Exhibit 99.1
FOR IMMEDIATE RELEASE
HCP ANNOUNCES SECOND QUARTER 2010 RESULTS
HIGHLIGHTS
· Diluted FFO per share of $0.55 and diluted EPS of $0.27
· Year-over-year three and six-month adjusted NOI same property performance increased by 5.9% and 4.8%, respectively
· Acquisitions and capital investments of $136 million during the second quarter; additionally, in July 2010 we acquired a life science facility and two medical office buildings for $48 million
· Completed $512 million public offering of common stock
LONG BEACH, CA, August 3, 2010 — HCP (the “Company” or “we”) (NYSE:HCP) announced results for the quarter ended June 30, 2010 as follows (in thousands, except per share amounts):
| | Three Months Ended
June 30, 2010 | | Three Months Ended
June 30, 2009 | |
| | Amount | | Per Share | | Amount | | Per Share | |
Funds from operations (“FFO”) (1) | | $ | 161,875 | | $ | 0.55 | | $ | 146,094 | | $ | 0.55 | |
Impairments | | — | | — | | 5,906 | | 0.02 | |
FFO before giving effect to impairments | | $ | 161,875 | | $ | 0.55 | | $ | 152,000 | | $ | 0.57 | |
| | | | | | | | | | | | | |
Net income applicable to common shares (2) | | $ | 79,465 | | $ | 0.27 | | $ | 91,784 | | $ | 0.35 | |
(1) The quarter ended June 30, 2009 includes income of $6.0 million, or $0.02 per diluted share, resulting from an adjustment to the cost allocation of certain assets acquired in 2006.
(2) Including the items impacting FFO discussed above, the quarter ended June 30, 2009 includes gain on sales of real estate of $30.5 million, or $0.12 per diluted share.
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INVESTMENTS
During the quarter ended June 30, 2010, we made investments of $136 million, which included the following:
· On June 1, 2010, we acquired four senior housing facilities for $102 million. These facilities are leased to Emeritus Corporation under a master lease agreement that has an initial term of 10 years and two 10-year renewal options.
· Funded $34 million for construction and other capital projects, primarily in our life science segment.
Subsequently on July 26, 2010, we acquired a life science facility and two medical office buildings for approximately $48 million, including DownREIT units valued at $9 million and assumed debt of $5 million. The life science facility represents 85,000 rentable square feet and is occupied by a single tenant under a 15-year triple-net lease. The medical office buildings aggregate 103,000 rentable square feet and are currently 95% occupied.
FINANCINGS
In June 2010, we initiated a public offering, which resulted in the sale of 15.5 million shares of common stock at a price of $33.00 per share for gross proceeds of $512 million. This offering included: (i) the June 2010 public offering of 13.5 million shares for $445.5 million; and (ii) the July 2010 sale of 2.025 million shares, for $66.8 million, as a result of the underwriters exercising the over-allotment option from the June 2010 public offering. We received total net proceeds of $492 million from these sales, which were used to repay the outstanding indebtedness under our revolving line of credit, fund acquisitions and capital expenditures, repay mortgage debt and fund other general corporate purposes.
DIVIDEND
On July 29, 2010, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.465 per share. The dividend will be paid on August 24, 2010 to stockholders of record as of the close of business on August 9, 2010.
OUTLOOK
For the full year 2010, we expect FFO applicable to common shares to range between $2.10 and $2.16 per diluted share, before giving effect to impairment recoveries; FFO applicable to common shares to range between $2.14 and $2.20 per diluted share; and net income applicable to common shares to range between $1.05 and $1.11 per diluted share. These estimates do not include possible future gains or losses, the impact on operating results from possible future acquisitions or dispositions, or possible future impairments or recoveries.
COMPANY INFORMATION
HCP has scheduled a conference call and webcast for Tuesday, August 3, 2010 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) in order to present the Company’s performance and operating results for the quarter ended June 30, 2010. The conference call is accessible by dialing (800) 510-9834 (U.S.) or (617) 614-3669 (International). The participant passcode is 20761941. The webcast is accessible via the Company’s website at www.hcpi.com. This link can be found on the “Event Calendar” page, which is under the “Investor Relations” tab. A webcast replay of the conference call will be available after 12:00 p.m. Pacific Time (3:00 p.m. Eastern Time) on August 3, 2010 through August 17, 2010 on the Company’s website and a telephonic replay can be accessed by calling (888) 286-8010 (U.S.) or (617) 801-6888 (International) and entering passcode 51592244. The Company’s supplemental information package for the current period will also be available on the Company’s website in the “Presentations” section of the “Investor Relations” tab.
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ABOUT HCP
HCP, Inc., an S&P 500 company, is a real estate investment trust (REIT) that, together with its consolidated subsidiaries, invests primarily in real estate serving the healthcare industry in the United States. As of June 30, 2010, the Company’s portfolio of investments, including properties owned by its Investment Management Platform, consisted of: (i) interests in 677 facilities among the following segments: 258 senior housing, 100 life science, 250 medical office, 21 hospital and 48 skilled nursing; and (ii) $1.9 billion of mezzanine and other secured loans. For more information, visit the Company’s website at www.hcpi.com.
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FORWARD-LOOKING STATEMENTS
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release 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 among other things, net income applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis before giving effect to impairment recoveries, and gain on sales of real estate, real estate depreciation and amortization, and joint venture adjustments for the full year of 2010. These statements are made as of the date hereof and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of the Company’s control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include but are not limited to: national and local economic conditions; continued volatility in the capital markets, including changes in interest rates and the availability and cost of capital, which changes and volatility affect opportunities for profitable investment; the Company’s ability to access external sources of capital when desired and on reasonable terms; the Company’s ability to manage its indebtedness levels; changes in the terms of the Company’s indebtedness; the Company’s ability to maintain its credit ratings; the potential impact of existing and future litigation matters, including the possibility of larger than expected litigation costs and related developments; the Company’s ability to sell its investments when desired and on profitable terms; competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); the Company’s ability to reposition its properties on the same or better terms if existing leases are not renewed or the Company exercises its right to replace an existing operator or tenant upon default; the further restructuring of the loan with Cirrus; continuing reimbursement uncertainty in the skilled nursing segment; competition in the senior housing segment specifically and in the healthcare industry in general; the ability of the Company’s operators and tenants to maintain or increase occupancy levels at, and rental income from, the senior housing segment; the Company’s ability to realize the benefits of its mezzanine and other loan investments; the ability of the Company’s lessees and mortgagors to maintain the financial strength and liquidity necessary to satisfy their respective obligations to the Company and other third parties; the bankruptcy, insolvency or financial deterioration of the Company’s operators, lessees, borrowers or other obligors; changes in healthcare laws and regulations, including the impact of future or pending healthcare reform, and other changes in the healthcare industry which affect the operations of the Company’s lessees or obligors; the Company’s ability to recruit and retain key management personnel; costs of compliance with regulations and environmental laws affecting the Company’s properties; changes in tax laws and regulations; the Company’s ability and willingness to maintain its qualification as a REIT; changes in rules governing financial reporting, including new accounting pronouncements; and other risks described from time to time in the Company’s Securities and Exchange Commission filings. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.
CONTACT
HCP
Thomas M. Herzog
Executive Vice President and Chief Financial Officer
(562) 733-5309
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HCP, Inc.
Consolidated Balance Sheets
In thousands, except share and per share data
| | June 30, | | December 31, | |
| | 2010 | | 2009 | |
| | (Unaudited) | | | |
Assets | | | | | |
Real estate: | | | | | |
Buildings and improvements | | $ | 8,087,909 | | $ | 7,802,979 | |
Development costs and construction in progress | | 124,573 | | 272,542 | |
Land | | 1,557,168 | | 1,544,004 | |
Accumulated depreciation and amortization | | (1,147,237 | ) | (1,047,641 | ) |
Net real estate | | 8,622,413 | | 8,571,884 | |
| | | | | |
Net investment in direct financing leases | | 604,382 | | 600,077 | |
Loans receivable, net | | 1,707,609 | | 1,672,938 | |
Investments in and advances to unconsolidated joint ventures | | 265,436 | | 267,978 | |
Accounts receivable, net of allowance of $8,239 and $10,772, respectively | | 37,050 | | 43,726 | |
Cash and cash equivalents | | 96,260 | | 112,259 | |
Restricted cash | | 39,817 | | 33,000 | |
Intangible assets, net | | 356,387 | | 389,698 | |
Real estate held for sale, net | | — | | 13,461 | |
Other assets, net | | 515,289 | | 504,714 | |
| | | | | |
Total assets | | $ | 12,244,643 | | $ | 12,209,735 | |
| | | | | |
Liabilities and equity | | | | | |
Bank line of credit | | $ | — | | $ | — | |
Term loan | | — | | 200,000 | |
Senior unsecured notes | | 3,524,022 | | 3,521,325 | |
Mortgage and other secured debt | | 1,751,520 | | 1,834,935 | |
Other debt | | 94,956 | | 99,883 | |
Intangible liabilities, net | | 186,152 | | 200,260 | |
Accounts payable and accrued liabilities | | 312,775 | | 309,596 | |
Deferred revenue | | 81,898 | | 85,127 | |
Total liabilities | | 5,951,323 | | 6,251,126 | |
| | | | | |
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25.00 per share | | 285,173 | | 285,173 | |
Common stock, $1.00 par value: 750,000,000 shares authorized 308,038,877 and 293,548,162 shares issued and outstanding, respectively | | 308,039 | | 293,548 | |
Additional paid-in capital | | 6,157,609 | | 5,719,400 | |
Cumulative dividends in excess of earnings | | (634,066 | ) | (515,450 | ) |
Accumulated other comprehensive loss | | (4,552 | ) | (2,134 | ) |
Total stockholders’ equity | | 6,112,203 | | 5,780,537 | |
| | | | | |
Joint venture partners | | 14,995 | | 7,529 | |
Non-managing member unitholders | | 166,122 | | 170,543 | |
Total noncontrolling interests | | 181,117 | | 178,072 | |
| | | | | |
Total equity | | 6,293,320 | | 5,958,609 | |
| | | | | |
Total liabilities and equity | | $ | 12,244,643 | | $ | 12,209,735 | |
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HCP, Inc.
Consolidated Statements of Income
In thousands, except per share data
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2010 | | 2009 | | 2010 | | 2009 | |
| | | | | | | | | |
Revenues: | | | | | | | | | |
Rental and related revenues | | $ | 231,458 | | $ | 229,822 | | $ | 456,797 | | $ | 442,048 | |
Tenant recoveries | | 22,120 | | 21,010 | | 43,906 | | 44,660 | |
Income from direct financing leases | | 11,995 | | 13,204 | | 24,210 | | 26,129 | |
Interest income | | 36,156 | | 27,084 | | 71,422 | | 53,855 | |
Investment management fee income | | 1,290 | | 1,369 | | 2,598 | | 2,807 | |
Total revenues | | 303,019 | | 292,489 | | 598,933 | | 569,499 | |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Depreciation and amortization | | 77,912 | | 79,293 | | 156,059 | | 159,516 | |
Interest expense | | 72,747 | | 75,340 | | 148,703 | | 152,014 | |
Operating | | 45,451 | | 45,685 | | 91,568 | | 93,638 | |
General and administrative | | 20,526 | | 20,232 | | 45,450 | | 38,763 | |
Impairments (recoveries) | | — | | 5,781 | | (11,900 | ) | 5,781 | |
Total costs and expenses | | 216,636 | | 226,331 | | 429,880 | | 449,712 | |
| | | | | | | | | |
Other income (expense), net | | 224 | | 1,648 | | 580 | | (790 | ) |
| | | | | | | | | |
Income before income taxes and equity income from unconsolidated joint ventures | | 86,607 | | 67,806 | | 169,633 | | 118,997 | |
Income taxes | | (577 | ) | (840 | ) | (964 | ) | (1,727 | ) |
Equity income from unconsolidated joint ventures | | 2,486 | | 1,127 | | 3,869 | | 665 | |
Income from continuing operations | | 88,516 | | 68,093 | | 172,538 | | 117,935 | |
| | | | | | | | | |
Discontinued operations: | | | | | | | | | |
Income before impairment s and gain on sales of real estate, net of income taxes | | 14 | | 2,670 | | 93 | | 4,180 | |
Impairments | | — | | (125 | ) | — | | (125 | ) |
Gain on sales of real estate, net of income taxes | | 65 | | 30,540 | | 65 | | 31,897 | |
Total discontinued operations | | 79 | | 33,085 | | 158 | | 35,952 | |
| | | | | | | | | |
Net income | | 88,595 | | 101,178 | | 172,696 | | 153,887 | |
Noncontrolling interests’ share in earnings | | (3,494 | ) | (3,719 | ) | (6,559 | ) | (7,545 | ) |
Net income attributable to HCP, Inc. | | 85,101 | | 97,459 | | 166,137 | | 146,342 | |
Preferred stock dividends | | (5,283 | ) | (5,283 | ) | (10,566 | ) | (10,566 | ) |
Participating securities’ share in earnings | | (353 | ) | (392 | ) | (1,270 | ) | (707 | ) |
| | | | | | | | | |
Net income applicable to common shares | | $ | 79,465 | | $ | 91,784 | | $ | 154,301 | | $ | 135,069 | |
| | | | | | | | | |
Basic earnings per common share: | | | | | | | | | |
Continuing operations | | $ | 0.27 | | $ | 0.22 | | $ | 0.52 | | $ | 0.38 | |
Discontinued operations | | — | | 0.13 | | — | | 0.14 | |
Net income applicable to common shares | | $ | 0.27 | | $ | 0.35 | | $ | 0.52 | | $ | 0.52 | |
| | | | | | | | | |
Diluted earnings per common share: | | | | | | | | | |
Continuing operations | | $ | 0.27 | | $ | 0.22 | | $ | 0.52 | | $ | 0.38 | |
Discontinued operations | | — | | 0.13 | | — | | 0.14 | |
Net income applicable to common shares | | $ | 0.27 | | $ | 0.35 | | $ | 0.52 | | $ | 0.52 | |
| | | | | | | | | |
Weighted average shares used to calculate earnings per common share: | | | | | | | | | |
Basic | | 294,880 | | 265,422 | | 294,056 | | 259,412 | |
| | | | | | | | | |
Diluted | | 296,037 | | 265,542 | | 295,067 | | 259,516 | |
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HCP, Inc.
Consolidated Statements of Cash Flows
In thousands
(Unaudited)
| | Six Months Ended
June 30, | |
| | 2010 | | 2009 | |
Cash flows from operating activities: | | | | | |
Net income | | $ | 172,696 | | $ | 153,887 | |
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 | | 156,059 | | 159,516 | |
Discontinued operations | | 824 | | 711 | |
Amortization of above and below market lease intangibles, net | | (3,708 | ) | (10,980 | ) |
Stock-based compensation | | 7,688 | | 7,537 | |
Amortization of debt premiums, discounts and issuance costs, net | | 5,304 | | 4,313 | |
Straight-line rents | | (21,695 | ) | (25,759 | ) |
Interest accretion | | (30,742 | ) | (11,567 | ) |
Deferred rental revenue | | (2,022 | ) | 7,890 | |
Equity income from unconsolidated joint ventures | | (3,869 | ) | (665 | ) |
Distributions of earnings from unconsolidated joint ventures | | 3,648 | | 2,589 | |
Gain on sales of real estate | | (65 | ) | (31,897 | ) |
Marketable securities gains, net | | (35 | ) | (293 | ) |
Derivative losses, net | | 723 | | 154 | |
Impairments (recoveries) | | (11,900 | ) | 5,906 | |
Changes in: | | | | | |
Accounts receivable | | 4,456 | | 4,676 | |
Other assets | | 1,375 | | (6,452 | ) |
Accounts payable and accrued liabilities | | (2,640 | ) | (9,469 | ) |
Net cash provided by operating activities | | 276,097 | | 250,097 | |
Cash flows from investing activities: | | | | | |
Acquisitions and development of real estate | | (157,176 | ) | (39,319 | ) |
Lease commissions and tenant and capital improvements | | (16,545 | ) | (18,826 | ) |
Proceeds from sales of real estate, net | | — | | 52,281 | |
Contributions to unconsolidated joint ventures | | (264 | ) | — | |
Distributions in excess of earnings from unconsolidated joint ventures | | 1,723 | | 4,428 | |
Proceeds from the sale of securities | | 242 | | 4,800 | |
Principal repayments on loans receivable and direct financing leases | | 25,586 | | 4,727 | |
Investments in loans receivable | | (8,081 | ) | (16 | ) |
(Increase) decrease in restricted cash | | (6,817 | ) | 2,727 | |
Net cash provided by (used in) investing activities | | (161,332 | ) | 10,802 | |
Cash flows from financing activities: | | | | | |
Net repayments under bank line of credit facility | | — | | (50,000 | ) |
Repayment of term loan | | (200,000 | ) | (320,000 | ) |
Repayments of mortgage debt | | (87,720 | ) | (51,060 | ) |
Repurchase of senior unsecured notes | | — | | (7,735 | ) |
Net proceeds from the issuance of common stock and exercise of options | | 440,589 | | 421,453 | |
Dividends paid on common and preferred stock | | (284,753 | ) | (244,698 | ) |
Sale of noncontrolling interest | | 8,395 | | — | |
Purchase of noncontrolling interests | | — | | (9,097 | ) |
Distributions to noncontrolling interests | | (7,275 | ) | (7,840 | ) |
Net cash used in financing activities | | (130,764 | ) | (268,977 | ) |
Net decrease in cash and cash equivalents | | (15,999 | ) | (8,078 | ) |
Cash and cash equivalents, beginning of period | | 112,259 | | 57,562 | |
Cash and cash equivalents, end of period | | $ | 96,260 | | $ | 49,484 | |
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HCP, Inc.
Funds From Operations Information
In thousands, except per share data
(Unaudited)
| | Three Months Ended | | Six Months Ended | |
| | June 30, | | June 30, | |
| | 2010 | | 2009 | | 2010 | | 2009 | |
| | | | | | | | | |
Net income applicable to common shares | | $ | 79,465 | | $ | 91,784 | | $ | 154,301 | | $ | 135,069 | |
Depreciation and amortization of real estate, in-place lease and other intangibles: | | | | | | | | | |
Continuing operations | | 77,912 | | 79,293 | | 156,059 | | 159,516 | |
Discontinued operations | | — | | 336 | | 824 | | 711 | |
Gain on sales of real estate | | (65 | ) | (30,540 | ) | (65 | ) | (31,897 | ) |
Equity income from unconsolidated joint ventures | | (2,486 | ) | (1,127 | ) | (3,869 | ) | (665 | ) |
FFO from unconsolidated joint ventures | | 7,636 | | 6,940 | | 14,496 | | 12,571 | |
Noncontrolling interests’ and participating securities’ share in earnings | | 3,847 | | 4,111 | | 7,829 | | 8,252 | |
Noncontrolling interests’ and participating securities’ share in FFO | | (4,434 | ) | (4,703 | ) | (9,023 | ) | (9,497 | ) |
FFO applicable to common shares (1) | | $ | 161,875 | | $ | 146,094 | | $ | 320,552 | | $ | 274,060 | |
| | | | | | | | | |
Distributions on convertible units | | 1,637 | | 2,941 | | 3,244 | | 4,561 | |
| | | | | | | | | |
Diluted FFO applicable to common shares (1) | | $ | 163,512 | | $ | 149,035 | | $ | 323,796 | | $ | 278,621 | |
| | | | | | | | | |
Basic FFO per common share (1) | | $ | 0.55 | | $ | 0.55 | | $ | 1.09 | | $ | 1.06 | |
| | | | | | | | | |
Diluted FFO per common share (1) | | $ | 0.55 | | $ | 0.55 | | $ | 1.08 | | $ | 1.05 | |
| | | | | | | | | |
Weighted average shares used to calculate diluted FFO per common share | | 299,474 | | 271,457 | | 298,525 | | 264,243 | |
| | | | | | | | | |
Impairments (recoveries) | | $ | — | | $ | 5,906 | | $ | (11,900 | ) | $ | 5,906 | |
| | | | | | | | | |
Per common share impact of impairments (recoveries) on diluted FFO | | $ | — | | $ | 0.02 | | $ | (0.04 | ) | $ | 0.03 | |
| | | | | | | | | |
Diluted FFO per common share, before giving effect to impairments (recoveries) | | $ | 0.55 | | $ | 0.57 | | $ | 1.04 | | $ | 1.08 | |
(1) The Company believes funds from operations applicable to common shares, diluted funds from operations applicable to common shares and basic and diluted funds from operations per common share are important 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. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a real estate investment trust that uses historical cost accounting for depreciation could be less informative. The term funds from operations (“FFO”) was designed by the real estate investment trust industry to address this issue.
FFO is defined as net income applicable to common shares (computed in accordance with U.S. generally accepted accounting principles), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, with adjustments for joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. FFO does not represent cash generated from operating activities in accordance with U.S. generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income. 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 National Association of Real Estate Investment Trusts’ (“NAREIT”) definition or that have a different interpretation of the current NAREIT definition from the Company.
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HCP, Inc.
Net Operating Income and Same Property Performance Information (1) (2)
Dollars in thousands
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2010 | | 2009 | | 2010 | | 2009 | |
Net income | | $ | 88,595 | | $ | 101,178 | | $ | 172,696 | | $ | 153,887 | |
Interest income | | (36,156 | ) | (27,084 | ) | (71,422 | ) | (53,855 | ) |
Investment management fee income | | (1,290 | ) | (1,369 | ) | (2,598 | ) | (2,807 | ) |
Depreciation and amortization | | 77,912 | | 79,293 | | 156,059 | | 159,516 | |
Interest expense | | 72,747 | | 75,340 | | 148,703 | | 152,014 | |
General and administrative | | 20,526 | | 20,232 | | 45,450 | | 38,763 | |
Impairments (recoveries) | | — | | 5,781 | | (11,900 | ) | 5,781 | |
Other income (expense), net | | (224 | ) | (1,648 | ) | (580 | ) | 790 | |
Income taxes | | 577 | | 840 | | 964 | | 1,727 | |
Equity income from unconsolidated joint ventures | | (2,486 | ) | (1,127 | ) | (3,869 | ) | (665 | ) |
Total discontinued operations, net of income taxes | | (79 | ) | (33,085 | ) | (158 | ) | (35,952 | ) |
NOI (1) | | $ | 220,122 | | $ | 218,351 | | $ | 433,345 | | $ | 419,199 | |
Straight-line rents | | (8,419 | ) | (14,337 | ) | (21,695 | ) | (25,759 | ) |
Interest accretion – direct financing leases (“DFLs”) | | (1,850 | ) | (1,994 | ) | (3,663 | ) | (3,949 | ) |
Amortization of above and below market lease intangibles, net | | (1,804 | ) | (8,320 | ) | (3,708 | ) | (10,980 | ) |
Lease termination fees | | (1,589 | ) | (1,286 | ) | (3,573 | ) | (1,347 | ) |
NOI adjustments related to discontinued operations | | — | | 540 | | — | | 530 | |
Adjusted NOI (1) | | $ | 206,460 | | $ | 192,954 | | $ | 400,706 | | $ | 377,694 | |
Non-SPP adjusted NOI (1) (2) | | (11,737 | ) | (9,109 | ) | (23,419 | ) | (17,819 | ) |
Same property portfolio adjusted NOI (1) (2) | | $ | 194,723 | | $ | 183,845 | | $ | 377,287 | | $ | 359,875 | |
Adjusted NOI % change — SPP | | 5.9 | % | | | 4.8 | % | | |
(1) The Company believes Net Operating Income from Continuing Operations (“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 is used to evaluate the operating performance of real estate properties and SPP. 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.
NOI is defined as rental revenues, including tenant reimbursements and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, depreciation and amortization, interest expense, general and administrative expenses, litigation provision, impairments, impairment recoveries, other income (expense), net, income tax expense (benefit), equity income from unconsolidated joint ventures and discontinued operations. NOI, as adjusted, is calculated as NOI eliminating the effects of straight-line rents, DFL interest accretion, amortization of above and below market lease intangibles, and lease termination fees. NOI, as adjusted, is sometimes referred to as “adjusted NOI” or “cash basis NOI.”
(2) Same property statistics allow management to evaluate the performance of the Company’s real estate portfolio under a consistent population, which eliminates the changes in the composition of our portfolio of properties. The Company identifies its same property portfolio (“SPP”) as stabilized properties that are, and remained, in operations for the duration of the year-over-year comparison periods presented. Accordingly, it takes a stabilized property a minimum of 12 months in operations to be included in the Company’s same property portfolio. SPP NOI excludes certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.
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HCP, Inc.
Projected Future Operations (1)
(Unaudited)
| | 2010 | |
| | Low | | High | |
| | | | | |
Diluted earnings per common share | | $ | 1.05 | | $ | 1.11 | |
Gain on sales of real estate | | — | | — | |
Real estate depreciation and amortization | | 1.03 | | 1.03 | |
Joint venture adjustments | | 0.06 | | 0.06 | |
Diluted FFO per common share | | 2.14 | | 2.20 | |
Impairment recoveries | | (0.04 | ) | (0.04 | ) |
Diluted FFO per common share, before giving effect to impairment recoveries | | $ | 2.10 | | $ | 2.16 | |
(1) Except as otherwise noted above, the foregoing projections reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, development activities, property dispositions and the earnings impact of the events referenced in this release. Except as otherwise noted, these estimates do not reflect the potential impact of future acquisitions, impairments, impairment recoveries, the future bankruptcy or insolvency of the Company’s operators, lessees, borrowers or other obligors, the effect of any future restructuring of the Company’s contractual relationships with such entities, realized gains or losses on marketable securities, ineffectiveness related to our cash flow hedges, offerings of debt or equity securities or existing and future litigation matters including the possibility of larger than expected litigation costs and related developments. As defined by NAREIT, FFO does not include real estate-related depreciation and amortization or gains and losses associated with real estate disposition activities, but does include impairments. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above. The aforementioned ranges represent management’s best estimate of results based upon the underlying assumptions as of the date of this press release. Except as otherwise required by law, management assumes no, and hereby disclaims any, obligation to update any of the foregoing projections as a result of new information or new or future developments.
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