Exhibit 99.2
Supplemental Information
September 30, 2007
(Unaudited)
Edmonds, WA | South San Francisco, CA | Denver, CO |
Table of Contents
Overview | |
About the Company | 4 |
Company Information | 5 |
Quarterly Highlights | 6 |
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Consolidated Information | |
| |
Consolidated Balance Sheets | 8 |
Consolidated Statements of Income | 9 |
Consolidated Statements of Cash Flows | 10-11 |
Consolidated Funds From Operations | 12 |
Net Income to Net Operating Income Reconciliation | 13 |
Net Cash Provided by Operating Activities to Adjusted EBITDA Reconciliation | 14 |
Adjusted Fixed Charge Coverage | 15 |
Indebtedness | 16 |
Consolidated Book Capitalization | 17 |
Consolidated Market Capitalization | 18 |
Consolidated Portfolio Overview | 19-21 |
Same Property Performance | 22 |
Lease Expirations | 23 |
Development | 24 |
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Investment Management Business | |
| |
Investment Management Business Summary | 26 |
Balance Sheets | 27 |
Statements of Operations | 28 |
Funds From Operations | 29 |
Net Operating Income | 30 |
EBITDA | 31 |
Indebtedness | 32 |
Portfolio Overview | 33 |
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|
Other Information | |
| |
Reporting Definitions | 35-36 |
Supplemental Financial Measures Disclosures | 37-38 |
2
HCP, Inc. together with its consolidated subsidiaries and joint ventures (collectively, “HCP” or the “Company”), invests directly, or through joint ventures, in healthcare-related facilities located primarily throughout the United States. HCP is a Maryland real estate investment trust (“REIT”) organized in 1985. The Company is headquartered in Long Beach, California, with operations in Nashville, Tennessee, Chicago, Illinois and San Francisco, California, and its portfolio includes interests in 753 properties. The Company acquires healthcare-related facilities and leases them and provides mortgage financing. The Company’s portfolio includes: (i) senior housing, including independent living facilities (“ILFs”), assisted living facilities (“ALFs”), and continuing care retirement communities (“CCRCs”); (ii) medical office buildings (“MOBs”); (iii) life science facilities, including laboratory and office buildings; (iv) hospitals; (v) skilled nursing facilities (“SNFs”); and (vi) other healthcare facilities, including physician group practice clinics and health and wellness centers. For business segment financial data, see our consolidated information included elsewhere in this report.
References herein to “HCP,” the “Company,” “we,” “us” and “our” include HCP, Inc. and our consolidated subsidiaries and joint ventures, unless the context otherwise requires.
The Company is organized to invest in healthcare-related facilities. Our primary goal is to increase shareholder value through profitable growth. Our investment strategy to achieve this goal is based on three principles — opportunistic investing, portfolio diversification and conservative financing.
Opportunistic Investing. We make real estate investments that are expected to drive profitable growth and create long-term shareholder value. We attempt to position ourselves to create and take advantage of situations where we believe the opportunities meet our goals and investment criteria. We invest in healthcare-related facilities directly and through joint ventures, and provide secured financing, depending on the nature of the investment opportunity.
Portfolio Diversification. We believe in maintaining a portfolio of healthcare-related real estate diversified by sector, geography, operator and investment product. Diversification reduces the likelihood that a single event would materially harm our business. This allows us to take advantage of opportunities in different markets based on individual market dynamics. While pursuing our strategy of maintaining diversification in our portfolio, there are no specific limitations on the percentage of our total assets that may be invested in any one property, property type, geographic location or in the number of properties which we may invest, lease or lend to a single operator. With investments in multiple sectors of healthcare real estate, HCP can focus on opportunities with the best risk/reward profile for the portfolio as a whole, rather than having to choose from transactions within a specific property type.
Conservative Financing. We believe a conservative balance sheet provides us with the ability to execute our opportunistic investing principles and portfolio diversification principles. We maintain our conservative balance sheet by actively managing our debt to equity levels and maintaining available sources of liquidity, such as our revolving line of credit. Generally, we attempt to match the long-term duration of our leases with long-term fixed-rate financing.
In underwriting our investments, we structure and adjust the price of the investment in accordance with our assessment of risk. We may structure transactions as master leases, require indemnifications, obtain enhancements in the form of letters of credit or security deposits, and take other measures to mitigate risk. We finance our investments based on our evaluation of available sources of funding. For short-term purposes, we may utilize our revolving line of credit or arrange for other short-term borrowings from banks or other sources. We arrange for longer-term financing through public offerings of securities or from institutional investors. We may issue debt securities or preferred or common stock. We may incur additional mortgage indebtedness on real estate we acquire. We may also obtain non-recourse or other mortgage financing on unleveraged properties in which we have invested or may refinance existing debt on properties acquired.
As of September 30, 2007, the Company’s portfolio of properties, excluding assets held for sale and classified as discontinued operations, included 753 properties and consisted of:
• 271 senior housing facilities,
• 265 medical office buildings,
• 99 life science facilities,
• 41 hospitals,
• 65 skilled nursing facilities and
• 12 other healthcare facilities.
The information in this supplemental information package should be read in conjunction with the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information filed with the Securities and Exchange Commission (“SEC”). The Reporting Definitions and Supplemental Financial Measures Disclosures are an integral part of the information presented herein.
On our internet website, www.hcpi.com, you can access, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained on our website is not incorporated by reference into, and should not be considered a part of, this supplemental information package. In addition, the SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including HCP, that file electronically with the SEC at www.sec.gov.
For more information, contact Mark A. Wallace, Executive Vice President, Chief Financial Officer and Treasurer at (562) 733-5100.
(1) As of September 30, 2007.
4
Board of Directors |
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Mary A. Cirillo-Goldberg | Harold M. Messmer, Jr. |
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Former Chairman and Chief Executive | Chairman and Chief Executive Officer |
Compensation Committee | Compensation Committee |
Nominating and Corporate | Nominating and Corporate |
Governance Committee | Governance Committee |
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|
Robert R. Fanning, Jr. | Peter L. Rhein |
Managing Director (Retired) | Partner |
The Huron Consulting Group | Sarlot & Rhein |
Audit Committee | Chairperson, Audit Committee |
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|
James F. Flaherty III | Kenneth B. Roath |
Chairman and Chief Executive Officer | Chairman Emeritus |
HCP, Inc. | HCP, Inc. |
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|
Christine Garvey | Richard M. Rosenberg |
Former Global Head of Corporate | Chairman and Chief Executive Officer |
Real Estate Services | (Retired), Bank of America |
Deutsche Bank AG | Lead Director |
| Chairperson, Nominating and |
David B. Henry | Corporate Governance Committee |
| Finance Committee |
Vice Chairman and Chief Investment |
|
Officer, Kimco Realty Corporation | Joseph P. Sullivan |
Audit Committee | Chairman of the Board of Advisors |
Finance Committee | RAND Health |
Nominating and Corporate | Chairperson, Finance Committee |
Governance Committee | Audit Committee |
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Michael D. McKee |
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Vice Chairman and Chief Executive |
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Officer, The Irvine Company |
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Chairperson, Compensation Committee |
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Senior Management |
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George P. Doyle | Brian J. Maas |
| Senior Vice President |
Senior Vice President | Associate General Counsel |
Chief Accounting Officer |
|
| Donald S. McNutt |
Charles A. Elcan |
|
Executive Vice President | Executive Vice President |
Medical Office Properties | Operations |
|
|
James F. Flaherty III | Stephen I. Robie |
Chairman and | Senior Vice President |
Chief Executive Officer | Financial Planning and Analysis |
|
|
Paul F. Gallagher | Randall W. Rohner |
Executive Vice President | Senior Vice President |
Chief Investment Officer | Life Science Estates |
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|
Edward J. Henning | Timothy M. Schoen |
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|
Executive Vice President | Senior Vice President |
General Counsel and Corporate Secretary | Investment Management |
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|
Thomas D. Kirby | Susan M. Tate |
| Senior Vice President |
Senior Vice President | Asset Management |
Acquisitions and Dispositions |
|
| Mark A. Wallace |
Thomas M. Klaritch | Executive Vice President |
Senior Vice President | Chief Financial Officer and Treasurer |
Medical Office Properties |
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Marshall D. Lees |
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Executive Vice President |
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Life Science Estates |
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Other Information |
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Corporate Headquarters | Chicago Office | Senior Debt Ratings | |
3760 Kilroy Airport Way, Suite 300 | 444 North Michigan Avenue, Suite 3230 | Moody’s | Baa3 |
Long Beach, CA 90806-2473 | Chicago, IL 60611 | Standard & Poor’s | BBB |
(562) 733-5100 | (312) 755-0700 | Fitch | BBB |
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Nashville Office | San Francisco Office | Stock Exchange Listing | |
3100 West End Avenue, Suite 800 | 400 Oyster Point Boulevard, Suite 409 | NYSE |
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Nashville, TN 37203 | South San Francisco, CA 94080 |
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(615) 324-6900 | (650) 875-1002 | Trading Symbol | |
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| HCP | Common Stock |
|
| HCP_pe | Series E Preferred Stock |
|
| HCP_pf | Series F Preferred Stock |
(1) As of October 29, 2007.
5
ACQUISITON OF SLOUGH ESTATES USA INC.
On August 1, 2007, we closed our acquisition of SEUSA for aggregate cash consideration of approximately $3.0 billion. SEUSA’s life science portfolio is concentrated in the San Francisco Bay Area and San Diego County and comprises 83 existing properties representing approximately 5.2 million square feet and an established development pipeline of 3.8 million square feet upon completion.
In connection with our acquisition of SEUSA, we obtained, from a syndicate of banks, a financing commitment for a $3.0 billion bridge loan under which $2.75 billion was borrowed at closing. In October 2007, we made aggregate payments of approximately $1.4 billion, reducing the outstanding principal balance of the bridge loan to $1.35 billion.
OTHER INVESTMENT TRANSACTIONS
During the three months ended September 30, 2007, excluding the acquisition of SEUSA, we made investments of $118 million with an average yield of 7.8%. Our investments, including the acquisition of SEUSA, for the nine months ended September 30, 2007, aggregated $3.7 billion with an average yield of 6.6%, and were made in the following sectors: (i) 83% life science, (ii) 9% MOBs, (iii) 7% hospitals and (iv) 1% senior housing and other healthcare facilities.
During the three months ended September 30, 2007, we sold 42 properties for $504 million, which included the sale of 41 properties to Emeritus Corporation for $501.5 million. Our sales of properties and marketable securities for the nine months ended September 30, 2007, aggregated $949 million and were made from the following sectors: (i) 58% senior housing, (ii) 33% skilled nursing facilities, (iii) 5% hospitals, (iv) 3% MOB and (v) 1% other healthcare facilities.
For the three and nine months ended September 30, 2007, we recognized gains from sales of real estate and real estate interest of $286.2 million and $402.4 million, respectively. For the nine months ended September 30, 2007, we recognized gains from sales of marketable securities of $5 million.
JOINT VENTURE TRANSACTION
On September 28, 2007, HCP Ventures IV, LLC, a joint venture formed on April 30, 2007, acquired an MOB valued at $35 million and concurrently placed $23 million of secured debt. The acquisition was funded pro-rata by the partners to this joint venture.
CAPITAL MARKET TRANSACTIONS
On October 5, 2007, we issued 9 million shares of common stock and received net proceeds of approximately $303 million, which were used to repay outstanding borrowings under our bridge loan.
On October 15, 2007, we issued $600 million of 6.70% senior unsecured notes due in 2018. The notes were priced at 99.793% of the principal amount for an effective yield of 6.73%. We received net proceeds of approximately $595 million, which were used to repay outstanding borrowings under our bridge loan.
OTHER EVENTS
On September 7, 2007, we changed our name from Health Care Property Investors, Inc. to HCP, Inc. Our common stock continues to trade on the New York Stock Exchange under the symbol HCP.
On October 25, 2007, our Board of Directors declared a quarterly common stock cash dividend of $0.445 per share. The common stock dividend will be paid on November 19, 2007 to stockholders of record as of the close of business on November 5, 2007.
On October 25, 2007, our Board of Directors unanimously elected Ms. Christine Garvey as a new director.
(1) Includes events subsequent to the current quarter-end through the date of the most recent quarterly earnings press release issuance.
6
|
| September 30, |
| December 31, |
| ||
In thousands |
| 2007 |
| 2006 |
| ||
ASSETS |
| (Unaudited) |
|
|
| ||
Real estate: |
|
|
|
|
| ||
Buildings and improvements |
| $ | 8,017,019 |
| $ | 5,767,079 |
|
Developments in process |
| 266,903 |
| 42,346 |
| ||
Land |
| 1,601,529 |
| 653,435 |
| ||
Less accumulated depreciation and amortization |
| 672,401 |
| 523,732 |
| ||
Net real estate |
| 9,213,050 |
| 5,939,128 |
| ||
|
|
|
|
|
| ||
Net investment in direct financing leases |
| 637,742 |
| 678,013 |
| ||
Loans receivable, net |
| 159,879 |
| 196,480 |
| ||
Investments in and advances to unconsolidated joint ventures |
| 248,676 |
| 25,389 |
| ||
Accounts receivable, net |
| 34,403 |
| 31,026 |
| ||
Cash and cash equivalents |
| 568,853 |
| 58,405 |
| ||
Restricted cash |
| 65,080 |
| 40,786 |
| ||
Intangible assets, net |
| 648,915 |
| 380,568 |
| ||
Real estate held for sale, net |
| 5,578 |
| 502,278 |
| ||
Real estate held for contribution, net |
| — |
| 1,684,341 |
| ||
Other assets, net |
| 513,957 |
| 476,335 |
| ||
Total assets |
| $ | 12,096,133 |
| $ | 10,012,749 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
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Bank line of credit |
| $ | — |
| $ | 624,500 |
|
Bridge and term loans |
|
| 2,750,000 |
|
| 504,593 |
|
Senior unsecured notes |
| 3,224,215 |
| 2,748,522 |
| ||
Mortgage debt |
| 1,280,515 |
| 1,288,681 |
| ||
Mortgage debt on assets held for sale |
| 3,779 |
| 38,617 |
| ||
Mortgage debt on assets held for contribution |
| — |
| 889,356 |
| ||
Other debt |
| 109,208 |
| 107,746 |
| ||
Intangible liabilities, net |
| 286,270 |
| 134,050 |
| ||
Accounts payable and accrued liabilities |
| 214,809 |
| 200,088 |
| ||
Deferred revenue |
| 44,454 |
| 20,795 |
| ||
Total liabilities |
| 7,913,250 |
| 6,556,948 |
| ||
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Minority interests: |
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Joint venture partners |
| 33,177 |
| 34,211 |
| ||
Non-managing member unitholders |
| 305,850 |
| 127,554 |
| ||
Total minority interests |
| 339,027 |
| 161,765 |
| ||
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Commitments and contingencies |
|
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Stockholders’ equity: |
|
|
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|
| ||
Preferred stock |
| 285,173 |
| 285,173 |
| ||
Common stock |
| 207,277 |
| 198,599 |
| ||
Additional paid-in capital |
| 3,413,124 |
| 3,108,908 |
| ||
Cumulative dividends in excess of earnings |
| (69,436 | ) | (316,369 | ) | ||
Accumulated other comprehensive income |
| 7,718 |
| 17,725 |
| ||
Total stockholders’ equity |
| 3,843,856 |
| 3,294,036 |
| ||
Total liabilities and stockholders’ equity |
| $ | 12,096,133 |
| $ | 10,012,749 |
|
See Reporting Definitions and Supplemental Financial Measures Disclosures
8
Consolidated Statements of Income (Unaudited)
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
In thousands, except per share data |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
Revenues and other income: |
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Rental and related revenues |
| $ | 242,267 |
| $ | 112,234 |
| $ | 648,994 |
| $ | 320,174 |
|
Income from direct financing leases |
| 18,832 |
| — |
| 49,037 |
| — |
| ||||
Investment management fee income |
| 1,602 |
| 678 |
| 12,062 |
| 2,675 |
| ||||
Interest and other income |
| 21,548 |
| 6,903 |
| 54,755 |
| 25,987 |
| ||||
|
| 284,249 |
| 119,815 |
| 764,848 |
| 348,836 |
| ||||
Costs and expenses: |
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Interest |
| 103,829 |
| 36,727 |
| 255,918 |
| 101,986 |
| ||||
Depreciation and amortization |
| 74,253 |
| 27,779 |
| 195,415 |
| 80,033 |
| ||||
Operating |
| 52,582 |
| 19,902 |
| 133,664 |
| 56,252 |
| ||||
General and administrative |
| 16,558 |
| 8,261 |
| 55,443 |
| 25,137 |
| ||||
|
| 247,222 |
| 92,669 |
| 640,440 |
| 263,408 |
| ||||
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Operating income: |
| 37,027 |
| 27,146 |
| 124,408 |
| 85,428 |
| ||||
Equity income from unconsolidated joint ventures |
| 1,242 |
| 1,044 |
| 3,758 |
| 7,580 |
| ||||
Gain on sale of real estate interest |
| — |
| — |
| 10,141 |
| — |
| ||||
Minority interests’ share of earnings |
| (6,018 | ) | (3,511 | ) | (17,992 | ) | (11,458 | ) | ||||
Income from continuing operations: |
| 32,251 |
| 24,679 |
| 120,315 |
| 81,550 |
| ||||
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Discontinued operations: |
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Operating income |
| 3,744 |
| 16,411 |
| 26,136 |
| 52,833 |
| ||||
Impairments |
| — |
| — |
| — |
| (4,711 | ) | ||||
Gains on sales of real estate |
| 286,153 |
| 35,728 |
| 392,269 |
| 46,601 |
| ||||
|
| 289,897 |
| 52,139 |
| 418,405 |
| 94,723 |
| ||||
|
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|
|
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| ||||
Net income: |
| 322,148 |
| 76,818 |
| 538,720 |
| 176,273 |
| ||||
Preferred stock dividends |
| (5,282 | ) | (5,282 | ) | (15,848 | ) | (15,848 | ) | ||||
Net income applicable to common shares: |
| $ | 316,866 |
| $ | 71,536 |
| $ | 522,872 |
| $ | 160,425 |
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Basic earnings per common share (EPS): |
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Continuing operations |
| $ | 0.13 |
| $ | 0.14 |
| $ | 0.51 |
| $ | 0.48 |
|
Discontinued operations |
| 1.41 |
| 0.38 |
| 2.04 |
| 0.70 |
| ||||
Net income applicable to common shares |
| $ | 1.54 |
| $ | 0.52 |
| $ | 2.55 |
| $ | 1.18 |
|
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Diluted earnings per common share: |
|
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|
|
|
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| ||||
Continuing operations |
| $ | 0.13 |
| $ | 0.14 |
| $ | 0.51 |
| $ | 0.48 |
|
Discontinued operations |
| 1.40 |
| 0.38 |
| 2.02 |
| 0.69 |
| ||||
Net income applicable to common shares |
| $ | 1.53 |
| $ | 0.52 |
| $ | 2.53 |
| $ | 1.17 |
|
|
|
|
|
|
|
|
|
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| ||||
Weighted average shares used to calculate EPS: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 206,186 |
| 136,682 |
| 205,322 |
| 136,402 |
| ||||
Diluted |
| 207,070 |
| 137,578 |
| 206,672 |
| 137,209 |
| ||||
|
|
|
|
|
|
|
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Dividends declared per common share: |
| $ | 0.445 |
| $ | 0.425 |
| $ | 1.335 |
| $ | 1.275 |
|
See Reporting Definitions and Supplemental Financial Measures Disclosures
9
Consolidated Statements of Cash Flows (Unaudited)
|
| Nine Months Ended September 30, |
| ||||
In thousands |
| 2007 |
| 2006 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
| $ | 538,720 |
| $ | 176,273 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization of real estate, in-place lease and other intangibles: |
|
|
|
|
| ||
Continuing operations |
| 195,415 |
| 80,033 |
| ||
Discontinued operations |
| 6,465 |
| 15,792 |
| ||
Amortization of above and below market lease intangibles, net |
| (3,185 | ) | (1,383 | ) | ||
Stock-based compensation |
| 8,516 |
| 6,060 |
| ||
Debt issuance costs amortization |
| 15,274 |
| 2,746 |
| ||
Recovery of loan losses |
| (386 | ) | — |
| ||
Straight-line rents and interest accretion on direct financing leases |
| (45,895 | ) | (7,436 | ) | ||
Deferred revenue |
| 8,937 |
| 360 |
| ||
Equity income from unconsolidated joint ventures |
| (3,758 | ) | (7,580 | ) | ||
Distributions of earnings from unconsolidated joint ventures |
| 3,148 |
| 7,580 |
| ||
Minority interests’ share of earnings |
| 17,992 |
| 11,458 |
| ||
Impairments |
| — |
| 4,711 |
| ||
Gains on sales of real estate and real estate interest |
| (402,410 | ) | (46,601 | ) | ||
Gains on sales of securities |
| (4,874 | ) | (1,552 | ) | ||
Changes in: |
|
|
|
|
| ||
Accounts receivable |
| (2,626 | ) | 637 |
| ||
Loans receivable and other assets |
| (18,384 | ) | (6,898 | ) | ||
Accounts payable and accrued liabilities |
| (3,128 | ) | 20,293 |
| ||
Net cash provided by operating activities |
| 309,821 |
| 254,493 |
| ||
|
|
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| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Cash used in SEUSA acquisition, net of cash acquired |
| (2,977,564 | ) | — |
| ||
Other cash used in the acquisition and development of real estate |
| (339,692 | ) | (336,709 | ) | ||
Lease commissions and tenant and capital improvements |
| (27,029 | ) | (12,003 | ) | ||
Net proceeds from sales of real estate |
| 854,505 |
| 100,217 |
| ||
Contributions to unconsolidated joint ventures |
| (2,619 | ) | — |
| ||
Distributions in excess of earnings from unconsolidated joint ventures |
| 476,992 |
| 161 |
| ||
Purchases of securities |
| (26,647 | ) | (12,895 | ) | ||
Proceeds from the sales of securities |
| 53,514 |
| 5,630 |
| ||
Principal repayments on loans receivable and direct financing leases |
| 101,340 |
| 45,525 |
| ||
Investments in loans receivable and debt securities |
| (18,615 | ) | (4,005 | ) | ||
Increase in restricted cash |
| (28,461 | ) | (122,895 | ) | ||
Net cash used in investing activities |
| (1,934,276 | ) | (336,974 | ) | ||
See Reporting Definitions and Supplemental Financial Measures Disclosures
10
|
| Nine Months Ended September 30, |
| ||||
In thousands |
| 2007 |
| 2006 |
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Net repayments under bank lines of credit |
| (624,500 | ) | (258,600 | ) | ||
Repayments of term loan |
| (504,593 | ) | — |
| ||
Borrowings under bridge loan |
| 2,750,000 |
| — |
| ||
Repayments of mortgage debt |
| (82,482 | ) | (20,399 | ) | ||
Issuance of mortgage debt |
| 143,421 |
| 161,874 |
| ||
Repayments of senior unsecured notes |
| (20,000 | ) | (135,000 | ) | ||
Issuance of senior unsecured notes |
| 500,000 |
| 1,150,000 |
| ||
Debt issuance costs |
| (18,659 | ) | (7,123 | ) | ||
Settlement of cash flow hedges |
| — |
| (4,354 | ) | ||
Net proceeds from the issuance of common stock and exercise of options |
| 300,591 |
| 21,686 |
| ||
Dividends paid on common and preferred stock |
| (291,787 | ) | (191,287 | ) | ||
Distributions to minority interests |
| (17,088 | ) | (10,295 | ) | ||
Net cash provided by financing activities |
| 2,134,903 |
| 706,502 |
| ||
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|
|
|
|
| ||
Net increase in cash and cash equivalents |
| 510,448 |
| 624,021 |
| ||
Cash and cash equivalents, beginning of period |
| 58,405 |
| 21,342 |
| ||
Cash and cash equivalents, end of period |
| $ | 568,853 |
| $ | 645,363 |
|
See Reporting Definitions and Supplemental Financial Measures Disclosures
11
Consolidated Funds From Operations
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||
In thousands, except per share data |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Net income applicable to common shares: |
| $ | 316,866 |
| $ | 71,536 |
| $ | 522,872 |
| $ | 160,425 |
| ||||
Depreciation and amortization of real estate, in-place lease and other intangibles: |
|
|
|
|
|
|
|
|
| ||||||||
Continuing operations |
| 74,253 |
| 27,779 |
| 195,415 |
| 80,033 |
| ||||||||
Discontinued operations |
| 51 |
| 5,009 |
| 6,465 |
| 15,792 |
| ||||||||
Gains on sales of real estate and real estate interest |
| (286,153 | ) | (35,728 | ) | (402,410 | ) | (46,601 | ) | ||||||||
Equity income from unconsolidated joint ventures |
| (1,242 | ) | (1,044 | ) | (3,758 | ) | (7,580 | ) | ||||||||
FFO from unconsolidated joint ventures |
| 6,187 |
| 2,177 |
| 15,819 |
| 5,690 |
| ||||||||
Minority interests’ share of earnings |
| 6,018 |
| 3,511 |
| 17,992 |
| 11,458 |
| ||||||||
Minority interests’ share of FFO |
| (6,973 | ) | (3,820 | ) | (20,545 | ) | (12,093 | ) | ||||||||
FFO applicable to common shares |
| $ | 109,007 |
| $ | 69,420 |
| $ | 331,850 |
| $ | 207,124 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Distributions on convertible units |
| $ | 2,606 |
| $ | 2,533 |
| $ | 10,087 |
| $ | 7,832 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Diluted FFO applicable to common shares: |
| $ | 111,613 |
| $ | 71,953 |
| $ | 341,937 |
| $ | 214,956 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Basic FFO per common share |
| $ | 0.53 |
| $ | 0.51 |
| $ | 1.62 |
| $ | 1.52 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Diluted FFO per common share |
| $ | 0.52 |
| $ | 0.50 |
| $ | 1.60 |
| $ | 1.50 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted average shares used to calculate diluted FFO per common share |
| 212,920 |
| 143,538 |
| 213,947 |
| 143,349 |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Dividends declared per common share |
| $ | 0.445 |
| $ | 0.425 |
| $ | 1.335 |
| $ | 1.275 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
FFO payout ratio per common share |
| 85.6 | % | 85.0 | % | 83.4 | % | 85.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Impact of merger-related and impairment charges |
| $ | 9,078 |
| $ | — |
| $ | 18,057 |
| $ | 4,711 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
Per common share impact of merger-related and impairment charges on diluted FFO |
| $ | 0.05 |
| $ | — |
| $ | 0.08 |
| $ | 0.03 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||||||
FFO payout ratio per common share prior to merger-related and impairment charges |
| 78.1 | % | 85.0 | % | 79.5 | % | 83.3 | % | ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Consolidated selected supplemental cash flow information: |
|
|
|
|
|
|
|
|
| ||||||||
Impairments |
| $ | — |
| $ | — |
| $ | — |
| $ | 4,711 |
| ||||
Amortization of (above) and below market lease intangibles, net |
| 1,613 |
| 462 |
| 3,185 |
| 1,383 |
| ||||||||
Stock-based compensation |
| 2,674 |
| 1,812 |
| 8,516 |
| 6,060 |
| ||||||||
Debt issuance costs amortization |
| 9,631 |
| 942 |
| 15,274 |
| 2,746 |
| ||||||||
Straight-line rents |
| 19,088 |
| 2,715 |
| 39,467 |
| 7,436 |
| ||||||||
Interest accretion on direct financing leases |
| 2,265 |
| — |
| 6,428 |
| — |
| ||||||||
Deferred revenues — tenant improvement related |
| 4,922 |
| — |
| 4,922 |
| — |
| ||||||||
Increase (decrease) in SAB 104 deferred revenue |
| 1,540 |
| (1,265 | ) | 4,015 |
| 360 |
| ||||||||
Lease commissions and tenant and capital improvements |
| 12,621 |
| 3,910 |
| 27,029 |
| 12,003 |
| ||||||||
Capitalized interest |
| 3,851 |
| 227 |
| 4,024 |
| 588 |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
HCP’s share of selected supplemental cash flow information from unconsolidated joint ventures (1): |
|
|
|
|
|
|
|
|
| ||||||||
Amortization of (above) and below market lease intangibles, net |
| $ | (276 | ) | $ | 264 |
| $ | (728 | ) | $ | 545 |
| ||||
Debt issuance costs amortization |
| 95 |
| 56 |
| 241 |
| 140 |
| ||||||||
Straight-line rents |
| 1,510 |
| 71 |
| 4,452 |
| 277 |
| ||||||||
Lease commissions and tenant and capital improvements |
| 316 |
| 862 |
| 391 |
| 1,449 |
| ||||||||
(1) Prior to November 30, 2006, HCP MOP was an unconsolidated joint venture formed between the Company and an affiliate of General Electric Company (“GE”), for which the Company was the managing member and had a 33% interest therein. HCP’s share of EBITDA and interest expense from HCP MOP excludes amounts subsequent to HCP’s acquisition of GE’s interest.
See Reporting Definitions and Supplemental Financial Measure Disclosure
12
Net Income to Net Operating Income Reconciliation
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
In thousands |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 322,148 |
| $ | 76,818 |
| $ | 538,720 |
| $ | 176,273 |
|
Income from direct financing leases |
| (18,832 | ) | — |
| (49,037 | ) | — |
| ||||
Investment management fee income |
| (1,602 | ) | (678 | ) | (12,062 | ) | (2,675 | ) | ||||
Interest and other income |
| (21,548 | ) | (6,903 | ) | (54,755 | ) | (25,987 | ) | ||||
Interest expense |
| 103,829 |
| 36,727 |
| 255,918 |
| 101,986 |
| ||||
Depreciation and amortization |
| 74,253 |
| 27,779 |
| 195,415 |
| 80,033 |
| ||||
General and administrative |
| 16,558 |
| 8,261 |
| 55,443 |
| 25,137 |
| ||||
Equity income from unconsolidated joint ventures |
| (1,242 | ) | (1,044 | ) | (3,758 | ) | (7,580 | ) | ||||
Gain on sale of real estate interest |
| — |
| — |
| (10,141 | ) | — |
| ||||
Minority interests’ share of earnings |
| 6,018 |
| 3,511 |
| 17,992 |
| 11,458 |
| ||||
Total discontinued operations |
| (289,897 | ) | (52,139 | ) | (418,405 | ) | (94,723 | ) | ||||
Net operating income (“NOI”) |
| $ | 189,685 |
| $ | 92,332 |
| $ | 515,330 |
| $ | 263,922 |
|
See Reporting Definitions and Supplemental Financial Measure Disclosure
13
Net Cash Provided by Operating Activities to Adjusted EBITDA Reconciliation
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
In thousands |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net cash provided by operating activities |
| $ | 90,149 |
| $ | 77,376 |
| $ | 309,821 |
| $ | 254,493 |
|
Changes in: |
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| (1,286 | ) | 254 |
| 2,626 |
| (637 | ) | ||||
Loans receivables and other assets |
| 13,180 |
| 6,616 |
| 18,384 |
| 6,898 |
| ||||
Accounts payable and accrued liabilities |
| 9,738 |
| (9,184 | ) | 3,128 |
| (20,293 | ) | ||||
Gains on sales of securities |
| — |
| 1,552 |
| 4,874 |
| 1,552 |
| ||||
Gains on sales of real estate and real estate interest |
| 286,153 |
| 35,728 |
| 402,410 |
| 46,601 |
| ||||
Impairments |
| — |
| — |
| — |
| (4,711 | ) | ||||
Minority interests’ share of earnings |
| (6,018 | ) | (3,511 | ) | (17,992 | ) | (11,458 | ) | ||||
Distributions of earnings from unconsolidated joint ventures |
| (1,081 | ) | (1,957 | ) | (3,148 | ) | (7,580 | ) | ||||
Equity income from unconsolidated joint ventures |
| 1,242 |
| 1,044 |
| 3,758 |
| 7,580 |
| ||||
Deferred rental revenue |
| (6,462 | ) | 1,265 |
| (8,937 | ) | (360 | ) | ||||
Straight-line rents and interest accretion on direct financing leases |
| 21,353 |
| 2,715 |
| 45,895 |
| 7,436 |
| ||||
Recovery of loan losses |
| 176 |
| — |
| 386 |
| — |
| ||||
Debt issuance costs amortization |
| (9,631 | ) | (942 | ) | (15,274 | ) | (2,746 | ) | ||||
Stock-based compensation |
| (2,674 | ) | (1,812 | ) | (8,516 | ) | (6,060 | ) | ||||
Amortization of above and below market lease intangibles, net |
| 1,613 |
| 462 |
| 3,185 |
| 1,383 |
| ||||
Depreciation and amortization of real estate, in-place lease and other intangibles: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| (74,253 | ) | (27,779 | ) | (195,415 | ) | (80,033 | ) | ||||
Discontinued operations |
| (51 | ) | (5,009 | ) | (6,465 | ) | (15,792 | ) | ||||
Net income |
| 322,148 |
| 76,818 |
| 538,720 |
| 176,273 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| 103,829 |
| 36,727 |
| 255,918 |
| 101,986 |
| ||||
Discontinued operations |
| 80 |
| 241 |
| 1,357 |
| 715 |
| ||||
Income taxes |
| 51 |
| 48 |
| 1,031 |
| 109 |
| ||||
Depreciation and amortization of real estate, in-place lease and other intangibles: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| 74,253 |
| 27,779 |
| 195,415 |
| 80,033 |
| ||||
Discontinued operations |
| 51 |
| 5,009 |
| 6,465 |
| 15,792 |
| ||||
Equity income from unconsolidated joint ventures |
| (1,242 | ) | (1,044 | ) | (3,758 | ) | (7,580 | ) | ||||
HCP’s share of EBITDA from unconsolidated joint ventures(1) |
| 9,511 |
| 3,599 |
| 26,167 |
| 15,963 |
| ||||
Other joint venture adjustments |
| 608 |
| — |
| 1,609 |
| — |
| ||||
Minority interests’ share of earnings |
| 6,018 |
| 3,511 |
| 17,992 |
| 11,458 |
| ||||
Gains on sales of real estate and real estate interest, net of impairments |
| (286,153 | ) | (35,728 | ) | (402,410 | ) | (41,890 | ) | ||||
Adjusted EBITDA |
| $ | 229,154 |
| $ | 116,960 |
| $ | 638,506 |
| $ | 352,859 |
|
(1) Prior to November 30, 2006, HCP MOP was an unconsolidated joint venture formed between the Company and an affiliate of GE, for which the Company was the managing member and had a 33% interest therein. HCP’s share of EBITDA and interest expense from HCP MOP excludes amounts subsequent to HCP’s acquisition of GE’s interest.
See Reporting Definitions and Supplemental Financial Measure Disclosure
14
Adjusted Fixed Charge Coverage
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
In thousands |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 322,148 |
| $ | 76,818 |
| $ | 538,720 |
| $ | 176,273 |
|
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| 103,829 |
| 36,727 |
| 255,918 |
| 101,986 |
| ||||
Discontinued operations |
| 80 |
| 241 |
| 1,357 |
| 715 |
| ||||
Income taxes |
| 51 |
| 48 |
| 1,031 |
| 109 |
| ||||
Depreciation and amortization of real estate, in-place lease and other intangibles: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| 74,253 |
| 27,779 |
| 195,415 |
| 80,033 |
| ||||
Discontinued operations |
| 51 |
| 5,009 |
| 6,465 |
| 15,792 |
| ||||
Equity income from unconsolidated joint ventures |
| (1,242 | ) | (1,044 | ) | (3,758 | ) | (7,580 | ) | ||||
HCP’s share of EBITDA from unconsolidated joint ventures(1) |
| 9,511 |
| 3,599 |
| 26,167 |
| 15,963 |
| ||||
Other joint venture adjustments |
| 608 |
| — |
| 1,609 |
| — |
| ||||
Minority interests’ share of earnings |
| 6,018 |
| 3,511 |
| 17,992 |
| 11,458 |
| ||||
Gains on sales of real estate and real estate interest, net of impairments |
| (286,153 | ) | (35,728 | ) | (402,410 | ) | (41,890 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Adjusted EBITDA |
| $ | 229,154 |
| $ | 116,960 |
| $ | 638,506 |
| $ | 352,859 |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| $ | 103,829 |
| $ | 36,727 |
| $ | 255,918 |
| $ | 101,986 |
|
Discontinued operations |
| 80 |
| 241 |
| 1,357 |
| 715 |
| ||||
HCP’s share of interest expense from unconsolidated joint ventures(1) |
| 4,998 |
| 1,344 |
| 13,433 |
| 4,294 |
| ||||
Capitalized interest |
| 3,851 |
| 227 |
| 4,024 |
| 588 |
| ||||
Preferred stock dividends |
| 5,282 |
| 5,282 |
| 15,848 |
| 15,848 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Fixed charges |
| $ | 118,040 |
| $ | 43,821 |
| $ | 290,580 |
| $ | 123,431 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted fixed charge coverage |
| 1.9 x |
| 2.7 x |
| 2.2 x |
| 2.9 x |
|
(1) Prior to November 30, 2006, HCP MOP was an unconsolidated joint venture formed between the Company and an affiliate of GE, for which the Company was the managing member and had a 33% interest therein. HCP’s share of EBITDA and interest expense from HCP MOP excludes amounts subsequent to HCP’s acquisition of GE’s interest.
See Reporting Definitions and Supplemental Financial Measure Disclosure
15
In thousands
Debt Maturities and Scheduled Principal Repayments
September 30, 2007
|
| Bank Line |
|
|
|
|
|
|
|
|
| HCP’s Share of |
|
|
| |||||||
|
| of Credit |
| Senior |
|
|
|
|
|
|
| Unconsolidated |
|
|
| |||||||
|
| and |
| Unsecured |
| Mortgage |
| Other |
| Consolidated |
| Mortgage |
|
|
| |||||||
|
| Bridge Loan |
| Notes |
| Debt(1) |
| Debt(3) |
| Debt |
| Debt(4) |
| Total Debt |
| |||||||
2007 |
| $ | — |
| $ | — |
| $ | 11,611 |
| $ | 109,208 |
| $ | 120,819 |
| $ | 1,037 |
| $ | 121,856 |
|
2008 |
| 2,750,000 |
| 300,000 |
| 91,721 |
| — |
| 3,141,721 |
| 3,319 |
| 3,145,040 |
| |||||||
2009 |
| — |
| — |
| 272,402 |
| — |
| 272,402 |
| 3,552 |
| 275,954 |
| |||||||
2010 |
| — |
| 206,421 |
| 296,569 |
| — |
| 502,990 |
| 3,773 |
| 506,763 |
| |||||||
2011 |
| — |
| 300,000 |
| 130,583 |
| — |
| 430,583 |
| 4,321 |
| 434,904 |
| |||||||
2012 |
| — |
| 250,000 |
| 102,658 |
| — |
| 352,658 |
| 11,518 |
| 364,176 |
| |||||||
2013 |
| — |
| 550,000 |
| 47,343 |
| — |
| 597,343 |
| 43,010 |
| 640,353 |
| |||||||
2014 |
| — |
| 87,000 |
| 168,534 |
| — |
| 255,534 |
| 4,164 |
| 259,698 |
| |||||||
2015 |
| — |
| 400,000 |
| 33,054 |
| — |
| 433,054 |
| 15,092 |
| 448,146 |
| |||||||
2016 |
| — |
| 400,000 |
| 46,452 |
| — |
| 446,452 |
| 50,741 |
| 497,193 |
| |||||||
Thereafter |
| — |
| 750,000 |
| 76,193 |
| — |
| 826,193 |
| 201,547 |
| 1,027,740 |
| |||||||
Subtotal |
| 2,750,000 |
| 3,243,421 |
| 1,277,120 |
| 109,208 |
| 7,379,749 |
| 342,074 |
| 7,721,823 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(Discounts) and premiums, net |
| — |
| (19,206 | ) | 7,174 |
| — |
| (12,032 | ) | (784 | ) | (12,816 | ) | |||||||
Total |
| $ | 2,750,000 |
| $ | 3,224,215 |
| $ | 1,284,294 |
| $ | 109,208 |
| $ | 7,367,717 |
| $ | 341,290 |
| $ | 7,709,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Weighted average interest rate |
| 6.25 | % | 6.09 | % | 6.07 | % | N/A |
| 6.15 | % | 5.66 | % | 6.13 | % | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Weighted average maturity in years |
| 0.83 |
| 6.43 |
| 4.85 |
| N/A |
| 4.03 |
| 8.58 |
| 4.23 |
|
Debt Analysis
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Fixed rate debt |
|
|
|
|
| ||
Senior unsecured notes |
| $ | 2,899,574 |
| $ | 2,424,163 |
|
Mortgage debt(1)(2) |
| 1,088,434 |
| 2,001,716 |
| ||
Other debt |
| 109,208 |
| 107,746 |
| ||
HCP’s share of unconsolidated debt |
| 341,290 |
| 27,519 |
| ||
|
| 4,438,506 |
| 4,561,144 |
| ||
Variable rate debt |
|
|
|
|
| ||
Bank line of credit |
| — |
| 624,500 |
| ||
Bridge and term loans |
| 2,750,000 |
| 504,593 |
| ||
Senior unsecured notes |
| 324,641 |
| 324,359 |
| ||
Mortgage debt |
| 195,860 |
| 214,938 |
| ||
|
| 3,270,501 |
| 1,668,390 |
| ||
Total debt |
| 7,709,007 |
| 6,229,534 |
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Fixed and variable rate ratios |
|
|
|
|
| ||
Fixed rate |
| 57.6 | % | 73.2 | % | ||
Variable rate |
| 42.4 | % | 26.8 | % | ||
|
|
|
|
|
| ||
|
| 100.0 | % | 100.0 | % | ||
(1) Includes mortgage debt on assets held for contribution at December 31, 2006.
(2) Includes $45.6 million of mortgage debt that has been hedged through interest rate swap contracts.
(3) In connection with the CRP merger on October 5, 2006, the Company assumed non-interest bearing Life Care Bonds at two of its CCRCs and non-interest bearing occupancy fee deposits at another of its senior housing facilities, all of which are payable to certain residents of the facilities.
(4) Only includes debt associated with investment management business.
16
Consolidated Book Capitalization
In thousands
Total Debt
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Bank line of credit |
| $ | — |
| $ | 624,500 |
|
Bridge and term loans |
| 2,750,000 |
| 504,593 |
| ||
Senior unsecured notes |
| 3,224,215 |
| 2,748,522 |
| ||
Mortgage debt(1) |
| 1,284,294 |
| 2,216,654 |
| ||
Other debt |
| 109,208 |
| 107,746 |
| ||
Consolidated debt |
| 7,367,717 |
| 6,202,015 |
| ||
HCP’s share of unconsolidated mortgage debt |
| 341,290 |
| 27,519 |
| ||
Total debt |
| $ | 7,709,007 |
| $ | 6,229,534 |
|
Book Capitalization
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Total debt |
| $ | 7,709,007 |
| $ | 6,229,534 |
|
Total minority interests |
| 339,027 |
| 161,765 |
| ||
Total stockholders’ equity |
| 3,843,856 |
| 3,294,036 |
| ||
Total book capitalization |
| 11,891,890 |
| 9,685,335 |
| ||
Accumulated depreciation and amortization |
| 750,126 |
| 573,455 |
| ||
Accumulated depreciation and amortization from assets held for sale and contribution |
| 1,624 |
| 7,662 |
| ||
HCP’s share of unconsolidated accumulated depreciation and amortization |
| 14,142 |
| 849 |
| ||
Total undepreciated book capitalization |
| $ | 12,657,782 |
| $ | 10,267,301 |
|
Gross Assets
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Consolidated total assets |
| $ | 12,096,133 |
| $ | 10,012,749 |
|
Investments in and advances to unconsolidated joint ventures |
| (248,676 | ) | (25,389 | ) | ||
Accumulated depreciation and amortization |
| 750,126 |
| 573,455 |
| ||
Accumulated depreciation and amortization from assets held for sale and contribution |
| 1,624 |
| 7,662 |
| ||
Consolidated gross assets |
| 12,599,207 |
| 10,568,477 |
| ||
HCP’s share of unconsolidated total assets |
| 558,502 |
| 45,208 |
| ||
HCP’s share of unconsolidated accumulated depreciation and amortization |
| 14,142 |
| 849 |
| ||
Total gross assets |
| $ | 13,171,851 |
| $ | 10,614,534 |
|
Capitalization Ratios
|
| September 30, |
| December 31, |
|
|
| 2007 |
| 2006 |
|
Total debt/Total book capitalization |
| 64.8 | % | 64.3 | % |
Total debt/Total undepreciated book capitalization |
| 60.9 | % | 60.7 | % |
|
|
|
|
|
|
Consolidated debt/Consolidated gross assets |
| 58.5 | % | 58.7 | % |
Total debt/Total gross assets |
| 58.5 | % | 58.7 | % |
|
|
|
|
|
|
Consolidated secured debt/Consolidated gross assets |
| 10.2 | % | 21.0 | % |
Total secured debt/Total gross assets |
| 12.3 | % | 21.1 | % |
(1) Includes mortgage debt on assets held for contribution and held for sale at December 31, 2006.
See Reporting Definitions and Supplemental Financial Measure Disclosure
17
Consolidated Market Capitalization
In thousands, except price data
Total Debt
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
Bank line of credit |
| $ | — |
| $ | 624,500 |
|
Bridge and term loans |
| 2,750,000 |
| 504,593 |
| ||
Senior unsecured notes |
| 3,224,215 |
| 2,748,522 |
| ||
Mortgage debt(1) |
| 1,284,294 |
| 2,216,654 |
| ||
Other debt |
| 109,208 |
| 107,746 |
| ||
Consolidated debt |
| $ | 7,367,717 |
| $ | 6,202,015 |
|
HCP’s share of unconsolidated mortgage debt |
| 341,290 |
| 27,519 |
| ||
Total debt |
| $ | 7,709,007 |
| $ | 6,229,534 |
|
Market Capitalization
|
| September 30, 2007 |
| December 31, 2006 |
| ||||||||||||
Security |
| Shares/Units |
| Price |
| Value |
| Shares/Units |
| Price |
| Value |
| ||||
Common stock |
| 207,277 |
| $ | 33.17 |
| $ | 6,875,378 |
| 198,599 |
| $ | 36.82 |
| $ | 7,312,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Convertible partnership units |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
2 for 1(2) |
| 2,516 |
| 66.34 |
| 166,911 |
| 2,533 |
| 73.64 |
| 186,530 |
| ||||
1 for 1(3) |
| 5,066 |
| 33.17 |
| 168,039 |
| 887 |
| 36.82 |
| 32,659 |
| ||||
|
|
|
|
|
| 334,950 |
|
|
|
|
| 219,189 |
| ||||
Preferred stock: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
7.25% Series E |
| 4,000 |
| 24.60 |
| 98,400 |
| 4,000 |
| 25.56 |
| 102,240 |
| ||||
7.10% Series F |
| 7,820 |
| 24.25 |
| 189,635 |
| 7,820 |
| 25.62 |
| 200,348 |
| ||||
|
|
|
|
|
| 288,035 |
|
|
|
|
| 302,588 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated market equity |
|
|
|
|
| $ | 7,498,363 |
|
|
|
|
| $ | 7,834,192 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated debt |
|
|
|
|
| 7,367,717 |
|
|
|
|
| 6,202,015 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated market capitalization |
|
|
|
|
| $ | 14,866,080 |
|
|
|
|
| $ | 14,036,207 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
HCP’s share of unconsolidated mortgage debt |
|
|
|
|
| 341,290 |
|
|
|
|
| 27,519 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total market capitalization |
|
|
|
|
| $ | 15,207,370 |
|
|
|
|
| $ | 14,063,726 |
| ||
Capitalization Ratios
|
| September 30, |
| December 31, |
|
Consolidated debt/Consolidated market capitalization |
| 49.6 | % | 44.2 | % |
|
|
|
|
|
|
Total debt/Total market capitalization |
| 50.7 | % | 44.3 | % |
(1) Includes mortgage debt on assets held for contribution and held for sale at December 31, 2006.
(2) Each convertible partnership unit is exchangeable for an amount of cash approximating the then-current market value of two shares of the Company’s common stock at time of conversion or, at the Company’s option, two shares of the Company’s common stock.
(3) Each convertible partnership unit is exchangeable for an amount of cash approximating the then-current market value of one share of the Company’s common stock at time of conversion or, at the Company’s option, one share of the Company’s common stock.
See Reporting Definitions and Supplemental Financial Measure Disclosure
18
Consolidated Portfolio Overview
As of and for the nine months ended September 30, 2007, dollars and square feet in thousands
Owned Property, Secured Loan and Direct Financing Lease Portfolios
Overview by property type
|
| Property |
|
|
| Square |
| Facility Occupancy % |
| Number |
| ||
Sector |
| Count |
| Beds/Units |
| Feet |
| 09/30/07 |
| 06/30/07 |
| of States |
|
Hospital |
| 37 |
| 4,402 Beds |
| 4,846 |
| 54 |
| 59 |
| 17 |
|
Skilled Nursing |
| 65 |
| 7,560 Beds |
| 2,525 |
| 85 |
| 86 |
| 16 |
|
Senior Housing |
| 242 |
| 26,171 Units |
| 22,668 |
| 88 |
| 89 |
| 34 |
|
MOB |
| 201 |
| N/A |
| 13,567 |
| 90 |
| 90 |
| 28 |
|
Life Science |
| 91 |
| N/A |
| 5,868 |
| 84 |
| 89 |
| 2 |
|
Other |
| 12 |
| N/A |
| 512 |
| 96 |
| 100 |
| 7 |
|
Total |
| 648 |
|
|
| 49,986 |
|
|
|
|
|
|
|
Operator concentration
|
| Property |
| Investment |
|
|
| Interest and |
| Total |
| ||||||||
Operator |
| Count |
| Amount |
| % |
| NOI |
| DFL Income |
| Amount |
| % |
| ||||
Sunrise Senior Living |
| 103 |
| $ | 2,228,288 |
| 21 |
| $ | 79,164 |
| $ | 32,734 |
| $ | 111,898 |
| 20 |
|
Brookdale |
| 24 |
| 675,054 |
| 7 |
| 50,072 |
| — |
| 50,072 |
| 9 |
| ||||
Tenet Healthcare Corporation |
| 8 |
| 423,497 |
| 4 |
| 40,764 |
| — |
| 40,764 |
| 7 |
| ||||
Aegis Senior Living |
| 12 |
| 258,008 |
| 2 |
| 16,808 |
| — |
| 16,808 |
| 3 |
| ||||
Emeritus Corporation |
| 25 |
| 233,886 |
| 2 |
| 25,810 |
| 247 |
| 26,057 |
| 5 |
| ||||
HCA |
| 8 |
| 233,205 |
| 2 |
| 17,224 |
| — |
| 17,224 |
| 3 |
| ||||
Capital Senior Living |
| 15 |
| 176,517 |
| 2 |
| 10,393 |
| — |
| 10,393 |
| 2 |
| ||||
Harbor Retirement Associates |
| 10 |
| 159,029 |
| 2 |
| 3,370 |
| 1,283 |
| 4,653 |
| 1 |
| ||||
Healthsouth Corporation |
| 10 |
| 119,560 |
| 1 |
| 12,163 |
| — |
| 12,163 |
| 2 |
| ||||
Atria Senior Living Group |
| 6 |
| 88,076 |
| 1 |
| 6,841 |
| — |
| 6,841 |
| 1 |
| ||||
Other Public Companies |
| 36 |
| 254,907 |
| 2 |
| 24,480 |
| 3,427 |
| 27,907 |
| 5 |
| ||||
Other |
| 391 |
| 5,572,345 |
| 54 |
| 214,069 |
| 16,032 |
| 230,101 |
| 40 |
| ||||
|
| 648 |
| $ | 10,422,372 |
| 100 |
| $ | 501,158 |
| $ | 53,723 |
| $ | 554,881 |
| 98 |
|
NOI from assets contributed to ventures |
|
|
|
|
|
|
| 14,172 |
| — |
| 14,172 |
| 2 |
| ||||
|
|
|
|
|
|
|
| $ | 515,330 |
| $ | 53,723 |
| $ | 569,053 |
| 100 |
|
See Reporting Definitions and Supplemental Financial Measures Disclosures
19
As of and for the nine months ended September 30, 2007, dollars and square feet in thousands
Owned Property Portfolio — Overview by type
|
| Property |
|
|
| Beds/ |
| Square |
| Facility Occupancy % |
| Cash Flow Coverage |
| |||||
Sector |
| Count |
| Investment |
| Units |
| Feet |
| 09/30/07 |
| 06/30/07 |
| 09/30/07 |
| 06/30/07 |
| |
Hospital |
| 36 |
| $ | 1,047,490 |
| 4,344 Beds |
| 4,707 |
| 54 |
| 59 |
| 2.5 | x | 2.5 | x |
Skilled Nursing |
| 62 |
| 305,805 |
| 7,118 Beds |
| 2,366 |
| 85 |
| 86 |
| 1.5 | x | 1.5 | x | |
Senior Housing |
| 209 |
| 3,500,061 |
| 22,862 Units |
| 20,516 |
| 88 |
| 90 |
| 1.1 | x | 1.1 | x | |
MOB |
| 201 |
| 2,162,070 |
| N/A |
| 13,567 |
| 90 |
| 91 |
| N/A |
| N/A |
| |
Life Science |
| 91 |
| 2,644,986 |
| N/A |
| 5,868 |
| 84 |
| 89 |
| N/A |
| N/A |
| |
Other |
| 12 |
| 63,885 |
| N/A |
| 512 |
| 96 |
| 100 |
| N/A |
| N/A |
| |
Total |
| 611 |
| $ | 9,724,297 |
|
|
| 47,536 |
|
|
|
|
|
|
|
|
|
Direct Financing Lease Portfolio — Overview by type
|
| Property |
|
|
| Beds/ |
| Square |
| Facility Occupancy % |
| Cash Flow Coverage |
| |||||
Sector |
| Count |
| Investment |
| Units |
| Feet |
| 09/30/07 |
| 06/30/07 |
| 09/30/07 |
| 06/30/07 |
| |
Senior Housing |
| 30 |
| $ | 628,800 |
| 3,141 Units |
| 1,969 |
| 91 |
| 91 |
| 0.9 | x | 0.9 | x |
Secured Loan Portfolio — Overview by type
|
| Property |
|
|
| Beds/ |
| Square |
| Facility Occupancy % |
| Cash Flow Coverage |
| |||||
Sector |
| Count |
| Investment |
| Units |
| Feet |
| 09/30/07 |
| 06/30/07 |
| 09/30/07 |
| 06/30/07 |
| |
Hospital |
| 1 |
| $ | 35,308 |
| 58 Beds |
| 139 |
| 49 |
| 56 |
| 2.5 | x | 2.8 | x |
Skilled Nursing |
| 3 |
|
| 15,767 |
| 442 Beds |
| 159 |
| 83 |
| 84 |
| 2.3 | x | 2.1 | x |
Senior Housing |
| 3 |
|
| 18,200 |
| 168 Units |
| 183 |
| 83 |
| 81 |
| N/A |
| N/A |
|
Total |
| 7 |
| $ | 69,275 |
|
|
| 481 |
|
|
|
|
|
|
|
|
|
Owned Property Portfolio — Overview by state
|
| Total |
| Hospital |
| Skilled Nursing |
| Senior Housing |
| MOB |
| Life Science |
| Other |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Square |
|
|
| Square |
|
|
| Square |
|
State |
| No. |
| No. |
| Beds |
| No. |
| Beds |
| No. |
| Units |
| No. |
| Feet |
| No. |
| Feet |
| No. |
| Feet |
|
CA |
| 138 |
| 4 |
| 745 |
| 7 |
| 721 |
| 27 |
| 3,124 |
| 15 |
| 859 |
| 82 |
| 5,288 |
| 3 |
| 127 |
|
TX |
| 87 |
| 7 |
| 1,137 |
| 4 |
| 570 |
| 30 |
| 3,323 |
| 46 |
| 4,112 |
| — |
| — |
| — |
| — |
|
FL |
| 50 |
| 2 |
| 312 |
| — |
| — |
| 29 |
| 3,629 |
| 19 |
| 1,020 |
| — |
| — |
| — |
| — |
|
VA |
| 22 |
| 1 |
| — |
| 9 |
| 934 |
| 10 |
| 1,347 |
| 2 |
| 154 |
| — |
| — |
| — |
| — |
|
CO |
| 23 |
| 1 |
| 64 |
| 2 |
| 240 |
| 5 |
| 871 |
| 15 |
| 914 |
| — |
| — |
| — |
| — |
|
UT |
| 34 |
| 1 |
| 139 |
| 1 |
| 120 |
| 1 |
| 158 |
| 22 |
| 940 |
| 9 |
| 580 |
| — |
| — |
|
WA |
| 15 |
| — |
| — |
| — |
| — |
| 8 |
| 571 |
| 7 |
| 687 |
| — |
| — |
| — |
| — |
|
IN |
| 34 |
| — |
| — |
| 15 |
| 1,558 |
| 5 |
| 392 |
| 14 |
| 763 |
| — |
| — |
| — |
| — |
|
Other |
| 208 |
| 20 |
| 1,947 |
| 24 |
| 2,975 |
| 94 |
| 9,447 |
| 61 |
| 4,118 |
| — |
| — |
| 9 |
| 385 |
|
Total |
| 611 |
| 36 |
| 4,344 |
| 62 |
| 7,118 |
| 209 |
| 22,862 |
| 201 |
| 13,567 |
| 91 |
| 5,868 |
| 12 |
| 512 |
|
See Reporting Definitions and Supplemental Financial Measures Disclosures
20
In thousands
Owned Property Portfolio — NOI by type
|
| Three Months Ended September 30, 2007 |
| Nine Months Ended September 30, 2007 |
| |||||||||||||||||||
|
| Rental and |
|
|
|
|
| Rental and |
|
|
|
|
| |||||||||||
|
| Related |
| Operating |
|
|
| Related |
| Operating |
|
|
| |||||||||||
Sector |
| Revenues |
| Expenses |
| NOI |
| Revenues |
| Expenses |
| NOI |
| |||||||||||
Hospital |
| $ | 33,497 |
| $ | 847 |
| $ | 32,650 |
| $ | 93,896 |
| $ | 834 |
| $ | 93,062 |
| |||||
Skilled Nursing |
| 10,905 |
| 77 |
| 10,828 |
| 32,449 |
| 128 |
| 32,321 |
| |||||||||||
Senior Housing |
| 79,351 |
| 3,554 |
| 75,797 |
| 217,045 |
| 11,160 |
| 205,885 |
| |||||||||||
MOB |
| 80,679 |
| 37,884 |
| 42,795 |
| 232,658 |
| 100,942 |
| 131,716 |
| |||||||||||
Life Science |
| 35,730 |
| 9,846 |
| 25,884 |
| 45,197 |
| 12,194 |
| 33,003 |
| |||||||||||
Other |
| 2,105 |
| 374 |
| 1,731 |
| 6,262 |
| 1,091 |
| 5,171 |
| |||||||||||
Total |
| $ | 242,267 |
| $ | 52,582 |
| $ | 189,685 |
| $ | 627,507 |
| $ | 126,349 |
| $ | 501,158 |
| |||||
NOI from assets contributed to ventures |
|
|
|
|
|
|
| 21,487 |
| 7,315 |
| 14,172 |
| |||||||||||
|
|
|
|
|
|
|
| $ | 648,994 |
| $ | 133,664 |
| $ | 515,330 |
| ||||||||
Direct Financing Lease Portfolio — DFL income by type
|
| Three Months |
| Nine Months |
| ||
|
| Ended |
| Ended |
| ||
|
| September 30, |
| September 30, |
| ||
Sector |
| 2007 |
| 2007 |
| ||
Senior Housing(1) |
| $ | 18,832 |
| $ | 49,037 |
|
Secured Loan Portfolio — Interest income by type(2)
Sector |
|
|
|
|
| ||
Hospital |
| $ | 750 |
| $ | 2,251 |
|
Skilled Nursing |
| 439 |
| 1,318 |
| ||
Senior Housing |
| 442 |
| 1,117 |
| ||
Total |
| $ | 1,631 |
| $ | 4,686 |
|
(1) Includes revenues of $5.3 million and $8.8 million from the two paid off DFLs for the three and nine months ended September 30, 2007, respectively.
(2) Excludes interest on loans repaid as of September 30, 2007.
See Reporting Definitions and Supplemental Financial Measures Disclosures
21
Dollars and square feet in thousands
|
|
|
|
|
| Skilled |
| Senior |
|
|
| Life |
|
|
| |||||||||||||
|
| Total |
| Hospital |
| Nursing |
| Housing |
| MOB |
| Science |
| Other |
| |||||||||||||
Owned Property Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Property count |
| 611 |
| 36 |
| 62 |
| 209 |
| 201 |
| 91 |
| 12 |
| |||||||||||||
Investment |
| $ | 9,724,297 |
| $ | 1,047,490 |
| $ | 305,805 |
| $ | 3,500,061 |
| $ | 2,162,070 |
| $ | 2,644,986 |
| $ | 63,885 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Same Property Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Property count |
| 284 |
| 26 |
| 61 |
| 76 |
| 102 |
| 9 |
| 10 |
| |||||||||||||
Investment |
| $ | 3,124,032 |
| 714,391 |
| $ | 300,738 |
| $ | 971,979 |
| $ | 962,000 |
| $ | 118,243 |
| $ | 56,681 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Percent of Owned Property Portfolio (by investment) |
| 32 | % | 68 | % | 98 | % | 28 | % | 44 | % | 4 | % | 89 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Square feet |
| 22,575 |
| 3,272 |
| 2,320 |
| 9,493 |
| 6,258 |
| 762 |
| 470 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Facility occupancy at September 30, 2007 |
| 55 | % | 84 | % | 89 | % | 92 | % | 86 | % | 100 | % |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Facility occupancy at September 30, 2006 |
| 55 | % | 86 | % | 91 | % | 94 | % | 100 | % | 100 | % |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NOI for the nine months ended September 30, 2007 |
| $ | 264,435 |
| $ | 69,362 |
| $ | 31,920 |
| $ | 79,146 |
| $ | 72,154 |
| $ | 6,609 |
| $ | 5,244 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NOI for the nine months ended September 30, 2006 |
| $ | 250,132 |
| $ | 67,739 |
| $ | 30,232 |
| $ | 69,207 |
| $ | 69,360 |
| $ | 8,442 |
| $ | 5,152 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Same property change in NOI |
| 5.7 | % | 2.4 | % | 5.6 | % | 14.4 | % | 4.0 | % | (21.7% | ) | 1.8 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NOI for the nine months ended September 30, 2007 |
| $ | 264,435 |
| $ | 69,362 |
| $ | 31,920 |
| $ | 79,146 |
| $ | 72,154 |
| $ | 6,609 |
| $ | 5,244 |
| ||||||
Straight-line rents |
| (17,766 | ) | (824 | ) | (564 | ) | (11,788 | ) | (4,144 | ) | (446 | ) | — |
| |||||||||||||
Amortization of above and below market lease intangibles, net |
| 1,293 |
| — |
| 87 |
| — |
| 1,075 |
| 131 |
| — |
| |||||||||||||
NOI, as adjusted, for the nine months ended September 30, 2007 |
| $ | 247,962 |
| $ | 68,538 |
| $ | 31,443 |
| $ | 67,358 |
| $ | 69,085 |
| $ | 6,294 |
| $ | 5,244 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NOI for the nine months ended September 30, 2006 |
| $ | 250,132 |
| $ | 67,739 |
| $ | 30,232 |
| $ | 69,207 |
| $ | 69,360 |
| $ | 8,442 |
| $ | 5,152 |
| ||||||
Straight-line rents |
| (6,943 | ) | (995 | ) | (103 | ) | (4,344 | ) | (1,616 | ) | 115 |
| — |
| |||||||||||||
Amortization of above and below market lease intangibles, net |
| (837 | ) | — |
| 87 |
| — |
| (924 | ) | — |
| — |
| |||||||||||||
NOI, as adjusted, for the nine months ended September 30, 2006 |
| $ | 242,352 |
| $ | 66,744 |
| $ | 30,216 |
| $ | 64,863 |
| $ | 66,820 |
| $ | 8,557 |
| $ | 5,152 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Same property change in NOI, as adjusted |
| 2.3 | % | 2.7 | % | 4.1 | % | 3.8 | % | 3.4 | % | (26.5% | ) | 1.8 | % | |||||||||||||
See Reporting Definitions and Supplemental Financial Measures Disclosures
22
Dollars in thousands
|
|
|
| Expiration Year(3) |
| |||||||||||||||
Sector |
| Totals |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Owned Property Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Hospital: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 14 |
| 2 |
| 1 |
| 7 |
| 1 |
| 3 |
| |||||||
Annualized expiring rents |
| $ | 53,332 |
| $ | 1,686 |
| $ | 2,048 |
| $ | 41,019 |
| $ | 2,973 |
| $ | 5,606 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Skilled Nursing: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 5 |
| — |
| 1 |
| 4 |
| — |
| — |
| |||||||
Annualized expiring rents |
| $ | 2,857 |
| $ | — |
| $ | 637 |
| $ | 2,220 |
| $ | — |
| $ | — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Senior Housing: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 7 |
| — |
| 1 |
| — |
| 3 |
| 3 |
| |||||||
Annualized expiring rents |
| $ | 1,330 |
| $ | — |
| $ | 72 |
| $ | — |
| $ | 473 |
| $ | 785 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
MOB: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 2,624 |
| 470 |
| 641 |
| 542 |
| 579 |
| 392 |
| |||||||
Annualized expiring rents |
| $ | 155,023 |
| $ | 19,479 |
| $ | 38,033 |
| $ | 34,011 |
| $ | 37,504 |
| $ | 25,996 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Life Science: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 81 |
| 12 |
| 18 |
| 14 |
| 22 |
| 15 |
| |||||||
Annualized expiring rents |
| $ | 44,309 |
| $ | 6,381 |
| $ | 6,782 |
| $ | 6,912 |
| $ | 10,127 |
| $ | 14,107 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 8 |
| — |
| 1 |
| 5 |
| 2 |
| — |
| |||||||
Annualized expiring rents |
| $ | 5,414 |
| $ | — |
| $ | 13 |
| $ | 5,135 |
| $ | 266 |
| $ | — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 2,739 |
| 484 |
| 663 |
| 572 |
| 607 |
| 413 |
| |||||||
Annualized expiring rents |
| $ | 262,265 |
| $ | 27,546 |
| $ | 47,585 |
| $ | 89,297 |
| $ | 51,343 |
| $ | 46,494 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
HCP Ventures III (4): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 48 |
| 3 |
| 3 |
| 17 |
| 13 |
| 12 |
| |||||||
Annualized expiring rents |
| $ | 3,495 |
| $ | 107 |
| $ | 232 |
| $ | 1,402 |
| $ | 1,047 |
| $ | 707 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
HCP Ventures IV (4): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leases |
| 414 |
| 86 |
| 108 |
| 67 |
| 78 |
| 75 |
| |||||||
Annualized expiring rents |
| $ | 29,670 |
| $ | 4,139 |
| $ | 5,588 |
| $ | 5,174 |
| $ | 8,770 |
| $ | 5,999 |
| |
(1) The table reflects the number of leases and annualized expiring rents in the year of expiration absent the impact of renewals, if any.
(2) All leases associated with HCP Ventures II expire in years later than 2011.
(3) Lease expirations through 2011.
(4) Represents 100% of each joint venture.
See Reporting Definitions and Supplemental Financial Measures Disclosures
23
Dollars and square feet in thousands
Development Projects in Process (1) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
| Estimated |
| |||
|
|
|
|
|
| Estimated |
| Estimated |
| Rentable |
| |||
|
|
|
|
|
| Completion |
| Stabilization |
| Square |
| |||
Name of Project |
| Location |
| Sector |
| Date |
| Date |
| Feet |
| |||
Memorial North Briargate |
| Colorado Springs, CO |
| MOB |
| 4Q 2007 |
| 2Q 2010 |
| 117 |
| |||
East Grand (Building 7) |
| So. San Francisco, CA |
| Life Science |
| 1Q 2008 |
| 1Q 2008 |
| 93 |
| |||
East Grand (Building 8) |
| So. San Francisco, CA |
| Life Science |
| 2Q 2008 |
| 2Q 2008 |
| 82 |
| |||
East Grand (Building 9) |
| So. San Francisco, CA |
| Life Science |
| 2Q 2008 |
| 2Q 2008 |
| 54 |
| |||
Oyster Point II (Building A) |
| So. San Francisco, CA |
| Life Science |
| 4Q 2008 |
| 4Q 2008 |
| 115 |
| |||
Oyster Point II (Building B) |
| So. San Francisco, CA |
| Life Science |
| 4Q 2008 |
| 4Q 2008 |
| 122 |
| |||
Oyster Point II (Building C) |
| So. San Francisco, CA |
| Life Science |
| 1Q 2010 |
| 1Q 2010 |
| 78 |
| |||
|
|
|
|
|
|
|
|
|
| 661 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Estimated total investment |
|
|
|
|
| $ | 436,747 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Investment-to-date(2) |
|
|
|
|
| $ | 254,267 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Percentage pre-leased |
|
|
|
|
|
|
| 86 | % | |||
Land Held for Future Development |
| ||||||||
|
|
|
|
|
|
|
| Estimated |
|
|
|
|
|
|
|
|
| Rentable |
|
|
|
|
|
|
| Gross Site |
| Square |
|
Name of Project |
| Location |
| Sector |
| Acreage |
| Feet |
|
Forbes Research Center (Buildings A & B) |
| So. San Francisco, CA |
| Life Science |
| 7 |
| 326 |
|
Sierra Point |
| So. San Francisco, CA |
| Life Science |
| 23 |
| 540 |
|
Bressi (Building 1) |
| Carlsbad, CA |
| Life Science |
| 23 |
| 397 |
|
Bressi (Building 2) |
| Carlsbad, CA |
| Life Science |
| 18 |
| 300 |
|
Poway (Building 1) |
| Poway, CA |
| Life Science |
| 41 |
| 679 |
|
Poway (Building 2) |
| Poway, CA |
| Life Science |
| 31 |
| 585 |
|
Torrey Pines Science Center |
| Torrey Pines, CA |
| Life Science |
| 6 |
| 93 |
|
Torrey Pines Science Park |
| Torrey Pines, CA |
| Life Science |
| 3 |
| 93 |
|
|
|
|
|
|
| 152 |
| 3,013 |
|
(1) Excludes potential redevelopment assets.
(2) Includes land.
See Reporting Definitions and Supplemental Financial Measures Disclosures
24
Investment Management Business Summary
As of and for the nine months ended September 30, 2007
Dollars in thousands
|
|
|
|
|
| HCP’s |
| Joint |
| HCP’s Net |
| Investment |
|
|
| |||
|
| Primary |
| Date |
| Ownership |
| Venture |
| Equity |
| Management |
| Term |
| |||
Joint Venture |
| Sector |
| Established |
| Percentage |
| Investment |
| Investment(1) |
| Fee Income(2) |
| (in years) |
| |||
HCP Ventures II |
| Senior Housing |
| January-07 |
| 35.0 | % | $ | 1,097,267 |
| $ | 145,244 |
| $ | 7,771 |
| Indefinite |
|
HCP Ventures III |
| MOB |
| October-06 |
| 30.0 | (3) | 140,337 |
| 13,520 |
| 326 |
| 10 |
| |||
HCP Ventures IV |
| MOB |
| April-07 |
| 20.0 |
| 645,729 |
| 49,762 |
| 3,965 |
| 10 |
| |||
|
|
|
|
|
|
|
| $ | 1,883,333 |
| $ | 208,526 |
| $ | 12,062 |
|
|
|
(1) Excludes unconsolidated joint ventures for which HCP is not the managing member.
(2) Includes acquisition fees from HCP Ventures II of $5.4 million and HCP Ventures IV of $3.2 million.
(3) The Company owns an 85% interest in HCP Birmingham Portfolio LLC, which owns a 30% interest in HCP Ventures III.
26
|
| September 30, 2007 |
| December 31, 2006 |
| ||||||||||||||
In thousands |
| HCP Ventures |
| HCP Ventures |
| HCP Ventures IV(2) |
| HCP Ventures |
| HCP Ventures |
| HCP Ventures IV(2) |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Buildings and improvements |
| $ | 936,095 |
| $ | 129,273 |
| $ | 514,555 |
| $ | — |
| $ | 129,289 |
| $ | — |
|
Developments in process |
| — |
| 190 |
| 2,757 |
| — |
| — |
| — |
| ||||||
Land |
| 108,907 |
| 1,780 |
| 65,680 |
| — |
| 1,780 |
| — |
| ||||||
Less accumulated depreciation and amortization |
| 27,172 |
| 5,294 |
| 15,222 |
| — |
| 2,829 |
| — |
| ||||||
Net real estate |
| 1,017,830 |
| 125,949 |
| 567,770 |
| — |
| 128,240 |
| — |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
| 2,948 |
| 2,987 |
| 5,894 |
| — |
| 5,312 |
| — |
| ||||||
Restricted cash |
| 5,839 |
| — |
| 6,390 |
| — |
| — |
| — |
| ||||||
Accounts receivable, net |
| 250 |
| 1,064 |
| 935 |
| — |
| 572 |
| — |
| ||||||
Intangible assets, net |
| 49,393 |
| 12,852 |
| 66,367 |
| — |
| 13,904 |
| — |
| ||||||
Other assets, net |
| 21,443 |
| 2,926 |
| 6,244 |
| — |
| 2,665 |
| — |
| ||||||
Total assets |
| $ | 1,097,703 |
| $ | 145,778 |
| $ | 653,600 |
| $ | — |
| $ | 150,693 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIABILITIES AND MEMBERS’ CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage debt |
| $ | 679,945 |
| $ | 91,730 |
| $ | 378,951 |
| $ | — |
| $ | 91,730 |
| $ | — |
|
Intangible liabilities, net |
| 1,309 |
| 5,745 |
| 13,785 |
| — |
| 6,236 |
| — |
| ||||||
Accounts payable and accrued liabilities |
| 8,117 |
| 2,744 |
| 11,448 |
| — |
| 5,103 |
| — |
| ||||||
Deferred revenue |
| — |
| 491 |
| 462 |
| — |
| 295 |
| — |
| ||||||
Total liabilities |
| 689,371 |
| 100,710 |
| 404,646 |
| — |
| 103,364 |
| — |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
HCP’s capital |
| 140,131 |
| 11,907 |
| 39,650 |
| — |
| 12,676 |
| — |
| ||||||
Partners’ capital |
| 268,201 |
| 33,161 |
| 209,304 |
| — |
| 34,653 |
| — |
| ||||||
Total liabilities and members’ capital |
| $ | 1,097,703 |
| $ | 145,778 |
| $ | 653,600 |
| $ | — |
| $ | 150,693 |
| $ | — |
|
(1) At December 31, 2006, HCP Ventures II was a wholly owned consolidated subsidiary of the Company.
(2) At December 31, 2006, 55 of the 58 assets included in HCP Ventures IV were included in the consolidated balance sheet.
27
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||
In thousands |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| ||||||||
Rental and related revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Rental and related revenues |
| $ | 20,901 |
| $ | 4,484 |
| $ | 16,335 |
| $ | 62,410 |
| $ | 13,519 |
| $ | 27,098 |
| ||
Interest and other income |
| 1 |
| — |
| — |
| 2 |
| — |
| — |
| ||||||||
|
| 20,902 |
| 4,484 |
| 16,335 |
| 62,412 |
| 13,519 |
| 27,098 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest |
| 10,003 |
| 1,481 |
| 5,265 |
| 29,761 |
| 4,352 |
| 8,557 |
| ||||||||
Depreciation and amortization |
| 7,141 |
| 1,235 |
| 6,243 |
| 21,403 |
| 3,452 |
| 10,333 |
| ||||||||
Operating |
| 8 |
| 1,538 |
| 6,599 |
| 8 |
| 4,585 |
| 10,549 |
| ||||||||
General and administrative |
| 1,293 |
| 158 |
| 662 |
| 3,664 |
| 548 |
| 1,091 |
| ||||||||
|
| 18,445 |
| 4,412 |
| 18,769 |
| 54,836 |
| 12,937 |
| 30,530 |
| ||||||||
Net income (loss) |
| $ | 2,457 |
| $ | 72 |
| $ | (2,434 | ) | $ | 7,576 |
| $ | 582 |
| $ | (3,432 | ) | ||
28
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||
In thousands |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| ||||||
Net income (loss) |
| $ | 2,457 |
| $ | 72 |
| $ | (2,434 | ) | $ | 7,576 |
| $ | 582 |
| $ | (3,432 | ) |
Real estate depreciation and amortization: |
| 7,141 |
| 1,235 |
| 6,243 |
| 21,403 |
| 3,452 |
| 10,333 |
| ||||||
Funds from operations (FFO) |
| $ | 9,598 |
| $ | 1,307 |
| $ | 3,809 |
| $ | 28,979 |
| $ | 4,034 |
| $ | 6,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
HCP’s share of FFO from unconsolidated joint ventures |
| $ | 3,359 |
| $ | 392 |
| $ | 762 |
| $ | 10,143 |
| $ | 1,210 |
| $ | 1,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Selected supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of (above) and below market lease intangibles, net |
| $ | (697 | ) | $ | 142 |
| $ | (370 | ) | $ | (2,091 | ) | $ | 426 |
| $ | (618 | ) |
Debt issuance costs amortization |
| 156 |
| 38 |
| 150 |
| 450 |
| 114 |
| 244 |
| ||||||
Straight-line rents |
| 3,825 |
| 120 |
| 679 |
| 11,473 |
| 564 |
| 1,336 |
| ||||||
Lease commissions and tenant and capital improvements |
| — |
| 134 |
| 1,383 |
| — |
| 151 |
| 1,730 |
|
29
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||
In thousands |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| ||||||
Net income (loss) |
| $ | 2,457 |
| $ | 72 |
| $ | (2,434 | ) | $ | 7,576 |
| $ | 582 |
| $ | (3,432 | ) |
Interest expense |
| 10,003 |
| 1,481 |
| 5,265 |
| 29,761 |
| 4,352 |
| 8,557 |
| ||||||
Depreciation and amortization |
| 7,141 |
| 1,235 |
| 6,243 |
| 21,403 |
| 3,452 |
| 10,333 |
| ||||||
General and administrative |
| 1,293 |
| 158 |
| 662 |
| 3,664 |
| 548 |
| 1,091 |
| ||||||
NOI |
| $ | 20,894 |
| $ | 2,946 |
| $ | 9,736 |
| $ | 62,404 |
| $ | 8,934 |
| $ | 16,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
HCP’s share of NOI from unconsolidated joint ventures |
| $ | 7,313 |
| $ | 884 |
| $ | 1,947 |
| $ | 21,841 |
| $ | 2,680 |
| $ | 3,310 |
|
30
|
| Three Months Ended |
| Nine Months Ended |
| |||||||||||||||
In thousands |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| HCP Ventures II |
| HCP Ventures III |
| HCP Ventures IV |
| |||||||
Net income (loss) |
| $ | 2,457 |
| $ | 72 |
| $ | (2,434 | ) | $ | 7,576 |
| $ | 582 |
| $ | (3,432 | ) | |
Interest expense |
| 10,003 |
| 1,481 |
| 5,265 |
| 29,761 |
| 4,352 |
| 8,557 |
| |||||||
Depreciation and amortization of real estate andin-place lease intangibles |
| 7,141 |
| 1,235 |
| 6,243 |
| 21,403 |
| 3,452 |
| 10,333 |
| |||||||
EBITDA |
| $ | 19,601 |
| $ | 2,788 |
| $ | 9,074 |
| $ | 58,740 |
| $ | 8,386 |
| $ | 15,458 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
HCP’s share of EBITDA from unconsolidated joint ventures |
| $ | 6,860 |
| $ | 836 |
| $ | 1,815 |
| $ | 20,559 |
| $ | 2,516 |
| $ | 3,092 |
| |
31
In thousands
Mortgage Debt Maturities and Scheduled Principal Repayments
September 30, 2007
|
| HCP |
| HCP |
| HCP |
| Total |
| HCP’s Share |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
2007 |
| $ | 2,879 |
| $ | — |
| $ | 154 |
| $ | 3,033 |
| $ | 1,037 |
|
2008 |
| 8,974 |
| — |
| 891 |
| 9,865 |
| 3,319 |
| |||||
2009 |
| 9,613 |
| — |
| 937 |
| 10,550 |
| 3,552 |
| |||||
2010 |
| 10,179 |
| — |
| 1,049 |
| 11,228 |
| 3,773 |
| |||||
2011 |
| 10,779 |
| — |
| 2,742 |
| 13,521 |
| 4,321 |
| |||||
2012 |
| 11,308 |
| — |
| 37,802 |
| 49,110 |
| 11,518 |
| |||||
2013 |
| 118,000 |
| — |
| 8,550 |
| 126,550 |
| 43,010 |
| |||||
2014 |
| 10,409 |
| — |
| 2,606 |
| 13,015 |
| 4,164 |
| |||||
2015 |
| 11,023 |
| — |
| 56,169 |
| 67,192 |
| 15,092 |
| |||||
2016 |
| 10,873 |
| 91,730 |
| 97,075 |
| 199,678 |
| 50,741 |
| |||||
Thereafter |
| 476,535 |
| — |
| 173,798 |
| 650,333 |
| 201,547 |
| |||||
Subtotal |
| 680,572 |
| 91,730 |
| 381,773 |
| 1,154,075 |
| 342,074 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Discounts) and premiums, net |
| (627 | ) | — |
| (2,822 | ) | (3,449 | ) | (784 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total debt |
| $ | 679,945 |
| $ | 91,730 |
| $ | 378,951 |
| $ | 1,150,626 |
| $ | 341,290 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
HCP’s share of total debt |
| $ | 237,981 |
| $ | 27,519 |
| $ | 75,790 |
| $ | 341,290 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted average interest rate |
| 5.66 | % | 6.02 | % | 5.58 | % | 5.66 | % |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted average maturity in years |
| 8.61 |
| 8.69 |
| 8.46 |
| 8.58 |
|
|
|
|
| September 30, 2007 |
| December 31, 2006 |
| |||||||||||||||||||||||||||||||||
|
| HCP |
| HCP |
| HCP |
| Total |
| HCP |
| HCP |
| HCP |
| Total |
| |||||||||||||||||||||
Fixed rate debt |
| $ | 679,945 |
| $ | 91,730 |
| $ | 378,951 |
| $ | 1,150,626 |
| $ | — |
| $ | 91,730 |
| $ | — |
| $ | 91,730 |
| |||||||||||||
Variable rate debt |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||
Total debt |
| $ | 679,945 |
| $ | 91,730 |
| $ | 378,951 |
| $ | 1,150,626 |
| $ | — |
| $ | 91,730 |
| $ | — |
| $ | 91,730 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
HCP’s share of total debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Fixed rate |
| $ | 237,981 |
| $ | 27,519 |
| $ | 75,790 |
| $ | 341,290 |
| $ | — |
| $ | 27,519 |
| $ | — |
| $ | 27,519 |
| |||||||||||||
Variable rate |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||
|
| $ | 237,981 |
| $ | 27,519 |
| $ | 75,790 |
| $ | 341,290 |
| $ | — |
| $ | 27,519 |
| $ | — |
| $ | 27,519 |
| |||||||||||||
(1) At December 31, 2006, HCP Ventures II was a wholly owned consolidated subsidiary of the Company.
(2) At December 31, 2006, 55 of the 58 assets included in HCP Ventures IV were included in the consolidated balance sheet.
32
As of and for the nine months ended September 30, 2007, dollars and square feet in thousands
Portfolio Overview
|
|
|
| Property |
|
|
|
|
| Facility Occupancy % |
| Cash Flow Coverage |
| Number of |
| ||||
Joint Venture |
| Primary Sector |
| Count |
| Units |
| Square Feet |
| 09/30/07 |
| 06/30/07 |
| 09/30/07 |
| 06/30/07 |
| States |
|
HCP Ventures II |
| Senior Housing |
| 25 |
| 5,635 |
| 5,566 |
| 92 |
| 92 |
| 1.0 x |
| 1.0 x |
| 6 |
|
HCP Ventures III |
| MOB |
| 13 |
| N/A |
| 789 | �� | 100 |
| 100 |
| N/A |
| N/A |
| 5 |
|
HCP Ventures IV |
| MOB |
| 58 |
| N/A |
| 2,850 |
| 87 |
| 89 |
| N/A |
| N/A |
| 13 |
|
|
|
|
| 96 |
|
|
| 9,205 |
|
|
|
|
|
|
|
|
|
|
|
|
| Property |
| Investment |
| For the Three Months Ended |
| For the Nine Months Ended |
| |||||||||||
Operator |
| Count |
| Amount |
| % |
| NOI |
| % |
| NOI |
| % |
| |||||
Horizon Bay |
| 25 |
| $ | 1,097,267 |
| 58 |
| $ | 20,894 |
| 62 |
| $ | 62,402 |
| 71 |
| ||
Other operators |
| 71 |
| 786,066 |
| 42 |
| 12,682 |
| 38 |
| 25,485 |
| 29 |
| |||||
|
| 96 |
| $ | 1,883,333 |
| 100 |
| $ | 33,576 |
| 100 |
| $ | 87,887 |
| 100 |
| ||
|
|
|
| Expiration Year |
| ||||||||||||||
Joint Venture |
| Total |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| ||||||
HCP Ventures III: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Leases |
| 48 |
| 3 |
| 3 |
| 17 |
| 13 |
| 12 |
| ||||||
Annualized expiring rents |
| $ | 3,495 |
| $ | 107 |
| $ | 232 |
| $ | 1,402 |
| $ | 1,047 |
| $ | 707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
HCP Ventures IV: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Leases |
| 414 |
| 86 |
| 108 |
| 67 |
| 78 |
| 75 |
| ||||||
Annualized expiring rents |
| $ | 29,670 |
| $ | 4,139 |
| $ | 5,588 |
| $ | 5,174 |
| $ | 8,770 |
| $ | 5,999 |
|
(1) All leases associated with HCP Ventures II expire after 2011.
33
ALF. Assisted living facility.
Annualized Debt Service. The most recent monthly interest and principal amortization due to HCP as of period end annualized for twelve months. The Company uses Annualized Debt Service for purposes of determining Debt Service Coverage.
Annualized Expiring Rent. The annualized future minimum rents due to HCP in the year of lease expiration.
Annualized Rent. The most recent monthly base rent due to HCP as of period end annualized for twelve months plus additional rents received by HCP over the most recent twelve month period as of period end. The Company uses Annualized Rent for purposes of determining property level Cash Flow Coverage.
Assets Held for Sale. Assets of discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Beds/Units/Square Feet. Hospitals and skilled nursing facilities are measured by licensed bed count. ALFs and CCRCs are stated in units (e.g., studio, one or two bedroom units). MOBs, life science facilities and other healthcare facilities are measured in square feet.
Book Value. The carrying amount as reported in the Company’s financial statements.
Cash Flow Coverage. Facility EBITDAR for the most recent twelve months of available data divided by the Annualized Rent. Cash Flow Coverage is a supplemental measure of the property’s ability to generate cash flow to meet related rent and other obligations to the Company. However, its usefulness is limited by, among other things, the same factors that limit the usefulness of EBITDAR. The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. Results exclude data related to ALFs leased to Emeritus since the operator has elected not to allocate the cost of a recent liability judgment to each of the facilities.
CCRC. Continuing care retirement community.
Consolidated Assets. Total assets as reported in the Company’s consolidated financial statements.
Consolidated Book Capitalization. The carrying amount of (i) Consolidated Debt, plus (ii) total minority interests, plus (iii) total stockholders’ equity, as reported in the Company’s consolidated financial statements.
Consolidated Debt. The carrying amount of bank lines of credit, bridge loans (if applicable), term loans (if applicable), senior unsecured notes, mortgage debt and other debt as reported in the Company’s consolidated financial statements.
Consolidated Gross Assets. The carrying amount of total assets, excluding investments in and advances to unconsolidated joint ventures, after adding back accumulated depreciation and amortization.
Consolidated Market Capitalization. Consolidated Debt at Book Value plus Consolidated Market Equity.
Consolidated Market Equity. The total number of outstanding shares of the Company’s common stock multiplied by the closing price per share of its common stock on the New York Stock Exchange as of period end, plus the total number of convertible partnership units multiplied by the closing price per share of its common stock on the New York Stock Exchange as of period end (adjusted for stock splits), plus the total number of outstanding shares of the Company’s preferred stock multiplied by the closing price of its preferred stock on the New York Stock Exchange as of period end.
Consolidated Secured Debt. Mortgage debt secured by real estate as reported in the Company’s consolidated financial statements.
Consolidated Undepreciated Book Capitalization. Consolidated Book Capitalization after adding back accumulated depreciation and amortization on the Company’s real estate assets.
Debt Service. The periodic payment of interest expense and principal amortization on secured loans.
Debt Service Coverage. Facility EBITDAR for the most recent twelve months of available data divided by the Annualized Debt Service. Debt Service Coverage is a supplemental measure of the property’s ability to generate sufficient cash flows to meet related obligations to the Company under loan agreements. However, its usefulness is limited by the same factors that limit the usefulness of EBITDAR. The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. Results exclude data related to one ALF that secures a loan to Emeritus since the operator has elected not to allocate the cost of a recent liability judgment.
DFL. Direct financing lease.
Estimated Completion Date. Management’s estimate of the date the core and shell structure improvements are expected to be completed.
35
Facility EBITDAR. Earnings before interest, taxes, depreciation, amortization and rent for a particular facility accruing to the operator of the property (not the Company). The Company uses Facility EBITDAR in determining Debt Service Coverage and Cash Flow Coverage. EBITDAR as an analytical tool has limitations similar to EBITDA. However, the Company receives periodic financial information from operators regarding the performance of the Company’s facilities under the operator’s management. The Company utilizes Facility EBITDAR as a supplemental measure of the ability of those properties to generate sufficient liquidity to meet related obligations to the Company. Facility EBITDAR includes the greater of (i) contractual management fees or (ii) an imputed management fee of 2% for acute care hospitals and 5% for skilled nursing facilities, ILFs, ALFs and CCRCs which the Company believes represents typical management fees in their respective industries. All facility financial performance data was derived solely from information provided by lessees and borrowers without verification by the Company.
Facility Occupancy. For MOBs and other healthcare properties, facility occupancy represents the percentage of rentable square feet occupied. For hospitals, skilled nursing facilities, ALFs and CCRCs, facility occupancy represents the facilities’ operating occupancy for each quarter based on the most recent quarter of available data. The percentages are calculated based on licensed beds, available beds and units for hospitals, skilled nursing facilities, ILFs, ALFs and CCRCs, respectively. The percentages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful. All facility financial performance data were derived solely from information provided by lessees and borrowers without verification by the Company.
Future Minimum Rents. Future minimum lease payments to be received by HCP, excluding operating expense reimbursements, from lessees under non-cancelable operating leases as of period end.
GAAP. U.S. generally accepted accounting principles.
HCP MOP. Prior to November 30, 2006, HCP Medical Office Portfolio, LLC (“HCP MOP”), was an unconsolidated joint venture formed between the Company and an affiliate of General Electric Company (“GE”), for which the Company was the managing member and had a 33% interest therein.
HCP Ventures II. An unconsolidated joint venture formed on January 5, 2007 between the Company and an institutional capital partner, for which the Company is managing member and has a 35% interest therein.
HCP Ventures III. An unconsolidated joint venture formed on October 27, 2006 between the Company and an institutional capital partner, for which the Company is managing member and has an effective 25.5% interest therein.
HCP Ventures IV. An unconsolidated joint venture formed on April 30, 2007 between the Company and an institutional capital partner, for which the Company is managing member and has a 20% interest therein.
ILF. Independent living facility.
Investment. The carrying amount of real estate assets, including intangibles, after adding back accumulated depreciation and amortization and the carrying amount of mortgage loans receivable. Excludes assets held for sale and classified as discontinued operations.
Life Science. Laboratory and office space primarily for biotechnology and pharmaceutical companies, scientific research institutions, government agencies and other entities involved in the life science industry.
Marketable Securities. The Company classifies its existing marketable equity and debt securities as available-for-sale in accordance with provisions of SFAS No. 115. These securities are carried at fair market value, with unrealized gains and losses reported in stockholders’ equity as a component of accumulated other comprehensive income.
MOB. Medical office building.
Occupancy Percentage. Represents the percentage of total rentable square feet leased, including month-to-month leases, as of the date reported. Space is considered leased when the tenant has taken physical occupancy.
“Other” Property Type. Physician group practice clinics and health and wellness centers.
Percentage Pre-leased. Represents the percentage of a development project’s estimated square footage attributed to signed leases.
Same Property Performance (“SPP”). An important component of the Company’s evaluation of the operating performance of its properties. The Company defines its same property portfolio each quarter as those properties that have been in operation throughout the current year and the prior year and that were also in operation at January 1st of the prior year. Newly acquired assets, developments in process and assets classified in discontinued operations are excluded from the same property portfolio. Same property statistics allow management to evaluate the NOI of its real estate portfolio as a consistent population from period to period and eliminates the effects of changes in the composition of the properties on performance measures.
Square Feet Owned. The square footage for properties owned by the Company or its consolidated joint ventures, and excludes square footage for development properties prior to completion.
Total Book Capitalization. Total Debt plus the carrying amount of minority interests plus the carrying amount of stockholders’ equity.
Total Debt. Consolidated Debt at Book Value plus the Company’s pro rata share of debt from unconsolidated joint ventures.
Total Gross Assets. Consolidated Gross Assets plus the Company’s pro rata share of total assets from unconsolidated joint ventures, after adding back accumulated depreciation and amortization.
Total Market Capitalization. Total Debt plus Consolidated Market Equity.
Total Secured Debt. Consolidated secured debt plus the Company’s pro rata share of mortgage debt from unconsolidated joint ventures.
Total Undepreciated Book Capitalization. Total Book Capitalization after adding back accumulated depreciation and amortization on the Company’s real estate assets and the Company’s pro rata share of accumulated depreciation and amortization on real estate assets in unconsolidated joint ventures.
36
Supplemental Financial Measures Disclosures
Adjusted Fixed Charge Coverage. Adjusted EBITDA divided by Fixed Charges. The Company uses Adjusted Fixed Charge Coverage, a non-GAAP financial measure, as a measure of liquidity. The Company believes Adjusted Fixed Charge Coverage provides investors, particularly fixed income investors, relevant and useful information because it measures the Company’s ability to meet its interest payments on outstanding debt and pay dividends to its preferred stockholders. The Company’s various debt agreements contain covenants that require the Company to maintain ratios similar to Adjusted Fixed Charge Coverage and credit rating agencies utilize similar ratios in evaluating and determining the credit rating on certain debt instruments of the Company. However, since this ratio is derived from Adjusted EBITDA and Fixed Charges, its usefulness is limited by the same factors that limit the usefulness of Adjusted EBITDA and Fixed Charges. Further, the Company’s computation of Adjusted Fixed Charge Coverage may not be comparable to similar fixed charge coverage ratios reported by other companies.
EBITDA and Adjusted EBITDA. The real estate industry uses earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, as a measure of both operating performance and liquidity. Adjusted EBITDA is calculated as EBITDA excluding minority interests’ share of earnings and gains or losses from real estate dispositions. The Company’s presentations of EBITDA and Adjusted EBITDA herein are solely as non-GAAP liquidity measures in connection with the presentation of Fixed Charge Coverage and Adjusted Fixed Charge Coverage. As a liquidity measure, the Company believes that EBITDA and Adjusted EBITDA help investors analyze the Company’s ability to meet its interest payments on outstanding debt and to make preferred dividend payments. The Company’s various debt agreements contain covenants that require the Company to maintain ratios similar to Fixed Charge Coverage and Adjusted Fixed Charge Coverage and credit rating agencies utilize similar ratios in evaluating and determining the credit rating on certain debt instruments of the Company. The Company believes investors should consider EBITDA and Adjusted EBITDA in conjunction with cash flows from operating activities, and other required measures under GAAP, to improve their understanding of the Company’s liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools and should be used in conjunction with the Company’s required GAAP presentations. EBITDA and Adjusted EBITDA do not reflect the Company’s historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. Also, EBITDA and Adjusted EBITDA do not reflect the cash required to make interest and principal payments on the Company’s outstanding debt. The Company believes cash flows from operating activities is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA do not represent net income or cash flows from operations as defined by GAAP and should not be considered an alternative to those indicators. Further, the Company’s computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.
Fixed Charges. Total interest expense plus capitalized interest plus preferred stock dividends. The Company uses Fixed Charges to measure its interest payments on outstanding debt and dividends to its preferred stockholders for purposes of presenting Fixed Charge Coverage and Adjusted Fixed Charge Coverage. However, the usefulness of Fixed Charges is limited as, among other things, it does not include all contractual obligations. The Company’s computation of Fixed Charges should not be considered an alternative to fixed charges as defined by Item 503(d) of Regulation S-K and may not be comparable to fixed charges reported by other companies.
Funds From Operations (“FFO”). The Company believes that net income as defined by GAAP is the most appropriate earnings measure. The Company also believes that Funds From Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO applicable to common shares, Diluted FFO applicable to common shares, and Basic and Diluted FFO per common share are important non-GAAP supplemental measures of operating performance for a real estate investment trust. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a real estate investment trust that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, with adjustments to derive the Company’s pro rata share of FFO from consolidated and unconsolidated joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. The Company believes that the use of FFO, combined with the required GAAP presentations, improves the understanding of operating results of real estate investment trusts among investors and makes comparisons of operating results among such companies more meaningful. The Company considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help investors compare the operating performance of a real estate investment trust between periods or as compared to other companies. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. FFO also does not consider the costs associated with capital expenditures related to the Company’s real estate assets nor is FFO necessarily indicative of cash available to fund the Company’s future cash requirements. Further, the Company’s computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently from the Company.
FFO Payout Ratio per Common Share. Dividends declared per common share divided by Diluted FFO per common share for a given period. The Company believes the FFO Payout Ratio per common share provides investors relevant and useful information because it measures the portion of FFO being declared as dividends to common stockholders.
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Net Operating Income from Continuing Operations (“NOI”). A non-GAAP supplemental financial measure used to evaluate the operating performance of real estate properties and same property performance, or “SPP.” 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. NOI, as adjusted, is calculated as NOI eliminating the effects of straight-line rents, amortization of above and below market lease intangibles, and lease termination fees. The Company uses NOI and NOI, as adjusted, to make decisions about resource allocations, to assess and compare property level performance, and evaluate SPP. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP since it does not reflect the aforementioned excluded items. Further, NOI may not be comparable to that of other real estate investment trusts, as they may use different methodologies for calculating NOI.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this Supplemental Information which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include the Company’s estimate of (i) net income per diluted common share, FFO per diluted common share, and FFO per diluted common share before giving effect to merger-related charges for the full year of 2007 and (ii) completion dates, stabilization dates, rentable square feet and total investment for development projects in progress, and rentable square feet for land held for future development. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include the ability of the Company to achieve its expected benefits from acquisitions; the ability of the Company to integrate companies and to preserve the goodwill of these acquired companies; competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); continuing operational difficulties in the skilled nursing and senior housing sectors; the Company’s ability to acquire, sell or lease facilities and the timing of acquisitions, sales and leasings; changes in healthcare laws and regulations and other changes in the healthcare industry which affect the operations of the Company’s lessees or mortgagors; changes in management; costs of compliance with building regulations; changes in tax laws and regulations; changes in the financial condition of the Company’s lessees and mortgagors; changes in rules governing financial reporting, including new accounting pronouncements; and changes in economic conditions, including changes in interest rates and the availability and cost of capital, which affect opportunities for profitable investments. Some of these risks, and other risks, are described from time to time in the Company’s Securities and Exchange Commission filings.
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