 |
| ||
Cumulative net income |
| 1,521,146 |
| 1,348,089 |
| ||
Cumulative dividends |
| (1,988,248 | ) | (1,739,859 | ) | ||
Other equity |
| (9,312 | ) | (10,954 | ) | ||
Total stockholders’ equity |
| 1,399,766 |
| 1,419,442 |
| ||
Total liabilities and stockholders’ equity |
| $ | 3,597,265 |
| $ | 3,104,526 |
|
See accompanying Notes to Consolidated Financial Statements.
15
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
| Year Ended December 31, |
| |||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Revenues and other income: |
|
|
|
|
|
|
| |||
Rental and other revenues |
| $ | 433,516 |
| $ | 362,934 |
| $ | 299,974 |
|
Equity income (loss) from unconsolidated joint ventures |
| (1,123 | ) | 2,157 |
| 2,889 |
| |||
Interest and other income |
| 26,154 |
| 36,061 |
| 47,813 |
| |||
|
| 458,547 |
| 401,152 |
| 350,676 |
| |||
Costs and expenses: |
|
|
|
|
|
|
| |||
Interest |
| 107,201 |
| 87,561 |
| 88,297 |
| |||
Depreciation and amortization |
| 103,579 |
| 81,440 |
| 67,903 |
| |||
Operating |
| 58,983 |
| 42,484 |
| 34,296 |
| |||
General and administrative |
| 32,012 |
| 36,649 |
| 22,486 |
| |||
Impairments |
| — |
| 1,305 |
| 2,090 |
| |||
|
| 301,775 |
| 249,439 |
| 215,072 |
| |||
Income before minority interests |
| 156,772 |
| 151,713 |
| 135,604 |
| |||
Minority interests |
| (12,950 | ) | (12,204 | ) | (9,751 | ) | |||
Income from continuing operations |
| 143,822 |
| 139,509 |
| 125,853 |
| |||
Discontinued operations: |
|
|
|
|
|
|
| |||
Operating income |
| 19,079 |
| 24,208 |
| 32,498 |
| |||
Gain on sales of real estate, net of impairments |
| 10,156 |
| 5,323 |
| 234 |
| |||
|
| 29,235 |
| 29,531 |
| 32,732 |
| |||
Net income |
| 173,057 |
| 169,040 |
| 158,585 |
| |||
Preferred stock dividends |
| (21,130 | ) | (21,130 | ) | (18,183 | ) | |||
Preferred redemption charges |
| — |
| — |
| (18,553 | ) | |||
Net income applicable to common shares |
| $ | 151,927 |
| $ | 147,910 |
| $ | 121,849 |
|
Basic earnings per common share: |
|
|
|
|
|
|
| |||
Continuing operations |
| $ | 0.91 |
| $ | 0.90 |
| $ | 0.71 |
|
Discontinued operations |
| 0.22 |
| 0.22 |
| 0.27 |
| |||
Net income applicable to common shares |
| $ | 1.13 |
| $ | 1.12 |
| $ | 0.98 |
|
Diluted earnings per common share: |
|
|
|
|
|
|
| |||
Continuing operations |
| $ | 0.91 |
| $ | 0.89 |
| $ | 0.71 |
|
Discontinued operations |
| 0.21 |
| 0.22 |
| 0.26 |
| |||
Net income applicable to common shares |
| $ | 1.12 |
| $ | 1.11 |
| $ | 0.97 |
|
Weighted average shares used to calculate earnings per common share: |
|
|
|
|
|
|
| |||
Basic |
| 134,673 |
| 131,854 |
| 124,942 |
| |||
Diluted |
| 135,560 |
| 133,362 |
| 126,130 |
|
See accompanying Notes to Consolidated Financial Statements.
16
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
| |||||||
|
| Preferred Stock |
| Common Stock |
| Paid-In |
| Cumulative |
| Other |
|
|
| |||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Net Income |
| Dividends |
| Equity |
| Total |
| |||||||
January 1, 2003 |
| 11,722 |
| $ | 274,487 |
| 118,940 |
| $ | 118,940 |
| $ | 1,152,081 |
| $ | 1,020,464 |
| $ | (1,273,378 | ) | $ | (11,705 | ) | $ | 1,280,889 |
|
Issuances of common stock, net |
| — |
| — |
| 9,524 |
| 9,524 |
| 182,498 |
| — |
| — |
| (6,280 | ) | 185,742 |
| |||||||
Exercise of stock options |
| — |
| — |
| 2,576 |
| 2,576 |
| 38,854 |
| — |
| — |
| — |
| 41,430 |
| |||||||
Issuance of preferred stock, net |
| 11,820 |
| 285,173 |
| — |
| — |
| — |
| — |
| — |
| — |
| 285,173 |
| |||||||
Redemption of preferred stock |
| (11,722 | ) | (274,487 | ) | — |
| — |
| (18,553 | ) | — |
| — |
| — |
| (293,040 | ) | |||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| 158,585 |
| — |
| — |
| 158,585 |
| |||||||
Preferred stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (18,183 | ) | — |
| (18,183 | ) | |||||||
Common stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (206,166 | ) | — |
| (206,166 | ) | |||||||
Amortization of deferred compensation |
| — |
| — |
| — |
| — |
| 419 |
| — |
| — |
| 2,722 |
| 3,141 |
| |||||||
Changes in notes receivable from officers |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 2,023 |
| 2,023 |
| |||||||
Changes in other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,023 |
| 1,023 |
| |||||||
December 31, 2003 |
| 11,820 |
| $ | 285,173 |
| 131,040 |
| $ | 131,040 |
| $ | 1,355,299 |
| $ | 1,179,049 |
| $ | (1,497,727 | ) | $ | (12,217 | ) | $ | 1,440,617 |
|
Issuances of common stock, net |
| — |
| — |
| 1,172 |
| 1,172 |
| 26,857 |
| — |
| — |
| (1,751 | ) | 26,278 |
| |||||||
Exercise of stock options |
| — |
| — |
| 1,446 |
| 1,446 |
| 19,682 |
| — |
| — |
| — |
| 21,128 |
| |||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| 169,040 |
| — |
| — |
| 169,040 |
| |||||||
Preferred stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (21,130 | ) | — |
| (21,130 | ) | |||||||
Common stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (221,002 | ) | — |
| (221,002 | ) | |||||||
Amortization of deferred compensation |
| — |
| — |
| — |
| — |
| 1,497 |
| — |
| — |
| 4,665 |
| 6,162 |
| |||||||
Changes in notes receivable from officers |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 236 |
| 236 |
| |||||||
Changes in other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1,887 | ) | (1,887 | ) | |||||||
December 31, 2004 |
| 11,820 |
| $ | 285,173 |
| 133,658 |
| $ | 133,658 |
| $ | 1,403,335 |
| $ | 1,348,089 |
| $ | (1,739,859 | ) | $ | (10,954 | ) | $ | 1,419,442 |
|
Issuances of common stock, net |
| — |
| — |
| 1,100 |
| 1,100 |
| 26,618 |
| — |
| — |
| (2,744 | ) | 24,974 |
| |||||||
Exercise of stock options |
| — |
| — |
| 1,436 |
| 1,436 |
| 21,429 |
| — |
| — |
| — |
| 22,865 |
| |||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| 173,057 |
| — |
| — |
| 173,057 |
| |||||||
Preferred stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (21,130 | ) | — |
| (21,130 | ) | |||||||
Common stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (227,259 | ) | — |
| (227,259 | ) | |||||||
Amortization of deferred compensation |
| — |
| — |
| — |
| — |
| 3,431 |
| — |
| — |
| 3,064 |
| 6,495 |
| |||||||
Changes in other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,322 |
| 1,322 |
| |||||||
December 31, 2005 |
| 11,820 |
| $ | 285,173 |
| 136,194 |
| $ | 136,194 |
| $ | 1,454,813 |
| $ | 1,521,146 |
| $ | (1,988,248 | ) | $ | (9,312 | ) | $ | 1,399,766 |
|
See accompanying Notes to Consolidated Financial Statements.
17
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| Year Ended December 31, |
| |||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
| |||
Net income |
| $ | 173,057 |
| $ | 169,040 |
| $ | 158,585 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
| |||
Depreciation and amortization of real estate and in-place lease intangibles: |
|
|
|
|
|
|
| |||
Continuing operations |
| 103,579 |
| 81,440 |
| 67,903 |
| |||
Discontinued operations |
| 4,387 |
| 7,917 |
| 12,220 |
| |||
Amortization of above and below market lease intangibles |
| (1,912 | ) | — |
| — |
| |||
Stock-based compensation |
| 6,495 |
| 6,162 |
| 3,141 |
| |||
Debt issuance cost amortization |
| 3,181 |
| 3,823 |
| 4,287 |
| |||
Impairments |
| — |
| 17,067 |
| 13,992 |
| |||
Provisions (recovery) for loan losses |
| (56 | ) | 1,648 |
| 748 |
| |||
Straight-line rents |
| (7,257 | ) | (8,946 | ) | 1,315 |
| |||
Equity (income) loss from unconsolidated joint ventures |
| 1,123 |
| (2,157 | ) | (2,889 | ) | |||
Distributions of earnings from unconsolidated joint ventures |
| — |
| 2,157 |
| 1,195 |
| |||
Minority interests |
| 12,950 |
| 12,204 |
| 9,751 |
| |||
Net gain on sales of securities |
| (4,517 | ) | — |
| — |
| |||
Net gain on sales of real estate |
| (10,156 | ) | (21,085 | ) | (12,136 | ) | |||
Changes in: |
|
|
|
|
|
|
| |||
Accounts receivable |
| 1,521 |
| 1,637 |
| 5,911 |
| |||
Other assets |
| (8,524 | ) | 243 |
| (6,948 | ) | |||
Accounts payable, accrued liabilities and deferred revenue |
| 8,219 |
| 1,392 |
| 6,500 |
| |||
Net cash provided by operating activities |
| 282,090 |
| 272,542 |
| 263,575 |
| |||
|
|
|
|
|
|
|
| |||
Cash flows from investing activities: |
|
|
|
|
|
|
| |||
Acquisition and development of real estate |
| (447,152 | ) | (337,445 | ) | (216,275 | ) | |||
Lease commissions and tenant and capital improvements |
| (7,138 | ) | (3,419 | ) | (6,470 | ) | |||
Net proceeds from sales of real estate |
| 64,564 |
| 140,402 |
| 56,110 |
| |||
Distributions from (contribution to) unconsolidated joint ventures and other |
| 6,973 |
| 88,554 |
| (176,991 | ) | |||
Purchase of securities |
| (6,768 | ) | — |
| — |
| |||
Proceeds from the sale of securities |
| 6,482 |
| — |
| — |
| |||
Principal repayments on loans receivable |
| 19,138 |
| 39,570 |
| 77,709 |
| |||
Investment in loans receivable |
| (53,293 | ) | (9,622 | ) | (43,404 | ) | |||
Decrease (increase) in restricted cash |
| 2,408 |
| (2,722 | ) | 2,507 |
| |||
Net cash used in investing activities |
| (414,786 | ) | (84,682 | ) | (306,814 | ) | |||
|
|
|
|
|
|
|
| |||
Cash flows from financing activities: |
|
|
|
|
|
|
| |||
Borrowings (repayments) under bank line of credit |
| (41,500 | ) | 102,100 |
| (69,800 | ) | |||
Repayment of mortgage debt |
| (17,889 | ) | (69,313 | ) | (21,629 | ) | |||
Repayment of senior unsecured notes |
| (31,000 | ) | (92,000 | ) | (36,000 | ) | |||
Issuance of senior unsecured notes |
| 445,471 |
| 87,000 |
| 197,536 |
| |||
Net proceeds from the issuance of preferred stock |
| — |
| — |
| 285,173 |
| |||
Net proceeds from the issuance of common stock and exercise of options |
| 45,238 |
| 42,629 |
| 222,730 |
| |||
Repurchase of preferred stock |
| — |
| — |
| (293,040 | ) | |||
Dividends paid on common and preferred stock |
| (248,389 | ) | (243,250 | ) | (223,231 | ) | |||
Distributions to minority interests |
| (14,855 | ) | (14,953 | ) | (9,965 | ) | |||
Other, net |
| — |
| 60 |
| 730 |
| |||
Net cash provided by (used in) financing activities |
| 137,076 |
| (187,727 | ) | 52,504 |
| |||
Net increase in cash and cash equivalents |
| 4,380 |
| 133 |
| 9,265 |
| |||
Cash and cash equivalents, beginning of year |
| 16,962 |
| 16,829 |
| 7,564 |
| |||
Cash and cash equivalents, end of year |
| $ | 21,342 |
| $ | 16,962 |
| $ | 16,829 |
|
See accompanying Notes to Consolidated Financial Statements.
18
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Business
Health Care Property Investors, Inc. is a real estate investment trust (“REIT”) that, together with its consolidated entities (collectively, “HCP” or the “Company”), invests directly, or through joint ventures and mortgage loans, in healthcare related properties located throughout the United States.
(2) Summary of Significant Accounting Policies
Use of Estimates
Management is required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ.
Principles of Consolidation
The consolidated financial statements include the accounts of HCP, its wholly owned subsidiaries and its controlled, through voting rights or other means, joint ventures. All material intercompany transactions and balances have been eliminated in consolidation.
The Company adopted Interpretation No. 46R, Consolidation of Variable Interest Entities, as revised (“FIN 46R”), effective January 1, 2004 for variable interest entities created before February 1, 2003 and effective January 1, 2003 for variable interest entities created after January 31, 2003. FIN 46R provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise is the primary beneficiary of the VIE. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional financial support. The Company consolidates investments in VIEs when it is determined that the Company is the primary beneficiary of the VIE at either the creation of the variable interest entity or upon the occurrence of a reconsideration event. The adoption of FIN 46R resulted in the consolidation of five joint ventures with aggregate assets of $18.5 million, effective January 1, 2004, that were previously accounted for under the equity method. The consolidation of these joint ventures did not have a significant effect on the Company’s consolidated financial statements or results of operations.
The Company adopted Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights (“EITF 04-5”), effective June 2005. The issue concludes as to what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership in accordance with GAAP. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership of limited partnership interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. This EITF also applies to managing members in limited liability companies. The adoption of EITF 04-5 did not have an impact on the Company’s consolidated financial position or results of operations.
Investments in entities which the Company does not consolidate but for which the Company has the ability to exercise significant influence over operating and financial policies are reported under the equity method. Generally, under the equity method of accounting the Company’s share of the investee’s earnings or loss is included in the Company’s operating results.
19
Revenue Recognition
Rental income from tenants is recognized in accordance with GAAP, including Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue exceeding amounts contractually due from tenants. Such cumulative excess amounts are included in other assets and were $18.4 million and $11.0 million, net of allowances, at December 31, 2005 and 2004, respectively. In the event the Company determines that collectibility of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed, and, where appropriate, the Company establishes an allowance for estimated losses. Certain leases provide for additional rents based upon a percentage of the facility’s revenue in excess of specified base periods or other thresholds. Such revenue is deferred until the related thresholds are achieved.
The Company monitors the liquidity and creditworthiness of its tenants and borrowers on an ongoing basis. The evaluation considers industry and economic conditions, property performance, security deposits and guarantees, and other matters. The Company establishes provisions and maintains an allowance for estimated losses resulting from the possible inability of its tenants and borrowers to make payments sufficient to recover recognized assets. For straight-line rent amounts, the Company’s assessment is based on income recoverable over the term of the lease. At December 31, 2005 and 2004, respectively, the Company had an allowance of $21.6 million and $15.8 million, included in other assets, as a result of the Company’s determination that collectibility is not reasonably assured for certain straight-line rent amounts. Results for the fourth quarter of 2004 include income of $5.7 million resulting from the Company’s change in estimate relating to the collectibility of straight-line rents due from affiliates of American Retirement Corporation.
Loans Receivable
Loans receivable are classified as held-to-maturity because the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the effective interest method.
Real Estate
Real estate, consisting of land, buildings, and improvements, is recorded at cost. The Company allocates acquisition costs to the acquired tangible and identified intangible assets and liabilities, primarily lease intangibles, based on their estimated fair values in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations.
The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and/or capitalization rates, third party appraisals and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
The Company records acquired “above and below” market leases at their fair value using a discount rate which reflects the risks associated with the leases acquired, equal to the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term for any below-market fixed rate renewal options for below-market leases. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related costs.
Real estate assets and related intangibles are periodically reviewed for potential impairment by comparing the carrying amount to the expected undiscounted future cash flows to be generated from the assets. If the sum of the expected future net undiscounted cash flows is less than the carrying amount of the property, the Company will recognize an impairment loss by adjusting the asset’s carrying amount to its estimated fair value. Fair value for properties to be held and used is based on the
20
present value of the future cash flows expected to be generated from the asset. Properties held for sale are recorded at the lower of carrying amount or fair value less costs to dispose.
Developments in process are carried at cost which includes pre-construction costs essential to development of the property, construction costs, capitalized interest, and other costs directly related to the property. Capitalization of interest ceases when the property is ready for service which generally is near the date that a certificate of occupancy is obtained. Expenditures for tenant improvements and leasing commissions are capitalized and amortized over the terms of the respective leases. Repairs and maintenance are expensed as incurred.
The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful lives. Depreciation is discontinued when a property is identified as held for sale. Building and improvements are depreciated over useful lives ranging up to 45 years. Above and below market rent intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods. Other in-place lease intangibles are amortized to expense over the remaining lease term and bargain renewal periods. At December 31, 2005 and 2004, lease intangibles assets were $38.8 million and $19.7 million, respectively. At December 31, 2005 and 2004, lease intangible liabilities were $5.3 million and $0.8 million and are included in deferred revenue.
Income Taxes
The Company has elected and believes it operates so as to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the “Code”). Under the Code, the Company generally is not subject to federal income tax on its taxable income distributed to stockholders if certain distribution, income, asset, and shareholder tests are met. A REIT must distribute at least 90% of its annual taxable income to stockholders. At December 31, 2005 and 2004, the tax basis of the Company’s net assets is less than the reported amounts by $298 million and $288 million, respectively.
Certain activities the Company undertakes must be conducted by entities which elect to be treated as taxable REIT subsidiaries (“TRSs”). TRSs are subject to both federal and state income taxes. For the year ended December 31, 2005 and 2004, income taxes related to the Company’s TRSs approximated a benefit of $0.7 million and an expense of $1.5 million, respectively, and is included in general and administrative expenses. The Company’s income tax expense in 2003 was insignificant.
Discontinued Operations
Certain long lived assets are classified as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as discontinued operations. Discontinued operations are defined in SFAS No. 144 as a component of an entity that has either been disposed of or is deemed to be held for sale if both the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.
The Company periodically sells assets based on market conditions and the exercise of purchase options by tenants. The operating results of properties meeting the criteria established in SFAS No. 144 are reported as discontinued operations in the Company’s consolidated statements of income. Discontinued operations in 2005, based on activity through September 30, 2006, include 46 properties with revenues of $24.0 million. The Company had 78 and 103 properties classified as discontinued operations for the years ended December 31, 2004 and 2003, with revenue of $34.8million and $56.3 million, respectively. During 2005, 2004, and 2003, 18, 32 and 25 properties were sold, respectively, with net gains on real estate dispositions of $10.2 million, $21.1 million and $12.1 million, respectively. At December 31, 2005 and December 31, 2004, the number of assets held for sale was 16 and 28 with carrying amounts of $98.9 million and $157.7 million, respectively, and are included in real estate held for sale, net on our consolidated balance sheets.
Stock-Based Compensation
On January 1, 2002, the Company adopted the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transaction and Disclosure (“SFAS 148”). The fair value provisions of SFAS
21
123 were adopted prospectively with the fair value of all new stock option grants recognized as compensation expense beginning January 1, 2002. Since only new grants are accounted for under the fair value method, stock-based compensation expense is less than that which would have been recognized if the fair value method had been applied to all awards. Compensation expense for awards with graded vesting is generally recognized ratably over the vesting period.
The following table reflects net income and earnings per share, adjusted as if the fair value based method had been applied to all outstanding stock awards in each period (in thousands, except per share amounts):
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Net income, as reported |
| $ | 173,057 |
| $ | 169,040 |
| $ | 158,585 |
|
Add: Stock-based compensation expense included in reported net income |
| 6,495 |
| 6,162 |
| 3,141 |
| |||
Deduct: Stock-based employee compensation expense determined under the fair value based method |
| (6,811 | ) | (6,785 | ) | (4,040 | ) | |||
Pro forma net income |
| $ | 172,741 |
| $ | 168,417 |
| $ | 157,686 |
|
Earnings per share: |
|
|
|
|
|
|
| |||
Basic—as reported |
| $ | 1.13 |
| $ | 1.12 |
| $ | 0.98 |
|
Basic—pro forma |
| $ | 1.13 |
| $ | 1.12 |
| $ | 0.97 |
|
Diluted—as reported |
| $ | 1.12 |
| $ | 1.11 |
| $ | 0.97 |
|
Diluted—pro forma |
| $ | 1.12 |
| $ | 1.10 |
| $ | 0.96 |
|
Cash and Cash Equivalents
Cash and cash equivalents represent short term investments with original maturities of three months or less when purchased.
Restricted Cash
Restricted cash primarily consist of amounts held by mortgage lenders to provide for future real estate tax expenditures and tenant improvements, security deposits, and net proceeds from property sales that were executed as a tax-deferred disposition.
Derivatives
The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 148 (“SFAS No. 133”), as of January 1, 2001. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition of all derivative instruments as assets or liabilities in the Company’s condensed consolidated balance sheets at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge accounting criteria of SFAS No. 133 are recognized in earnings. For derivatives designated as hedging instruments in qualifying cash flow hedges, the effective portion of changes in fair value of the derivatives is recognized in accumulated other comprehensive income (loss) whereas the ineffective portions are recognized in earnings.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to specific assets and liabilities in the balance sheet. The Company also assesses and documents, both at the hedging instrument’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the hedged items. When it is determined that a derivative ceases to be highly effective as a hedge, the Company discontinues hedge accounting prospectively.
Marketable Securities
The Company classifies its existing marketable equity securities as available-for-sale in accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Investment, (“SFAS No. 115”). These securities
22
are carried at fair market value, with unrealized gains and losses reported in stockholders’ equity as a component of accumulated other comprehensive income. Gains or losses on securities sold are based on the specific identification method. During the year ended December 31, 2005, the Company realized gains totaling $4.5 million, related to the sale of various securities. There were no gains or losses realized for the years ended December 31, 2004 and 2003.
All debt securities are classified as held-to-maturity because the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity.
Segment Reporting
The Company reports its consolidated financial statements in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”). The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by leasing activities. The Company’s segments include: medical office buildings (“MOBs”) and triple-net leased.
Stock Split
As of March 2, 2004, each stockholder received one additional share of common stock for each share they own resulting from a 2-for-1 stock split declared by the Company on January 22, 2004. The stock split has been reflected in all periods presented.
Minority Interests and Mandatorily Redeemable Financial Instruments
As of December 31, 2005, there were 3.4 million non-managing member units outstanding in five limited liability companies of which the Company is the managing member: HCPI/Tennessee, LLC; HCPI/Utah, LLC; HCPI/Utah II, LLC; HCPI Indiana, LLC; and HCP DR California, LLC. The Company consolidates these entities since it exercises control. The non-managing member LLC Units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares of the Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications).
SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS No. 150”), requires, among other things, that mandatorily redeemable financial instruments be classified as a liability and recorded at settlement value. Consolidated joint ventures with a limited-life are considered mandatorily redeemable. Implementation of the provisions of SFAS No. 150 that require the valuation and establishment of a liability for limited-life entities was subsequently deferred. As of December 31, 2005, the Company has eleven limited-life entities that have a settlement value of the minority interests of approximately $4.9 million, which is approximately $3.0 million more than the carrying amount.
Preferred Stock Redemptions
The Company recognizes the excess of the redemption value of cumulative redeemable preferred stock redeemed over its carrying amount as a charge to income in accordance with Financial Accounting Standards Board (“FASB”)—EITF Topic D-42, The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock (“EITF Topic D-42”). In July 2003, the SEC staff issued a clarification of the SEC’s position on the application of FASB EITF Topic D-42. The SEC staff’s position, as clarified, is that in applying Topic D-42, the carrying value of preferred shares that are redeemed should be reduced by the amount of original issuance costs, regardless of where in stockholders’ equity those costs are reflected. (See Note 12.)
New Accounting Pronouncements
SFAS No. 123R, Share-Based Payments (“SFAS No. 123R”), which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, was issued in December 2004. Generally, the approach in SFAS No. 123R is similar to that in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS 123R must be adopted no later than January 1, 2006 for the Company. The Company believes the adoption
23
of SFAS 123R will not have a significant impact on its consolidated financial statements since it previously adopted the fair value method prospectively under SFAS No. 123 on January 1, 2002.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”), which replaces Accounting Principles Board Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principles. It requires retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a significant impact on the Company’s financial position or results of operations.
Reclassifications
Certain reclassifications have been made for comparative financial statement presentation.
(3) Future Minimum Rents
Future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under non-cancelable operating leases as of December 31, 2005, are as follows (in thousands):
Year |
| Amount |
| |
2006 |
| $ | 421,573 |
|
2007 |
| 396,295 |
| |
2008 |
| 365,051 |
| |
2009 |
| 294,307 |
| |
2010 |
| 262,786 |
| |
Thereafter |
| 1,283,771 |
| |
|
| $ | 3,023,783 |
|
(4) Acquisitions and Dispositions
A summary of 2005 acquisitions is as follows (in thousands):
| Consideration |
| Assets Acquired |
| ||||||||||||
Acquisition(1) |
| Cash |
| Assumed |
| DownREIT |
| Real |
| Net |
| |||||
Senior housing facilities |
| $ | 313,744 |
| $ | 52,060 |
| $ | 19,431 |
| $ | 379,745 |
| $ | 5,490 |
|
Medical office buildings |
| 96,863 |
| 61,424 |
| 10,967 |
| 154,182 |
| 15,072 |
| |||||
|
| $ | 410,607 |
| $ | 113,484 |
| $ | 30,398 |
| $ | 533,927 |
| $ | 20,562 |
|
A summary of 2004 acquisitions is as follows (in thousands):
| Consideration |
| Assets Acquired |
| ||||||||||||
Acquisition(1) |
| Cash |
| Assumed |
| Loans |
| Real |
| Net |
| |||||
Senior housing facilities |
| $ | 58,574 |
| $ | 81,386 |
| $ | 93,268 |
| $ | 233,228 |
| $ | — |
|
Medical office buildings |
| 131,213 |
| — |
| — |
| 113,621 |
| 17,592 |
| |||||
Assisted living facilities |
| 77,988 |
| — |
| 1,500 |
| 79,043 |
| 445 |
| |||||
Other healthcare facilities |
| 41,223 |
| — |
| — |
| 41,223 |
| — |
| |||||
|
| $ | 308,998 |
| $ | 81,386 |
| $ | 94,768 |
| $ | 467,115 |
| $ | 18,037 |
|
(1) Includes transaction costs, if any.
(2) Non-managing member LLC units.
During the year ended December 31, 2005, the Company acquired properties aggregating $554 million, including the following significant acquisitions:
24
On December 23, 2005, the Company acquired two medical office buildings for $25 million. The medical office buildings include 152,000 rentable square feet and have an initial yield of 7.4%. As of December 31, 2005, the purchase price allocation is preliminary and is pending information necessary to complete the valuation of certain intangibles.
On December 22, 2005, the Company acquired two independent and assisted living facilities for $18 million through a sale-leaseback transaction. The facilities have an initial lease term of 15 years, with two ten-year renewal options. The initial annual lease rate is 8.5% with annual escalators based on the Consumer Price Index (“CPI”) that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
On October 19, 2005, the Company acquired seven medical office buildings for $51 million, including assumed debt and DownREIT units valued at $24 million and $11 million, respectively. The medical office buildings include approximately 351,000 rentable square feet and have an initial yield of 8.2%.
On August 31, 2005, the Company acquired five assisted living facilities for $41 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 8.5% with annual CPI-based escalators that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
On July 22, 2005, the Company acquired twelve independent and assisted living facilities for approximately $252 million, including assumed debt and DownREIT units valued at $52 million and $19 million, respectively, 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 7.1% with annual CPI-based escalators that have a floor of 3%.
On July 1, 2005, the Company acquired an assisted living facility for $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 8.75% with annual CPI-based escalators that have a floor of 2.75%.
On April 28, 2005, the Company acquired five medical office buildings for $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.
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 9.0% with annual CPI-based escalators that have a floor of 2.75%. These properties are included in a master lease that has 21 properties leased to the operator.
During the year ended December 31, 2005, the Company sold 18 properties for $65 million and recognized net gains of $10 million.
See Note 20 for a discussion of acquisitions subsequent to December 31, 2005.
(5) Intangibles
At December 31, 2005 and 2004, intangible lease assets, comprised of lease-up and below market ground lease intangibles, were $38.8 million and $19.7 million, respectively, and are included in intangibles, net in the consolidated balance sheets. The weighted average amortization period of intangibles assets is approximately 12 years.
At December 31, 2005 and 2004, below market lease intangibles, net were $5.3 million and $0.8 million, respectively, and are included in deferred revenue in the consolidated balance sheets. Rental income and operating expense for the year ended December 31, 2005, includes $2.0 million of income and $0.1 million of expense, respectively, of above and below market lease intangibles amortization. There was no amortization of below market lease intangibles in 2004 and 2003. The weighted average amortization period of below market lease intangibles is approximately six years.
25
Estimated aggregate amortization of intangible assets and liabilities for each of the five succeeding fiscal years and thereafter is as follows (in thousands):
| Intangible |
| Intangible |
| Net Intangible |
| ||||
2006 |
| $ | 9,044 |
| $ | (1,350 | ) | $ | 7,694 |
|
2007 |
| 8,613 |
| (1,241 | ) | 7,372 |
| |||
2008 |
| 6,532 |
| (1,059 | ) | 5,473 |
| |||
2009 |
| 2,914 |
| (750 | ) | 2,164 |
| |||
2010 |
| 1,820 |
| (374 | ) | 1,446 |
| |||
Thereafter |
| 9,881 |
| (508 | ) | 9,373 |
| |||
|
| $ | 38,804 |
| $ | (5,282 | ) | $ | 33,522 |
|
(6) Operator Concentration
Tenet Healthcare Corporation (NYSE: THC) and American Retirement Corporation (NYSE: ARC) accounted for 11% and 9%, respectively, of the Company’s revenue in 2005 and accounted for 13% and 12%, respectively, of the Company’s revenue in 2004. The carrying amount of the Company’s real estate assets leased to Tenet and ARC was $343.1 million and $370.7 million, respectively, at December 31, 2005.
These companies are publicly traded and are subject to the informational filing requirements of the Securities and Exchange Act of 1934, as amended. Accordingly, each is required to file periodic reports on Form 10-K and Form 10-Q with the Securities and Exchange Commission.
Certain operators of the Company’s properties are experiencing financial, legal and regulatory difficulties. The loss of a significant operator or a combination of smaller operators could have a material impact on the Company’s financial position or results of operations.
(7) Investments in and Advances to Joint Ventures
HCP Medical Office Portfolio, LLC
HCP Medical Office Portfolio, LLC (“HCP MOP”) is a joint venture formed in June 2003 between the Company and an affiliate of General Electric Company (“GE”). HCP MOP is engaged in the acquisition, development and operation of MOB properties. The Company has a 33% ownership interest therein and is the managing member. Activities of the joint venture requiring equity capital are generally funded on a transactional basis by the members in proportion to their ownership interest. Cash distributions are made to the members in proportion to their ownership interest until GE’s cumulative return, as defined, exceeds specified thresholds. Thereafter, the Company will be entitled to an additional promoted interest.
The Company uses the equity method of accounting for its investment in HCP MOP because it exercises significant influence through voting rights and its position as managing member. However, the Company does not consolidate HCP MOP since it does not control, through voting rights or other means, the joint venture as GE has substantive participating decision making rights and has the majority of the economic interest. The accounting policies of the HCP MOP are the same as those described in the summary of significant accounting policies (see Note 2).
Summarized unaudited condensed consolidated financial information of HCP MOP follows:
26
| December 31, |
| |||||
|
| 2005 |
| 2004 |
| ||
|
| (In thousands) |
| ||||
Real estate, at cost |
| $ | 390,840 |
| $ | 367,066 |
|
Less accumulated depreciation and amortization |
| 21,342 |
| 11,068 |
| ||
Net real estate |
| 369,498 |
| 355,998 |
| ||
Real estate held for sale, net |
| 78,811 |
| 85,793 |
| ||
Other assets, net |
| 36,790 |
| 52,405 |
| ||
Total assets |
| $ | 485,099 |
| $ | 494,196 |
|
Mortgage loans and notes payable |
| $ | 270,466 |
| $ | 262,178 |
|
Mortgage loans on assets held for sale |
| 58,232 |
| 60,381 |
| ||
Other liabilities |
| 21,439 |
| 22,220 |
| ||
GE’s capital |
| 90,424 |
| 100,109 |
| ||
HCP’s capital |
| 44,538 |
| 49,308 |
| ||
Total liabilities and members’ capital |
| $ | 485,099 |
| $ | 494,196 |
|
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
|
| (In thousands) |
| |||||||
Revenue and other income |
| $ | 71,107 |
| $ | 66,383 |
| $ | 15,937 |
|
Net income (loss) |
| $ | (3,829 | ) | $ | 4,932 |
| $ | 3,853 |
|
HCP’s equity income (loss) |
| $ | (1,379 | ) | $ | 1,537 |
| $ | 1,694 |
|
Fees earned by HCP |
| $ | 3,102 |
| $ | 3,112 |
| $ | 2,491 |
|
Distributions received |
| $ | 5,302 |
| $ | 98,291 |
| $ | — |
|
HCP MOP acquired 100 properties from MedCap in October 2003 for cash of $464 million and the assumption of $26 million of mortgage debt that accrues interest at 7%. In connection therewith, the Company contributed $143 million to HCP MOP. In January 2004, HCP MOP completed $288 million of non-recourse mortgage financings, including $254 million at a weighted average fixed interest rate of 5.57% with the balance based on LIBOR plus 1.75%. The Company received $92 million of distributions from HCP MOP in connection with this financing during early 2004.
The Company has not guaranteed any indebtedness or other obligations of HCP MOP. Generally, the Company may only be required to provide additional funding to HCP MOP under limited circumstances as specified in the related agreements. At December 31, 2005 and 2004, investments and advances to unconsolidated joint ventures includes outstanding advances to HCP MOP of $3.7 million and $6.4 million, respectively.
During the year ended December 31, 2005, HCP MOP revised its purchase price allocation related to its 2003 acquisition of certain properties acquired from MedCap Properties, LLC. The revisions made by HCP MOP to the purchase price allocation attributed more value to below-market lease intangibles and other intangibles from real estate assets. Lease intangibles generally amortize over a shorter period of time relative to tangible real estate assets. The impact to net income for HCP MOP, for the year ended December 31, 2005, resulting from the purchase price allocation revisions was a charge of $1.4 million.
In late August and early September 2005, ten medical office buildings owned by HCP MOP, principally in Louisiana and the surrounding area, sustained varying degrees of damage due to hurricanes Katrina and Rita. Due to the nature and extent of the overall damage to the area, the Company has not been able to finalize damage assessments. Preliminary estimates indicate that four of the buildings have incurred substantial damage, and may be a total loss. For the years ended December 31, 2005 and 2004, the four buildings generated revenues of $0.9 million and $1.4 million, respectively. As of December 31, 2005, the $3.8 million carrying value of these four buildings was written off and an equal amount was recorded as a receivable for the expected insurance proceeds up to the carrying value of each building.
At December 31, 2005, the remaining six buildings had resumed operations with repairs underway. Revenues for the six facilities undergoing repair were $5.8 million and $5.9 million for the years ended December 31, 2005, and 2004, respectively.
Repair costs and other related expenses for damages caused by hurricanes Katrina and Rita during the year ended December 31, 2005, were approximately $1.4 million. The Company has property, business interruption and other related
27
insurance coverage to mitigate the financial impact of these types of events; such coverage is subject to various limits and deductible provisions based on the terms of the policies. Any excess insurance recovery above the carrying value of the assets is expected to be recognized by HCP MOP as a gain at the time the claims settle with the insurance carrier.
In January and February 2006, HCP MOP sold 21 MOBs with 787,000 of rentable square feet for $50 million, net of estimated transaction costs, and recognized aggregate gains of $8 million. In connection with the sale, approximately $39 million of HCP MOP’s mortgage debt was either repaid or assumed by the purchaser.
Other Unconsolidated Joint Ventures
The Company owns minority interests in the following entities which are accounted for on the equity method at December 31, 2005 (dollars in thousands):
Entity |
| Investment(1) |
| Ownership(2) |
| |
Arborwood Living Center, LLC |
| $ | 756 |
| 45 | % |
Edgewood Assisted Living Center, LLC |
| (378 | ) | 45 | % | |
Greenleaf Living Centers, LLC |
| 510 |
| 45 | % | |
Seminole Shores Living Center, LLC |
| (628 | ) | 50 | % | |
|
| $ | 260 |
|
|
|
(1) Represents the Company’s investment in the identified unconsolidated joint venture. See Note 2 regarding the Company’s policy for accounting for joint venture interests.
(2) The Company’s ownership interest and economic interests are substantially the same.
On June 30, 2005, the Company sold its minority interests in two joint ventures with American Retirement Corporation (“ARC”) for $6.2 million in exchange for a note collateralized by certain partnership interests of ARC. The note bears interest at 9% per annum and matures June 2010. The gain on sale of $2.4 million was deferred and will be recognized under the installment method of accounting as the principal balance of the note is repaid. These joint ventures were accounted for by the Company under the equity method prior to June 30, 2005.
Summarized unaudited condensed combined financial information for the other unconsolidated joint ventures follows:
| December 31, |
| |||||
|
| 2005 |
| 2004(1) |
| ||
|
| (In thousands) |
| ||||
Real estate, net |
| $ | 14,708 |
| $ | 117,557 |
|
Other assets, net |
| 1,407 |
| 1,376 |
| ||
Total assets |
| $ | 16,115 |
| $ | 118,933 |
|
Notes payable |
| $ | 15,449 |
| $ | 15,361 |
|
Mortgage notes payable |
| — |
| 15,862 |
| ||
Accounts payable |
| 55 |
| 767 |
| ||
Entrance fee liabilities and deferred life estate obligations |
| — |
| 75,746 |
| ||
Other partners’ capital |
| 351 |
| 6,855 |
| ||
HCP’s capital |
| 260 |
| 4,342 |
| ||
Total liabilities and partners’ capital |
| $ | 16,115 |
| $ | 118,933 |
|
(1) Includes financial information related to two joint ventures with ARC that were sold on June 30, 2005.
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
|
| (In thousands) |
| |||||||
Revenue and other income |
| $ | 4,420 |
| $ | 13,244 |
| $ | 12,894 |
|
Net income |
| $ | 442 |
| $ | 3,432 |
| $ | 1,992 |
|
HCP’s equity income |
| $ | 256 |
| $ | 620 |
| $ | 1,195 |
|
Distributions received |
| $ | — |
| $ | 694 |
| $ | 1,445 |
|
28
As of December 31, 2005, the Company has guaranteed approximately $7.2 million of a total of $15.4 million of notes payable for four of these joint ventures.
(8) Loans Receivable
| December 31, |
| |||||||||||||||||
|
| 2005 |
| 2004 |
| ||||||||||||||
|
| Secured |
| Unsecured |
| Total |
| Secured |
| Unsecured |
| Total |
| ||||||
|
| (In thousands ) |
| ||||||||||||||||
Joint venture partners |
| $ | — |
| $ | 7,006 |
| $ | 7,006 |
| $ | 5,694 |
| $ | 779 |
| $ | 6,473 |
|
Other |
| 175,426 |
| 6,663 |
| 182,089 |
| 135,006 |
| 7,340 |
| 142,346 |
| ||||||
Loan loss allowance |
| — |
| (2,264 | ) | (2,264 | ) | — |
| (2,427 | ) | (2,427 | ) | ||||||
|
| $ | 175,426 |
| $ | 11,405 |
| $ | 186,831 |
| $ | 140,700 |
| $ | 5,692 |
| $ | 146,392 |
|
During 2004, ARC repaid its secured loans and interest thereon, and the Company recognized $4.6 million of additional interest income. The interest income recognized resulted from the reversal of a previously established allowance of $4.6 million that was based on, among other things, the Company’s analysis of the loan to asset value underlying the investment.
In the fourth quarter of 2004, the Company recorded a charge of $1.6 million to increase its loan loss allowance as a result of a borrower who defaulted upon maturity of two notes and a credit assessment of another borrower.
On December 28, 2005, the Company closed a $40 million loan secured by a hospital in Texas. The note bears interest at 8.75% per annum. Subject to certain performance conditions, the Company may fund an additional $10 million under the existing loan agreement.
On February 9, 2006, the Company refinanced two existing loans secured by a hospital in Texas. The loans were combined into a new single loan that bears interest at 8.5% per annum and matures 2016. The original maturity of these loans was January 2006 with a weighted average interest rate of 10.35%.
At December 31, 2005, minimum future principal payments to be received on secured loans receivable are $66.5 million in 2006, $8.8 million in 2007, $2.4 million in 2008, $7.2 million in 2009, $39.8 million in 2010, and $50.7 million thereafter.
Following is a summary of secured loans receivable at December 31, 2005:
Final |
| Number of |
| Payment Terms |
| Initial |
| Carrying |
| ||
|
|
|
|
|
| (In thousands) |
| ||||
2006 |
| 3 |
| Monthly payments from $227,000 to $361,000 including interest from 10.19% to 12.20%, these three loans are secured by an acute care hospital located in Texas and one in New Mexico. |
| $ | 61,435 |
| $ | 56,697 |
|
2006 |
| 1 |
| Monthly payments of $62,000 at 13.5% interest, secured by six assisted living facilities in various states. |
| 9,500 |
| 7,433 |
| ||
2007 |
| 1 |
| Monthly interest payments of $88,000 and quarterly principal payments of $238,000, including interest of 12.50%. Secured by leasehold interests in nine properties. |
| 13,500 |
| 8,289 |
| ||
2010 |
| 2 |
| Monthly payments of $183,000 to $348,000, including interest from 10.67% to 11.40%, secured by two assisted living facilities in Colorado, and nine skilled nursing facilities. |
| 53,157 |
| 45,654 |
| ||
2008-2015 |
| 6 |
| Monthly payments from $8,000 to $292,000, including interest from 7.25% to 12.81%, secured by facilities in several states. |
| 63,914 |
| 57,353 |
| ||
|
| 13 |
|
|
| $ | 201,506 |
| $ | 175,426 |
|
29
(9) Debt
Senior Unsecured Notes
Following is a summary of senior unsecured notes outstanding at December 31, 2005 (dollars in thousands):
Year Issued |
| Maturity |
| Principal |
| Interest |
|
1996 |
| 2006 |
| 115,000 |
| 6.500 | % |
1998 |
| 2006 |
| 20,000 |
| 7.875 |
|
1997 |
| 2007 |
| 140,000 |
| 7.30 - 7.62 |
|
1995 |
| 2010 |
| 6,421 |
| 6.62 |
|
2005 |
| 2010 |
| 200,000 |
| 4.875 |
|
2002 |
| 2012 |
| 250,000 |
| 6.45 |
|
2004 |
| 2014 |
| 87,000 |
| 5.39 - 6.00 |
|
2003 |
| 2015 |
| 200,000 |
| 6.00 |
|
1998 |
| 2015 |
| 200,000 |
| 7.072 |
|
2005 |
| 2017 |
| 250,000 |
| 5.625 |
|
|
|
|
| 1,468,421 |
|
|
|
Net discounts |
|
|
| (6,171 | ) |
|
|
|
|
|
| 1,462,250 |
|
|
|
In June 2004, the Company issued $25 million in aggregate principal amount of 6.00% fixed rate senior notes due 2014 and $25 million in aggregate principal amount of variable-rate senior notes due 2014. In July 2004, the Company issued $37 million in aggregate principal amount of 6.00% senior notes due 2014. In February 2003, the Company issued $200 million in aggregate principal amount of 6.00% senior notes due 2015.
On April 27, 2005, the Company issued $250 million of 5.625% senior unsecured notes due 2017. The notes were priced at 99.585% of the principal amount with an effective yield of 5.673%. The Company received proceeds of $247 million, which were used to repay outstanding indebtedness and for general corporate purposes.
Senior unsecured notes at December 31, 2004, included $200 million principal amount of Mandatory Par Put Remarketed Securities (“MOPPRS”), due June 8, 2015. The MOPPRS contained an option (the “MOPPRS Option”) exercisable by the Remarketing Dealer, an investment bank affiliate, which derived its value from the yield on ten-year U.S. Treasury rates relative to a fixed strike rate of 5.565%. Generally, the value of the option to the Remarketing Dealer increased as ten-year Treasury rates declined and the option’s value to the Remarketing Dealer decreased as ten-year Treasury rates increased. On June 3, 2005, the Remarketing Dealer exercised its option to redeem the Company’s $200 million principal amount of 6.875% 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%. The reissued notes are at an effective interest rate which is higher than what would otherwise have been available if the Company had issued new ten-year notes at par value.
On September 16, 2005, the Company issued $200 million of 4.875% senior unsecured notes due 2010. The notes were priced at 99.567% of the principal amount with an effective yield of 4.974%. The Company received net proceeds of $198 million, which were used to repay outstanding indebtedness and for other general corporate purposes.
During the year ended December 31, 2005, the Company repaid $31 million of maturing senior unsecured notes which accrued interest at a rate of 7.5%. These notes were repaid with funds available under the Company’s bank line of credit.
The weighted average interest rate on the senior unsecured notes at December 31, 2005 and 2004, respectively, was 6.23% and 6.55%. Discounts and premiums are amortized to interest expense over the term of the related debt.
The senior unsecured notes contain certain covenants including limitations on debt and other terms customary in transactions of this type.
30
Mortgage Debt
At December 31, 2005, the Company had $236.1 million in mortgage debt secured by 38 healthcare facilities with a carrying amount of $384.5 million. Interest rates on the mortgage notes ranged from 2.75% to 9.32%. At December 31, 2005 and 2004, the weighted-average interest rate on mortgage notes payable was 7.05% and 7.86%, respectively.
The instruments encumbering the properties restrict title transfer of the respective properties subject to the terms of the mortgage, prohibit additional liens, restrict prepayment, require payment of real estate taxes, maintenance of the properties in good condition, maintenance of insurance on the properties and include a requirement to obtain lender consent to enter into material tenant leases.
Bank Line of Credit
In October 2004, the Company closed a $500 million three-year unsecured revolving credit facility. Interest accrues at LIBOR plus 65 basis points, based on the Company’s current credit ratings, with a 15 basis point facility fee. The credit agreement contains certain financial restrictions and requirements customary in transactions of this type. The more significant covenants, using terms defined in the agreements, limit (i) Consolidated Total Indebtedness to Total Asset Value to 60%, (ii) Secured Debt to Total Asset Value to 30%, and (iii) Unsecured Debt to Consolidated Unencumbered Asset Value to 60%. The agreement also requires that the Company maintain (i) a Fixed Charge Coverage Ratio, as defined, of 1.75 times and (ii) a formula-determined Minimum Tangible Net Worth. As of December 31, 2005, the Company was in compliance with each of these restrictions and requirements. The weighted average interest rate on outstanding line of credit borrowings at December 31, 2005 and 2004 was 5.01% and 3.14%, respectively.
Debt Maturities
Debt maturities and scheduled principal payments at December 31, 2005 are as follows (in thousands):
Year |
| Senior |
| Mortgage |
| Bank |
| Total |
| ||||
2006 |
| $ | 135,000 |
| $ | 5,228 |
| $ | — |
| $ | 140,228 |
|
2007 |
| 140,000 |
| 10,762 |
| 258,600 |
| 409,362 |
| ||||
2008 |
| — |
| 19,922 |
| — |
| 19,922 |
| ||||
2009 |
| — |
| 10,814 |
| — |
| 10,814 |
| ||||
2010 |
| 206,421 |
| 65,174 |
| — |
| 271,595 |
| ||||
Thereafter |
| 987,000 |
| 119,510 |
| — |
| 1,106,510 |
| ||||
|
| $ | 1,468,421 |
| $ | 231,410 |
| $ | 258,600 |
| $ | 1,958,431 |
|
(10) Commitments and Contingencies
The Company, from time to time, is party to legal proceedings, lawsuits and other claims in the ordinary course of the Company’s business. These claims, even if not meritorious, could force the Company to spend significant financial resources. Except as described below, the Company is not aware of any legal proceedings or claims that it believes will have, individually or taken together, a material adverse effect on its business, prospects, financial condition or results of operations.
On September 26, 2005, the Company filed a lawsuit in Superior Court of California, County of San Diego entitled Health Care Property Investors, Inc. v. Fenton Partners, Fenton & Grust, LLC and SRG Holdco, LP. The Company held an option to acquire certain limited partnership units in SRG Holdco, LP. The Company settled this lawsuit on November 11, 2005. The settlement included a payment to the Company of $1.7 million. The Company accounted for the transfer of this financial asset as a sale and recognized a gain of approximately $1.3 million based on the proceeds received less the carrying value of the securities. The net gain from the sale of these securities is included in interest and other income.
One of the Company’s properties located in Tarzana, California is affected by State of California Senate Bill 1953 (SB 1953), which requires certain seismic safety building standards for acute care hospital facilities. This hospital is operated by Tenet under a lease expiring in February 2009. The Company and Tenet are currently reviewing the SB 1953 compliance of this hospital, multiple plans of action to cause such compliance, the estimated time for completing the same, and the cost of performing necessary remediation of the property. We cannot currently estimate the remediation costs that will need to be incurred prior to 2013 in order to make the facility SB 1953-compliant through 2030, and the final allocation of any
31
remediation costs between the Company and Tenet. Rent on the hospital in 2005 and 2004 was $10.8 million and $10.6 million, respectively, and the carrying amount was $76.1 million at December 31, 2005.
Certain residents of two of the Company’s senior housing facilities have entered into a master trust agreement with the operator of the facilities whereby amounts paid upfront by such residents were deposited into a trust account. These funds were then made available to the senior housing operator in the form of a non-interest bearing loan to provide permanent financing for the related communities. The operator of the senior housing is the borrower under these arrangements; however, two of the Company’s properties are collateral under the master trust agreements. As of December 31, 2005, the remaining obligation under the master trust agreements for these two properties is $10.8 million. The Company’s property is released as collateral as the master trust liabilities are extinguished.
On July 28, 2005, in connection with the acquisition of SCCI Healthcare Services Corporation (“SCCI”) by Triumph Healthcare Holdings, Inc. (“Buyer”), the Company sold its securities in SCCI, with a carrying value of zero, and received proceeds of $2.9 million. Pursuant to certain indemnities specified in the related Stock Purchase Agreement (“SPA”), the Company could be required to return or pay to the Buyer a portion of the proceeds received from the sale of its shares in certain circumstances. Specifically, the SPA provides that each seller under the SPA, severally but not jointly, indemnifies Buyer for damages relating to certain legal proceedings, which are defined in the SPA. The SPA generally imposes an aggregate cap on the liability of the sellers for indemnities under the SPA in the amount of $17.5 million, which sum was deposited into escrow at the closing of the sale as a holdback. The Company accounted for the transfer of this financial asset as a sale and recognized a gain of approximately $2.8 million based on the proceeds received less the estimated fair value of the indemnities. The gain from the sale of these securities is included in interest and other income in the Company’s results of operations for the year ended December 31, 2005.
Earn-out Obligations. Pursuant to the terms of certain acquisition-related agreements, the Company may be obligated to make additional payments (“Earn-outs”) upon the achievement of certain criteria. If it is probable at the time of acquisition of the related properties that the Earn-out criteria will be achieved, the Earn-out payments are accrued. Otherwise, the additional purchase consideration is recognized when the performance criteria are achieved.
General Uninsured Losses. The Company obtains various types of insurance to mitigate the impact of property, business interruption, liability, flood, earthquake and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. Although the Company has obtained coverage to mitigate the impact of various casualty losses, with policy specifications and insured limits that it believes are commercially reasonable, there can be no assurance that the Company will be able to collect under such policies or that the policies will provide adequate coverage. Should an uninsured loss occur at a property, the Company’s assets may become impaired and the Company may not be able to operate its business at the property for an extended period of time.
Leases with certain tenants contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized lease payments to be received from leases subject to purchase options, in the year that these purchase options are exercisable, are summarized as follows (dollars in thousands):
Year |
| Base Rent |
| Number |
| |
2006 |
| $ | 4,166 |
| 16 |
|
2007 |
| 2,075 |
| 4 |
| |
2008 |
| 5,063 |
| 12 |
| |
2009 |
| 11,089 |
| 14 |
| |
2010 |
| 1,390 |
| 2 |
| |
Thereafter |
| 68,891 |
| 82 |
| |
|
| $ | 92,674 |
| 130 |
|
32
The Company’s rental expense attributable to continuing operations for the years ended December 31, 2005, 2004 and 2003 was approximately $2.6 million, $1.3 million and $0.6 million, respectively. These rental expense amounts include ground rent and other leases. Future minimum lease obligations under non-cancelable ground leases as of December 31, 2005 were as follows (in thousands):
Year |
| Amount |
| |
2006 |
| $ | 1,353 |
|
2007 |
| 1,377 |
| |
2008 |
| 1,400 |
| |
2009 |
| 1,424 |
| |
2010 |
| 1,450 |
| |
Thereafter |
| 117,760 |
| |
Total |
| $ | 124,764 |
|
(11) Derivative Financial Instruments
In July 2005, the Company entered into three interest-rate swap contracts that are designated as hedging the variability in expected cash flows for variable rate debt assumed in connection with the acquisition of a portfolio of real estate assets in July 2005. The cash flow hedges have a notional amount of $45.6 million and expire in July 2020. The fair value of these contracts at December 31, 2005, was $0.4 million and is included in other assets. For the year ended December 31, 2005, the Company recognized increased interest expense of $0.2 million attributable to the contracts. The Company determined that these swap agreements were highly effective in offsetting future variable-interest cash flows related to the assumed mortgages. The effective portion of gains and losses on these contracts is recognized in accumulated other comprehensive income (loss) whereas the ineffective portion is recognized in earnings. During the year ended December 31, 2005, there was no ineffective portion related to these hedges.
(12) Stockholders’ Equity
Common Stock
Dividends on the Company’s common stock are characterized for federal income tax purposes as taxable ordinary income, capital gain distributions, nontaxable distributions or a combination thereof. Following is the characterization of the Company’s annual common stock dividends per share:
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Taxable ordinary income |
| $ | 1.0492 |
| $ | 1.0730 |
| $ | 1.0913 |
|
Capital gain distribution |
| 0.0300 |
| — |
| — |
| |||
Nontaxable distribution |
| 0.6008 |
| 0.5970 |
| 0.5687 |
| |||
|
| $ | 1.6800 |
| $ | 1.6700 |
| $ | 1.6600 |
|
During 2005 and 2004, the Company issued 0.9 million shares of common stock under its Dividend Reinvestment and Stock Purchase Plan (DRIP) in each year. The Company issued 1.4 million shares upon exercise of stock options in each of the years ended December 31, 2005 and 2004.
On February 6, 2006, the Company announced that its Board declared a quarterly cash dividend of $0.425 per share. The common stock cash dividend will be paid on February 23, 2006 to stockholders of record as of the close of business on February 13, 2006.
33
Preferred Stock
The Series E and Series F preferred stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and are not convertible into any other securities of the Company. Dividends are payable quarterly in arrears. The following summarizes cumulative redeemable preferred stock outstanding at December 31, 2005:
Series |
| Shares |
| Issue Price |
| Dividend |
| Callable at |
| |
Series E |
| 4,000,000 |
| $ | 25/share |
| 7.25 | % | September 15, 2008 |
|
Series F |
| 7,820,000 |
| $ | 25/share |
| 7.10 | % | December 3, 2008 |
|
Dividends on preferred stock are characterized as ordinary income, capital gains, or a combination thereof for federal income tax purposes and are summarized in the following annual distribution table:
|
|
| Annual Dividends Per Share |
| |||||||||||
|
| Dividend |
| Capital Gain |
| Ordinary Income |
| ||||||||
|
| Rate |
| 2005 |
| 2005 |
| 2004 |
| 2003 |
| ||||
Series A |
| 7.875 | % | $ | — |
| $ | — |
| $ | — |
| $ | 1.3672 |
|
Series B |
| 8.700 | % | — |
| — |
| — |
| 1.6251 |
| ||||
Series C |
| 8.600 | % | — |
| — |
| — |
| 0.7243 |
| ||||
Series E |
| 7.250 | % | 0.0504 |
| 1.7621 |
| 1.8125 |
| 0.5337 |
| ||||
Series F |
| 7.100 | % | 0.0493 |
| 1.7257 |
| 1.9180 |
| — |
| ||||
On September 15, 2003, the Company issued 4,000,000 shares of 7.25% Series E Cumulative Redeemable Preferred Stock at $25 per share, generating gross proceeds of $100 million.
On December 3, 2003, the Company issued 7,820,000 shares of 7.10% Series F Cumulative Redeemable Preferred Stock at $25 per share, raising gross proceeds of $195.5 million.
On May 2, 2003, the Company redeemed all of the outstanding 8.6% Series C preferred stock. The amount paid to redeem the preferred stock was approximately $99.4 million plus accrued dividends. The redemption amount in excess of the carrying amount of the Series C preferred stock resulted in a preferred stock redemption charge of $11.8 million.
On September 10, 2003, the Company redeemed all of the outstanding 7.875% Series A preferred stock. The amount paid to redeem the Series A preferred stock was approximately $60 million plus accrued dividends. The redemption amount in excess of the carrying amount of the Series A preferred stock resulted in a preferred stock redemption charge of $2.2 million.
On October 1, 2003, the Company redeemed all of the 8.7% Series B preferred stock. The amount paid to redeem the Series B preferred stock was approximately $133.6 million plus accrued dividends. The redemption amount in excess of the carrying amount of the Series B preferred stock resulted in a preferred stock redemption charge of $4.6 million.
On January 2006, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.45313 per share on its Series E cumulative redeemable preferred stock and $0.44375 per share on its Series F cumulative redeemable preferred stock. These dividends will be paid on March 31, 2006 to stockholders of record as of the close of business on March 15, 2006.
Accumulated Other Comprehensive (Income) Loss (“AOCI”) and Other Equity
| December 31, |
| |||||
|
| 2005 |
| 2004 |
| ||
Unamortized balance of deferred compensation |
| $ | 8,464 |
| $ | 8,786 |
|
AOCI—unrealized gains on securities available for sale |
| (1,080 | ) | — |
| ||
AOCI—unrealized gains on cash flow hedges |
| (388 | ) | — |
| ||
Supplemental Executive Retirement Plan (“SERP”) minimum liability |
| 2,316 |
| 2,168 |
| ||
Total other equity |
| $ | 9,312 |
| $ | 10,954 |
|
34
Other comprehensive income and losses are additions to and reductions of net income, respectively, in calculating comprehensive income. Comprehensive income for the years ended December 31, 2005 and 2004 was $174.4 million and $167.2 million, respectively.
(13) Impairments
During 2005, no properties were determined to be impaired in connection with an assessment of the underlying undiscounted cash flows or as a result of the Company’s intent to dispose of the asset. During 2004 and 2003, 16 and 15 properties respectively, were deemed impaired resulting in impairment charges of $17.1 million and $14.0 million, respectively. Impairment charges principally arose as a result of reduced anticipated holding periods and planned near-term dispositions.
Impairment charges are summarized as follows:
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
|
| (In thousands) |
| |||||||
Continuing operations |
| $ | — |
| $ | 1,305 |
| $ | 2,090 |
|
Discontinued operations |
| — |
| 15,762 |
| 11,902 |
| |||
|
| $ | — |
| $ | 17,067 |
| $ | 13,992 |
|
(14) Supplemental Cash Flow Information
Supplemental Cash Flow Information
| Year Ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
|
| (In thousands) |
| |||||||
Interest paid, net of capitalized interest and other |
| $ | 99,862 |
| $ | 87,168 |
| $ | 87,653 |
|
Taxes paid |
| 106 |
| 1,716 |
| 124 |
| |||
Capitalized interest |
| 637 |
| 1,650 |
| 1,210 |
| |||
Mortgages assumed on acquired properties |
| 113,484 |
| 81,386 |
| — |
| |||
Mortgages included with real estate dispositions |
| — |
| 31,397 |
| — |
| |||
Loans received upon sale of unconsolidated joint venture investments |
| 6,228 |
| — |
| — |
| |||
Non-managing member units issued in connection with acquisitions |
| 30,398 |
| 1,086 |
| 48,181 |
| |||
Loans receivable settled in connection with real estate acquisitions |
| — |
| 94,768 |
| 36,953 |
| |||
Accrued dividends |
| — |
| 1,118 |
| (1,118 | ) | |||
Restricted stock issued, net of cancellations |
| 2,744 |
| 1,751 |
| 6,280 |
| |||
Conversion of non-managing member units into common stock |
| 2,601 |
| 4,777 |
| 4,442 |
| |||
(15) Earnings Per Common Share
The Company computes earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per common share is computed by dividing net income applicable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated including the effect of dilutive securities. Approximately 0.9 million, 1.0 million and 1.0 million options to purchase shares of common stock that had an exercise price in excess of the average market price of the common stock during 2005, 2004 and 2003 were not included because they are not dilutive. Additionally, 6.0 million shares issuable upon conversion of 3.4 million non-managing member units in 2005, 5.1 million shares issuable upon conversion of 2.5 million non-managing member units in 2004 and 5.4 million shares issuable upon the conversion of 2.7 million non-managing member units in 2003 were not included since they are anti-dilutive.
35
|
| 2005 |
| 2004 |
| 2003 |
| ||||||||||||||||||
|
| Income |
| Shares |
| Per |
| Income |
| Shares |
| Per |
| Income |
| Shares |
| Per |
| ||||||
|
| (In thousands, except per share amounts) |
| ||||||||||||||||||||||
Basic earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income applicable to common shares |
| $ | 151,927 |
| 134,673 |
| $ | 1.13 |
| $ | 147,910 |
| 131,854 |
| $ | 1.12 |
| $ | 121,849 |
| 124,942 |
| $ | 0.98 |
|
Dilutive options and unvested restricted stock |
| — |
| 887 |
| (0.01 | ) | — |
| 1,508 |
| (0.01 | ) | — |
| 1,188 |
| (0.01 | ) | ||||||
Diluted earnings per common share |
| $ | 151,927 |
| 135,560 |
| $ | 1.12 |
| $ | 147,910 |
| 133,362 |
| $ | 1.11 |
| $ | 121,849 |
| 126,130 |
| $ | 0.97 |
|
(16) Disclosures About Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, receivables, payables, and accrued liabilities are reasonable estimates of fair value because of the short maturities of these instruments. Fair values for secured loans receivable, senior unsecured notes and mortgage debt are estimates based on rates currently prevailing for similar instruments of similar maturities. The fair values of the interest rate swaps and the MOPPRS Option were determined through estimates provided by investment bank affiliates. The fair values of the available for sale securities were determined based on market quotes.
| December 31, |
| |||||||||||
|
| 2005 |
| 2004 |
| ||||||||
|
| Carrying |
| Fair Value |
| Carrying |
| Fair Value |
| ||||
|
| (In thousands) |
| ||||||||||
Secured loans receivable |
| $ | 175,426 |
| $ | 202,695 |
| $ | 140,700 |
| $ | 161,960 |
|
Senior unsecured notes and mortgage debt |
| (1,698,346 | ) | (1,750,559 | ) | (1,183,961 | ) | (1,269,234 | ) | ||||
Available for sale securities |
| 6,333 |
| 6,333 |
| — |
| — |
| ||||
Interest rate swaps |
| 388 |
| 388 |
| — |
| — |
| ||||
MOPPRS option |
| — |
| — |
| (3,230 | ) | (20,000 | ) | ||||
(17) Compensation Plans
Stock Based Compensation
The Company’s 2000 Stock Incentive Plan (the “Incentive Plan”) provides for the granting of stock based compensation, including stock options, restricted stock, and performance restricted stock units. The maximum number of shares issuable over the term of the Incentive Plan is 11.4 million shares with approximately 4.9 million shares available for future awards at December 31, 2005, of which approximately 262,700 shares may be issued as restricted stock and performance restricted stock units.
36
Stock Options
Stock options are generally granted with an exercise price equal to the fair market value of the underlying stock on the date of grant. Stock options generally vest ratably over a five-year period. Vesting of certain options may accelerate upon retirement, a change in control of the Company, as defined, and other events. A summary of the option activity is presented in the following table (in thousands, except per share amounts):
| Number of |
| Weighted |
| Number of |
| Weighted |
| |||
Balance at January 1, 2003 |
| 7,538 |
| $ | 15 |
| 2,074 |
| $ | 17 |
|
Granted |
| 1,068 |
| 19 |
|
|
|
|
| ||
Exercised |
| (2,576 | ) | 16 |
|
|
|
|
| ||
Forfeited |
| (669 | ) | 15 |
|
|
|
|
| ||
Balance at December 31, 2003 |
| 5,361 |
| 16 |
| 921 |
| $ | 15 |
| |
Granted |
| 1,011 |
| 27 |
|
|
|
|
| ||
Exercised |
| (1,446 | ) | 15 |
|
|
|
|
| ||
Forfeited |
| (645 | ) | 15 |
|
|
|
|
| ||
Balance at December 31, 2004 |
| 4,281 |
| 19 |
| 1,277 |
| $ | 17 |
| |
Granted |
| 1,175 |
| 25 |
|
|
|
|
| ||
Exercised |
| (1,436 | ) | 16 |
|
|
|
|
| ||
Forfeited |
| (158 | ) | 21 |
|
|
|
|
| ||
Balance at December 31, 2005 |
| 3,862 |
| 22 |
| 1,157 |
| $ | 19 |
| |
A summary of stock options outstanding at December 31, 2005, is presented in the following table (in thousands, except per share and life data).
Options Outstanding |
| Options Exercisable |
| |||||||||||
Number |
| Exercise |
| Weighted |
| Weighted |
| Number |
| Weighted |
| |||
481 |
| $ | 12-16 |
| $ | 14 |
| 4 years |
| 266 |
| $ | 15 |
|
611 |
| 17-18 |
| 18 |
| 6 years |
| 338 |
| 18 |
| |||
485 |
| 19-22 |
| 19 |
| 6 years |
| 301 |
| 19 |
| |||
2,285 |
| 23-28 |
| 26 |
| 9 years |
| 252 |
| 26 |
| |||
3,862 |
| 12-28 |
| 23 |
| 7 years |
| 1,157 |
| 19 |
| |||
The weighted average fair value per share at the dates of grant for options awarded during 2005, 2004 and 2003 was $1.87, $1.79 and $0.91, respectively. At December 31, 2005, the remaining unamortized cost of stock options was $3.2 million. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The assumptions underlying the determination of such fair values for options granted are summarized as follows:
| 2005 |
| 2004 |
| 2003 |
| |
Dividend yield |
| 7.5 | % | 7.5 | % | 8.7 | % |
Expected life—years |
| 6.5 |
| 5 |
| 10 |
|
Risk-free interest rate |
| 3.71 | % | 2.78 | % | 3.99 | % |
Expected stock price volatility |
| 20 | % | 20 | % | 20 | % |
Restricted Stock and Performance Restricted Stock Units
Under the Incentive Plan, restricted stock and performance restricted stock units generally vest over a three to five year period. The vesting of certain restricted shares and units may accelerate upon retirement, a change in control of the Company, as defined, and other events. When vested, each performance restricted stock unit is convertible into one share of common stock. The restricted stock and performance restricted stock units are valued on the grant date based on the market price of a common share on that date. Generally, the Company recognizes the fair value of the awards over the applicable vesting period as compensation expense. At December 31, 2005, there were 0.5 million unvested shares of restricted stock and 0.5
37
million performance restricted stock units outstanding, with no units vested and convertible into common stock. At December 31, 2005, the remaining unamortized cost of restricted stock and performance restricted stock units was $8.5 million and $7.9 million, respectively. The following table summarizes awards for restricted stock and performance restricted stock units (in thousands):
| Year Ended December 31, |
| ||||||||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||||||||
|
| Shares |
| Fair |
| Shares |
| Fair |
| Shares |
| Fair |
| |||
Performance restricted stock units |
| 292 |
| $ | 7,438 |
| 122 |
| $ | 3,346 |
| 113 |
| $ | 837 |
|
Restricted stock |
| 117 |
| 3,047 |
| 124 |
| 3,279 |
| 334 |
| 7,145 |
| |||
Employee Benefit Plan
The Company maintains a 401(k) and profit sharing plan that allows for eligible participants to defer compensation, subject to certain limitations imposed by the Code. The Company provides a matching contribution of up to 4% of each participant’s eligible compensation. During 2005, 2004 and 2003, the Company’s matching contributions have been approximately $0.2 million in each year.
(18) Segment Disclosures
The Company’s business consists of financing and leasing healthcare-related real estate. The Company evaluates its business and makes resource allocations on its two business segments—triple-net leased and medical office buildings segments. Under the triple-net leased segment, the Company invests in healthcare-related real estate through acquisition and secured financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases. Under the medical office buildings segment, the Company acquires medical office buildings that are primarily leased under gross or modified gross leases, and generally require a greater level of property management. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (See Note 2). There are no intersegment sales or transfers. The Company evaluates performance based upon property net operating income of the combined properties in each segment.
Non-segment revenue consists mainly of interest on unsecured loans and other fee income. Non-segment assets consist of corporate assets including cash, restricted cash, accounts receivable, net and deferred financing costs. Interest expense, depreciation and amortization, and other non-property specific revenues and expenses are not allocated to individual segments in determining the Company’s performance measure.
Summary information for the reportable segments is as follows (dollars in thousands):
For the year ended December 31, 2005:
Segments |
| Rental |
| Equity |
| Interest |
| Total |
| NOI(1) |
| |||||
Triple-net leased |
|
|
|
|
|
|
|
|
|
|
| |||||
Senior housing facilities |
| $ | 112,346 |
| $ | 256 |
| $ | 3,160 |
| $ | 115,762 |
| $ | 103,459 |
|
Hospital |
| 91,122 |
| — |
| 6,065 |
| 97,187 |
| 91,122 |
| |||||
Skilled nursing facilities |
| 77,684 |
| — |
| 5,814 |
| 83,498 |
| 77,684 |
| |||||
Other healthcare facilities |
| 25,466 |
| — |
| — |
| 25,466 |
| 20,275 |
| |||||
Total triple-net leased |
| 306,618 |
| $ | 256 |
| $ | 15,039 |
| $ | 321,913 |
| $ | 292,540 |
| |
Medical office buildings |
| 126,898 |
| (1,379 | ) | — |
| 125,519 |
| 81,993 |
| |||||
Non-segment revenues and other income |
| — |
| — |
| 11,115 |
| 11,115 |
| — |
| |||||
Total |
| $ | 433,516 |
| $ | (1,123 | ) | $ | 26,154 |
| $ | 458,547 |
| $ | 374,533 |
|
38
For the year ended December 31, 2004:
Segments |
| Rental |
| Equity |
| Interest |
| Total |
| NOI(1) |
| |||||
Triple-net leased |
|
|
|
|
|
|
|
|
|
|
| |||||
Senior housing facilities |
| $ | 84,569 |
| $ | 620 |
| $ | 15,516 |
| $ | 100,705 |
| $ | 78,069 |
|
Hospital |
| 89,185 |
| — |
| 6,270 |
| 95,455 |
| 89,185 |
| |||||
Skilled nursing facilities |
| 71,018 |
| — |
| 6,440 |
| 77,458 |
| 71,018 |
| |||||
Other healthcare facilities |
| 24,438 |
| — |
| — |
| 24,438 |
| 18,713 |
| |||||
Total triple-net leased |
| $ | 269,210 |
| $ | 620 |
| $ | 28,226 |
| $ | 298,056 |
| $ | 256,985 |
|
Medical office buildings |
| 93,725 |
| 1,537 |
| — |
| 95,262 |
| 63,465 |
| |||||
Non-segment revenues and other income |
| — |
| — |
| 7,835 |
| 7,835 |
| — |
| |||||
Total |
| $ | 362,935 |
| $ | 2,157 |
| $ | 36,061 |
| $ | 401,153 |
| $ | 320,450 |
|
For the year ended December 31, 2003:
Segments |
| Rental |
| Equity |
| Interest |
| Total |
| NOI(1) |
| |||||
Triple-net leased: |
|
|
|
|
|
|
|
|
|
|
| |||||
Senior housing facilities |
| $ | 54,791 |
| $ | 1,195 |
| $ | 25,404 |
| $ | 81,390 |
| $ | 47,314 |
|
Hospital |
| 90,784 |
| — |
| 6,447 |
| 97,231 |
| 90,784 |
| |||||
Skilled nursing facilities |
| 60,320 |
| — |
| 8,186 |
| 68,506 |
| 60,320 |
| |||||
Other healthcare facilities |
| 17,510 |
| — |
| — |
| 17,510 |
| 14,131 |
| |||||
Total triple net leased: |
| $ | 223,405 |
| $ | 1,195 |
| $ | 40,037 |
| $ | 264,637 |
| $ | 212,549 |
|
Medical office buildings |
| 76,569 |
| 1,694 |
| — |
| 78,263 |
| 53,129 |
| |||||
Non-segment revenues and other income |
| — |
| — |
| 7,776 |
| 7,776 |
| — |
| |||||
Total |
| $ | 299,974 |
| $ | 2,889 |
| $ | 47,813 |
| $ | 350,676 |
| $ | 265,678 |
|
(1) Net Operating Income from Continuing Operations (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate properties. The Company defines NOI as rental revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments, interest expense and discontinued operations. 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. The Company uses NOI to make decisions about resource allocations and assess property level performance. 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.
The following is a reconciliation from NOI to reported net income, a financial measure under GAAP (in thousands):
| Years ended December 31, |
| ||||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Net operating income from continuing operations |
| $ | 374,533 |
| $ | 320,450 |
| $ | 265,678 |
|
Equity income (loss) from unconsolidated joint ventures |
| (1,123 | ) | 2,157 |
| 2,889 |
| |||
Interest and other income |
| 26,154 |
| 36,061 |
| 47,813 |
| |||
Interest expense |
| (107,201 | ) | (87,561 | ) | (88,297 | ) | |||
Depreciation and amortization |
| (103,579 | ) | (81,440 | ) | (67,903 | ) | |||
General and administrative |
| (32,012 | ) | (36,649 | ) | (22,486 | ) | |||
Impairments |
| — |
| (1,305 | ) | (2,090 | ) | |||
Minority interests |
| (12,950 | ) | (12,204 | ) | (9,751 | ) | |||
Total discontinued operations |
| 29,235 |
| 29,531 |
| 32,732 |
| |||
Net income |
| $ | 173,057 |
| $ | 169,040 |
| $ | 158,585 |
|
39
The Company’s total assets by segment were:
| As of December 31, |
| |||||
Segments |
| 2005 |
| 2004 |
| ||
Triple-net leased: |
|
|
|
|
| ||
Senior housing facilities |
| $ | 1,305,971 |
| $ | 926,663 |
|
Hospital |
| 809,930 |
| 787,624 |
| ||
Skilled nursing facilities |
| 701,687 |
| 710,535 |
| ||
Other healthcare facilities |
| 239,364 |
| 210,168 |
| ||
Total triple-net leased assets |
| $ | 3,056,952 |
| $ | 2,634,990 |
|
Medical office building assets |
| 1,034,651 |
| 881,020 |
| ||
Gross segment assets |
| 4,091,603 |
| 3,516,010 |
| ||
Accumulated depreciation and amortization |
| (615,845 | ) | (528,901 | ) | ||
Net segment assets |
| 3,475,758 |
| 2,987,109 |
| ||
Non-segment assets |
| 121,507 |
| 117,417 |
| ||
Total assets |
| $ | 3,597,265 |
| $ | 3,104,526 |
|
(19) Transactions with Related Parties
Mr. Fanning, a director of the Company, on January 1, 2004, had remaining balances on loans from the Company of $107,938 with an interest rate of 5.55% due on April 8, 2004 and $127,690 with an interest rate of 3.85% due on April 9, 2005. Mr. Fanning paid both loans in full on April 5, 2004. The loans were made for the purpose of purchasing shares upon option exercise and such loans were secured by the common stock of the Company. The authority of the Company to maintain such loans was “grandfathered” under the Exchange Act, as amended by Section 402 of the Sarbanes-Oxley Act of 2002.
Mr. Flaherty, Chairman and Chief Executive Officer, of the Company, is a director of Quest Diagnostics Incorporated (“Quest”). During 2005, Quest made payments of approximately $0.5 million to the Company or its affiliates for the lease of medical office space at 14 locations. The leases for 12 of those locations were initially entered into by the predecessor landlord prior to the Company’s ownership of the particular medical office building with eight of those leases entered into before Mr. Flaherty became an employee and director of the Company and a director of Quest.
Mr. McKee, a director of the Company, is Vice Chairman and Chief Operating Officer of The Irvine Company. During each of 2005, 2004 and 2003, the Company made payments of approximately $0.6 million, $0.5 million and $0.5 million, respectively, to The Irvine Company for the lease of office space.
Mr. Messmer, a director of the Company, is Chairman and Chief Executive Officer of Robert Half International Inc. During 2005, 2004 and 2003, the Company made payments of approximately $0.1 million, $1.1 million and $0.1 million, respectively, to Robert Half International Inc. and certain of its subsidiaries for services including placement of temporary and permanent employees and Sarbanes-Oxley compliance consultation.
Mr. Rhein, a director of the Company, is a director of Cohen & Steers, Inc. Cohen & Steers Capital Management, Inc., a wholly owned subsidiary of Cohen & Steers, Inc., is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. As of December 31, 2005, mutual funds managed by Cohen & Steers Capital Management, Inc., in the aggregate, owned 6.2% of the Company’s common stock.
Mr. Sullivan, a director of the Company, was a director of SCCI prior to July 28, 2005 and is a director of Covenant Care, Inc. During 2005, 2004 and 2003, SCCI made payments of approximately $0.9 million, $1.0 million and $1.3 million, respectively, to the Company for a lease and a loan, which loan was paid in full in July 2004, related to two of its hospital properties, and Covenant Care, Inc. made payments of approximately $8.0 million, $7.9 million and $7.6 million, respectively, to the Company for the lease of certain of its nursing home properties. Prior to July 28, 2005, the Company also owned certain preferred convertible securities in SCCI. On July 28, 2005, in connection with the acquisition of SCCI by Triumph Healthcare Holdings, Inc., the Company sold its securities in SCCI, and received proceeds of $2.9 million. The acquisition of the convertible securities in SCCI and the agreements that required payment to the Company from SCCI and Covenant Care were entered into prior to Mr. Sullivan being elected a director of the Company.
40
Pursuant to the original purchase agreement dated October 2, 2003, the Company paid $9.8 million during the year ended December 31, 2005, in additional purchase consideration in the form of an earn-out to the former members of MedCap Properties, LLC related to the Company’s 2003 acquisition of four MOBs that were under development at the time of acquisition. The amounts paid included $3.7 million paid to former members who are now senior officers of the Company. At the time that the original purchase agreement was entered into, the former members were not officers of the Company.
Notwithstanding these matters, the Board of Directors of the Company has determined, in accordance with the categorical standards adopted by the Board, that each of Messrs. McKee, Messmer, Rhein and Sullivan is independent within the meaning of the rules of the New York Stock Exchange.
See Note 10 for a discussion of the sale of the Company’s securities in SCCI.
(20) Subsequent Events
The following events occurred subsequent to December 31, 2005, through February 10, 2006.
On January 4, 2006, the Company acquired five medical office buildings for $41 million. The medical office buildings include approximately 216,000 rentable square feet and have an initial yield of 7.7%.
On February 8, 2006, the Company acquired four laboratory, office and biotech manufacturing buildings located in San Diego, California for $31 million. The initial yield is 6.0%, with the stabilized yield expected to be 8.3%. The buildings include approximately 158,000 rentable square feet.
(21) Selected Quarterly Financial Data (Unaudited)
| Three Months Ended During 2005 |
| |||||||||||
|
| March 31 |
| June 30 |
| September 30 |
| December 31 |
| ||||
|
| (In thousands, except share data) |
| ||||||||||
Revenue |
| $ | 103,047 |
| $ | 113,291 |
| $ | 119,224 |
| $ | 122,986 |
|
Gain from real estate dispositions, net of impairments |
| 4,738 |
| 4,166 |
| 273 |
| 979 |
| ||||
Net income applicable to common shares |
| 38,175 |
| 37,764 |
| 39,759 |
| 36,229 |
| ||||
Dividends paid per common share |
| 0.42 |
| 0.42 |
| 0.42 |
| 0.42 |
| ||||
Basic earnings per common share |
| 0.29 |
| 0.28 |
| 0.29 |
| 0.27 |
| ||||
Diluted earnings per common share |
| 0.28 |
| 0.28 |
| 0.29 |
| 0.27 |
| ||||
| Three Months Ended During 2004 |
| |||||||||||
|
| March 31 |
| June 30 |
| September 30 |
| December 31 |
| ||||
|
| (In thousands, except share data) |
| ||||||||||
Revenue |
| $ | 89,445 |
| $ | 98,571 |
| $ | 104,081 |
| $ | 109,055 |
|
Gain (loss) from real estate dispositions, net of impairments |
| 9,008 |
| (2,176 | ) | (6,036 | ) | 4,527 |
| ||||
Net income applicable to common shares |
| 41,552 |
| 36,302 |
| 29,208 |
| 40,848 |
| ||||
Dividends paid per common share |
| 0.4175 |
| 0.4175 |
| 0.4175 |
| 0.4175 |
| ||||
Basic earnings per common share |
| 0.32 |
| 0.28 |
| 0.22 |
| 0.31 |
| ||||
Diluted earnings per common share |
| 0.31 |
| 0.27 |
| 0.22 |
| 0.30 |
| ||||
Results of operations for properties sold or to be sold have been classified as discontinued operations for all periods presented.
41
Health Care Property Investors, Inc.
Schedule III: Real Estate and Accumulated Depreciation
December 31, 2005
(Dollars in Thousands)
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Senior housing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Birmingham |
| AL |
| $ | — |
| $ | 1,200 |
| $ | 8,023 |
| $ | 9,223 |
| $ | (1,635 | ) | 1999 |
| 45 |
|
Mesa |
| AZ |
|
|
| 880 |
| 3,679 |
| 4,559 |
| (562 | ) | 2003 |
| 30 |
| |||||
Phoenix |
| AZ |
|
|
| 473 |
| 4,478 |
| 4,951 |
| (1,400 | ) | 1995 |
| 35 |
| |||||
Tucson |
| AZ |
|
|
| 2,350 |
| 24,037 |
| 26,387 |
| (1,803 | ) | 2003 |
| 30 |
| |||||
Auburn |
| CA |
| — |
| 540 |
| 8,309 |
| 8,849 |
| (1,302 | ) | 2001 |
| 40 |
| |||||
Concord |
| CA |
| (25,000 | ) | 6,010 |
| 38,637 |
| 44,647 |
| (507 | ) | 2005 |
| 40 |
| |||||
Dana Point |
| CA |
| — |
| 1,960 |
| 16,144 |
| 18,104 |
| (207 | ) | 2005 |
| 40 |
| |||||
Escondido |
| CA |
| — |
| 627 |
| 4,951 |
| 5,578 |
| (396 | ) | 2004 |
| 20 |
| |||||
Escondido |
| CA |
| (14,340 | ) | 5,090 |
| 24,619 |
| 29,709 |
| (328 | ) | 2005 |
| 40 |
| |||||
Fairfield |
| CA |
| — |
| 149 |
| 2,835 |
| 2,984 |
| (659 | ) | 1997 |
| 35 |
| |||||
Fremont |
| CA |
| — |
| 2,360 |
| 11,855 |
| 14,215 |
| (161 | ) | 2005 |
| 40 |
| |||||
Granada Hills |
| CA |
| — |
| 2,200 |
| 18,493 |
| 20,693 |
| (242 | ) | 2005 |
| 40 |
| |||||
Lodi |
| CA |
| — |
| 732 |
| 5,907 |
| 6,639 |
| (1,590 | ) | 1998 |
| 35 |
| |||||
Murietta |
| CA |
| — |
| 435 |
| 5,934 |
| 6,369 |
| (1,331 | ) | 1999 |
| 35 |
| |||||
Ontario |
| CA |
| — |
| 174 |
| 4,622 |
| 4,796 |
| (1,183 | ) | 1997 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Pleasant Hill |
| CA |
| (6,270 | ) | 2,480 |
| 21,569 |
| 24,049 |
| (280 | ) | 2005 |
| 40 |
| |||||
South San Francisco |
| CA |
| — |
| 3,000 |
| 16,291 |
| 19,291 |
| (211 | ) | 2005 |
| 40 |
| |||||
Stockton |
| CA |
| — |
| 505 |
| 3,977 |
| 4,482 |
| (411 | ) | 2004 |
| 15 |
| |||||
Ventura |
| CA |
| — |
| 2,030 |
| 17,644 |
| 19,674 |
| (233 | ) | 2005 |
| 40 |
| |||||
Denver |
| CO |
| — |
| 2,810 |
| 36,021 |
| 38,831 |
| (2,702 | ) | 2003 |
| 30 |
| |||||
Torrington |
| CT |
| — |
| 166 |
| 11,251 |
| 11,417 |
| (257 | ) | 2005 |
| 40 |
| |||||
Dover |
| DE |
| — |
| 380 |
| 4,147 |
| 4,527 |
| (1,316 | ) | 1995 |
| 35 |
| |||||
Altamonte Springs |
| FL |
| — |
| 1,530 |
| 7,956 |
| 9,486 |
| (885 | ) | 2002 |
| 40 |
| |||||
Altamonte Springs |
| FL |
| — |
| 394 |
| 3,124 |
| 3,518 |
| (167 | ) | 2004 |
| 35 |
| |||||
Boynton Beach |
| FL |
| — |
| 1,270 |
| 5,232 |
| 6,502 |
| (598 | ) | 2003 |
| 40 |
| |||||
Casselberry |
| FL |
| — |
| 540 |
| 1,550 |
| 2,090 |
| (395 | ) | 1998 |
| 35 |
| |||||
Clearwater |
| FL |
| — |
| 2,250 |
| 3,207 |
| 5,457 |
| (544 | ) | 2002 |
| 40 |
| |||||
Clearwater |
| FL |
| — |
| 3,856 |
| 12,446 |
| 16,302 |
| (299 | ) | 2005 |
| 40 |
| |||||
Delray Beach |
| FL |
| — |
| 850 |
| 5,257 |
| 6,107 |
| (651 | ) | 2002 |
| 45 |
| |||||
Englewood |
| FL |
| — |
| 1,240 |
| 9,841 |
| 11,081 |
| (514 | ) | 2004 |
| 35 |
| |||||
Jacksonville |
| FL |
| — |
| 3,250 |
| 26,786 |
| 30,036 |
| (3,416 | ) | 2002 |
| 35 |
| |||||
Lakeland |
| FL |
| — |
| 300 |
| 3,332 |
| 3,632 |
| (50 | ) | 2005 |
| 25 |
| |||||
New Port Richey |
| FL |
| — |
| 1,575 |
| 12,463 |
| 14,038 |
| (585 | ) | 2004 |
| 40 |
| |||||
New Port Richey |
| FL |
| — |
| 540 |
| 7,021 |
| 7,561 |
| (100 | ) | 2005 |
| 25 |
| |||||
Ocala |
| FL |
| — |
| 522 |
| 5,420 |
| 5,942 |
| (1,004 | ) | 1999 |
| 45 |
| |||||
Ocala |
| FL |
| — |
| 1,010 |
| 7,453 |
| 8,463 |
| (135 | ) | 2005 |
| 20 |
| |||||
Ocoee |
| FL |
| — |
| 2,096 |
| 9,540 |
| 11,636 |
| (231 | ) | 2005 |
| 40 |
| |||||
Pinellas Park |
| FL |
| — |
| 480 |
| 4,251 |
| 4,731 |
| (1,430 | ) | 1996 |
| 35 |
| |||||
Port Orange |
| FL |
| — |
| 2,340 |
| 10,158 |
| 12,498 |
| (237 | ) | 2005 |
| 40 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
St. Augustine |
| FL |
| — |
| 830 |
| 11,851 |
| 12,681 |
| (138 | ) | 2005 |
| 35 |
| |||||
42
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Sun City Center |
| FL |
| $ | — |
| $ | 510 |
| $ | 6,120 |
| $ | 6,630 |
| $ | (328 | ) | 2004 |
| 35 |
|
Sun City Center |
| FL |
| — |
| 3,466 |
| 70,810 |
| 74,276 |
| (3,247 | ) | 2004 |
| 35 |
| |||||
Tampa |
| FL |
| — |
| 600 |
| 6,225 |
| 6,825 |
| (1,512 | ) | 1999 |
| 45 |
| |||||
Venice |
| FL |
| — |
| 360 |
| 7,906 |
| 8,266 |
| (137 | ) | 2005 |
| 20 |
| |||||
Winter Haven |
| FL |
| — |
| 390 |
| 607 |
| 997 |
| (436 | ) | 1989 |
| 45 |
| |||||
Zephyrhills |
| FL |
| — |
| 460 |
| 3,355 |
| 3,815 |
| (777 | ) | 1998 |
| 35 |
| |||||
Cedar Rapids |
| IA |
| — |
| 440 |
| 3,496 |
| 3,936 |
| (180 | ) | 2004 |
| 35 |
| |||||
Boise |
| ID |
| — |
| 150 |
| 3,197 |
| 3,347 |
| (515 | ) | 1999 |
| 35 |
| |||||
Lewiston |
| ID |
| — |
| 767 |
| 6,079 |
| 6,846 |
| (282 | ) | 2004 |
| 40 |
| |||||
Anderson |
| IN |
| — |
| 500 |
| 6,375 |
| 6,875 |
| (1,023 | ) | 1999 |
| 35 |
| |||||
Evansville |
| IN |
| — |
| 500 |
| 8,171 |
| 8,671 |
| (1,339 | ) | 2000 |
| 45 |
| |||||
Jeffersonville |
| IN |
| — |
| 160 |
| 1,341 |
| 1,501 |
| (148 | ) | 2003 |
| 40 |
| |||||
Mission |
| KS |
| — |
| 340 |
| 9,517 |
| 9,857 |
| (1,069 | ) | 2002 |
| 35 |
| |||||
Overland Park |
| KS |
| — |
| 750 |
| 8,241 |
| 8,991 |
| (1,589 | ) | 2000 |
| 45 |
| |||||
Wichita |
| KS |
| — |
| 220 |
| 4,422 |
| 4,642 |
| (2,093 | ) | 1986 |
| 40 |
| |||||
Lexington |
| KY |
| (8,010 | ) | 2,093 |
| 16,917 |
| 19,010 |
| (997 | ) | 2004 |
| 30 |
| |||||
Alexandria |
| LA |
| — |
| 393 |
| 5,262 |
| 5,655 |
| (1,157 | ) | 1997 |
| 45 |
| |||||
Lafayette |
| LA |
| — |
| 433 |
| 5,259 |
| 5,692 |
| (1,142 | ) | 1997 |
| 45 |
| |||||
Lake Charles |
| LA |
| — |
| 454 |
| 5,583 |
| 6,037 |
| (1,214 | ) | 1997 |
| 45 |
| |||||
Auburn |
| MA |
| — |
| 1,281 |
| 10,153 |
| 11,434 |
| (471 | ) | 2004 |
| 40 |
| |||||
Westminster |
| MD |
| — |
| 768 |
| 5,619 |
| 6,387 |
| (1,517 | ) | 1999 |
| 45 |
| |||||
Cape Elizabeth |
| ME |
| — |
| 630 |
| 3,957 |
| 4,587 |
| (443 | ) | 2003 |
| 40 |
| |||||
Saco |
| ME |
| — |
| 80 |
| 2,688 |
| 2,768 |
| (265 | ) | 2003 |
| 40 |
| |||||
Holland |
| MI |
| (16,375 | ) | 787 |
| 51,410 |
| 52,197 |
| (2,916 | ) | 2004 |
| 30 |
| |||||
Sterling Height |
| MI |
| — |
| 920 |
| 7,326 |
| 8,246 |
| (907 | ) | 2001 |
| 35 |
| |||||
Biloxi |
| MS |
| — |
| 480 |
| 5,856 |
| 6,336 |
| (968 | ) | 2001 |
| 40 |
| |||||
Bozeman |
| MT |
| — |
| 982 |
| 7,776 |
| 8,758 |
| (360 | ) | 2004 |
| 40 |
| |||||
Hendersonville |
| NC |
| — |
| 100 |
| 1,836 |
| 1,936 |
| (621 | ) | 1996 |
| 35 |
| |||||
Hendersonville |
| NC |
| — |
| 320 |
| 7,902 |
| 8,222 |
| (2,504 | ) | 1996 |
| 35 |
| |||||
Glassboro |
| NJ |
| — |
| 162 |
| 2,875 |
| 3,037 |
| (741 | ) | 1997 |
| 35 |
| |||||
Hillsborough |
| NJ |
| — |
| 1,042 |
| 10,260 |
| 11,302 |
| (231 | ) | 2005 |
| 40 |
| |||||
Manahawkin |
| NJ |
| — |
| 921 |
| 10,187 |
| 11,108 |
| (231 | ) | 2005 |
| 40 |
| |||||
Vineland |
| NJ |
| — |
| 177 |
| 2,897 |
| 3,074 |
| (761 | ) | 1997 |
| 35 |
| |||||
Voorhees Township |
| NJ |
| — |
| 380 |
| 6,360 |
| 6,740 |
| (1,927 | ) | 1995 |
| 35 |
| |||||
Voorhees Township |
| NJ |
| — |
| 900 |
| 7,968 |
| 8,868 |
| (1,496 | ) | 1999 |
| 45 |
| |||||
Albuquerque |
| NM |
| — |
| 767 |
| 9,324 |
| 10,091 |
| (2,235 | ) | 1997 |
| 45 |
| |||||
Las Vegas |
| NV |
| — |
| 1,960 |
| 5,916 |
| 7,876 |
| (91 | ) | 2005 |
| 40 |
| |||||
Painted Post |
| NY |
| — |
| 150 |
| 3,939 |
| 4,089 |
| (1,307 | ) | 1995 |
| 35 |
| |||||
Cincinnati |
| OH |
| — |
| 600 |
| 4,428 |
| 5,028 |
| (548 | ) | 2001 |
| 35 |
| |||||
Cleveland |
| OH |
| — |
| 1,310 |
| 5,798 |
| 7,108 |
| (799 | ) | 2002 |
| 40 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Allentown |
| PA |
| — |
| 115 |
| 4,882 |
| 4,997 |
| (1,576 | ) | 1995 |
| 35 |
| |||||
Latrobe |
| PA |
| — |
| 50 |
| 9,008 |
| 9,058 |
| (2,791 | ) | 1995 |
| 35 |
| |||||
Easley |
| SC |
| — |
| 510 |
| 13,087 |
| 13,597 |
| (4,110 | ) | 1996 |
| 35 |
| |||||
Georgetown |
| SC |
| — |
| 239 |
| 3,136 |
| 3,375 |
| (567 | ) | 1999 |
| 45 |
| |||||
Lancaster |
| SC |
| — |
| 84 |
| 3,120 |
| 3,204 |
| (499 | ) | 2000 |
| 45 |
| |||||
43
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Rock Hill |
| SC |
| $ | — |
| $ | 203 |
| $ | 2,908 |
| $ | 3,111 |
| $ | (607 | ) | 1999 |
| 45 |
|
Spartanburg |
| SC |
| — |
| 535 |
| 17,769 |
| 18,304 |
| (5,217 | ) | 1996 |
| 35 |
| |||||
Sumter |
| SC |
| — |
| 196 |
| 2,866 |
| 3,062 |
| (626 | ) | 1999 |
| 45 |
| |||||
Jackson |
| TN |
| — |
| 200 |
| 2,310 |
| 2,510 |
| (969 | ) | 1999 |
| 35 |
| |||||
Austin |
| TX |
| — |
| 2,960 |
| 41,645 |
| 44,605 |
| (3,123 | ) | 2003 |
| 30 |
| |||||
Beaumont |
| TX |
| — |
| 145 |
| 10,404 |
| 10,549 |
| (2,429 | ) | 1996 |
| 45 |
| |||||
Carthage |
| TX |
| — |
| 83 |
| 1,486 |
| 1,569 |
| (443 | ) | 1995 |
| 35 |
| |||||
Conroe |
| TX |
| — |
| 167 |
| 1,885 |
| 2,052 |
| (527 | ) | 1996 |
| 35 |
| |||||
Dallas |
| TX |
| — |
| 330 |
| 7,058 |
| 7,388 |
| — |
| 2005 |
| 35 |
| |||||
El Paso |
| TX |
| — |
| 470 |
| 8,053 |
| 8,523 |
| (2,420 | ) | 1997 |
| 35 |
| |||||
El Paso |
| TX |
| — |
| 300 |
| 4,052 |
| 4,352 |
| (710 | ) | 1999 |
| 35 |
| |||||
Fort Worth |
| TX |
| — |
| 2,830 |
| 50,832 |
| 53,662 |
| (3,812 | ) | 2003 |
| 30 |
| |||||
Friendswood |
| TX |
| — |
| 400 |
| 7,675 |
| 8,075 |
| (797 | ) | 2002 |
| 45 |
| |||||
Gun Barrel |
| TX |
| — |
| 34 |
| 1,553 |
| 1,587 |
| (462 | ) | 1995 |
| 35 |
| |||||
Houston |
| TX |
| — |
| 835 |
| 7,195 |
| 8,030 |
| (1,219 | ) | 1998 |
| 45 |
| |||||
Houston |
| TX |
| — |
| 2,470 |
| 22,560 |
| 25,030 |
| (2,963 | ) | 2002 |
| 35 |
| |||||
Irving |
| TX |
| — |
| 710 |
| 10,126 |
| 10,836 |
| — |
| 2005 |
| 35 |
| |||||
Lubbock |
| TX |
| — |
| 197 |
| 2,467 |
| 2,664 |
| (689 | ) | 1996 |
| 35 |
| |||||
Mesquite |
| TX |
| — |
| 100 |
| 2,466 |
| 2,566 |
| (689 | ) | 1996 |
| 35 |
| |||||
Odessa |
| TX |
| — |
| 200 |
| 4,052 |
| 4,252 |
| (732 | ) | 1999 |
| 35 |
| |||||
San Antonio |
| TX |
| — |
| 180 |
| 9,429 |
| 9,609 |
| (2,772 | ) | 1997 |
| 35 |
| |||||
San Antonio |
| TX |
| — |
| 632 |
| 7,182 |
| 7,814 |
| (1,603 | ) | 1997 |
| 45 |
| |||||
San Antonio |
| TX |
| — |
| 730 |
| 4,276 |
| 5,006 |
| (566 | ) | 2002 |
| 45 |
| |||||
San Marcos |
| TX |
| — |
| 190 |
| 3,571 |
| 3,761 |
| (1,138 | ) | 1997 |
| 35 |
| |||||
Sherman |
| TX |
| — |
| 145 |
| 1,516 |
| 1,661 |
| (452 | ) | 1995 |
| 35 |
| |||||
Temple |
| TX |
| — |
| 96 |
| 2,138 |
| 2,234 |
| (561 | ) | 1997 |
| 35 |
| |||||
Victoria |
| TX |
| — |
| 175 |
| 4,292 |
| 4,467 |
| (1,201 | ) | 1996 |
| 43 |
| |||||
Woodbridge |
| VA |
| — |
| 950 |
| 7,158 |
| 8,108 |
| (1,349 | ) | 1998 |
| 45 |
| |||||
Everett |
| WA |
| — |
| 314 |
| 3,376 |
| 3,690 |
| (1,156 | ) | 1995 |
| 35 |
| |||||
Kirkland |
| WA |
| (6,395 | ) | 1,000 |
| 13,562 |
| 14,562 |
| (170 | ) | 2005 |
| 40 |
| |||||
Puyallup |
| WA |
| — |
| 1,088 |
| 8,630 |
| 9,718 |
| (400 | ) | 2004 |
| 40 |
| |||||
Renton |
| WA |
| — |
| 231 |
| 2,877 |
| 3,108 |
| (974 | ) | 1995 |
| 35 |
| |||||
Shoreline |
| WA |
| — |
| 1,590 |
| 10,800 |
| 12,390 |
| (144 | ) | 2005 |
| 40 |
| |||||
Shoreline |
| WA |
| — |
| 4,030 |
| 23,727 |
| 27,757 |
| (308 | ) | 2005 |
| 40 |
| |||||
Walla Walla |
| WA |
| — |
| 300 |
| 5,282 |
| 5,582 |
| (933 | ) | 1999 |
| 35 |
| |||||
Total senior housing |
|
|
| $ | (76,390 | ) | $ | 115,141 |
| $ | 1,144,080 |
| $ | 1,259,221 |
| $ | (122,323 | ) |
|
|
|
|
Medical office buildings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cullman |
| AL |
| — |
| — |
| 13,047 |
| 13,047 |
| — |
| 2005 |
| 40 |
| |||||
Cullman |
| AL |
| — |
| — |
| 12,350 |
| 12,350 |
| — |
| 2005 |
| 35 |
| |||||
Chandler |
| AZ |
| — |
| 3,669 |
| 13,920 |
| 17,589 |
| (463 | ) | 2004 |
| 40 |
| |||||
Oro Valley |
| AZ |
| — |
| 1,050 |
| 6,774 |
| 7,824 |
| (818 | ) | 2001 |
| 45 |
| |||||
Phoenix |
| AZ |
| — |
| 780 |
| 3,611 |
| 4,391 |
| (666 | ) | 1999 |
| 35 |
| |||||
Phoenix |
| AZ |
| — |
| 280 |
| 877 |
| 1,157 |
| (84 | ) | 2001 |
| 45 |
| |||||
Tucson |
| AZ |
| — |
| 215 |
| 6,318 |
| 6,533 |
| (891 | ) | 2001 |
| 35 |
| |||||
Tucson |
| AZ |
| — |
| 215 |
| 4,064 |
| 4,279 |
| (291 | ) | 2003 |
| 45 |
| |||||
Murietta |
| CA |
| — |
| 402 |
| 9,670 |
| 10,072 |
| (1,862 | ) | 1999 |
| 35 |
|
44
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Poway |
| CA |
| $ | — |
| $ | 2,700 |
| $ | 10,908 |
| $ | 13,608 |
| $ | (2,994 | ) | 1997 |
| 35 |
|
San Diego |
| CA |
| — |
| 2,900 |
| 5,959 |
| 8,859 |
| (2,519 | ) | 1997 |
| 35 |
| |||||
San Diego |
| CA |
| (7,869 | ) | 2,863 |
| 8,971 |
| 11,834 |
| (3,326 | ) | 1997 |
| 35 |
| |||||
San Diego |
| CA |
| — |
| 4,619 |
| 21,006 |
| 25,625 |
| (7,475 | ) | 1997 |
| 35 |
| |||||
San Diego |
| CA |
| (3,836 | ) | 1,650 |
| 4,192 |
| 5,842 |
| (920 | ) | 1999 |
| 35 |
| |||||
San Diego |
| CA |
| — |
| 2,910 |
| 17,362 |
| 20,272 |
| (3,059 | ) | 1999 |
| 35 |
| |||||
San Jose |
| CA |
| — |
| 1,935 |
| 2,110 |
| 4,045 |
| (366 | ) | 2003 |
| 36 |
| |||||
San Jose |
| CA |
| — |
| 1,460 |
| 6,095 |
| 7,555 |
| 59 |
| 2003 |
| 36 |
| |||||
Valencia |
| CA |
| — |
| 2,309 |
| 6,689 |
| 8,998 |
| (1,429 | ) | 1999 |
| 35 |
| |||||
West Hills |
| CA |
| — |
| 2,100 |
| 11,071 |
| 13,171 |
| (2,464 | ) | 1999 |
| 35 |
| |||||
Aurora |
| CO |
| — |
| — |
| 6,563 |
| 6,563 |
| — |
| 2005 |
| * |
| |||||
Conifer |
| CO |
| (942 | ) | — |
| 1,633 |
| 1,633 |
| (12 | ) | 2005 |
| 40 |
| |||||
Englewood |
| CO |
| (6,258 | ) | — |
| 9,996 |
| 9,996 |
| (123 | ) | 2005 |
| 35 |
| |||||
Englewood |
| CO |
| — |
| — |
| 9,666 |
| 9,666 |
| (142 | ) | 2005 |
| 35 |
| |||||
Englewood |
| CO |
| (5,644 | ) | — |
| 9,260 |
| 9,260 |
| (108 | ) | 2005 |
| 35 |
| |||||
Englewood |
| CO |
| (5,207 | ) | — |
| 10,015 |
| 10,015 |
| (112 | ) | 2005 |
| 35 |
| |||||
Littleton |
| CO |
| (2,931 | ) | — |
| 5,330 |
| 5,330 |
| (75 | ) | 2005 |
| 35 |
| |||||
Littleton |
| CO |
| (3,291 | ) | — |
| 5,584 |
| 5,584 |
| (62 | ) | 2005 |
| 40 |
| |||||
Lone Tree |
| CO |
| — |
| — |
| 17,732 |
| 17,732 |
| (673 | ) | 2004 |
| 40 |
| |||||
Thornton |
| CO |
| — |
| 236 |
| 10,219 |
| 10,455 |
| (966 | ) | 2001 |
| 45 |
| |||||
Atlantis |
| FL |
| (1,778 | ) | 4 |
| 5,785 |
| 5,789 |
| (1,096 | ) | 1999 |
| 35 |
| |||||
Atlantis |
| FL |
| (1,495 | ) | — |
| 1,987 |
| 1,987 |
| (350 | ) | 1999 |
| 35 |
| |||||
Atlantis |
| FL |
| — |
| — |
| 2,018 |
| 2,018 |
| (351 | ) | 1999 |
| 35 |
| |||||
Orlando |
| FL |
| — |
| 2,144 |
| 5,640 |
| 7,784 |
| (693 | ) | 2003 |
| 36 |
| |||||
Brownsburg |
| IN |
| — |
| 430 |
| 790 |
| 1,220 |
| (158 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 520 |
| 2,034 |
| 2,554 |
| (413 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 1,278 |
| 9,887 |
| 11,165 |
| (2,000 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 700 |
| 3,554 |
| 4,254 |
| (720 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 1,200 |
| 6,592 |
| 7,792 |
| (1,342 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 944 |
| 3,037 |
| 3,981 |
| (745 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 1,754 |
| 5,834 |
| 7,588 |
| (1,379 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 642 |
| 2,453 |
| 3,095 |
| (646 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 1,057 |
| 3,949 |
| 5,006 |
| (861 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| (3,209 | ) | 1,164 |
| 6,284 |
| 7,448 |
| (1,381 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 3,104 |
| 11,477 |
| 14,581 |
| (2,408 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 420 |
| 3,598 |
| 4,018 |
| (628 | ) | 1999 |
| 35 |
| |||||
Zionsville |
| IN |
| — |
| 400 |
| 2,040 |
| 2,440 |
| (464 | ) | 1998 |
| 35 |
| |||||
Wichita |
| KS |
| (2,321 | ) | 530 |
| 3,341 |
| 3,871 |
| (309 | ) | 2001 |
| 45 |
| |||||
Louisville |
| KY |
| (6,705 | ) | 936 |
| 9,196 |
| 10,132 |
| (543 | ) | 2005 |
| 12 |
| |||||
Louisville |
| KY |
| (22,356 | ) | 835 |
| 29,604 |
| 30,439 |
| (624 | ) | 2005 |
| 38 |
| |||||
Louisville |
| KY |
| — |
| 780 |
| 8,878 |
| 9,658 |
| (362 | ) | 2005 |
| 19 |
| |||||
Louisville |
| KY |
| — |
| 826 |
| 14,975 |
| 15,801 |
| (288 | ) | 2005 |
| 39 |
| |||||
Louisville |
| KY |
| — |
| 2,983 |
| 14,019 |
| 17,002 |
| (376 | ) | 2005 |
| 31 |
| |||||
Glen Burnie |
| MD |
| (3,578 | ) | 670 |
| 5,085 |
| 5,755 |
| (968 | ) | 1999 |
| 35 |
| |||||
Minneapolis |
| MN |
| (8,361 | ) | 117 |
| 13,267 |
| 13,384 |
| (3,129 | ) | 1997 |
| 35 |
| |||||
Minneapolis |
| MN |
| (3,655 | ) | 160 |
| 10,184 |
| 10,344 |
| (2,209 | ) | 1998 |
| 35 |
| |||||
St Louis/Shrews |
| MO |
| (3,441 | ) | 1,650 |
| 3,767 |
| 5,417 |
| (664 | ) | 1999 |
| 35 |
| |||||
Albuquerque |
| NM |
| — |
| — |
| 4,835 |
| 4,835 |
| — |
| 2005 |
| * |
| |||||
Elko |
| NV |
| — |
| 55 |
| 2,637 |
| 2,692 |
| (520 | ) | 1999 |
| 35 |
| |||||
Las Vegas |
| NV |
| — |
| — |
| 16,826 |
| 16,826 |
| (703 | ) | 2004 |
| 40 |
| |||||
Las Vegas |
| NV |
| — |
| 3,244 |
| 18,485 |
| 21,729 |
| (981 | ) | 2004 |
| 30 |
| |||||
Harrison |
| OH |
| (2,654 | ) | — |
| 4,561 |
| 4,561 |
| (804 | ) | 1999 |
| 35 |
| |||||
45
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Owasso |
| OK |
| $ | — |
| $ | — |
| $ | 265 |
| $ | 265 |
| $ | — |
| 2005 |
| * |
|
Roseburg |
| OR |
| — |
| — |
| 5,707 |
| 5,707 |
| (917 | ) | 2000 |
| 34 |
| |||||
Hermitage |
| TN |
| — |
| 830 |
| 7,858 |
| 8,688 |
| (471 | ) | 2003 |
| 36 |
| |||||
Hermitage |
| TN |
| — |
| 596 |
| 10,428 |
| 11,024 |
| (1,029 | ) | 2003 |
| 36 |
| |||||
Hermitage |
| TN |
| — |
| 317 |
| 7,066 |
| 7,383 |
| (676 | ) | 2003 |
| 36 |
| |||||
Murfreesboro |
| TN |
| (6,394 | ) | 900 |
| 11,936 |
| 12,836 |
| (2,148 | ) | 1999 |
| 35 |
| |||||
Fort Worth |
| TX |
| (2,828 | ) | — |
| 3,515 |
| 3,515 |
| (80 | ) | 2005 |
| 25 |
| |||||
Fort Worth |
| TX |
| (4,688 | ) | — |
| 8,001 |
| 8,001 |
| (75 | ) | 2005 |
| 40 |
| |||||
Houston |
| TX |
| — |
| 300 |
| 3,770 |
| 4,070 |
| (1,558 | ) | 1993 |
| 30 |
| |||||
Houston |
| TX |
| (13,276 | ) | 1,927 |
| 32,234 |
| 34,161 |
| (5,918 | ) | 1999 |
| 35 |
| |||||
Houston |
| TX |
| (10,427 | ) | 2,203 |
| 19,142 |
| 21,345 |
| (6,486 | ) | 1999 |
| 20 |
| |||||
Longview |
| TX |
| — |
| 102 |
| 7,998 |
| 8,100 |
| (2,106 | ) | 1993 |
| 45 |
| |||||
Lufkin |
| TX |
| — |
| 338 |
| 2,383 |
| 2,721 |
| (592 | ) | 1993 |
| 45 |
| |||||
McKinney |
| TX |
| — |
| 541 |
| 6,382 |
| 6,923 |
| (700 | ) | 2003 |
| 36 |
| |||||
McKinney |
| TX |
| — |
| — |
| 7,827 |
| 7,827 |
| (343 | ) | 2003 |
| 36 |
| |||||
Pampa |
| TX |
| — |
| 84 |
| 3,242 |
| 3,326 |
| (848 | ) | 1993 |
| 45 |
| |||||
Plano |
| TX |
| (4,426 | ) | 1,704 |
| 7,806 |
| 9,510 |
| (1,908 | ) | 1999 |
| 25 |
| |||||
Victoria |
| TX |
| — |
| 125 |
| 8,977 |
| 9,102 |
| (2,225 | ) | 1994 |
| 45 |
| |||||
Bountiful |
| UT |
| — |
| 276 |
| 5,237 |
| 5,513 |
| (1,217 | ) | 1995 |
| 45 |
| |||||
Castle Dale |
| UT |
| — |
| 50 |
| 1,818 |
| 1,868 |
| (359 | ) | 1999 |
| 35 |
| |||||
Centerville |
| UT |
| (507 | ) | 300 |
| 1,288 |
| 1,588 |
| (254 | ) | 1999 |
| 35 |
| |||||
Grantsville |
| UT |
| — |
| 50 |
| 429 |
| 479 |
| (84 | ) | 1999 |
| 35 |
| |||||
Kaysville |
| UT |
| — |
| 530 |
| 4,493 |
| 5,023 |
| (432 | ) | 2001 |
| 45 |
| |||||
Layton |
| UT |
| (1,117 | ) | — |
| 2,827 |
| 2,827 |
| (498 | ) | 1999 |
| 35 |
| |||||
Layton |
| UT |
| — |
| 371 |
| 7,085 |
| 7,456 |
| (982 | ) | 2001 |
| 35 |
| |||||
Ogden |
| UT |
| (608 | ) | 180 |
| 1,726 |
| 1,906 |
| (334 | ) | 1999 |
| 35 |
| |||||
Orem |
| UT |
| — |
| 337 |
| 9,813 |
| 10,150 |
| (1,975 | ) | 1999 |
| 35 |
| |||||
Providence |
| UT |
| — |
| 240 |
| 4,005 |
| 4,245 |
| (780 | ) | 1999 |
| 35 |
| |||||
Salt Lake City |
| UT |
| — |
| 190 |
| 779 |
| 969 |
| (151 | ) | 1999 |
| 35 |
| |||||
Salt Lake City |
| UT |
| (4,710 | ) | 180 |
| 14,849 |
| 15,029 |
| (2,974 | ) | 1999 |
| 35 |
| |||||
Salt Lake City |
| UT |
| — |
| 3,000 |
| 7,547 |
| 10,547 |
| (834 | ) | 2001 |
| 40 |
| |||||
Salt Lake City |
| UT |
| — |
| 509 |
| 4,402 |
| 4,911 |
| (549 | ) | 2003 |
| 36 |
| |||||
Salt Lake City |
| UT |
| — |
| 220 |
| 10,795 |
| 11,015 |
| (2,220 | ) | 1999 |
| 35 |
| |||||
Springville |
| UT |
| — |
| 85 |
| 1,493 |
| 1,578 |
| (294 | ) | 1999 |
| 35 |
| |||||
Stansbury |
| UT |
| (2,246 | ) | 450 |
| 3,220 |
| 3,670 |
| (298 | ) | 2001 |
| 45 |
| |||||
Washington Terrace |
| UT |
| — |
| — |
| 4,631 |
| 4,631 |
| (1,012 | ) | 1999 |
| 35 |
| |||||
Washington Terrace |
| UT |
| — |
| — |
| 2,703 |
| 2,703 |
| (584 | ) | 1999 |
| 35 |
| |||||
West Valley City |
| UT |
| — |
| 1,070 |
| 17,463 |
| 18,533 |
| (3,425 | ) | 1999 |
| 35 |
| |||||
West Valley City |
| UT |
| — |
| 410 |
| 8,264 |
| 8,674 |
| (827 | ) | 2002 |
| 35 |
| |||||
Reston |
| VA |
| — |
| — |
| 16,073 |
| 16,073 |
| (639 | ) | 2004 |
| 40 |
| |||||
Renton |
| WA |
| — |
| — |
| 18,796 |
| 18,796 |
| (3,406 | ) | 1999 |
| 35 |
| |||||
Seattle |
| WA |
| — |
| — |
| 58,900 |
| 58,900 |
| (3,184 | ) | 2004 |
| 39 |
| |||||
Seattle |
| WA |
| — |
| — |
| 28,945 |
| 28,945 |
| (2,156 | ) | 2004 |
| 36 |
| |||||
Seattle |
| WA |
| — |
| — |
| 9,439 |
| 9,439 |
| (724 | ) | 2004 |
| 33 |
| |||||
Seattle |
| WA |
| — |
| — |
| 9,639 |
| 9,639 |
| (817 | ) | 2004 |
| 10 |
| |||||
Seattle |
| WA |
| — |
| — |
| 4,585 |
| 4,585 |
| (412 | ) | 2004 |
| 25 |
| |||||
Total Medical office building |
|
|
| $ | (146,758 | ) | $ | 79,255 |
| $ | 903,392 |
| $ | 982,647 |
| $ | (119,457 | ) |
|
|
|
|
46
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Hospitals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fayetteville |
| AR |
| $ | — |
| $ | 700 |
| $ | 9,951 |
| $ | 10,651 |
| $ | (1,755 | ) | 1999 |
| 35 |
|
Little Rock |
| AR |
| — |
| 709 |
| 9,604 |
| 10,313 |
| (3,458 | ) | 1989 |
| 45 |
| |||||
Peoria |
| AZ |
| — |
| 1,565 |
| 7,070 |
| 8,635 |
| (2,774 | ) | 1988 |
| 45 |
| |||||
Tucson |
| AZ |
| — |
| 630 |
| 2,989 |
| 3,619 |
| (571 | ) | 1989 |
| 45 |
| |||||
Irvine |
| CA |
| — |
| 18,000 |
| 70,800 |
| 88,800 |
| (12,481 | ) | 1999 |
| 35 |
| |||||
Los Gatos |
| CA |
| — |
| 3,736 |
| 17,139 |
| 20,875 |
| (11,337 | ) | 1985 |
| 30 |
| |||||
Tarzana |
| CA |
| — |
| 12,300 |
| 77,465 |
| 89,765 |
| (13,636 | ) | 1999 |
| 35 |
| |||||
Colorado Springs |
| CO |
| — |
| 690 |
| 8,338 |
| 9,028 |
| (2,924 | ) | 1990 |
| 45 |
| |||||
Ft. Lauderdale |
| FL |
| — |
| 2,000 |
| 11,269 |
| 13,269 |
| (2,299 | ) | 1997 |
| 40 |
| |||||
Palm Beach Garden |
| FL |
| — |
| 4,200 |
| 58,250 |
| 62,450 |
| (10,265 | ) | 1999 |
| 35 |
| |||||
Roswell |
| GA |
| — |
| 6,900 |
| 54,859 |
| 61,759 |
| (9,731 | ) | 1999 |
| 35 |
| |||||
Idaho Falls |
| ID |
| — |
| 2,068 |
| 25,170 |
| 27,238 |
| (1,764 | ) | 2002 |
| 45 |
| |||||
Overland Park |
| KS |
| — |
| 2,316 |
| 10,704 |
| 13,020 |
| (4,159 | ) | 1986 |
| 45 |
| |||||
Wichita |
| KS |
| — |
| 1,500 |
| 12,501 |
| 14,001 |
| (2,203 | ) | 1999 |
| 35 |
| |||||
Plaquemine |
| LA |
| — |
| 636 |
| 9,722 |
| 10,358 |
| (3,647 | ) | 1992 |
| 35 |
| |||||
Slidell |
| LA |
| — |
| 2,520 |
| 19,412 |
| 21,932 |
| (9,936 | ) | 1985 |
| 40 |
| |||||
Poplar Bluff |
| MO |
| — |
| 1,200 |
| 34,800 |
| 36,000 |
| (6,131 | ) | 1999 |
| 35 |
| |||||
Hickory |
| NC |
| — |
| 2,600 |
| 69,900 |
| 72,500 |
| (12,316 | ) | 1999 |
| 35 |
| |||||
Bennetsville |
| SC |
| — |
| 794 |
| 13,700 |
| 14,494 |
| (3,381 | ) | 1999 |
| 25 |
| |||||
Cheraw |
| SC |
| — |
| 500 |
| 8,000 |
| 8,500 |
| (1,980 | ) | 1999 |
| 25 |
| |||||
Amarillo |
| TX |
| — |
| 350 |
| 3,800 |
| 4,150 |
| (2,425 | ) | 1999 |
| 10 |
| |||||
Cleveland |
| TX |
| — |
| 400 |
| 14,603 |
| 15,003 |
| (2,171 | ) | 1999 |
| 35 |
| |||||
San Antonio |
| TX |
| — |
| 1,990 |
| 12,994 |
| 14,984 |
| (6,192 | ) | 1988 |
| 45 |
| |||||
Webster |
| TX |
| — |
| 2,900 |
| 58,759 |
| 61,659 |
| (8,509 | ) | 1997 |
| 35 |
| |||||
West Valley City |
| UT |
| — |
| 890 |
| 5,161 |
| 6,051 |
| (1,231 | ) | 1999 |
| 35 |
| |||||
Morgantown |
| WV |
| — |
| — |
| 14,400 |
| 14,400 |
| (2,540 | ) | 1999 |
| 35 |
| |||||
Total hospitals |
|
|
| $ | — |
| $ | 72,094 |
| $ | 641,360 |
| $ | 713,454 |
| $ | (139,816 | ) |
|
|
|
|
Skilled nursing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mobile |
| AL |
| $ | — |
| $ | 335 |
| $ | 3,614 |
| $ | 3,949 |
| $ | (2,459 | ) | 1986 |
| 30 |
|
Dumas |
| AR |
| — |
| 50 |
| 1,453 |
| 1,503 |
| (1,021 | ) | 1988 |
| 25 |
| |||||
Piggott |
| AR |
| — |
| 30 |
| 1,909 |
| 1,939 |
| (1,090 | ) | 1988 |
| 30 |
| |||||
Douglas |
| AZ |
| — |
| 110 |
| 1,492 |
| 1,602 |
| (318 | ) | 1999 |
| 35 |
| |||||
Safford |
| AZ |
| — |
| 300 |
| 4,217 |
| 4,517 |
| (789 | ) | 1999 |
| 35 |
| |||||
Bellflower |
| CA |
| — |
| 330 |
| 1,148 |
| 1,478 |
| (732 | ) | 1986 |
| 35 |
| |||||
Claremont |
| CA |
| — |
| 513 |
| 1,944 |
| 2,457 |
| (1,339 | ) | 1985 |
| 25 |
| |||||
Downey |
| CA |
| — |
| 330 |
| 1,406 |
| 1,736 |
| (902 | ) | 1986 |
| 35 |
| |||||
El Monte |
| CA |
| — |
| 360 |
| 3,542 |
| 3,902 |
| (2,273 | ) | 1986 |
| 35 |
| |||||
Glendora |
| CA |
| — |
| 430 |
| 2,292 |
| 2,722 |
| (1,424 | ) | 1986 |
| 35 |
| |||||
Livermore |
| CA |
| — |
| 330 |
| 1,711 |
| 2,041 |
| (1,345 | ) | 1985 |
| 25 |
| |||||
Lomita |
| CA |
| — |
| 510 |
| 1,222 |
| 1,732 |
| (793 | ) | 1986 |
| 35 |
| |||||
Perris |
| CA |
| — |
| 336 |
| 3,394 |
| 3,730 |
| (1,153 | ) | 1998 |
| 25 |
| |||||
Vista |
| CA |
| — |
| 653 |
| 6,447 |
| 7,100 |
| (2,118 | ) | 1997 |
| 25 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Denver |
| CO |
| — |
| 200 |
| 3,764 |
| 3,964 |
| (701 | ) | 1999 |
| 35 |
| |||||
Fort Collins |
| CO |
| — |
| 159 |
| 2,064 |
| 2,223 |
| (1,611 | ) | 1985 |
| 25 |
| |||||
Lakewood |
| CO |
| — |
| 150 |
| 4,548 |
| 4,698 |
| (842 | ) | 1999 |
| 35 |
| |||||
Morrison |
| CO |
| — |
| 430 |
| 5,689 |
| 6,119 |
| (4,311 | ) | 1985 |
| 25 |
| |||||
Lake City |
| FL |
| — |
| 100 |
| 2,649 |
| 2,749 |
| (1,803 | ) | 1987 |
| 30 |
| |||||
Lake Worth |
| FL |
| — |
| 720 |
| 5,264 |
| 5,984 |
| (2,056 | ) | 1989 |
| 45 |
|
47
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Live Oak |
| FL |
| $ | — |
| $ | 130 |
| $ | 2,317 |
| $ | 2,447 |
| $ | (932 | ) | 1989 |
| 45 |
|
Orange Park |
| FL |
| — |
| 450 |
| 3,322 |
| 3,772 |
| (1,271 | ) | 1988 |
| 45 |
| |||||
Orlando |
| FL |
| — |
| 755 |
| 2,984 |
| 3,739 |
| (1,751 | ) | 1998 |
| 30 |
| |||||
Orlando |
| FL |
| — |
| 600 |
| 5,059 |
| 5,659 |
| (1,936 | ) | 1988 |
| 45 |
| |||||
Port St. Lucie |
| FL |
| — |
| 1,050 |
| 2,528 |
| 3,578 |
| (1,150 | ) | 1988 |
| 45 |
| |||||
Winter Haven |
| FL |
| — |
| 875 |
| 4,337 |
| 5,212 |
| (1,807 | ) | 1989 |
| 45 |
| |||||
Statesboro |
| GA |
| — |
| 168 |
| 1,695 |
| 1,863 |
| (599 | ) | 1998 |
| 25 |
| |||||
Cedar Rapids |
| IA |
| — |
| 300 |
| 3,430 |
| 3,730 |
| (1,971 | ) | 1988 |
| 30 |
| |||||
Rexburg |
| ID |
| — |
| 200 |
| 5,310 |
| 5,510 |
| (1,329 | ) | 1998 |
| 35 |
| |||||
Anderson |
| IN |
| — |
| 50 |
| 8,035 |
| 8,085 |
| (1,734 | ) | 1998 |
| 35 |
| |||||
Angola |
| IN |
| — |
| 130 |
| 2,970 |
| 3,100 |
| (581 | ) | 1999 |
| 35 |
| |||||
Chesterton |
| IN |
| — |
| 53 |
| 3,407 |
| 3,460 |
| (1,162 | ) | 1995 |
| 35 |
| |||||
Ferdinand |
| IN |
| — |
| 26 |
| 3,389 |
| 3,415 |
| (1,292 | ) | 1991 |
| 40 |
| |||||
Fort Wayne |
| IN |
| — |
| 125 |
| 3,391 |
| 3,516 |
| (794 | ) | 1998 |
| 35 |
| |||||
Fort Wayne |
| IN |
| — |
| 200 |
| 4,300 |
| 4,500 |
| (881 | ) | 1999 |
| 35 |
| |||||
Fort Wayne |
| IN |
| — |
| 140 |
| 3,860 |
| 4,000 |
| (762 | ) | 1999 |
| 35 |
| |||||
Greenfield |
| IN |
| — |
| 130 |
| 3,303 |
| 3,433 |
| (767 | ) | 1998 |
| 35 |
| |||||
Huntington |
| IN |
| — |
| 30 |
| 3,071 |
| 3,101 |
| (623 | ) | 1999 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 250 |
| 2,184 |
| 2,434 |
| (552 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 500 |
| 7,344 |
| 7,844 |
| (1,636 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 40 |
| 1,994 |
| 2,034 |
| (442 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 100 |
| 2,334 |
| 2,434 |
| (562 | ) | 1998 |
| 35 |
| |||||
Indianapolis |
| IN |
| — |
| 450 |
| 5,583 |
| 6,033 |
| (1,237 | ) | 1998 |
| 35 |
| |||||
Jasper |
| IN |
| — |
| 165 |
| 6,811 |
| 6,976 |
| (1,283 | ) | 2001 |
| 35 |
| |||||
Jeffersonville |
| IN |
| — |
| 296 |
| 6,955 |
| 7,251 |
| (3,776 | ) | 1990 |
| 30 |
| |||||
Kokomo |
| IN |
| — |
| 250 |
| 5,932 |
| 6,182 |
| (707 | ) | 2000 |
| 45 |
| |||||
Lebanon |
| IN |
| — |
| — |
| 5,550 |
| 5,550 |
| (1,033 | ) | 2000 |
| 45 |
| |||||
Ligonier |
| IN |
| — |
| 84 |
| 2,839 |
| 2,923 |
| (373 | ) | 2002 |
| 30 |
| |||||
Logansport |
| IN |
| — |
| 80 |
| 3,032 |
| 3,112 |
| (592 | ) | 2002 |
| 25 |
| |||||
Lowell |
| IN |
| — |
| 34 |
| 3,035 |
| 3,069 |
| (1,406 | ) | 1991 |
| 35 |
| |||||
Michigan City |
| IN |
| — |
| 555 |
| 5,494 |
| 6,049 |
| (270 | ) | 2004 |
| 40 |
| |||||
Milford |
| IN |
| — |
| 26 |
| 1,935 |
| 1,961 |
| (838 | ) | 1991 |
| 35 |
| |||||
New Albany |
| IN |
| — |
| 230 |
| 7,090 |
| 7,320 |
| (1,365 | ) | 2001 |
| 35 |
| |||||
Petersburg |
| IN |
| — |
| 25 |
| 2,434 |
| 2,459 |
| (1,026 | ) | 1991 |
| 40 |
| |||||
Richmond |
| IN |
| — |
| 250 |
| 5,016 |
| 5,266 |
| (867 | ) | 2001 |
| 35 |
| |||||
Seymour |
| IN |
| — |
| — |
| 7,897 |
| 7,897 |
| (410 | ) | 2004 |
| 45 |
| |||||
Spencer |
| IN |
| — |
| 70 |
| 7,440 |
| 7,510 |
| (1,498 | ) | 2001 |
| 35 |
| |||||
Tell City |
| IN |
| — |
| 95 |
| 7,812 |
| 7,907 |
| (867 | ) | 2001 |
| 45 |
| |||||
Upland |
| IN |
| — |
| 150 |
| 1,715 |
| 1,865 |
| (946 | ) | 1986 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Yorktown |
| IN |
| — |
| 64 |
| 3,603 |
| 3,667 |
| (1,221 | ) | 1995 |
| 35 |
| |||||
Hutchinson |
| KS |
| — |
| 318 |
| 3,756 |
| 4,074 |
| (1,922 | ) | 1986 |
| 40 |
| |||||
Salina |
| KS |
| — |
| 250 |
| 2,415 |
| 2,665 |
| (1,409 | ) | 1988 |
| 30 |
| |||||
Wichita |
| KS |
| — |
| 220 |
| 4,377 |
| 4,597 |
| (2,200 | ) | 1986 |
| 40 |
| |||||
Albany |
| KY |
| — |
| 95 |
| 1,918 |
| 2,013 |
| (315 | ) | 2002 |
| 30 |
| |||||
Augusta |
| KY |
| — |
| 75 |
| 881 |
| 956 |
| (207 | ) | 2002 |
| 20 |
| |||||
Bedford. |
| KY |
| — |
| 50 |
| 2,667 |
| 2,717 |
| (416 | ) | 2002 |
| 30 |
| |||||
Cynthiana |
| KY |
| — |
| 192 |
| 4,875 |
| 5,067 |
| (107 | ) | 2005 |
| 40 |
| |||||
Georgetown |
| KY |
| — |
| 620 |
| 2,298 |
| 2,918 |
| (362 | ) | 2002 |
| 30 |
| |||||
Mayfield |
| KY |
| — |
| 218 |
| 2,797 |
| 3,015 |
| (1,349 | ) | 1986 |
| 40 |
| |||||
Taylorsville |
| KY |
| — |
| 145 |
| 5,390 |
| 5,535 |
| (839 | ) | 2002 |
| 30 |
| |||||
Franklin |
| LA |
| — |
| 406 |
| 4,102 |
| 4,508 |
| (1,416 | ) | 1998 |
| 25 |
| |||||
48
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Morgan City |
| LA |
| $ | — |
| $ | 202 |
| $ | 2,048 |
| $ | 2,250 |
| $ | (707 | ) | 1998 |
| 25 |
|
Chelmsford |
| MA |
| — |
| 429 |
| 3,996 |
| 4,425 |
| (2,665 | ) | 1985 |
| 30 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Westborough |
| MA |
| — |
| 138 |
| 2,975 |
| 3,113 |
| (2,040 | ) | 1985 |
| 30 |
| |||||
Cambridge |
| MD |
| — |
| 371 |
| 9,166 |
| 9,537 |
| (4,752 | ) | 1987 |
| 35 |
| |||||
Elkton |
| MD |
| — |
| 706 |
| 7,012 |
| 7,718 |
| (3,607 | ) | 1987 |
| 35 |
| |||||
Lexington Park |
| MD |
| — |
| 210 |
| 4,658 |
| 4,868 |
| (2,317 | ) | 1987 |
| 40 |
| |||||
Bad Axe |
| MI |
| — |
| 400 |
| 4,506 |
| 4,906 |
| (906 | ) | 1998 |
| 40 |
| |||||
Deckerville |
| MI |
| — |
| 39 |
| 2,966 |
| 3,005 |
| (1,253 | ) | 1986 |
| 45 |
| |||||
Mc Bain |
| MI |
| — |
| 12 |
| 2,424 |
| 2,436 |
| (1,035 | ) | 1986 |
| 45 |
| |||||
West Point |
| MS |
| — |
| 110 |
| 2,635 |
| 2,745 |
| (1,253 | ) | 1986 |
| 40 |
| |||||
Arden |
| NC |
| — |
| 460 |
| 3,753 |
| 4,213 |
| (1,126 | ) | 1996 |
| 45 |
| |||||
King |
| NC |
| — |
| 207 |
| 3,423 |
| 3,630 |
| (1,262 | ) | 1993 |
| 45 |
| |||||
Knightdale |
| NC |
| — |
| 300 |
| 3,169 |
| 3,469 |
| (1,159 | ) | 1995 |
| 35 |
| |||||
Lenoir |
| NC |
| — |
| — |
| 3,459 |
| 3,459 |
| (259 | ) | 2002 |
| 40 |
| |||||
Walnut Cove |
| NC |
| — |
| 30 |
| 3,470 |
| 3,500 |
| (2,519 | ) | 1985 |
| 25 |
| |||||
Woodfin |
| NC |
| — |
| 301 |
| 3,321 |
| 3,622 |
| (1,236 | ) | 1993 |
| 45 |
| |||||
Las Vegas |
| NM |
| — |
| 178 |
| 1,638 |
| 1,816 |
| (1,350 | ) | 1985 |
| 25 |
| |||||
Las Vegas |
| NV |
| — |
| 1,300 |
| 4,300 |
| 5,600 |
| (1,046 | ) | 1999 |
| 35 |
| |||||
Las Vegas |
| NV |
| — |
| 1,300 |
| 6,200 |
| 7,500 |
| (1,422 | ) | 1999 |
| 35 |
| |||||
Canton |
| OH |
| — |
| 77 |
| 3,785 |
| 3,862 |
| (2,640 | ) | 1986 |
| 30 |
| |||||
Delaware |
| OH |
| — |
| 93 |
| 3,440 |
| 3,533 |
| (1,977 | ) | 1986 |
| 35 |
| |||||
Fairborn |
| OH |
| — |
| 250 |
| 4,951 |
| 5,201 |
| (955 | ) | 1999 |
| 35 |
| |||||
Georgetown |
| OH |
| — |
| 130 |
| 5,070 |
| 5,200 |
| (976 | ) | 1999 |
| 35 |
| |||||
Hilliard |
| OH |
| — |
| 87 |
| 3,776 |
| 3,863 |
| (2,610 | ) | 1986 |
| 30 |
| |||||
Marion |
| OH |
| — |
| 218 |
| 2,971 |
| 3,189 |
| (1,831 | ) | 1986 |
| 30 |
| |||||
Newark |
| OH |
| — |
| 400 |
| 8,588 |
| 8,988 |
| (4,544 | ) | 1986 |
| 35 |
| |||||
Port Clinton |
| OH |
| — |
| 370 |
| 3,730 |
| 4,100 |
| (740 | ) | 1999 |
| 35 |
| |||||
Springfield |
| OH |
| — |
| 250 |
| 4,051 |
| 4,301 |
| (796 | ) | 1999 |
| 35 |
| |||||
Toledo |
| OH |
| — |
| 120 |
| 5,280 |
| 5,400 |
| (1,054 | ) | 1999 |
| 35 |
| |||||
Versailles |
| OH |
| — |
| 120 |
| 5,080 |
| 5,200 |
| (977 | ) | 1999 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Edmond |
| OK |
| — |
| 516 |
| 3,768 |
| 4,284 |
| (1,782 | ) | 1986 |
| 45 |
| |||||
Moore |
| OK |
| — |
| 134 |
| 3,454 |
| 3,588 |
| (1,623 | ) | 1986 |
| 45 |
| |||||
Ponca City |
| OK |
| — |
| 316 |
| 2,630 |
| 2,946 |
| (420 | ) | 2000 |
| 35 |
| |||||
Seminole |
| OK |
| — |
| 263 |
| 464 |
| 727 |
| (264 | ) | 2000 |
| 35 |
| |||||
Shawnee |
| OK |
| — |
| 297 |
| 4,245 |
| 4,542 |
| (700 | ) | 2000 |
| 35 |
| |||||
Stillwater |
| OK |
| — |
| 50 |
| 1,323 |
| 1,373 |
| (444 | ) | 1998 |
| 35 |
| |||||
Salem |
| OR |
| — |
| 87 |
| 2,660 |
| 2,747 |
| (1,830 | ) | 1985 |
| 25 |
| |||||
Hillsdale |
| PA |
| — |
| 35 |
| 3,298 |
| 3,333 |
| (659 | ) | 1998 |
| 35 |
| |||||
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Carthage |
| TN |
| — |
| 129 |
| 2,406 |
| 2,535 |
| (141 | ) | 2004 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Huntsville |
| TN |
| — |
| 75 |
| 5,467 |
| 5,542 |
| (1,070 | ) | 2001 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Kingsport |
| TN |
| — |
| 450 |
| 8,092 |
| 8,542 |
| (1,688 | ) | 2001 |
| 35 |
| |||||
Lawrence County |
| TN |
| — |
| 210 |
| 7,832 |
| 8,042 |
| (1,595 | ) | 2001 |
| 35 |
| |||||
Loudon |
| TN |
| — |
| 26 |
| 3,879 |
| 3,905 |
| (2,100 | ) | 1986 |
| 35 |
| |||||
Maryville |
| TN |
| — |
| 160 |
| 1,472 |
| 1,632 |
| (636 | ) | 1986 |
| 45 |
| |||||
Maryville |
| TN |
| — |
| 307 |
| 4,376 |
| 4,683 |
| (1,813 | ) | 1986 |
| 45 |
| |||||
49
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Amarillo |
| TX |
| — |
| 200 |
| 2,048 |
| 2,248 |
| (501 | ) | 1998 |
| 35 |
| |||||
Fort Worth. |
| TX |
| — |
| 243 |
| 2,575 |
| 2,818 |
| (894 | ) | 1998 |
| 25 |
| |||||
Frankston |
| TX |
| — |
| 50 |
| 947 |
| 997 |
| (546 | ) | 1988 |
| 30 |
| |||||
Galveston |
| TX |
| — |
| 245 |
| 6,977 |
| 7,222 |
| (968 | ) | 2002 |
| 35 |
| |||||
Pilot Point |
| TX |
| — |
| 220 |
| 2,314 |
| 2,534 |
| (434 | ) | 2002 |
| 30 |
| |||||
Pittsburg |
| TX |
| — |
| 50 |
| 1,339 |
| 1,389 |
| (761 | ) | 1988 |
| 30 |
| |||||
Port Arthur |
| TX |
| — |
| 155 |
| 7,067 |
| 7,222 |
| (977 | ) | 2002 |
| 35 |
| |||||
Texas City |
| TX |
| — |
| 325 |
| 2,727 |
| 3,052 |
| (641 | ) | 1998 |
| 35 |
| |||||
Texas City |
| TX |
| — |
| 170 |
| 7,052 |
| 7,222 |
| (975 | ) | 2002 |
| 35 |
| |||||
Ogden |
| UT |
| — |
| 250 |
| 4,685 |
| 4,935 |
| (1,174 | ) | 1998 |
| 35 |
| |||||
Fishersville |
| VA |
| — |
| 751 |
| 7,734 |
| 8,485 |
| (482 | ) | 2004 |
| 40 |
| |||||
Floyd |
| VA |
| — |
| 309 |
| 2,708 |
| 3,017 |
| (401 | ) | 2004 |
| 25 |
| |||||
Independence |
| VA |
| — |
| 206 |
| 8,366 |
| 8,572 |
| (485 | ) | 2004 |
| 40 |
| |||||
Newport News |
| VA |
| — |
| 535 |
| 6,192 |
| 6,727 |
| (399 | ) | 2004 |
| 40 |
| |||||
Roanoke |
| VA |
| — |
| 586 |
| 7,159 |
| 7,745 |
| (439 | ) | 2004 |
| 40 |
| |||||
Staunton |
| VA |
| — |
| 422 |
| 8,681 |
| 9,103 |
| (527 | ) | 2004 |
| 40 |
| |||||
Williamsburg |
| VA |
| — |
| 699 |
| 4,886 |
| 5,585 |
| (330 | ) | 2004 |
| 40 |
| |||||
Windsor |
| VA |
| — |
| 319 |
| 7,543 |
| 7,862 |
| (444 | ) | 2004 |
| 40 |
| |||||
Woodstock |
| VA |
| — |
| 607 |
| 5,400 |
| 6,007 |
| (349 | ) | 2004 |
| 40 |
| |||||
Issaquah |
| WA |
| — |
| 1,700 |
| 5,742 |
| 7,442 |
| (1,843 | ) | 1999 |
| 20 |
| |||||
Green Bay |
| WI |
| — |
| 100 |
| 3,604 |
| 3,704 |
| (2,207 | ) | 1988 |
| 30 |
| |||||
Milwaukee |
| WI |
| — |
| 450 |
| 2,239 |
| 2,689 |
| (1,287 | ) | 1988 |
| 30 |
| |||||
Omro |
| WI |
| — |
| 36 |
| 3,651 |
| 3,687 |
| (2,872 | ) | 1985 |
| 25 |
| |||||
Sturgeon Bay |
| WI |
| — |
| 250 |
| 2,653 |
| 2,903 |
| (1,525 | ) | 1988 |
| 30 |
| |||||
Total skilled nursing |
|
|
| $ | — |
| $ | 38,832 |
| $ | 561,478 |
| $ | 600,310 |
| $ | (173,111 | ) |
|
|
|
|
Other healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Douglas |
| AZ |
| $ | — |
| $ | 110 |
| $ | 703 |
| $ | 813 |
| $ | (124 | ) | 1999 |
| 35 |
|
Sacramento |
| CA |
| (12,948 | ) | 2,860 |
| 21,706 |
| 24,566 |
| (5,680 | ) | 1998 |
| 35 |
| |||||
San Diego |
| CA |
| — |
| 7,872 |
| 33,537 |
| 41,409 |
| (1,576 | ) | 2004 |
| 40 |
| |||||
Sunnyvale |
| CA |
| — |
| 5,210 |
| 15,345 |
| 20,555 |
| (3,739 | ) | 1997 |
| 35 |
| |||||
Bristol |
| CT |
| — |
| 560 |
| 2,839 |
| 3,399 |
| (292 | ) | 2002 |
| 30 |
| |||||
Enfield |
| CT |
| — |
| 480 |
| 3,107 |
| 3,587 |
| (391 | ) | 2003 |
| 15 |
| |||||
Newington |
| CT |
| — |
| 310 |
| 2,007 |
| 2,317 |
| (206 | ) | 2002 |
| 30 |
| |||||
West Springfield |
| MA |
| — |
| 680 |
| 4,044 |
| 4,724 |
| (323 | ) | 2002 |
| 30 |
| |||||
East Providence |
| RI |
| — |
| 240 |
| 1,562 |
| 1,802 |
| (161 | ) | 2002 |
| 30 |
| |||||
Warwick |
| RI |
| — |
| 455 |
| 2,020 |
| 2,475 |
| (207 | ) | 2002 |
| 30 |
| |||||
Clarksville |
| TN |
| — |
| 1,195 |
| 6,537 |
| 7,732 |
| (1,430 | ) | 1998 |
| 35 |
| |||||
Knoxville |
| TN |
| — |
| 700 |
| 4,559 |
| 5,259 |
| (1,498 | ) | 1994 |
| 35 |
| |||||
Salt Lake City |
| UT |
| — |
| — |
| 878 |
| 878 |
| — |
| 2005 |
| * |
| |||||
Salt Lake City |
| UT |
| — |
| 500 |
| 8,548 |
| 9,048 |
| (1,110 | ) | 2001 |
| 35 |
| |||||
Salt Lake City |
| UT |
| — |
| 890 |
| 15,623 |
| 16,513 |
| (1,787 | ) | 2001 |
| 40 |
| |||||
Salt Lake City |
| UT |
| — |
| 190 |
| 9,875 |
| 10,065 |
| (971 | ) | 2001 |
| 45 |
| |||||
Salt Lake City |
| UT |
| — |
| 630 |
| 6,921 |
| 7,551 |
| (817 | ) | 2001 |
| 40 |
| |||||
Salt Lake City |
| UT |
| — |
| 125 |
| 6,368 |
| 6,493 |
| (626 | ) | 2001 |
| 45 |
| |||||
Salt Lake City |
| UT |
| — |
| — |
| 14,614 |
| 14,614 |
| (953 | ) | 2002 |
| 45 |
| |||||
Salt Lake City |
| UT |
| — |
| 280 |
| 4,345 |
| 4,625 |
| (337 | ) | 2002 |
| 45 |
|
50
|
|
|
|
|
| Gross Amount at Which Carried |
|
|
|
|
| Life on Which |
| |||||||||
City |
| State |
| Encumbrances |
| Land |
| Building |
| Total |
| Accumulated |
| Date |
| in Latest |
| |||||
Salt Lake City |
| UT |
| $ | — |
| $ | — |
| $ | 6,673 |
| $ | 6,673 |
| $ | (227 | ) | 2004 |
| 35 |
|
Total other healthcare |
|
|
| $ | (12,948 | ) | $ | 23,287 |
| 171,811 |
| $ | 195,098 |
| $ | (22,455 | ) |
|
|
|
| |
Total continuing operations properties |
|
|
| $ | (236,096 | ) | $ | 328,959 |
| $ | 3,424,385 |
| $ | 3,753,344 |
| $ | (579,425 | ) |
|
|
|
|
Properties held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mesa |
| AZ |
| $ | — |
| $ | 200 |
| $ | 1,445 |
| $ | 1,645 |
| $ | (390 | ) |
|
|
|
|
Tucson |
| AZ |
| — |
| 289 |
| 3,499 |
| 3,788 |
| (909 | ) |
|
|
|
| |||||
Palm Desert |
| CA |
| — |
| 760 |
| 3,062 |
| 3,822 |
| (379 | ) |
|
|
|
| |||||
Denver |
| CO |
| — |
| 952 |
| 4,791 |
| 5,743 |
| (2,800 | ) |
|
|
|
| |||||
Port Richey |
| FL |
| — |
| 1,450 |
| 5,187 |
| 6,637 |
| (642 | ) |
|
|
|
| |||||
Port Richey |
| FL |
| — |
| 250 |
| 967 |
| 1,217 |
| (451 | ) |
|
|
|
| |||||
Milledgeville |
| GA |
| — |
| 150 |
| 1,687 |
| 1,837 |
| (516 | ) |
|
|
|
| |||||
Terre Haute |
| IN |
| — |
| 275 |
| (275 | ) | — |
| — |
|
|
|
|
| |||||
Vincennes |
| IN |
| — |
| 1,000 |
| 5,373 |
| 6,373 |
| (3,518 | ) |
|
|
|
| |||||
Fairhaven |
| MA |
| — |
| 350 |
| 2,264 |
| 2,614 |
| (2,263 | ) |
|
|
|
| |||||
Las Vegas |
| NV |
| — |
| 5,900 |
| 38,366 |
| 44,266 |
| (3,982 | ) |
|
|
|
| |||||
Columbus |
| OH |
| — |
| 800 |
| 7,415 |
| 8,215 |
| (2,210 | ) |
|
|
|
| |||||
Whitehouse |
| OH |
| — |
| 250 |
| 2,501 |
| 2,751 |
| (1,174 | ) |
|
|
|
| |||||
Blountville |
| TN |
| — |
| 38 |
| 4,320 |
| 4,358 |
| (2,033 | ) |
|
|
|
| |||||
Bolivar |
| TN |
| — |
| 61 |
| 3,424 |
| 3,485 |
| (1,589 | ) |
|
|
|
| |||||
Camden |
| TN |
| — |
| 68 |
| 3,730 |
| 3,798 |
| (2,065 | ) |
|
|
|
| |||||
Huntingdon |
| TN |
| — |
| 84 |
| 4,220 |
| 4,304 |
| (1,999 | ) |
|
|
|
| |||||
Jefferson City |
| TN |
| — |
| 63 |
| 4,060 |
| 4,123 |
| (2,188 | ) |
|
|
|
| |||||
Memphis |
| TN |
| — |
| 236 |
| 4,923 |
| 5,159 |
| (2,332 | ) |
|
|
|
| |||||
Ripley |
| TN |
| — |
| 29 |
| 3,718 |
| 3,747 |
| (1,603 | ) |
|
|
|
| |||||
Houston |
| TX |
| — |
| 350 |
| 3,089 |
| 3,439 |
| (927 | ) |
|
|
|
| |||||
Houston |
| TX |
| — |
| 400 |
| 2,845 |
| 3,245 |
| (787 | ) |
|
|
|
| |||||
San Angelo |
| TX |
| — |
| 150 |
| 250 |
| 400 |
| (250 | ) |
|
|
|
| |||||
Sugar Land |
| TX |
| — |
| 350 |
| 2,976 |
| 3,326 |
| (885 | ) |
|
|
|
| |||||
Texarkana |
| TX |
| — |
| 111 |
| 3,102 |
| 3,213 |
| (2,071 | ) |
|
|
|
| |||||
The Woodlands |
| TX |
| — |
| 400 |
| 1,864 |
| 2,264 |
| (610 | ) |
|
|
|
| |||||
Walla Walla |
| WA |
| — |
| 115 |
| 1,490 |
| 1,605 |
| (1,129 | ) |
|
|
|
| |||||
Milwaukee |
| WI |
| — |
| 550 |
| 3,252 |
| 3,802 |
| (619 | ) |
|
|
|
| |||||
Total properties held for sale |
|
|
| $ | — |
| $ | 15,631 |
| $ | 123,545 |
| $ | 139,176 |
| $ | (40,321 | ) |
|
|
|
|
Corporate and other assets |
|
|
| $ | — |
| $ | — |
| $ | 5,324 |
| $ | 5,324 |
| $ | (2,372 | ) |
|
|
|
|
Total |
|
|
| $ | (236,096 | ) | $ | 344,240 |
| $ | 3,550,990 |
| $ | 3,895,230 |
| $ | (619,855 | ) |
|
|
|
|
* Property is in development and not yet placed in service.
Schedule III total |
| $ | 3,895,230 |
|
Less: In-place lease intangibles included in other assets and deferred revenue |
| 39,289 |
| |
Amount included under real estate on consolidated balance sheet |
| $ | 3,855,941 |
|
(b) A summary of activity for real estate and accumulated depreciation for the year ended December 31, 2005, 2004 and 2003 is as follows (in thousands):
51
|
| Year ended December 31, |
| |||||||
|
| 2005 |
| 2004 |
| 2003 |
| |||
Real estate: |
|
|
|
|
|
|
| |||
Balances at beginning of year |
| $ | 3,350,945 |
| $ | 3,017,461 |
| $ | 2,783,799 |
|
Acquisition of real state, development and improvements |
| 576,932 |
| 511,448 |
| 310,151 |
| |||
Disposition of real estate |
| (68,048 | ) | (183,012 | ) | (62,497 | ) | |||
Impairments |
| — |
| (17,067 | ) | (13,992 | ) | |||
Balances associated with changes in reporting presentation |
| (3,888 | ) | 22,115 |
| — |
| |||
Balances at end of year |
| $ | 3,855,941 |
| $ | 3,350,945 |
| $ | 3,017,461 |
|
|
|
|
|
|
|
|
| |||
Accumulated depreciation: |
|
|
|
|
|
|
| |||
Balances at beginning of year |
| $ | 533,764 |
| $ | 474,021 |
| $ | 412,388 |
|
Depreciation expense |
| 101,202 |
| 88,548 |
| 80,123 |
| |||
Disposition of real estate |
| (14,450 | ) | (34,163 | ) | (18,490 | ) | |||
Balances associated with changes in reporting presentation |
| (6,427 | ) | 5,358 |
| — |
| |||
Balances at end of year |
| $ | 614,089 |
| $ | 533,764 |
| $ | 474,021 |
|
52