Exhibit 99.1
Item 6. | Selected Financial Data |
The following selected financial data for the five years ended December 31, 2006 are derived from our audited consolidated financial statements (in thousands, except per share data):
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Operating Data | ||||||||||||||||||||
Revenues(1) | $ | 128,107 | $ | 173,188 | $ | 225,826 | $ | 267,339 | $ | 316,345 | ||||||||||
Expenses: | ||||||||||||||||||||
Interest expense(1) | 32,296 | 45,600 | 64,690 | 75,523 | 93,015 | |||||||||||||||
Depreciation and amortization(1) | 26,531 | 39,475 | 60,421 | 72,997 | 91,280 | |||||||||||||||
Property operating expenses | 1,115 | |||||||||||||||||||
Other expenses(2) | 13,038 | 17,274 | 20,391 | 20,073 | 30,259 | |||||||||||||||
Impairment of assets | 2,298 | 2,792 | 314 | |||||||||||||||||
Loss on extinguishment of debt(3) | 403 | 21,484 | ||||||||||||||||||
Total expenses | 74,566 | 105,141 | 145,816 | 190,077 | 215,669 | |||||||||||||||
Income before minority interests | 53,541 | 68,047 | 80,010 | 77,262 | 100,676 | |||||||||||||||
Minority interests | (13 | ) | ||||||||||||||||||
Income from continuing operations | 53,541 | 68,047 | 80,010 | 77,262 | 100,663 | |||||||||||||||
Income from discontinued operations, net(1) | 14,118 | 14,693 | 5,361 | 7,024 | 2,087 | |||||||||||||||
Net income | 67,659 | 82,740 | 85,371 | 84,286 | 102,750 | |||||||||||||||
Preferred stock dividends | 12,468 | 9,218 | 12,737 | 21,594 | 21,463 | |||||||||||||||
Preferred stock redemption charge | 2,790 | |||||||||||||||||||
Net income available to common stockholders | $ | 55,191 | $ | 70,732 | $ | 72,634 | $ | 62,692 | $ | 81,287 | ||||||||||
Other Data | ||||||||||||||||||||
Average number of common shares outstanding: | ||||||||||||||||||||
Basic | 36,702 | 43,572 | 51,544 | 54,110 | 61,661 | |||||||||||||||
Diluted | 37,301 | 44,201 | 52,082 | 54,499 | 62,045 | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations available to common stockholders | $ | 1.12 | $ | 1.29 | $ | 1.31 | $ | 1.03 | $ | 1.28 | ||||||||||
Discontinued operations, net | 0.38 | 0.34 | 0.10 | 0.13 | 0.03 | |||||||||||||||
Net income available to common stockholders* | $ | 1.50 | $ | 1.62 | $ | 1.41 | $ | 1.16 | $ | 1.32 | ||||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations available to common stockholders | $ | 1.10 | $ | 1.27 | $ | 1.29 | $ | 1.02 | $ | 1.28 | ||||||||||
Discontinued operations, net | 0.38 | 0.33 | 0.10 | 0.13 | 0.03 | |||||||||||||||
Net income available to common stockholders* | $ | 1.48 | $ | 1.60 | $ | 1.39 | $ | 1.15 | $ | 1.31 | ||||||||||
Cash distributions per common share | $ | 2.34 | $ | 2.34 | $ | 2.385 | $ | 2.46 | $ | 2.8809 |
* | Amounts may not sum due to rounding | |
(1) | In accordance with FASB Statement No. 144, we have reclassified the income and expenses attributable to the properties sold subsequent to January 1, 2002 through September 30, 2007 and attributable to the properties held for sale at September 30, 2007, to discontinued operations for all periods presented. See Note 16 to our audited consolidated financial statements. | |
(2) | Other expenses include loan expense, provision for loan losses and general and administrative expenses. | |
(3) | Effective January 1, 2003, in accordance with FASB Statement No. 145, we reclassified the losses on extinguishments of debt in 2002 to income from continuing operations rather than as extraordinary items as previously required under FASB Statement No. 4. |
December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Net real estate investments | $ | 1,524,457 | $ | 1,992,446 | $ | 2,441,972 | $ | 2,849,518 | $ | 4,122,893 | ||||||||||
Total assets | 1,591,482 | 2,184,088 | 2,552,171 | 2,972,164 | 4,280,610 | |||||||||||||||
Total debt | 673,703 | 1,014,541 | 1,192,958 | 1,500,818 | 2,198,001 | |||||||||||||||
Total liabilities and minority interests | 694,250 | 1,034,409 | 1,216,892 | 1,541,408 | 2,301,817 | |||||||||||||||
Total stockholders’ equity | 897,232 | 1,149,679 | 1,335,279 | 1,430,756 | 1,978,793 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis is based primarily on the consolidated financial statements of Health Care REIT, Inc. for the periods presented and should be read together with the notes thereto. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” in the Annual Report on Form 10-K/A for the year ended December 31, 2006.
Executive Overview
Business
Health Care REIT, Inc. is a self-administered, equity real estate investment trust that invests in the full spectrum of senior housing and health care real estate. Founded in 1970, we were the first REIT to invest exclusively in health care properties. The following table summarizes our portfolio as of December 31, 2006:
Investments(1) | Percentage of | Revenues(2) | Percentage of | Number of | # Beds/Units | Investment per | Operators/ | |||||||||||||||||||||||||||||
Type of Property | (in thousands) | Investments | (in thousands) | Revenues(2) | Properties | or Sq. Ft. | metric (3) | Tenants | States | |||||||||||||||||||||||||||
Independent living/CCRCs | $ | 533,950 | 13 | % | $ | 39,475 | 12 | % | 47 | 5,887 | units | $ | 123,073 | unit | 18 | 19 | ||||||||||||||||||||
Assisted living facilities | 1,024,219 | 25 | % | 107,165 | 33 | % | 204 | 12,538 | units | 90,697 | unit | 25 | 33 | |||||||||||||||||||||||
Skilled nursing facilities | 1,414,115 | 34 | % | 157,945 | 48 | % | 221 | 30,218 | beds | 47,279 | bed | 22 | 28 | |||||||||||||||||||||||
Medical office buildings | 900,132 | 22 | % | 3,247 | 1 | % | 89 | 3,297,370 | sq. ft. | 273 | sq.ft. | 642 | 12 | |||||||||||||||||||||||
Specialty care facilities | 260,333 | 6 | % | 16,632 | 5 | % | 17 | 1,351 | beds | 210,969 | bed | 9 | 9 | |||||||||||||||||||||||
Other income | 3,924 | 1 | % | |||||||||||||||||||||||||||||||||
Totals | $ | 4,132,749 | 100 | % | $ | 328,388 | 100 | % | 578 | |||||||||||||||||||||||||||
(1) | Investments include real estate investments and credit enhancements which amounted to $4,130,299,000 and $2,450,000, respectively. | |
(2) | Revenues include gross revenues and revenues from discontinued operations for the year ended December 31, 2006. | |
(3) | Investment per metric was computed by using the total investment amount of $4,475,503,000 which includes real estate investments, credit enhancements and unfunded construction commitments for which initial funding has commenced which amounted to $4,130,299,000, $2,450,000 and $342,754,000, respectively. |
Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in rental and interest income and portfolio growth. To meet these objectives, we invest across the full spectrum of senior housing and health care real estate and diversify our investment portfolio by property type, operator/tenant and geographic location.
Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals and interest earned on outstanding loans receivable. These items represent our primary source of liquidity to fund distributions and are dependent upon our obligors’ continued ability to make contractual rent and interest payments to us. To the extent that our obligors experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidityand/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property and operator/tenant. Our asset management process includes review of monthly financial statements for each property, periodic review of obligor credit, periodic property inspections and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends and risks. Through these asset management and research efforts, we are typically able to intervene at an early stage to address payment risk, and in so doing, support both the collectibility of revenue and the value of our investment.
In addition to our asset management and research efforts, we also structure our investments to help mitigate payment risk. We typically limit our investments to no more than 90% of the appraised value of a property.
Operating leases and loans are normally credit enhanced by guarantiesand/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the obligor and its affiliates.
For the year ended December 31, 2006, rental income and interest income represented 93% and 6%, respectively, of total gross revenues (including discontinued operations). Substantially all of our operating leases are designed with either fixed or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectibility assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.
Depending upon the availability and cost of external capital, we anticipate investing in additional properties. New investments are generally funded from temporary borrowings under our unsecured lines of credit arrangements, internally generated cash and the proceeds from sales of real property. Our investments generate internal cash from rent and interest receipts and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under the unsecured lines of credit arrangements, is expected to be provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt. We believe our liquidity and various sources of available capital are sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and finance future investments.
Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. We expect to complete gross new investments of $1,000,000,000 to $1,200,000,000 in 2007, including acquisitions of $700,000,000 to $800,000,000 and funded new development of $300,000,000 to $400,000,000. We anticipate the sale of real property and the repayment of loans receivable totaling approximately $100,000,000 to $200,000,000 during 2007. It is possible that additional loan repayments or sales of real property may occur in the future. To the extent that loan repayments and real property sales exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any loan repayments and real property sales in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our unsecured lines of credit arrangements. At December 31, 2006, we had $36,216,000 of cash and cash equivalents and $515,000,000 of available borrowing capacity under our unsecured lines of credit arrangements. Our investment activity may exceed our borrowing capacity under our unsecured lines of credit. To the extent that we are unable to issue equity or debt securities to provide additional capital, we may not be able to fund all of our potential investments, which could have an adverse effect on our revenues and cash flows from operations.
Key Transactions in 2006
We completed the following key transactions during the year ended December 31, 2006:
• | our Board of Directors increased our quarterly dividend to $0.64 per share, which represented a two cent increase from the quarterly dividend of $0.62 paid for 2005. The dividend declared for the quarter ended December 31, 2006 represented the 143rd consecutive dividend payment; | |
• | we completed a $1.0 billion merger with Windrose Medical Properties Trust on December 20, 2006; | |
• | we completed $559,209,000 of gross investments offset by $140,791,000 of investment payoffs; | |
• | we completed a public offering of 3,222,800 shares of common stock with net proceeds of approximately $109,748,000 in April 2006; | |
• | we extended our $40,000,000 unsecured line of credit which matured in May 2006 to May 2007 and reduced pricing by 40 basis points; | |
• | we closed on a $700,000,000 unsecured revolving credit facility to replace our $500,000,000 facility, which was scheduled to mature in June 2008. Among other things, the new facility provides us with additional |
financial flexibility and borrowing capacity, extends our agreement to July 2009 and adds two new lenders to the bank group in addition to commitment increases by eight of the ten existing lenders; and |
• | we issued $345,000,000 of 4.75% convertible notes due December 2026 in November and December 2006. |
Windrose Medical Properties Trust Merger
On December 20, 2006, we completed our merger with Windrose Medical Properties Trust, a self-managed real estate investment trust based in Indianapolis, Indiana. The aggregate purchase price was approximately $1,018,345,000, including direct acquisition costs of approximately $29,918,000. The Windrose merger diversified our portfolio of investments throughout the health care delivery system. Windrose shareholders received approximately 9,679,000 shares of our common stock (valued at $41.00 per share) and Windrose preferred shareholders received 2,100,000 shares of our 7.5% Series G Cumulative Convertible Preferred Stock (valued at $29.58 per share). Additionally, our investment in Windrose includes $183,139,000 of cash provided to Windrose to extinguish secured debt, the assumption of $301,641,000 of debt and the assumption of other liabilities and minority interests totaling $44,683,000. The results of operations for Windrose have been included in our consolidated results of operations from the date of acquisition.
Key Performance Indicators, Trends and Uncertainties
We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, credit strength and concentration risk. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.
Operating Performance. We believe that net income available to common stockholders (“NICS”) is the most appropriate earnings measure. Other useful supplemental measures of our operating performance include funds from operations (“FFO”) and funds available for distribution (“FAD”); however, these supplemental measures are not defined by U.S. generally accepted accounting principals (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion of FFO and FAD and for reconciliations of FFO and FAD to NICS. These earning measures and their relative per share amounts are widely used by investors and analysts in the valuation, comparison and investment recommendations of REITs. The following table reflects the recent historical trends of our operating performance measures (in thousands, except per share data):
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
Net income available to common stockholders | $ | 72,634 | $ | 62,692 | $ | 81,287 | ||||||
Funds from operations | 146,742 | 144,293 | 177,580 | |||||||||
Funds available for distribution | 136,343 | 147,730 | 191,885 | |||||||||
Per share data (fully diluted): | ||||||||||||
Net income available to common stockholders | $ | 1.39 | $ | 1.15 | $ | 1.31 | ||||||
Funds from operations | 2.82 | 2.65 | 2.86 | |||||||||
Funds available for distribution | 2.62 | 2.71 | 3.09 |
Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to book capitalization, debt to gross assets and debt to market capitalization. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest plus preferred dividends and secured debt principal amortizations). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain investment grade ratings with Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) which is discussed in further detail, and reconciled to net income, below in “Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are
widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures:
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
Debt to book capitalization ratio | 47 | % | 51 | % | 53 | % | ||||||
Debt to market capitalization ratio | 34 | % | 40 | % | 39 | % | ||||||
Interest coverage ratio | 3.21 | x | 3.06 | x | 2.97x | |||||||
Fixed charge coverage ratio | 2.65 | x | 2.37 | x | 2.39x |
Concentration Risk. We evaluate our concentration risk in terms of asset mix, investment mix, customer mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property. In order to qualify as an equity REIT, at least 75% of our real estate investments must be real property whereby each property, which includes the land, buildings, improvements, intangibles and related rights, is owned by us and leased to an operator pursuant to a long-term operating lease. Investment mix measures the portion of our investments that relate to our various property types. Customer mix measures the portion of our investments that relate to our top five customers. The following table reflects our recent historical trends of concentration risk:
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
Asset mix: | ||||||||||||
Real property | 90 | % | 93 | % | 95 | % | ||||||
Loans receivable | 10 | % | 7 | % | 5 | % | ||||||
Investment mix: | ||||||||||||
Assisted living facilities | 54 | % | 34 | % | 25 | % | ||||||
Skilled nursing facilities | 39 | % | 44 | % | 34 | % | ||||||
Independent/CCRC(1) | 15 | % | 13 | % | ||||||||
Medical office buildings | 22 | % | ||||||||||
Specialty care facilities | 7 | % | 7 | % | 6 | % | ||||||
Customer mix: | ||||||||||||
Emeritus Corporation | 15 | % | 13 | % | 9 | % | ||||||
Brookdale Senior Living Inc. | 7 | % | ||||||||||
Home Quality Management, Inc. | 7 | % | 6 | % | ||||||||
Life Care Centers of America, Inc. | 7 | % | 6 | % | ||||||||
Merrill Gardens L.L.C. | 7 | % | 4 | % | ||||||||
Southern Assisted Living, Inc.(2) | 8 | % | 7 | % | ||||||||
Commonwealth Communities Holdings LLC | 8 | % | 7 | % | ||||||||
Delta Health Group, Inc. | 7 | % | ||||||||||
Remaining portfolio | 55 | % | 59 | % | 68 | % | ||||||
Geographic mix: | ||||||||||||
Florida | 15 | % | 14 | % | 17 | % | ||||||
Texas | 6 | % | 8 | % | 11 | % | ||||||
Massachusetts | 14 | % | 13 | % | 8 | % | ||||||
California | 7 | % | 7 | % | ||||||||
Ohio | 6 | % | 6 | % | ||||||||
North Carolina | 8 | % | 8 | % | ||||||||
Remaining portfolio | 51 | % | 50 | % | 51 | % |
(1) | As a result of our significant independent living/continuing care retirement community acquisitions in the fourth quarter of 2005, we began to separately disclose this property classification in our portfolio reporting. We adopted the National Investment Center definitions and reclassified certain of our existing facilities to this classification. | |
(2) | In September 2005, Alterra Healthcare Corporation, one of our tenants, became an indirect wholly-owned subsidiary of Brookdale Senior Living Inc. as a result of Brookdale’s merger with FEBC-ALT Investors LLC. In April 2006, Brookdale completed the acquisition of Southern Assisted Living, Inc. |
We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Management regularly monitors various economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to “Item 1A — Risk Factors” in the Annual Report on Form 10-K/A for the year ended December 31, 2006 for further discussion.
Portfolio Update
Investment Properties
Payment coverages of the operators in our investment property portfolio continue to improve. Our overall payment coverage is at 1.93 times and represents an increase of one basis point from 2005 and 15 basis points from 2004. The following table reflects our recent historical trends of portfolio coverages. Coverage data reflects the 12 months ended for the periods presented. CBMF represents the ratio of facilities’ earnings before interest, taxes, depreciation, amortization, rent and management fees to contractual rent or interest due us. CAMF represents the ratio of earnings before interest, taxes, depreciation, amortization, and rent (but after imputed management fees) to contractual rent or interest due us.
September 30, 2004 | September 30, 2005 | September 30, 2006 | ||||||||||||||||||||||
CBMF | CAMF | CBMF | CAMF | CBMF | CAMF | |||||||||||||||||||
Independent living/CCRCs | 1.43 | x | 1.21 | x | 1.41 | x | 1.21x | |||||||||||||||||
Assisted living facilities | 1.45 | x | 1.23 | x | 1.52 | x | 1.30 | x | 1.54 | x | 1.33x | |||||||||||||
Skilled nursing facilities | 2.11 | x | 1.62 | x | 2.18 | x | 1.61 | x | 2.17 | x | 1.55x | |||||||||||||
Specialty care facilities | 2.69 | x | 2.08 | x | 3.36 | x | 2.77 | x | 2.88 | x | 2.34x | |||||||||||||
Weighted averages | 1.78 | x | 1.44 | x | 1.92 | x | 1.53 | x | 1.93 | x | 1.50x |
Operating Properties
Our consolidated financial results for the year ended December 31, 2006 include twelve days of revenues and expenses from operating properties due to the Windrose merger completed on December 20, 2006. The primary performance measure for our operating properties is net operating income (“NOI”) as discussed below in Non-GAAP Financial Measures. For the twelve days ended December 31, 2006, our operating properties generated $2,359,000 of net operating income which represents $3,474,000 of rental income less $1,115,000 of property operating expenses.
Corporate Governance
Maintaining investor confidence and trust has become increasingly important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. The Board of Directors adopted and annually reviews its Corporate Governance Guidelines. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on our Web site at www.hcreit.com and from us upon written request sent to the Senior Vice President — Administration and Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio,43603-1475.
Liquidity and Capital Resources
Sources and Uses of Cash
Our primary sources of cash include rent and interest receipts, borrowings under unsecured lines of credit arrangements, public and private offerings of debt and equity securities, proceeds from the sales of real property and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property acquisitions, loan advances and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below.
The following is a summary of our sources and uses of cash flows (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Cash and cash equivalents at beginning of period | $ | 124,496 | $ | 19,763 | $ | (104,733 | ) | (84 | )% | $ | 36,237 | $ | 16,474 | 83 | % | $ | (88,259 | ) | (71 | )% | ||||||||||||||||
Cash provided from (used in) operating activities | 144,025 | 173,755 | 29,730 | 21 | % | 216,446 | 42,691 | 25 | % | 72,421 | 50 | % | ||||||||||||||||||||||||
Cash provided from (used in) investing activities | (507,362 | ) | (449,069 | ) | 58,293 | (11 | )% | (560,815 | ) | (111,746 | ) | 25 | % | (53,453 | ) | 11 | % | |||||||||||||||||||
Cash provided from (used in) financing activities | 258,604 | 291,788 | 33,184 | 13 | % | 344,348 | 52,560 | 18 | % | 85,744 | 33 | % | ||||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 19,763 | $ | 36,237 | $ | 16,474 | 83 | % | $ | 36,216 | $ | (21 | ) | 0 | % | $ | 16,453 | 83 | % | |||||||||||||||||
Operating Activities. The increases in net cash provided from operating activities are primarily attributable to increases in net income, excluding depreciation and amortization, stock-based compensation and net straight-line rental income. Net income and the provisions for depreciation and amortization increased primarily as a result of net new investments in properties owned by us. See the discussion of investing activities below for additional details. To the extent that we acquire or dispose of additional properties in the future, our net income and provisions for depreciation and amortization will change accordingly.
The following is a summary of our straight-line rent (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Gross straight-line rental income | $ | 21,936 | $ | 13,142 | $ | (8,794 | ) | (40 | )% | $ | 9,432 | $ | (3,710 | ) | (28 | )% | $ | (12,504 | ) | (57 | )% | |||||||||||||||
Cash receipts due to real property sales | (3,756 | ) | (9,384 | ) | (5,628 | ) | (150 | )% | (3,544 | ) | 5,840 | (62 | )% | 212 | (6 | )% | ||||||||||||||||||||
Prepaid rent receipts | (4,388 | ) | (4,485 | ) | (97 | ) | 2 | % | (17,017 | ) | (12,532 | ) | 279 | % | (12,629 | ) | 288 | % | ||||||||||||||||||
Rental income related to above/below market leases | 60 | 60 | n/a | 60 | n/a | |||||||||||||||||||||||||||||||
Cash receipts in excess of (less than) rental income | $ | 13,792 | $ | (727 | ) | $ | (14,519 | ) | n/a | $ | (11,069 | ) | $ | (10,342 | ) | 1,423 | % | $ | (24,861 | ) | n/a | |||||||||||||||
Gross straight-line rental income represents the non-cash difference between contractual cash rent due and the average rent recognized pursuant to Statement of Financial Accounting Standards No. 13Accounting for Leases (“SFAS 13”) for leases with fixed rental escalators, net of collectibility reserves, if any. This amount is positive in the first half of a lease term (but declining every year due to annual increases in cash rent due) and is negative in the second half of a lease term. The decrease in gross straight-line rental income is primarily due to annual increases in cash rent due on leases with fixed increases. The increase in non-recurring cash receipts is primarily attributable to cash received upon renegotiation of a lease in connection to the acquisition of Commonwealth Communities Holdings LLC by Kindred Healthcare, Inc. in February 2006.
Investing Activities. The changes in net cash used in investing activities are primarily attributable to the Windrose merger and net changes in loans receivable and real property investments. The following is a summary of our investment and disposition activities, excluding the Windrose merger (dollars in thousands):
Year Ended | ||||||||||||||||||||||||
December 31, 2004 | December 31, 2005 | December 31, 2006 | ||||||||||||||||||||||
Facilities | Amount | Facilities | Amount | Facilities | Amount | |||||||||||||||||||
Real property acquisitions: | ||||||||||||||||||||||||
Assisted living | 22 | $ | 179,940 | 4 | $ | 47,660 | 8 | $ | 77,600 | |||||||||||||||
Skilled nursing | 52 | 338,951 | 45 | 262,084 | 18 | 148,955 | ||||||||||||||||||
Independent/CCRC | 11 | 230,225 | 5 | 56,417 | ||||||||||||||||||||
Specialty care | 5 | 51,000 | ||||||||||||||||||||||
Land parcels | 10,250 | |||||||||||||||||||||||
Total acquisitions | 74 | 518,891 | 65 | 590,969 | 31 | 293,222 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Assumed debt | (14,555 | ) | (22,309 | ) | (25,049 | ) | ||||||||||||||||||
Preferred stock issuance | ||||||||||||||||||||||||
Cash disbursed for acquisitions | 504,336 | 568,660 | 268,173 | |||||||||||||||||||||
Additions to CIP | 11,883 | 8,790 | 149,843 | |||||||||||||||||||||
Capital improvements to existing properties | 26,328 | 21,841 | 11,167 | |||||||||||||||||||||
Total cash invested in real property | 542,547 | 599,291 | 429,183 | |||||||||||||||||||||
Real property dispositions: | ||||||||||||||||||||||||
Assisted living | 4 | 20,271 | 15 | 90,485 | 12 | 58,479 | ||||||||||||||||||
Skilled nursing | 2 | 6,076 | 3 | 7,827 | ||||||||||||||||||||
Independent/CCRC | 1 | 3,095 | ||||||||||||||||||||||
Specialty care | 1 | 11,220 | ||||||||||||||||||||||
Land parcels | 840 | 486 | ||||||||||||||||||||||
Proceeds from real property sales | 7 | 37,567 | 15 | 91,325 | 16 | 69,887 | ||||||||||||||||||
Net cash investments in real property | 67 | $ | 504,980 | 50 | $ | 507,966 | 15 | $ | 359,296 | |||||||||||||||
Advances on loans receivable: | ||||||||||||||||||||||||
Investments in new loans | $ | 47,826 | $ | 26,554 | $ | 75,209 | ||||||||||||||||||
Draws on existing loans | 14,062 | 13,833 | 11,781 | |||||||||||||||||||||
Total investments in loans | 61,888 | 40,387 | 86,990 | |||||||||||||||||||||
Receipts on loans receivable: | ||||||||||||||||||||||||
Loan payoffs | 38,450 | 82,379 | 65,002 | |||||||||||||||||||||
Principal payments on loans | 17,023 | 16,259 | 17,253 | |||||||||||||||||||||
Total principal receipts on loans | 55,473 | 98,638 | 82,255 | |||||||||||||||||||||
Net cash advances/(receipts) on loans receivable | $ | 6,415 | $ | (58,251 | ) | $ | 4,735 | |||||||||||||||||
The investment in Windrose primarily represents $183,139,000 of cash provided to Windrose to extinguish secured debt and cash used to pay advisory fees, lender consents and other merger-related costs totaling $15,023,000. These cash uses have been offset by $15,591,000 of cash assumed from Windrose on the merger effective date.
Financing Activities. The changes in net cash provided from or used in financing activities are primarily attributable to changes related to our long-term debt, common stock issuances, preferred stock issuances and cash distributions to stockholders.
The following is a summary of our senior unsecured note issuances (dollars in thousands):
Date Issued | Maturity Date | Interest Rate | Face Amount | Net Proceeds | ||||||||||
September 2004 | November 2013 | 6.000 | % | $ | 50,000 | $ | 50,708 | |||||||
April 2005 | May 2015 | 5.875 | % | $ | 250,000 | $ | 246,859 | |||||||
November 2005 | June 2016 | 6.200 | % | 300,000 | 297,194 | |||||||||
2005 Totals | $ | 550,000 | $ | 544,053 | ||||||||||
November 2006 | December 2006 | 4.750 | % | $ | 345,000 | $ | 337,517 | |||||||
We repaid $40,000,000 of 8.0% senior unsecured notes upon maturity in April 2004. In May 2005, we redeemed all of our outstanding $50,000,000 8.17% senior unsecured notes due March 2006, we completed a public tender offer for $57,670,000 of our outstanding $100,000,000 7.625% senior unsecured notes due March 2008, and we redeemed $122,500,000 of our outstanding $175,000,000 7.5% senior unsecured notes due August 2007. The increase in principal payments on secured debt during 2005 is primarily due to early extinguishments of outstanding mortgages. During the year ended December 31, 2005, we paid off mortgages with outstanding balances of $72,309,000 and average interest rates of 7.481%.
The change in common stock is primarily attributable to public and private issuances and common stock issuances related to our dividend reinvestment and stock purchase plan (“DRIP”). The remaining difference in common stock issuances is primarily due to issuances pursuant to stock incentive plans.
The following is a summary of our common stock issuances (dollars in thousands, except per share amounts):
Date Issued | Shares Issued | Issue Price | Gross Proceeds | Net Proceeds | ||||||||||||
2004 DRIP | 1,532,819 | $ | 33.65 | $ | 51,575 | $ | 51,575 | |||||||||
November 2005 | 3,000,000 | $ | 34.15 | $ | 102,450 | $ | 100,977 | |||||||||
2005 DRIP | 1,546,959 | $ | 34.59 | 53,505 | 53,505 | |||||||||||
4,546,959 | $ | 155,955 | $ | 154,482 | ||||||||||||
April 2006 | 3,222,800 | $ | 36.00 | $ | 116,021 | $ | 109,748 | |||||||||
2006 DRIP | 1,876,377 | $ | 36.34 | 68,184 | 68,184 | |||||||||||
5,099,177 | $ | 184,205 | $ | 177,932 | ||||||||||||
In September 2004, we closed on a public offering of 7,000,000 shares of 7.625% Series F Cumulative Redeemable Preferred Stock, which generated net proceeds of approximately $169,107,000. The proceeds were used to repay borrowings under our unsecured lines of credit arrangements and to invest in additional properties.
In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income (including 100% of capital gains) to our stockholders. The increases in dividends are primarily attributable to increases in outstanding common and preferred stock shares as discussed above and increases in our annual common stock dividend per share and the payment of a prorated dividend of $0.3409 in December 2006 in conjunction with the Windrose merger.
The following is a summary of our dividend payments (in thousands, except per share amounts):
Year Ended | ||||||||||||||||||||||||
December 31, 2004 | December 31, 2005 | December 31, 2006 | ||||||||||||||||||||||
Per Share | Amount | Per Share | Amount | Per Share | Amount | |||||||||||||||||||
Common Stock | $ | 2.385 | $ | 122,987 | $ | 2.46 | $ | 132,548 | $ | 2.8809 | $ | 178,365 | ||||||||||||
Series D Preferred Stock | 1.97 | 7,875 | 1.97 | 7,875 | 1.97 | 7,875 | ||||||||||||||||||
Series E Preferred Stock | 1.50 | 933 | 1.50 | 375 | 1.50 | 112 | ||||||||||||||||||
Series F Preferred Stock | 1.50 | 3,929 | 1.91 | 13,344 | 1.91 | 13,344 | ||||||||||||||||||
Series G Preferred Stock | 0.0625 | 132 | ||||||||||||||||||||||
Totals | $ | 135,724 | $ | 154,142 | $ | 199,828 | ||||||||||||||||||
Off-Balance Sheet Arrangements
We have an outstanding letter of credit issued for the benefit of certain insurance companies that provide workers’ compensation insurance to one of our tenants. Our obligation under the letter of credit matures in 2009. At December 31, 2006, our obligation under the letter of credit was $2,450,000.
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on the general trend in interest rates at the applicable dates, our perception of the future volatility of interest rates and our relative levels of variable rate debt and variable rate investments. As of December 31, 2006, we participated in two interest rate swap agreements related to our long-term debt. Our interest rate swaps are discussed below in “Contractual Obligations.”
We have a $52,215,000 liability to a subsidiary trust issuing trust preferred securities that was assumed in the Windrose merger. On March 24, 2006, Windrose’s wholly-owned subsidiary, Windrose Capital Trust I (the “Trust”), completed the issuance and sale in a private placement of $50,000,000 in aggregate principal amount of fixed/floating rate preferred securities. The trust preferred securities mature on March 30, 2036, are redeemable at our option beginning March 30, 2011, and require quarterly distributions of interest to the holders of the trust preferred securities. The trust preferred securities bear a fixed rate per annum equal to 7.22% through March 30, 2011, and a variable rate per annum equal to LIBOR plus 2.05% thereafter.
The common stock of the Trust was purchased by an operating partnership of Windrose for $1,000,000. The Trust used the proceeds from the sale of the trust preferred securities together with the proceeds from the sale of the common stock to purchase $51,000,000 in aggregate principal amount of unsecured fixed/floating junior subordinated notes due March 30, 2036 issued by an operating partnership. The operating partnership received approximately $49,000,000 in net proceeds, after the payment of fees and expenses, from the sale of the junior subordinated notes to the Trust. In accordance with FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, we have not consolidated the trust because the operating partnership is not considered the primary beneficiary.
Contractual Obligations
The following table summarizes our payment requirements under contractual obligations as of December 31, 2006 (in thousands):
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | 2007 | 2008-2009 | 2010-2011 | Thereafter | |||||||||||||||
Unsecured lines of credit arrangements(1) | $ | 740,000 | $ | 40,000 | $ | 700,000 | $ | 0 | $ | 0 | ||||||||||
Senior unsecured notes | 1,539,830 | 52,500 | 42,330 | 0 | 1,445,000 | |||||||||||||||
Secured debt | 378,400 | 19,199 | 85,176 | 62,013 | 212,012 | |||||||||||||||
Trust preferred liability | 51,000 | 0 | 0 | 0 | 51,000 | |||||||||||||||
Contractual interest obligations | 1,114,788 | 143,201 | 254,340 | 219,379 | 497,868 | |||||||||||||||
Capital lease obligations | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Operating lease obligations | 37,378 | 2,756 | 4,664 | 4,005 | 25,953 | |||||||||||||||
Purchase obligations | 375,036 | 80,907 | 245,924 | 48,205 | 0 | |||||||||||||||
Other long-term liabilities | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Total contractual obligations | $ | 4,236,432 | $ | 338,563 | $ | 1,332,434 | $ | 333,602 | $ | 2,231,833 | ||||||||||
(1) | Unsecured lines of credit arrangements reflected at 100% capacity. |
We have an unsecured credit arrangement with a consortium of twelve banks providing for a revolving line of credit (“revolving credit facility”) in the amount of $700,000,000, which expires on July 26, 2009 (with the ability to extend for one year at our discretion if we are in compliance with all covenants). The agreement specifies that borrowings under the revolving credit facility are subject to interest payable in periods no longer than three months at either the agent bank’s prime rate of interest or the applicable margin over LIBOR interest rate, at our option (6.275% at December 31, 2006). The applicable margin is based on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.9% at December 31, 2006. In addition, we pay a facility fee annually to each bank based on the bank’s commitment under the revolving credit facility. The facility fee depends on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.015% at December 31, 2006. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement. We have another unsecured line of credit arrangement with a bank for a total of $40,000,000, which expires May 31, 2007. Borrowings under this line of credit are subject to interest at either the bank’s prime rate of interest (8.25% at December 31, 2006) or 0.9% over LIBOR interest rate, at our option. Principal is due upon expiration of the agreement. At December 31, 2006, we had $225,000,000 outstanding under the unsecured lines of credit arrangements and estimated total contractual interest obligations of $35,196,000. Contractual interest obligations are estimated based on the assumption that the balance of $225,000,000 at December 31, 2006 is constant until maturity at interest rates in effect at December 31, 2006.
We have $1,539,830,000 of senior unsecured notes principal outstanding with fixed annual interest rates ranging from 4.75% to 8.0%, payable semi-annually. Total contractual interest obligations on senior unsecured notes totaled $890,675,000 at December 31, 2006. Additionally, we have 63 mortgage loans totaling with total outstanding principal of $378,400,000, collateralized by owned properties, with annual interest rates ranging from 4.89% to 8.5%, payable monthly. The carrying values of the properties securing the mortgage loans totaled $752,917,000 at December 31, 2006. Total contractual interest obligations on mortgage loans totaled $146,427,000 at December 31, 2006.
On May 6, 2004, we entered into two interest rate swap agreements (the “Swaps”) for a total notional amount of $100,000,000 to hedge changes in fair value attributable to changes in the LIBOR swap rate of $100,000,000 of fixed rate debt with a maturity date of November 15, 2013. The Swaps are treated as fair-value hedges for accounting purposes and we utilize the short-cut method in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The Swaps are with highly rated counterparties in which we receive a fixed rate of 6% and pay a variable rate based on six-month
LIBOR plus a spread. At December 31, 2006, total contractual interest obligations were estimated to be $42,490,000 at interest rates in effect at that time.
At December 31, 2006, we had operating lease obligations of $37,378,000 relating to our ground leases at certain of our properties and office space leases.
Purchase obligations are comprised of unfunded construction commitments and contingent purchase obligations. At December 31, 2006, we had outstanding construction financings of $138,222,000 for leased properties and were committed to providing additional financing of approximately $342,754,000 to complete construction. At December 31, 2006, we had contingent purchase obligations totaling $32,282,000. These contingent purchase obligations primarily relate to deferred acquisition fundings and capital improvements. Deferred acquisition fundings are contingent upon a tenant satisfying certain conditions in the lease. Upon funding, amounts due from the tenant are increased to reflect the additional investment in the property.
Capital Structure
As of December 31, 2006, we had stockholders’ equity of $1,978,793,000 and a total outstanding debt balance of $2,198,001,000, which represents a debt to total book capitalization ratio of 53%. Our ratio of debt to market capitalization was 39% at December 31, 2006. For the year ended December 31, 2006, our coverage ratio of EBITDA to interest was 2.97 to 1.00. For the year ended December 31, 2006, our coverage ratio of EBITDA to fixed charges was 2.39 to 1.00. Also, at December 31, 2006, we had $36,216,000 of cash and cash equivalents and $515,000,000 of available borrowing capacity under our unsecured lines of credit arrangements.
Our debt agreements contain various covenants, restrictions and events of default. Among other things, these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2006, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration that could be triggered by our debt ratings. However, under our unsecured lines of credit arrangements, the ratings on our senior unsecured notes are used to determine the fees and interest payable.
Our senior unsecured notes are rated Baa3 (ratings watch positive), BBB- (stable) and BBB- (positive) by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, respectively. We plan to manage the Company to maintain investment grade status with a commensurate capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the noted rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidityand/or financial condition.
On May 12, 2006, we filed an open-ended automatic or “universal” shelf registration statement with the Securities and Exchange Commission covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units. Also, as of February 16, 2007, we had an effective registration statement on file in connection with our enhanced DRIP program under which we may issue up to 6,314,213 shares of common stock. As of February 16, 2007, 1,101,020 shares of common stock remained available for issuance under this registration statement. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured lines of credit arrangements.
Results of Operations
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Net income available to common stockholders | $ | 72,634 | $ | 62,692 | $ | (9,942 | ) | (14 | )% | $ | 81,287 | $ | 18,595 | 30 | % | $ | 8,653 | 12 | % | |||||||||||||||||
Funds from operations | 146,742 | 144,293 | (2,449 | ) | (2 | )% | 177,580 | 33,287 | 23 | % | 30,838 | 21 | % | |||||||||||||||||||||||
Funds available for distribution | 136,343 | 147,730 | 11,387 | 8 | % | 191,885 | 44,155 | 30 | % | 55,542 | 41 | % | ||||||||||||||||||||||||
EBITDA | 235,377 | 254,731 | 19,354 | 8 | % | 300,485 | 45,754 | 18 | % | 65,108 | 28 | % |
The components of the changes in revenues, expenses and other items are discussed in detail below. The following is a summary of certain items that impact the results of operations for the year ended December 31, 2006:
• | $5,213,000 ($0.08 per diluted share) of merger-related expenses; | |
• | $1,287,000 ($0.02 per diluted share) of additional compensation costs related to accelerated vesting requirements of certain stock-based compensation awards; | |
• | $1,267,000 ($0.02 per diluted share) of gains on the sales of real property; and | |
• | $20,561,000 ($0.33 per diluted share) prepaid/straight-line rent cash receipts for FAD only. |
The following is a summary of certain items that impact the results of operations for the year ended December 31, 2005:
• | $20,662,000 ($0.38 per diluted share) of net losses on extinguishments of debt; | |
• | $4,523,000 ($0.08 per diluted share) of additional interest income related to the payoffs of loans that were either on non-accrual or partial accrual and all contractual interest due was received from the borrowers; | |
• | $3,227,000 ($0.06 per diluted share) of gains on the sales of real property; and | |
• | $13,869,000 ($0.25 per diluted share) prepaid/straight-line rent cash receipts for FAD only. |
The following is a summary of certain items that impact the results of operations for the year ended December 31, 2004:
• | $314,000 ($0.01 per diluted share) of impairment charges; | |
• | $143,000 ($0.00 per diluted share) of losses on the sales of real property; and | |
• | $8,144,000 ($0.16 per diluted share) prepaid/straight-line rent cash receipts for FAD only. |
The increase in fully diluted average common shares outstanding is primarily the result of the Windrose merger, public and private common stock offerings and common stock issuances pursuant to our DRIP. The following table represents the changes in outstanding common stock for the period from January 1, 2004 to December 31, 2006 (in thousands):
Year Ended | ||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | ||||||||||||||
2004 | 2005 | 2006 | Totals | |||||||||||||
Beginning balance | 50,361 | 52,925 | 58,125 | 50,361 | ||||||||||||
Windrose merger | 9,679 | 9,679 | ||||||||||||||
Public/private offerings | 3,000 | 3,223 | 6,223 | |||||||||||||
DRIP issuances | 1,533 | 1,547 | 1,877 | 4,957 | ||||||||||||
Preferred stock conversions | 369 | 210 | 579 | |||||||||||||
Other issuances | 662 | 443 | 288 | 1,393 | ||||||||||||
Ending balance | 52,925 | 58,125 | 73,192 | 73,192 | ||||||||||||
Average number of common shares outstanding: | ||||||||||||||||
Basic | 51,544 | 54,110 | 61,661 | |||||||||||||
Diluted | 52,082 | 54,449 | 62,045 |
Revenues were comprised of the following (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Rental income | $ | 200,526 | $ | 238,798 | $ | 38,272 | 19 | % | $ | 293,592 | $ | 54,794 | 23 | % | $ | 93,066 | 46 | % | ||||||||||||||||||
Interest income | 22,818 | 23,993 | 1,175 | 5 | % | 18,829 | (5,164 | ) | (22 | )% | (3,989 | ) | (17 | )% | ||||||||||||||||||||||
Other income | 2,432 | 4,548 | 2,116 | 87 | % | 3,924 | (624 | ) | (14 | )% | 1,492 | 61 | % | |||||||||||||||||||||||
Prepayment fees | 50 | (50 | ) | n/a | n/a | (50 | ) | (100 | )% | |||||||||||||||||||||||||||
Totals | $ | 225,826 | $ | 267,339 | $ | 41,513 | 18 | % | $ | 316,345 | $ | 49,006 | 18 | % | $ | 90,519 | 40 | % | ||||||||||||||||||
The increase in gross revenues is primarily attributable to increased rental income resulting from the acquisitions of new properties from which we receive rent. See the discussion of investing activities in “Liquidity and Capital Resources” above for further information. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Indexand/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. While this change does not affect our cash flow or our ability to pay dividends, it is anticipated that we will generate additional organic growth and minimize non-cash straight-line rent over time. If gross operating revenues at our facilitiesand/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income.
Interest income decreased in 2006 primarily due to recognition of additional interest income of approximately $4,523,000 in 2005. The additional interest income related to the payoffs of loans that were either on non-accrual or partial accrual and all contractual interest was received from the borrowers. The decrease from 2004 to 2006 is primarily due to the decrease in outstanding loans receivable from $258,734,000 at December 31, 2003 to $194,448,000 at December 31, 2006.
Expenses were comprised of the following (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Interest expense | $ | 64,690 | $ | 75,523 | $ | 10,833 | 17 | % | $ | 93,015 | $ | 17,492 | 23 | % | $ | 28,325 | 44 | % | ||||||||||||||||||
Property operating expenses | 1,115 | 1,115 | n/a | 1,115 | n/a | |||||||||||||||||||||||||||||||
Depreciation and amortization | 60,421 | 72,997 | 12,576 | 21 | % | 91,280 | 18,283 | 25 | % | 30,859 | 51 | % | ||||||||||||||||||||||||
General and administrative | 15,798 | 16,163 | 365 | 2 | % | 26,004 | 9,841 | 61 | % | 10,206 | 65 | % | ||||||||||||||||||||||||
Loan expense | 3,393 | 2,710 | (683 | ) | (20 | )% | 3,255 | 545 | 20 | % | (138 | ) | (4 | )% | ||||||||||||||||||||||
Impairment of assets | 314 | (314 | ) | n/a | n/a | (314 | ) | (100 | )% | |||||||||||||||||||||||||||
Loss on extinguishment of debt | 21,484 | 21,484 | 100 | % | (21,484 | ) | (100 | )% | n/a | |||||||||||||||||||||||||||
Provision for loan losses | 1,200 | 1,200 | 0 | 0 | % | 1,000 | (200 | ) | (17 | )% | (200 | ) | (17 | )% | ||||||||||||||||||||||
Totals | $ | 145,816 | $ | 190,077 | $ | 44,261 | 30 | % | $ | 215,669 | $ | 25,592 | 13 | % | $ | 69,853 | 48 | % | ||||||||||||||||||
The increase in total expenses is primarily attributable to increases in interest expense and the provisions for depreciation and amortization offset by the recognition of losses on extinguishment of debt in 2005. The increases in interest expense are primarily due to higher average borrowings and changes in the amount of capitalized interest offsetting interest expense. If we borrow under our unsecured lines of credit arrangements, issue additional senior unsecured notes or assume additional secured debt, our interest expense will increase.
The following is a summary of our interest expense (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Senior unsecured notes | $ | 61,216 | $ | 63,080 | $ | 1,864 | 3 | % | $ | 80,069 | $ | 16,989 | 27 | % | $ | 18,853 | 31 | % | ||||||||||||||||||
Secured debt | 11,069 | 11,769 | 700 | 6 | % | 9,641 | (2,128 | ) | (18 | )% | (1,428 | ) | (13 | )% | ||||||||||||||||||||||
Unsecured lines of credit | 2,916 | 9,413 | 6,497 | 223 | % | 11,397 | 1,984 | 21 | % | 8,481 | 291 | % | ||||||||||||||||||||||||
Capitalized interest | (875 | ) | (665 | ) | 210 | (24 | )% | (4,470 | ) | (3,805 | ) | 572 | % | (3,595 | ) | 411 | % | |||||||||||||||||||
SWAP losses (savings) | (1,770 | ) | (972 | ) | 798 | (45 | )% | 197 | 1,169 | n/a | 1,967 | n/a | ||||||||||||||||||||||||
Discontinued operations | (7,866 | ) | (7,102 | ) | 764 | (10 | )% | (3,819 | ) | 3,283 | (46 | )% | 4,047 | (51 | )% | |||||||||||||||||||||
Totals | $ | 64,690 | $ | 75,523 | $ | 10,833 | 17 | % | $ | 93,015 | $ | 17,492 | 23 | % | $ | 28,325 | 44 | % | ||||||||||||||||||
The change in interest expense on senior unsecured notes is due to the net effect and timing of issuances and extinguishments. See the discussion of financing activities in “Liquidity and Capital Resources” above for further information.
The following is a summary of our senior unsecured notes activity (dollars in thousands):
Year Ended December 31, 2004 | Year Ended December 31, 2005 | Year Ended December 31, 2006 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
Beginning balance | $ | 865,000 | 7.291 | % | $ | 875,000 | 7.181 | % | $ | 1,194,830 | 6.566 | % | ||||||||||||
Debt issued | 50,000 | 6.000 | % | 550,000 | 6.052 | % | 345,000 | 4.750 | % | |||||||||||||||
Debt extinguished | (40,000 | ) | 8.090 | % | (230,170 | ) | 7.677 | % | ||||||||||||||||
Ending balance | $ | 875,000 | 7.181 | % | $ | 1,194,830 | 6.566 | % | $ | 1,539,830 | 6.159 | % | ||||||||||||
Monthly averages | $ | 852,692 | 7.242 | % | $ | 961,469 | 6.829 | % | $ | 1,244,445 | 6.494 | % |
The change in interest expense on secured debt is due to the net effect and timing of assumptions, extinguishments and principal amortizations. The following is a summary of our secured debt activity (dollars in thousands):
Year Ended December 31, 2004 | Year Ended December 31, 2005 | Year Ended December 31, 2006 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
Beginning balance | $ | 148,184 | 7.512 | % | $ | 160,225 | 7.508 | % | $ | 107,540 | 7.328 | % | ||||||||||||
Debt assumed | 14,555 | 7.500 | % | 22,309 | 6.561 | % | 273,893 | 6.053 | % | |||||||||||||||
Debt extinguished | (72,309 | ) | 7.481 | % | ||||||||||||||||||||
Principal payments | (2,514 | ) | 7.709 | % | (2,685 | ) | 7.584 | % | (3,033 | ) | 7.226 | % | ||||||||||||
Ending balance | $ | 160,225 | 7.508 | % | $ | 107,540 | 7.328 | % | $ | 378,400 | 6.406 | % | ||||||||||||
Monthly averages | $ | 148,141 | 7.510 | % | $ | 156,027 | 7.452 | % | $ | 144,512 | 7.021 | % |
The change in interest expense on unsecured lines of credit arrangements is due primarily to higher average interest rates. The following is a summary of our unsecured lines of credit arrangements (dollars in thousands):
Year Ended December 31 | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Balance outstanding at December 31 | $ | 151,000 | $ | 195,000 | $ | 225,000 | ||||||
Maximum amount outstanding at any month end | 159,000 | 318,000 | 276,000 | |||||||||
Average amount outstanding (total of daily principal balances divided by days in year) | 54,770 | 181,232 | 164,905 | |||||||||
Weighted average interest rate (actual interest expense divided by average borrowings outstanding) | 5.32 | % | 5.19 | % | 6.91 | % |
We capitalize certain interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the borrowings outstanding during the construction period using the rate of interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized. Capitalized interest for the years ended December 31, 2004, 2005 and 2006 totaled $875,000, $665,000 and $4,470,000, respectively.
On May 6, 2004, we entered into two interest rate swap agreements (the “Swaps”) for a total notional amount of $100,000,000 to hedge changes in fair value attributable to changes in the LIBOR swap rate of $100,000,000 of fixed rate debt with a maturity date of November 15, 2013. We receive a fixed rate of 6.0% and pay a variable rate based on six-month LIBOR plus a spread. For the year ended December 31, 2006, we incurred $197,000 of losses related to our Swaps that was recorded as an addition to interest expense. For the years ended December 31, 2005, and 2004, we generated $972,000 and $1,770,000, respectively, of savings related to our Swaps that was recorded as a reduction of interest expense.
Property operating expenses represent 12 days of expenses in 2006 related to Windrose’s operating properties acquired on December 20, 2006. These expenses include ground leases, property taxes and other expenses not reimbursed by tenants.
Depreciation and amortization increased primarily as a result of additional investments in properties owned directly by us. See the discussion of investing activities in “Liquidity and Capital Resources” above for further information. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation will change accordingly.
General and administrative expenses as a percentage of revenues (including discontinued operations) for the year ended December 31, 2006, were 8.26% as compared with 5.89% and 6.54% for the same periods in 2005 and 2004, respectively. The 2006 increase is directly attributable to $5,213,000 of merger related expenses and $1,287,000 of accelerated stock-based compensation expenses. The change from 2004 to 2005 is due to increased costs to attract and retain appropriate personnel to achieve our business objectives offset by a decrease in professional service fees and other operating costs as a result of focused expense control.
The change in loan expense was primarily due to increased costs in 2006 related to amending our primary unsecured line of credit arrangement and costs related to the issuance of senior unsecured notes.
During the year ended December 31, 2004, it was determined that the projected undiscounted cash flows from one of our properties did not exceed its related net book value and an impairment charge of $314,000 was recorded to reduce the property to its estimated fair market value. The estimated fair market value of the property was determined by an independent appraisal. We did not record any impairment charges for the years ended December 31, 2005 or December 31, 2006.
The provision for loan losses is related to our critical accounting estimate for the allowance for loan losses and is discussed below in “Critical Accounting Policies.”
Other items were comprised of the following (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2004 | Dec. 31, 2005 | $ | % | Dec. 31, 2006 | $ | % | $ | % | ||||||||||||||||||||||||||||
Minority interests | $ | (13 | ) | $ | (13 | ) | n/a | $ | (13 | ) | n/a | |||||||||||||||||||||||||
Gain (loss) on sales of properties | (143 | ) | 3,227 | 3,370 | n/a | 1,267 | (1,960 | ) | (61 | )% | 1,410 | n/a | ||||||||||||||||||||||||
Discontinued operations, net | 5,504 | 3,797 | (1,707 | ) | (31 | )% | 820 | (2,977 | ) | (78 | )% | (4,684 | ) | (85 | )% | |||||||||||||||||||||
Preferred dividends | (12,737 | ) | (21,594 | ) | (8,857 | ) | 70 | % | (21,463 | ) | 131 | (1 | )% | (8,726 | ) | 69 | % | |||||||||||||||||||
Totals | $ | (7,376 | ) | $ | (14,570 | ) | $ | (7,194 | ) | 98 | % | $ | (19,389 | ) | $ | (4,819 | ) | 33 | % | $ | (12,013 | ) | 163 | % | ||||||||||||
Three assisted living facilities were held for sale at December 31, 2006 and were sold subsequent to year-end. During the years ended December 31, 2004, 2005 and 2006, we sold properties with carrying values of $37,710,000, $88,098,000 and $75,989,000 for net losses of $143,000 and net gains of $3,227,000 and $1,267,000, respectively. During the nine months ended September 30, 2007, we sold properties with carrying values of $63,165,000 for a net gain of $2,775,000. Also, at September 30, 2007, two properties were classified as held for sale.
In accordance with Statement of Financial Accounting Standards No. 144, we have reclassified the income and expenses attributable to the properties sold subsequent to January 1, 2002 through September 30, 2007 and attributable to assets held for sale at September 30, 2007 to discontinued operations. These properties generated $5,504,000, $3,797,000 and $820,000 of income after deducting depreciation and interest expense from rental revenue for the years ended December 31, 2004, 2005 and 2006, respectively. Please refer to Note 16 of our audited consolidated financial statements in the Annual Report on Form 10-K/A for the year ended December 31, 2006 for further discussion.
The increase in preferred dividends is primarily due to the increase in average outstanding preferred shares. The following is a summary of our preferred stock activity:
Year Ended December 31, 2004 | Year Ended December 31, 2005 | Year Ended December 31, 2006 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Shares | Dividend Rate | Shares | Dividend Rate | Shares | Dividend Rate | |||||||||||||||||||
Beginning balance | 4,830,444 | 7.553 | % | 11,350,045 | 7.663 | % | 11,074,989 | 7.704 | % | |||||||||||||||
Shares issued | 7,000,000 | 7.625 | % | 2,100,000 | 7.500 | % | ||||||||||||||||||
Shares redeemed | ||||||||||||||||||||||||
Shares converted | (480,399 | ) | 6.000 | % | (275,056 | ) | 6.000 | % | ||||||||||||||||
Ending balance | 11,350,045 | 7.663 | % | 11,074,989 | 7.704 | % | 13,174,989 | 7.672 | % | |||||||||||||||
Monthly averages | 6,786,481 | 7.621 | % | 11,245,073 | 7.679 | % | 11,236,527 | 7.701 | % |
In conjunction with the acquisition of Windrose Medical Properties Trust in December 2006, we issued 2,100,000 shares of 7.5% Series G Cumulative Convertible Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after June 30, 2010. Each Series G Preferred Share is convertible by the holder into our common stock at a conversion price of $34.93, equivalent to a conversion rate of 0.7157 common shares per Series G Preferred Share. These shares were recorded at $29.58 per share, which was deemed to be the fair value at the date of issuance.
Non-GAAP Financial Measures
We believe that net income available to common stockholders, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider FFO and FAD to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FAD represents FFO excluding the net straight-line rental adjustments, rental income related to above/below market leases and amortization of deferred loan expenses and less cash used to fund capital expenditures, tenant improvements and lease commissions.
In April 2002, the Financial Accounting Standards Board issued Statement No. 145 that requires gains and losses on extinguishment of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement No. 4. We adopted the standard effective January 1, 2003 and have properly reflected the $21,484,000, or $0.39 per diluted share, of losses on extinguishment of debt for the year ended December 31, 2005. These charges have not been added back for the calculations of FFO, FAD or EBITDA.
In October 2003, NAREIT informed its member companies that the SEC had changed its position on certain aspects of the NAREIT FFO definition, including impairment charges. Previously, the SEC accepted NAREIT’s view that impairment charges were effectively an early recognition of an expected loss on an impending sale of
property and thus should be added back to net income in the calculation of FFO and FAD similar to other gains and losses on sales. However, the SEC’s clarified interpretation is that recurring impairments taken on real property may not be added back to net income in the calculation of FFO and FAD. We have adopted this interpretation and have not added back impairment charges of $314,000, or $0.01 per diluted share, recorded for the year ended December 31, 2004.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. Additionally, restrictive covenants in our long-term debt arrangements contain financial ratios based on EBITDA. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends.
FFO, FAD and EBITDA are financial measures that are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, FFO and FAD are utilized by the Board of Directors to evaluate management. FFO, FAD and EBITDA do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, FFO, FAD and EBITDA, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.
Net operating income (“NOI”) is used to evaluate the operating performance of certain real estate properties such as medical office buildings. We define 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. We believe NOI provides investors relevant and useful information because it measures the operating performance of our medical office buildings at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our medical office buildings.
The table below reflects the reconciliation of FFO to net income available to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and amortization includes provisions for depreciation and amortization from discontinued operations. Amounts are in thousands except for per share data.
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
FFO Reconciliation: | ||||||||||||
Net income available to common stockholders | $ | 72,634 | $ | 62,692 | $ | 81,287 | ||||||
Depreciation and amortization | 74,015 | 84,828 | 97,564 | |||||||||
Loss (gain) on sales of properties | 143 | (3,227 | ) | (1,267 | ) | |||||||
Minority interests | (4 | ) | ||||||||||
Prepayment fees | (50 | ) | ||||||||||
Funds from operations | $ | 146,742 | $ | 144,293 | $ | 177,580 | ||||||
Average common shares outstanding: | ||||||||||||
Basic | 51,544 | 54,110 | 61,661 | |||||||||
Diluted | 52,082 | 54,499 | 62,045 | |||||||||
Per share data: | ||||||||||||
Net income available to common stockholders | ||||||||||||
Basic | $ | 1.41 | $ | 1.16 | $ | 1.32 | ||||||
Diluted | 1.39 | 1.15 | 1.31 | |||||||||
Funds from operations | ||||||||||||
Basic | $ | 2.85 | $ | 2.67 | $ | 2.88 | ||||||
Diluted | 2.82 | 2.65 | 2.86 |
The table below reflects the reconciliation of FAD to net income available to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and amortization includes provisions for depreciation and amortization from discontinued operations. Amounts are in thousands except for per share data.
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
FAD Reconciliation: | ||||||||||||
Net income available to common stockholders | $ | 72,634 | $ | 62,692 | $ | 81,287 | ||||||
Depreciation and amortization | 74,015 | 84,828 | 97,564 | |||||||||
Loss (gain) on sales of properties | 143 | (3,227 | ) | (1,267 | ) | |||||||
Prepayment fees | (50 | ) | ||||||||||
Gross straight-line rental income | (21,936 | ) | (13,142 | ) | (9,432 | ) | ||||||
Prepaid/straight-line rent receipts | 8,144 | 13,869 | 20,561 | |||||||||
Rental income related to above/(below) market leases, net | (60 | ) | ||||||||||
Amortization of deferred loan expenses | 3,393 | 2,710 | 3,255 | |||||||||
Cap Ex, tenant improvements, lease commissions | (21 | ) | ||||||||||
Minority interests | (2 | ) | ||||||||||
Funds available for distribution | $ | 136,343 | $ | 147,730 | $ | 191,885 | ||||||
Average common shares outstanding: | ||||||||||||
Basic | 51,544 | 54,110 | 61,661 | |||||||||
Diluted | 52,082 | 54,499 | 62,045 | |||||||||
Per share data: | ||||||||||||
Net income available to common stockholders | ||||||||||||
Basic | $ | 1.41 | $ | 1.16 | $ | 1.32 | ||||||
Diluted | 1.39 | 1.15 | 1.31 | |||||||||
Funds available for distribution | ||||||||||||
Basic | $ | 2.65 | $ | 2.73 | $ | 3.11 | ||||||
Diluted | 2.62 | 2.71 | 3.09 |
The table below reflects the reconciliation of EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense and the provisions for depreciation and amortization includes discontinued operations. Tax expense represents income-based taxes. Amortization represents the amortization of deferred loan expenses. Adjusted EBITDA represents EBITDA as adjusted below for items pursuant to covenant provisions of our unsecured lines of credit arrangements. Dollars are in thousands.
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
EBITDA Reconciliation: | ||||||||||||
Net income | $ | 85,371 | $ | 84,286 | $ | 102,750 | ||||||
Interest expense | 72,556 | 82,625 | 96,834 | |||||||||
Tax expense(benefit) | 42 | 282 | 82 | |||||||||
Depreciation and amortization | 74,015 | 84,828 | 97,564 | |||||||||
Amortization of deferred loan expenses | 3,393 | 2,710 | 3,255 | |||||||||
EBITDA | 235,377 | 254,731 | 300,485 | |||||||||
Stock-based compensation expense | 2,887 | 2,948 | 6,980 | |||||||||
Provision for loan losses | 1,200 | 1,200 | 1,000 | |||||||||
Loss on extinguishment of debt, net | 20,662 | |||||||||||
EBITDA - adjusted | $ | 239,464 | $ | 279,541 | $ | 308,465 | ||||||
Interest Coverage Ratio: | ||||||||||||
Interest expense | $ | 72,556 | $ | 82,625 | $ | 96,834 | ||||||
Capitalized interest | 875 | 665 | 4,470 | |||||||||
Total interest | 73,431 | 83,290 | 101,304 | |||||||||
EBITDA | $ | 235,377 | $ | 254,731 | $ | 300,485 | ||||||
Interest coverage ratio | 3.21 | x | 3.06 | x | 2.97 | x | ||||||
EBITDA - adjusted | $ | 239,464 | $ | 279,541 | $ | 308,465 | ||||||
Interest coverage ratio - adjusted | 3.26 | x | 3.36 | x | 3.04 | x | ||||||
Fixed Charge Coverage Ratio: | ||||||||||||
Total interest | $ | 73,431 | $ | 83,290 | $ | 101,304 | ||||||
Secured debt principal amortization | 2,514 | 2,685 | 3,033 | |||||||||
Preferred dividends | 12,737 | 21,594 | 21,463 | |||||||||
Total fixed charges | 88,682 | 107,569 | 125,800 | |||||||||
EBITDA | $ | 235,377 | $ | 254,731 | $ | 300,485 | ||||||
Fixed charge coverage ratio | 2.65 | x | 2.37 | x | 2.39 | x | ||||||
EBITDA - adjusted | $ | 239,464 | $ | 279,541 | $ | 308,465 | ||||||
Fixed charge coverage ratio - adjusted | 2.70 | x | 2.60 | x | 2.45 | x |
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers an accounting estimate or assumption critical if:
• | the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and | |
• | the impact of the estimates and assumptions on financial condition or operating performance is material. |
Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to them. Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidityand/or financial condition. Please refer to Note 1 of our audited consolidated financial statements for further information on significant accounting policies that impact us. There were no material changes to these policies in 2006.
We adopted the fair value-based method of accounting for share-based payments effective January 1, 2003 using the prospective method described in FASB Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Because Statement 123(R) must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date of Statement 123(R), and because we adopted Statement 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date of Statement 123), compensation cost for some previously granted awards that were not recognized under Statement 123 has been recognized under Statement 123(R). Additionally, we amortize compensation cost for share based payments to the date that the awards become fully vested or to the expected retirement date, if sooner. Effective with the adoption of Statement 123(R) we began recognizing compensation cost to the date the awards become fully vested or to the retirement eligible date, if sooner. Had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share to our audited consolidated financial statements. The adoption of Statement 123(R) increased compensation cost by approximately $1,287,000 for 2006 as a result of amortizing share based awards to the retirement eligible date.
The following table presents information about our critical accounting policies, as well as the material assumptions used to develop each estimate:
Nature of Critical | Assumptions/ | |
Accounting Estimate | Approach Used | |
Allowance for Loan Losses | ||
We maintain an allowance for loan losses in accordance with Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, as amended, and SEC Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues. The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of all outstanding loans. If this evaluation indicates that there is a greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. To the extent circumstances improve and the risk of collectibility is diminished, we will return these loans to full accrual status. | The determination of the allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectibility of loan payments and principal. We evaluate the collectibility of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying property or other collateral. For the year ended December 31, 2006 we recorded $1,000,000 as provision for loan losses, resulting in an allowance for loan losses of $7,406,000 relating to loans with outstanding balances of $78,113,000 at December 31, 2006. At December 31, 2006, we had loans with outstanding balances of $10,529,000 on non- accrual status. | |
Depreciation and Amortization and Useful Lives | ||
Substantially all of the properties owned by us are leased under operating leases and are recorded at cost. The cost of our real property is allocated to land, buildings, improvements and intangibles in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. The allocation of the acquisition costs of properties is based on appraisals commissioned from independent real estate appraisal firms. | We compute depreciation and amortization on our properties using the straight-line method based on their estimated useful lives which range from 15 to 40 years for buildings, five to 15 years for improvements and five years for intangibles. For the year ended December 31, 2006, we recorded $79,284,000, $17,955,000 and $325,000 as provisions for depreciation and amortization relating to buildings, improvements and intangibles, respectively, including amounts reclassified as discontinued |
Nature of Critical | Assumptions/ | |
Accounting Estimate | Approach Used | |
operations. The average useful life of our buildings and improvements was 32.1 years and 11.5 years, respectively, at December 31, 2006. The amortization of lease intangibles represents 12 days of amortization expenses due to the Windrose merger on December 20, 2006. | ||
Impairment of Long-Lived Assets | ||
We review our long-lived assets for potential impairment in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets. An impairment charge must be recognized when the carrying value of a long-lived asset is not recoverable. The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that a permanent impairment of a long-lived asset has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recognized for the difference between the carrying value and the fair value. | The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if there are indicators of impairment. These indicators may include anticipated operating losses at the property level, the tenant’s inability to make rent payments, a decision to dispose of an asset before the end of its estimated useful life and changes in the market that may permanently reduce the value of the property. If indicators of impairment exist, then the undiscounted future cash flows from the most likely use of the property are compared to the current net book value. This analysis requires us to determine if indicators of impairment exist and to estimate the most likely stream of cash flows to be generated from the property during the period the property is expected to be held. We did not record any impairment charges for the year ended December 31, 2006. | |
Fair Value of Derivative Instruments | ||
The valuation of derivative instruments is accounted for in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (‘SFAS133”), as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. SFAS133, as amended, requires companies to record derivatives at fair market value on the balance sheet as assets or liabilities. | The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by a third party consultant, which utilizes pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates which may change in the future. At December 31, 2006, we participated in two interest rate swap agreements related to our long-term debt. At December 31, 2006, the swaps were reported at their fair value as a $902,000 other asset. For the year ended December 31, 2006, we incurred $197,000 of losses related to our swaps that was recorded as an addition to interest expense. | |
Revenue Recognition | ||
Revenue is recorded in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases, and SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, as amended (‘SAB104‘). SAB104 requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectibility. If the collectibility of revenue is determined incorrectly, the amount and timing of our reported revenue could be significantly affected. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectibility risk. Substantially all of our operating leases contain either fixed or contingent escalating rent structure. Leases with fixed annual rental escalators are generally recognized on a straight- line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. | We evaluate the collectibility of our revenues and related receivables on an on-going basis. We evaluate collectibility based on assumptions and other considerations including, but not limited to, the certainty of payment, payment history, the financial strength of the investment’s underlying operations as measured by cash flows and payment coverages, the value of the underlying collateral and guaranties and current economic conditions. If our evaluation indicates that collectibility is not reasonably assured, we may place an investment on non-accrual or reserve against all or a portion of current income as an offset to revenue. For the year ended December 31, 2006 we recognized $18,829,000 of interest income and $305,635,000 of rental income, including discontinued operations. Cash receipts on leases with deferred revenue provisions were $20,561,000 as compared to gross straight-line rental income recognized of $9,432,000. At December 31, 2006, our straight-line receivable balance was $53,281,000, net of reserves totaling $5,902,000. Also at December 31, 2006, we had loans with outstanding balances of $10,529,000 on non-accrual status. |
Impact of Inflation
During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, our earnings are primarily long-term investments with fixed rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes and borrowings under our
unsecured lines of credit arrangements. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.
Item 8. | Financial Statements and Supplementary Data |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Directors
Health Care REIT, Inc.
We have audited the accompanying consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedules listed in Item 15(a)(2) of the Annual Report on Form 10-K/A for the year ended December 31, 2006. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Care REIT, Inc. at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in Note 9 to the consolidated financial statements, effective January 1, 2006, the Company changed its method of accounting for stock-based compensation to conform to Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment.”
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2007 (not included herein) expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Toledo, Ohio
February 28, 2007,
except for Note 16, as to which the date is November 5, 2007
except for Note 16, as to which the date is November 5, 2007
HEALTH CARE REIT, INC.
December 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Real property owned | ||||||||
Land and land improvements | $ | 386,693 | $ | 261,236 | ||||
Buildings & improvements | 3,659,065 | 2,659,746 | ||||||
Acquired lease intangibles | 84,082 | 0 | ||||||
Real property held for sale, net of accumulated depreciation | 14,796 | 11,912 | ||||||
Construction in progress | 138,222 | 3,906 | ||||||
4,282,858 | 2,936,800 | |||||||
Less accumulated depreciation and amortization | (347,007 | ) | (274,875 | ) | ||||
Total real property owned | 3,935,851 | 2,661,925 | ||||||
Loans receivable | 194,448 | 194,054 | ||||||
Less allowance for losses on loans receivable | (7,406 | ) | (6,461 | ) | ||||
187,042 | 187,593 | |||||||
Net real estate investments | 4,122,893 | 2,849,518 | ||||||
Other assets: | ||||||||
Equity investments | 4,700 | 2,970 | ||||||
Deferred loan expenses | 20,657 | 12,228 | ||||||
Cash and cash equivalents | 36,216 | 36,237 | ||||||
Receivables and other assets | 96,144 | 71,211 | ||||||
157,717 | 122,646 | |||||||
Total assets | $ | 4,280,610 | $ | 2,972,164 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Borrowings under unsecured lines of credit arrangements | $ | 225,000 | $ | 195,000 | ||||
Senior unsecured notes | 1,541,814 | 1,198,278 | ||||||
Secured debt | 378,972 | 107,540 | ||||||
Liability to subsidiary trust issuing preferred securities | 52,215 | 0 | ||||||
Accrued expenses and other liabilities | 101,588 | 40,590 | ||||||
Total liabilities | 2,299,589 | 1,541,408 | ||||||
Minority interests | 2,228 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $1.00 par value: | 338,993 | 276,875 | ||||||
Authorized — 25,000,000 shares | ||||||||
Issued and outstanding — 13,174,989 in 2006 and 11,074,989 shares in 2005 at liquidation preference | ||||||||
Common stock, $1.00 par value: | 73,152 | 58,050 | ||||||
Authorized — 125,000,000 shares | ||||||||
Issued — 73,272,052 shares in 2006 and 58,182,592 shares in 2005 | ||||||||
Outstanding — 73,192,128 shares in 2006 and 58,124,657 shares in 2005 | ||||||||
Capital in excess of par value | 1,873,811 | 1,306,471 | ||||||
Treasury stock | (2,866 | ) | (2,054 | ) | ||||
Cumulative net income | 932,853 | 830,103 | ||||||
Cumulative dividends | (1,238,860 | ) | (1,039,032 | ) | ||||
Accumulated other comprehensive loss | (135 | ) | 0 | |||||
Other equity | 1,845 | 343 | ||||||
Total stockholders’ equity | 1,978,793 | 1,430,756 | ||||||
Total liabilities and stockholders’ equity | $ | 4,280,610 | $ | 2,972,164 | ||||
See accompanying notes
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Rental income | $ | 293,592 | $ | 238,798 | $ | 200,526 | ||||||
Interest income | 18,829 | 23,993 | 22,818 | |||||||||
Other income | 3,924 | 4,548 | 2,432 | |||||||||
Prepayment fees | 50 | |||||||||||
316,345 | 267,339 | 225,826 | ||||||||||
Expenses: | ||||||||||||
Interest expense | 93,015 | 75,523 | 64,690 | |||||||||
Property operating expenses | 1,115 | |||||||||||
Depreciation and amortization | 91,280 | 72,997 | 60,421 | |||||||||
General and administrative | 26,004 | 16,163 | 15,798 | |||||||||
Loan expense | 3,255 | 2,710 | 3,393 | |||||||||
Impairment of assets | 314 | |||||||||||
Loss on extinguishment of debt | 21,484 | |||||||||||
Provision for loan losses | 1,000 | 1,200 | 1,200 | |||||||||
215,669 | 190,077 | 145,816 | ||||||||||
Income before minority interests | 100,676 | 77,262 | 80,010 | |||||||||
Minority interests | (13 | ) | ||||||||||
Income from continuing operations | 100,663 | 77,262 | 80,010 | |||||||||
Discontinued operations: | ||||||||||||
Net gain (loss) on sales of properties | 1,267 | 3,227 | (143 | ) | ||||||||
Income (loss) from discontinued operations, net | 820 | 3,797 | 5,504 | |||||||||
2,087 | 7,024 | 5,361 | ||||||||||
Net income | 102,750 | 84,286 | 85,371 | |||||||||
Preferred stock dividends | 21,463 | 21,594 | 12,737 | |||||||||
Net income available to common stockholders | $ | 81,287 | $ | 62,692 | $ | 72,634 | ||||||
Average number of common shares outstanding: | ||||||||||||
Basic | 61,661 | 54,110 | 51,544 | |||||||||
Diluted | 62,045 | 54,499 | 52,082 | |||||||||
Earnings per share: | ||||||||||||
Basic: | ||||||||||||
Income from continuing operations available to common stockholders | $ | 1.28 | $ | 1.03 | $ | 1.31 | ||||||
Discontinued operations, net | 0.03 | 0.13 | 0.10 | |||||||||
Net income available to common stockholders* | $ | 1.32 | $ | 1.16 | $ | 1.41 | ||||||
Diluted: | ||||||||||||
Income from continuing operations and after preferred stock dividends | $ | 1.28 | $ | 1.02 | $ | 1.29 | ||||||
Discontinued operations, net | 0.03 | 0.13 | 0.10 | |||||||||
Net income available to common stockholders* | $ | 1.31 | $ | 1.15 | $ | 1.39 | ||||||
* | Amounts may not sum due to rounding |
See accompanying notes
HEALTH CARE REIT, INC.
Accumulated | ||||||||||||||||||||||||||||||||||||
Capital in | Other | |||||||||||||||||||||||||||||||||||
Preferred | Common | Excess of | Treasury | Cumulative | Cumulative | Comprehensive | Other | |||||||||||||||||||||||||||||
Stock | Stock | Par Value | Stock | Net Income | Dividends | Loss | Equity | Total | ||||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||||||
Balances at December 31, 2003 | $ | 120,761 | $ | 50,298 | $ | 1,069,887 | $ | (523 | ) | $ | 660,446 | $ | (749,166 | ) | $ | 1 | $ | (2,025 | ) | $ | 1,149,679 | |||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 85,371 | 85,371 | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||
Unrealized loss on equity investments | 0 | |||||||||||||||||||||||||||||||||||
Total comprehensive income | 85,371 | |||||||||||||||||||||||||||||||||||
Proceeds from issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures | 2,194 | 64,087 | (763 | ) | 65,518 | |||||||||||||||||||||||||||||||
Restricted stock amortization | 949 | 949 | ||||||||||||||||||||||||||||||||||
Option compensation expense | 379 | 379 | ||||||||||||||||||||||||||||||||||
Proceeds from issuance of preferred stock | 175,000 | (5,893 | ) | 169,107 | ||||||||||||||||||||||||||||||||
Redemption of preferred stock | (12,010 | ) | 368 | 11,642 | 0 | |||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||
Common stock-$2.385 per share | (122,987 | ) | (122,987 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series D-$1.97 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series E-$1.50 per share | (933 | ) | (933 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series F-$1.50 per share | (3,929 | ) | (3,929 | ) | ||||||||||||||||||||||||||||||||
Balances at December 31, 2004 | 283,751 | 52,860 | 1,139,723 | (1,286 | ) | 745,817 | (884,890 | ) | 1 | (697 | ) | 1,335,279 | ||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 84,286 | 84,286 | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||
Unrealized loss on equity investments | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||
Total comprehensive income | 84,285 | |||||||||||||||||||||||||||||||||||
Proceeds from issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures | 1,980 | 62,105 | (768 | ) | 63,317 | |||||||||||||||||||||||||||||||
Restricted stock amortization | 728 | 728 | ||||||||||||||||||||||||||||||||||
Option compensation expense | 312 | 312 | ||||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | 3,000 | 97,977 | 100,977 | |||||||||||||||||||||||||||||||||
Conversion of preferred stock | (6,876 | ) | 210 | 6,666 | 0 | |||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||
Common stock-$2.46 per share | (132,548 | ) | (132,548 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series D-$1.97 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series E-$1.50 per share | (375 | ) | (375 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series F-$1.91 per share | (13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||
Balances at December 31, 2005 | 276,875 | 58,050 | 1,306,471 | (2,054 | ) | 830,103 | (1,039,032 | ) | 0 | 343 | 1,430,756 | |||||||||||||||||||||||||
Net income | 102,750 | 102,750 | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | 0 | |||||||||||||||||||||||||||||||||||
Total comprehensive income | 102,750 | |||||||||||||||||||||||||||||||||||
Adjustment to adopt SFAS 158 | (135 | ) | (135 | ) | ||||||||||||||||||||||||||||||||
Proceeds from issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures | 2,200 | 75,081 | (812 | ) | (85 | ) | 76,384 | |||||||||||||||||||||||||||||
Option compensation expense | 1,066 | 1,066 | ||||||||||||||||||||||||||||||||||
Shares issued in Windrose Medical Properties Trust merger | 62,118 | 9,679 | 386,255 | 458,052 | ||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | 3,223 | 106,525 | 109,748 | |||||||||||||||||||||||||||||||||
SFAS 123(R) reclassification | (521 | ) | 521 | 0 | ||||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||
Common stock-$2.8809 per share | (178,365 | ) | (178,365 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series D-$1.97 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series E-$1.50 per share | (112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series F-$1.91 per share | (13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||
Preferred stock,Series G-$0.06 per share | (132 | ) | (132 | ) | ||||||||||||||||||||||||||||||||
Balances at December 31, 2006 | $ | 338,993 | $ | 73,152 | $ | 1,873,811 | $ | (2,866 | ) | $ | 932,853 | $ | (1,238,860 | ) | $ | (135 | ) | $ | 1,845 | $ | 1,978,793 | |||||||||||||||
See accompanying notes
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Operating activities | ||||||||||||
Net income | $ | 102,750 | $ | 84,286 | $ | 85,371 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||||||
Depreciation and amortization | 97,564 | 84,828 | 74,015 | |||||||||
Other amortization expenses | 3,090 | 3,935 | 3,393 | |||||||||
Stock-based compensation expense | 6,980 | 2,948 | 2,887 | |||||||||
Capitalized interest | (4,470 | ) | (665 | ) | (875 | ) | ||||||
Provision for loan losses | 1,000 | 1,200 | 1,200 | |||||||||
Minority interests | 13 | |||||||||||
Impairment of assets | 314 | |||||||||||
Rental income less than (in excess of) cash received | 11,069 | 727 | (13,792 | ) | ||||||||
Loss (gain) on sales of properties | (1,267 | ) | (3,227 | ) | 143 | |||||||
Increase (decrease) in accrued expenses and other liabilities | 5,810 | (3,375 | ) | 2,030 | ||||||||
Decrease (increase) in receivables and other assets | (6,093 | ) | 3,098 | (10,661 | ) | |||||||
Net cash provided from (used in) operating activities | 216,446 | 173,755 | 144,025 | |||||||||
Investing activities | ||||||||||||
Investment in real property | (429,183 | ) | (599,291 | ) | (542,547 | ) | ||||||
Investment in loans receivable | (86,990 | ) | (40,387 | ) | (61,888 | ) | ||||||
Other investments, net of payments | (11,761 | ) | 328 | |||||||||
Principal collected on loans receivable | 82,255 | 98,638 | 55,473 | |||||||||
Investment in Windrose, net of cash assumed | (182,571 | ) | ||||||||||
Proceeds from sales of properties | 69,887 | 91,325 | 37,567 | |||||||||
Other | (2,452 | ) | 318 | 4,033 | ||||||||
Net cash provided from (used in) investing activities | (560,815 | ) | (449,069 | ) | (507,362 | ) | ||||||
Financing activities | ||||||||||||
Net increase under unsecured lines of credit arrangements | 30,000 | 44,000 | 151,000 | |||||||||
Proceeds from issuance of senior unsecured notes | 337,517 | 544,053 | 50,708 | |||||||||
Principal payments on senior unsecured notes | (230,170 | ) | (40,000 | ) | ||||||||
Principal payments on secured debt | (3,033 | ) | (74,994 | ) | (2,514 | ) | ||||||
Net proceeds from the issuance of common stock | 182,069 | 165,062 | 66,281 | |||||||||
Net proceeds from the issuance of preferred stock | 169,107 | |||||||||||
Increase in deferred loan expense | (2,377 | ) | (2,021 | ) | (254 | ) | ||||||
Cash distributions to stockholders | (199,828 | ) | (154,142 | ) | (135,724 | ) | ||||||
Net cash provided from (used in) financing activities | 344,348 | 291,788 | 258,604 | |||||||||
Increase (decrease) in cash and cash equivalents | (21 | ) | 16,474 | (104,733 | ) | |||||||
Cash and cash equivalents at beginning of year | 36,237 | 19,763 | 124,496 | |||||||||
Cash and cash equivalents at end of year | $ | 36,216 | $ | 36,237 | $ | 19,763 | ||||||
Supplemental cash flow information-interest paid | $ | 94,461 | $ | 85,123 | $ | 73,308 | ||||||
Supplemental schedule of non-cash activities: | ||||||||||||
Secured debt assumed from real property acquisitions | $ | 25,049 | $ | 22,309 | $ | 14,555 | ||||||
Assets and liabilities assumed from the Windrose acquisition: | ||||||||||||
Real estate investments | 975,475 | |||||||||||
Other assets acquired | 21,154 | |||||||||||
Secured debt | 249,424 | |||||||||||
Liability to subsidiary trust issuing preferred securities | 52,217 | |||||||||||
Other liabilities | 42,468 | |||||||||||
Minority interests | 2,215 | |||||||||||
Issuance of common stock | 396,846 | |||||||||||
Issuance of preferred stock | 62,118 |
See accompanying notes
HEALTH CARE REIT, INC.
1. | Accounting Policies and Related Matters |
Industry
We are a self-administered, equity real estate investment trust that invests across the full spectrum of senior housing and health care real estate including skilled nursing facilities, independent living facilities/continuing care retirement communities, assisted living facilities, hospitals, long-term acute care hospitals and medical office buildings.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries after the elimination of all significant intercompany accounts and transactions.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recorded in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases, and SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, as amended (“SAB 104”). SAB 104 requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectibility. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectibility risk. Substantially all of our operating leases contain either fixed or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectibility assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.
Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.
Loans Receivable
Loans receivable consist of mortgage loans, construction loans and working capital loans. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectibility risks. The mortgage loans and construction loans are primarily collateralized by a first or second mortgage lien or leasehold mortgage on, or an assignment of the partnership interest in, the related properties. Working capital loans are generally either unsecured or secured by the operator’s leasehold rights, corporate guarantiesand/or personal guaranties.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of these loans, including general economic conditions and estimated collectibility of loan payments. We evaluate the collectibility of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying collateral. If such factors
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
indicate that there is greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. At December 31, 2006, we had loans with outstanding balances of $10,529,000 on non-accrual status ($16,770,000 at December 31, 2005). To the extent circumstances improve and the risk of collectibility is diminished, we will return these loans to full accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding balance.
Real Property Owned
Real property developed by us is recorded at cost, including the capitalization of construction period interest. The cost of real property acquired is allocated to net tangible and identifiable intangible assets based on their respective fair values in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. The allocation of the acquisition costs of tangible assets (land, building and equipment) is based on appraisals commissioned from independent real estate appraisal firms. Substantially all of the properties owned by us are leased under operating leases and are recorded at cost. These properties are depreciated on a straight-line basis over their estimated useful lives which range from 15 to 40 years for buildings and five to 15 years for improvements.
The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value of in-place leases.
The value allocable to the above or below market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease intangibles and below market leases are included in other liabilities in the balance sheet and are amortized to rental income over the remaining terms of the respective leases.
The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The estimated aggregate amortization expense for acquired lease intangibles is approximately $16,816,000 for each of the next five years.
The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be changed. We consider external factors relating to each asset. If these external factors and the projected undiscounted cash flows of the asset over the remaining depreciation period indicate that the asset will not be recoverable, the carrying value may be reduced to the estimated fair market value.
Capitalization of Construction Period Interest
We capitalize interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of interest which approximates our cost of financing. We capitalized interest costs of $4,470,000, $665,000, and $875,000, during 2006, 2005 and 2004, respectively, related to construction of real property owned by us. Our interest expense reflected in the consolidated statements of income has been reduced by the amounts capitalized.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred Loan Expenses
Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of short-term and long-term debt. We amortize these costs over the term of the debt using the straight-line method, which approximates the interest yield method.
Equity Investments
Equity investments consist of investments in private companies where we do not have the ability to exercise influence and are accounted for under the cost method. Under the cost method of accounting, investments in private companies are carried at cost and are adjusted only forother-than-temporary declines in fair value, distributions of earnings and additional investments. For investments in public companies, if any, that have readily determinable fair market values, we classify our equity investments asavailable-for-sale and, accordingly, record these investments at their fair market values with unrealized gains and losses included in accumulated other comprehensive income, a separate component of stockholders’ equity. These investments represent a minimal ownership interest in these companies. In connection with the Windrose merger, we assumed a $1,000,000 investment in an unconsolidated subsidiary that holds trust preferred securities and is accounted for under the cost method.
Segment Reporting
We report consolidated financial statements in accordance with Financial Accounting Standards Board Statement No. 131, Disclosure about Segments of an Enterprise and Related Information. Segments are based on our method of internal reporting which classifies operations by leasing activities. Our segments include investment properties and operating properties. See Note 18 for additional information.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income includes unrealized gains or losses on our equity investments and unrecognized actuarial losses from the adoption of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans — An amendment of FASB Statements No. 87, 88, 106 and 132(R) on December 31, 2006. Accumulated unrealized gains and losses totaled $0, $0 and $1,000 at December 31, 2006, 2005 and 2004, respectively, and is included as a component of stockholders’ equity.
Fair Value of Derivative Instruments
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to fund our fixed rate investments with long-term fixed rate debt and equity, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates.
On May 6, 2004, we entered into two interest rate swap agreements (the “Swaps”) for a total notional amount of $100,000,000 to hedge changes in fair value attributable to changes in the LIBOR swap rate of $100,000,000 of fixed rate debt with a maturity date of November 15, 2013. The Swaps are treated as fair-value hedges for accounting purposes and we utilize the short-cut method in accordance with Statement No. 133, as amended. The Swaps are with highly rated counterparties in which we receive a fixed rate of 6.0% and pay a variable rate based on six-month LIBOR plus a spread. The hedging arrangement is considered highly effective and, as such, changes in the Swaps’ fair values exactly offset the corresponding changes in the fair value of senior unsecured notes and, as a result, the changes in fair value do not result in an impact on net income. At December 31, 2006 and 2005, the Swaps were reported at their fair value of $902,000 and $2,211,000, respectively, in other assets with an offsetting adjustment to the underlying senior unsecured notes. For the year ended December 31, 2006, we incurred $197,000 of losses related to the Swaps that was recorded as an addition to interest expense. For the years ended December 31,
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2005 and 2004, we generated $972,000 and $1,770,000, respectively, of savings related to the Swaps that was recorded as a reduction in interest expense.
The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by a third party consultant, which utilizes pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding for the period adjusted for non-vested shares of restricted stock. The computation of diluted earnings per share is similar to basic earnings per share, except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
Federal Income Tax
No provision has been made for federal income taxes since we have elected to be treated as a real estate investment trust under the applicable provisions of the Internal Revenue Code, and we believe that we have met the requirements for qualification as such for each taxable year. See Note 12.
New Accounting Standards
In December 2004, the Financial Accounting Standards Board issued Statement No. 123 (revised 2004), Share-Based Payment. See Note 9 for a discussion of our adoption of Statement 123(R) as of January 1, 2006.
In September 2006, the FASB issued Statement No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans — An amendment of FASB Statements No. 87, 88, 106 and 132(R). The statement requires employers to recognize the overfunded and underfunded portion of a defined benefit plan as an asset or liability, respectively, and any unrecognized gains and losses or prior service costs as a component of accumulated other comprehensive income. It also requires that a plan’s funded status to be measured at the employer’s fiscal year-end. The new statement, which is effective as of December 31, 2006, increased accrued pension costs and accumulated other comprehensive loss by $135,000.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes, and will be effective for the Company’s fiscal year 2007. The interpretation prescribes guidance for recognizing, measuring, reporting and disclosing a tax position taken or expected to be taken in a tax return. We are currently evaluating the effects the interpretation will have on our financial position.
In September 2006, the FASB also issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The statement will be effective for fiscal year 2008. Adoption of this statement is not expected to have a material impact on our financial position, although additional disclosures may be required.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No, 108. The guidance requires registrants to evaluate adjusting entries using both the roll-over method and the iron curtain method. Previously, registrants would use one method to perform their evaluation of an error’s materiality, even though their conclusion may be different under the other method. If an adjustment is deemed quantitatively and
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
qualitatively material to the financial statements under either method, correction of the error is required. The adoption of the guidance during the fourth quarter of 2006 did not have a material impact on our financial position.
Reclassifications
Certain amounts in prior years have been reclassified to conform with the current year presentation.
2. | Windrose Medical Properties Trust Merger |
On December 20, 2006, we completed our merger with Windrose Medical Properties Trust, a self-managed real estate investment trust based in Indianapolis, Indiana. The aggregate purchase price was approximately $1,018,345,000, including direct acquisition costs of approximately $29,918,000. The Windrose merger diversified our portfolio of investments throughout the health care delivery system. Windrose shareholders received approximately 9,679,000 shares of our common stock (valued at $41.00 per share) and Windrose preferred shareholders received 2,100,000 shares of our 7.5% Series G Cumulative Convertible Preferred Stock (valued at $29.58 per share). Additionally, our investment in Windrose includes $183,139,000 of cash provided to Windrose to extinguish secured debt, the assumption of $301,641,000 of debt and the assumption of other liabilities and minority interests totaling $44,683,000. The total purchase price for Windrose has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values. Such allocations have not been finalized and, as such, the allocation of the purchase consideration included in the accompanying Consolidated Balance Sheet at December 31, 2006, is preliminary and subject to adjustment.
The following table presents the allocation of the purchase price, net of merger-related expenses and capitalized equity issuance costs of $5,213,000 and $912,000, respectively, to assets acquired and liabilities assumed, based on their estimated fair values (in thousands):
Land and land improvements | $ | 102,328 | ||
Buildings & improvements | 758,599 | |||
Acquired lease intangibles | 80,883 | |||
Above market lease intangibles | 33,665 | |||
Cash and cash equivalents | 15,591 | |||
Receivables and other assets | 21,154 | |||
Total assets acquired | 1,012,220 | |||
Secured debt | 249,424 | |||
Liability to subsidiary trust issuing preferred securities | 52,217 | |||
Below market lease intangibles | 23,491 | |||
Accrued expenses and other liabilities | 18,977 | |||
Total liabilities assumed | 344,109 | |||
Minority interests | 2,215 | |||
Net assets acquired | $ | 665,896 | ||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following pro forma consolidated results of operations have been prepared as if the acquisition of Windrose had occurred as of January 1, 2005 (in thousands, except per share data):
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
(unaudited) | ||||||||
Revenues | $ | 409,832 | $ | 352,151 | ||||
Income from continuing operations available to common stockholders | 59,640 | 35,511 | ||||||
Income from continuing operations available to common stockholders per share — basic | 0.84 | 0.56 | ||||||
Income from continuing operations available to common stockholders per share — diluted | 0.83 | 0.55 |
3. | Loans Receivable |
The following is a summary of loans receivable (in thousands):
December 31, | ||||||||
2006 | 2005 | |||||||
Mortgage loans | $ | 177,615 | $ | 141,467 | ||||
Working capital loans | 16,833 | 52,587 | ||||||
Totals | $ | 194,448 | $ | 194,054 | ||||
Loans to related parties (an entity whose ownership included one Company director) that existed in prior years were at rates comparable to loans to other third-party borrowers and were equal to or greater than our net interest cost on borrowings to support such loans. There were no such loans outstanding during 2006 or 2005. The amount of interest income and commitment fees from related parties amounted to $682,000 for 2004.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of mortgage loans at December 31, 2006:
Final | Number | Principal | ||||||||||||||
Payment | of | Amount at | Carrying | |||||||||||||
Due | Loans | Payment Terms | Inception | Amount | ||||||||||||
(In thousands) | ||||||||||||||||
2007 | 7 | Monthly payments from $1,478 to $234,525, including interest from 7.52% to 19.26% | $ | 38,704 | $ | 32,171 | ||||||||||
2008 | 7 | Monthly payments from $2,552 to $91,547, including interest from 8.96% to 19.00% | 46,496 | 30,254 | ||||||||||||
2009 | 10 | Monthly payments from $185 to $48,165, including interest from 3.90% to 19.26% | 19,141 | 19,155 | ||||||||||||
2010 | 5 | Monthly payments from $46,525 to $275,000, including interest from 9.13% to 13.69% | 20,645 | 19,174 | ||||||||||||
2011 | 4 | Monthly payments from $802 to $4,495, including interest from 10.14% to 15.21% | 386 | 782 | ||||||||||||
2012 | 2 | Monthly payments from $73,954 to $128,975, including interest from 7.00% to 11.50% | 25,891 | 16,991 | ||||||||||||
2013 | 1 | Monthly payments of $30,938, including interest of 8.25% | 4,500 | 4,500 | ||||||||||||
2014 | 1 | Monthly payments of $44, including interest of 9.25% | 6 | 6 | ||||||||||||
2015 | 1 | Monthly payments of $21,327, including interest of 11.38% | 2,016 | 1,964 | ||||||||||||
2016 | 2 | Monthly payments from $91 to $7,496, including interest from 10.14% to 10.75% | 51 | 848 | ||||||||||||
2017 | 1 | Monthly payments of $211, including interest of 10.14% | 75 | 25 | ||||||||||||
2018 | 1 | Monthly payments of $52,708, including interest of 5.75% | 11,000 | 11,000 | ||||||||||||
2019 | 1 | Monthly payments of $20,865, including interest of 10.35% | 2,419 | 2,419 | ||||||||||||
2020 | 3 | Monthly payments from $40,512 to $184,969, including interest from 9.885% to 9.89% | 38,500 | 38,326 | ||||||||||||
Totals | $ | 209,830 | $ | 177,615 | ||||||||||||
4. | Allowance for Loan Losses |
The following is a summary of the allowance for loan losses (in thousands):
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balance at beginning of year | $ | 6,461 | $ | 5,261 | $ | 7,825 | ||||||
Provision for loan losses | 1,000 | 1,200 | 1,200 | |||||||||
Charge-offs | (55 | ) | 0 | (3,764 | ) | |||||||
Balance at end of year | $ | 7,406 | $ | 6,461 | $ | 5,261 | ||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of our loan impairments (in thousands):
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balance of impaired loans at year end | $ | 10,529 | $ | 16,770 | $ | 35,918 | ||||||
Allowance for loan losses | 7,406 | 6,461 | 5,261 | |||||||||
Balance of impaired loans not reserved | $ | 3,123 | $ | 10,309 | $ | 30,657 | ||||||
Average impaired loans for the year | $ | 13,650 | $ | 26,344 | $ | 33,221 |
Interest income recognized on non-accrual loans was $2,495,000 and $2,391,000 for the years ended December 31, 2006 and 2005, respectively. We did not recognize any interest on non-accrual loans for the year ended December 31, 2004.
5. | Real Property Owned |
The following table summarizes certain information about our real property owned as of December 31, 2006 (dollars in thousands):
Buildings, | Accumulated | |||||||||||||||||||
Number of | Intangibles & | Gross | Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Assisted Living Facilities: | ||||||||||||||||||||
Arizona | 4 | $ | 2,100 | $ | 17,563 | $ | 19,663 | $ | 2,410 | |||||||||||
California | 8 | 8,050 | 49,994 | 58,044 | 7,353 | |||||||||||||||
Colorado | 1 | 940 | 3,721 | 4,661 | 500 | |||||||||||||||
Connecticut | 5 | 8,030 | 36,799 | 44,829 | 4,396 | |||||||||||||||
Delaware | 1 | 560 | 21,220 | 21,780 | 1,243 | |||||||||||||||
Florida | 15 | 8,797 | 82,894 | 91,691 | 15,260 | |||||||||||||||
Georgia | 2 | 1,080 | 3,688 | 4,768 | 451 | |||||||||||||||
Idaho | 3 | 1,125 | 14,875 | 16,000 | 1,362 | |||||||||||||||
Illinois | 4 | 8,063 | 15,300 | 23,363 | ||||||||||||||||
Indiana | 2 | 220 | 5,520 | 5,740 | 842 | |||||||||||||||
Kansas | 1 | 600 | 10,590 | 11,190 | 631 | |||||||||||||||
Kentucky | 1 | 490 | 7,610 | 8,100 | 717 | |||||||||||||||
Louisiana | 1 | 1,100 | 10,161 | 11,261 | 3,593 | |||||||||||||||
Maryland | 2 | 870 | 9,155 | 10,025 | 931 | |||||||||||||||
Massachusetts | 7 | 8,160 | 62,490 | 70,650 | 4,875 | |||||||||||||||
Mississippi | 2 | 1,080 | 13,470 | 14,550 | 1,497 | |||||||||||||||
Montana | 3 | 1,460 | 14,772 | 16,232 | 1,664 | |||||||||||||||
Nevada | 3 | 1,820 | 25,126 | 26,946 | 3,383 | |||||||||||||||
New Jersey | 2 | 740 | 7,447 | 8,187 | 999 | |||||||||||||||
New York | 3 | 2,320 | 34,452 | 36,772 | 1,322 | |||||||||||||||
North Carolina | 41 | 15,863 | 181,932 | 197,795 | 23,170 | |||||||||||||||
Ohio | 7 | 3,293 | 30,985 | 34,278 | 6,335 | |||||||||||||||
Oklahoma | 16 | 1,928 | 24,346 | 26,274 | 7,176 | |||||||||||||||
Oregon | 3 | 1,167 | 11,099 | 12,266 | 2,112 | |||||||||||||||
Pennsylvania | 2 | 2,234 | 13,409 | 15,643 | 1,466 | |||||||||||||||
South Carolina | 5 | 2,002 | 26,584 | 28,586 | 4,215 | |||||||||||||||
Tennessee | 4 | 1,526 | 9,152 | 10,678 | 1,561 | |||||||||||||||
Texas | 23 | 6,736 | 88,147 | 94,883 | 12,443 | |||||||||||||||
Utah | 2 | 1,420 | 12,842 | 14,262 | 1,431 | |||||||||||||||
Virginia | 4 | 2,300 | 40,486 | 42,786 | 2,767 | |||||||||||||||
Washington | 8 | 5,940 | 28,696 | 34,636 | 2,829 | |||||||||||||||
Wisconsin | 4 | 3,140 | 31,387 | 34,527 | 922 | |||||||||||||||
Construction in progress | 12 | 55,197 | ||||||||||||||||||
Assets held for sale | 3 | 14,796 | ||||||||||||||||||
204 | 105,154 | 945,912 | 1,121,059 | 119,856 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Buildings, | Accumulated | |||||||||||||||||||
Number of | Intangibles & | Gross | Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Skilled Nursing Facilities: | ||||||||||||||||||||
Alabama | 8 | $ | 3,000 | $ | 41,419 | $ | 44,419 | $ | 4,540 | |||||||||||
Arizona | 3 | 2,050 | 19,965 | 22,015 | 1,647 | |||||||||||||||
Colorado | 5 | 6,060 | 37,152 | 43,212 | 2,696 | |||||||||||||||
Connecticut | 6 | 2,700 | 18,941 | 21,641 | 628 | |||||||||||||||
Florida | 42 | 23,312 | 280,501 | 303,813 | 31,502 | |||||||||||||||
Georgia | 3 | 2,650 | 14,932 | 17,582 | 1,354 | |||||||||||||||
Idaho | 3 | 2,010 | 20,662 | 22,672 | 5,374 | |||||||||||||||
Illinois | 4 | 1,110 | 24,700 | 25,810 | 7,644 | |||||||||||||||
Indiana | 8 | 2,289 | 40,342 | 42,631 | 5,367 | |||||||||||||||
Kansas | 1 | 1,120 | 8,360 | 9,480 | 252 | |||||||||||||||
Kentucky | 10 | 3,015 | 65,432 | 68,447 | 4,483 | |||||||||||||||
Louisiana | 7 | 783 | 34,717 | 35,500 | 1,175 | |||||||||||||||
Maryland | 1 | 390 | 4,010 | 4,400 | 515 | |||||||||||||||
Massachusetts | 23 | 19,318 | 212,574 | 231,892 | 31,619 | |||||||||||||||
Mississippi | 11 | 1,625 | 52,651 | 54,276 | 6,860 | |||||||||||||||
Missouri | 3 | 1,247 | 23,827 | 25,074 | 5,444 | |||||||||||||||
Nevada | 1 | 182 | 2,503 | 2,685 | 701 | |||||||||||||||
New Hampshire | 1 | 340 | 4,360 | 4,700 | 186 | |||||||||||||||
New Jersey | 1 | 1,850 | 3,050 | 4,900 | 257 | |||||||||||||||
Ohio | 20 | 11,520 | 184,199 | 195,719 | 14,230 | |||||||||||||||
Oklahoma | 3 | 1,427 | 21,920 | 23,347 | 2,293 | |||||||||||||||
Oregon | 1 | 300 | 5,316 | 5,616 | 1,442 | |||||||||||||||
Pennsylvania | 4 | 3,179 | 21,414 | 24,593 | 5,045 | |||||||||||||||
Tennessee | 22 | 8,730 | 122,604 | 131,334 | 16,740 | |||||||||||||||
Texas | 15 | 8,346 | 69,545 | 77,891 | 5,462 | |||||||||||||||
Utah | 1 | 991 | 6,850 | 7,841 | 208 | |||||||||||||||
Virginia | 2 | 1,891 | 7,312 | 9,203 | 1,022 | |||||||||||||||
Construction in progress | 1 | 14,852 | ||||||||||||||||||
210 | 111,435 | 1,349,258 | 1,475,545 | 158,686 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Buildings, | ||||||||||||||||||||
Number of | Intangibles & | Gross | Accumulated Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Independent Living/CCRC Facilities: | ||||||||||||||||||||
Arizona | 1 | $ | 950 | $ | 9,087 | $ | 10,037 | $ | 1,583 | |||||||||||
California | 7 | 17,960 | 123,505 | 141,465 | 2,952 | |||||||||||||||
Colorado | 1 | 5,029 | 14,906 | 19,935 | 98 | |||||||||||||||
Florida | 3 | 6,843 | 68,173 | 75,016 | 9,717 | |||||||||||||||
Georgia | 3 | 3,256 | 24,759 | 28,015 | 8,733 | |||||||||||||||
Idaho | 1 | 550 | 14,740 | 15,290 | 1,674 | |||||||||||||||
Illinois | 1 | 670 | 6,780 | 7,450 | 952 | |||||||||||||||
Indiana | 2 | 670 | 13,591 | 14,261 | 1,980 | |||||||||||||||
Kansas | 1 | 1,400 | 11,000 | 12,400 | ||||||||||||||||
Missouri | 1 | 510 | 5,490 | 6,000 | ||||||||||||||||
Nevada | 1 | 1,144 | 10,831 | 11,975 | 4,170 | |||||||||||||||
New York | 1 | 1,510 | 9,490 | 11,000 | 1,238 | |||||||||||||||
North Carolina | 2 | 3,120 | 20,155 | 23,275 | 538 | |||||||||||||||
South Carolina | 4 | 7,190 | 62,345 | 69,535 | 2,445 | |||||||||||||||
Texas | 2 | 5,670 | 16,620 | 22,290 | 3,073 | |||||||||||||||
Washington | 1 | 620 | 4,780 | 5,400 | 407 | |||||||||||||||
Construction in progress | 3 | 61,709 | ||||||||||||||||||
35 | 57,092 | 416,252 | 535,053 | 39,560 | ||||||||||||||||
Medical Office Buildings: | ||||||||||||||||||||
Alabama | 5 | 1,447 | 43,431 | 44,878 | 64 | |||||||||||||||
Arizona | 1 | 48,134 | 48,134 | 76 | ||||||||||||||||
California | 5 | 4,796 | 85,196 | 89,992 | 96 | |||||||||||||||
Florida | 23 | 28,745 | 202,868 | 231,613 | 313 | |||||||||||||||
Georgia | 14 | 19,137 | 65,080 | 84,217 | 114 | |||||||||||||||
Illinois | 3 | 3,205 | 14,088 | 17,293 | 23 | |||||||||||||||
North Carolina | 10 | 4,963 | 29,131 | 34,094 | 43 | |||||||||||||||
New Jersey | 3 | 9,582 | 22,995 | 32,577 | 34 | |||||||||||||||
Nevada | 7 | 8,702 | 94,245 | 102,947 | 122 | |||||||||||||||
New York | 1 | 20,915 | 20,915 | 42 | ||||||||||||||||
Tennessee | 4 | 4,472 | 30,974 | 35,446 | 45 | |||||||||||||||
Texas | 13 | 8,977 | 150,237 | 159,214 | 216 | |||||||||||||||
89 | 94,026 | 807,294 | 901,320 | 1,188 | ||||||||||||||||
Specialty Care Facilities: | ||||||||||||||||||||
Illinois | 1 | 3,650 | 18,559 | 22,209 | 3,333 | |||||||||||||||
Louisiana | 1 | 1,383 | 8,318 | 9,701 | 15 | |||||||||||||||
Massachusetts | 3 | 3,375 | 62,101 | 65,476 | 19,352 | |||||||||||||||
Ohio | 1 | 3,020 | 27,445 | 30,465 | 2,926 | |||||||||||||||
Oklahoma | 2 | 2,101 | 9,651 | 11,752 | 184 | |||||||||||||||
Texas | 6 | 5,457 | 98,357 | 103,814 | 1,907 | |||||||||||||||
Construction in progress | 2 | 6,464 | ||||||||||||||||||
16 | 18,986 | 224,431 | 249,881 | 27,717 | ||||||||||||||||
Total Real Property Owned | 554 | $ | 386,693 | $ | 3,743,147 | $ | 4,282,858 | $ | 347,007 | |||||||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2006, future minimum lease payments receivable under operating leases are as follows (in thousands):
2007 | $ | 380,170 | ||
2008 | 372,888 | |||
2009 | 368,000 | |||
2010 | 368,064 | |||
2011 | 354,637 | |||
Thereafter | 2,395,209 | |||
Totals | $ | 4,238,968 | ||
We purchased $11,204,000, $3,908,000 and $8,500,000 of real property that had previously been financed by the Company with loans in 2006, 2005 and 2004, respectively. We converted $24,330,000 and $29,238,000 of completed construction projects into operating lease properties in 2006 and 2005, respectively. We acquired properties which included the assumption of mortgages totaling $274,473,000, $22,309,000 and $14,555,000 in 2006, 2005 and 2004, respectively. Certain of our 2006 and 2005 acquisitions included deferred acquisition payments totaling $2,000,000 and $18,125,000, respectively. These non-cash activities are appropriately not reflected in the accompanying statements of cash flows. See the accompanying statement of cash flows for non-cash investing activity related to the Windrose merger.
During the year ended December 31, 2004, it was determined that the projected undiscounted cash flows from a property did not exceed its related net book value and an impairment charge of $314,000 was recorded to reduce the property to its estimated fair market value. The estimated fair market value was determined by an offer to purchase received from a third party. We did not record any impairment charges during the years ended December 31, 2006 or 2005.
At December 31, 2006 and 2005, we had $14,796,000 and $11,912,000, respectively, related to assets held for sale. See Note 16 for further discussion of discontinued operations.
6. | Concentration of Risk |
As of December 31, 2006, long-term care facilities, which include skilled nursing, independent living/continuing care retirement communities and assisted living facilities, comprised 72% (93% at December 31, 2005) of our real estate investments and were located in 37 states. The following table summarizes certain information about our customer concentration as of December 31, 2006 (dollars in thousands):
Number of | Total | Percent of | ||||||||||
Properties | Investment(1) | Investment(2) | ||||||||||
Concentration by investment: | ||||||||||||
Emeritus Corporation | 50 | $ | 353,641 | 9 | % | |||||||
Brookdale Senior Living Inc. | 87 | 284,161 | 7 | % | ||||||||
Home Quality Management, Inc. | 37 | 244,449 | 6 | % | ||||||||
Life Care Centers of America, Inc. | 26 | 238,610 | 6 | % | ||||||||
Merrill Gardens L.L.C. | 13 | 183,841 | 4 | % | ||||||||
Remaining portfolio | 365 | 2,828,047 | 68 | % | ||||||||
Totals | 578 | $ | 4,132,749 | 100 | % | |||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Number of | Total | Percent of | ||||||||||
Properties | Revenue(3) | Revenue | ||||||||||
Concentration by revenue(4): | ||||||||||||
Emeritus Corporation | 50 | $ | 36,878 | 11 | % | |||||||
Brookdale Senior Living Inc. | 87 | 33,581 | 10 | % | ||||||||
Home Quality Management, Inc. | 37 | 27,318 | 8 | % | ||||||||
Life Care Centers of America, Inc. | 26 | 23,261 | 7 | % | ||||||||
Delta Health Group, Inc. | 25 | 22,861 | 7 | % | ||||||||
Remaining portfolio | 353 | 180,565 | 56 | % | ||||||||
Other income | n/a | 3,924 | 1 | % | ||||||||
Totals | 578 | $ | 328,388 | 100 | % | |||||||
(1) | Investments include real estate investments and credit enhancements which amounted to $4,130,299,000 and $2,450,000, respectively. | |
(2) | Investments with top five customers comprised 41% of total investments at December 31, 2005. | |
(3) | Revenues include gross revenues and revenues from discontinued operations for the year ended December 31, 2006. | |
(4) | Revenues from top five customers were 43% and 46% for the years ended December 31, 2005 and 2004, respectively. All of our top five customers are in our investment segment. |
7. | Borrowings Under Lines of Credit Arrangements and Related Items |
We have an unsecured credit arrangement with a consortium of twelve banks providing for a revolving line of credit (“revolving credit”) in the amount of $700,000,000, which expires on July 26, 2009 (with the ability to extend for one year at our discretion if we are in compliance with all covenants). The agreement specifies that borrowings under the revolving credit are subject to interest payable in periods no longer than three months at either the agent bank’s prime rate of interest (8.25% at December 31, 2006) or the applicable margin over LIBOR interest rate, at our option (6.275% at December 31, 2006). The applicable margin is based on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.9% at December 31, 2006. In addition, we pay a facility fee annually to each bank based on the bank’s commitment under the revolving credit facility. The facility fee depends on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.15% at December 31, 2006. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement. We have another unsecured line of credit arrangement with a bank for a total of $40,000,000, which expires May 31, 2007. Borrowings under this line of credit are subject to interest at either the bank’s prime rate of interest (8.25% at December 31, 2006) or 0.9% over LIBOR interest rate (6.25% at December 31, 2006), at our option. Principal is due upon expiration of the agreement.
The following information relates to aggregate borrowings under the unsecured lines of credit arrangements (dollars in thousands):
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balance outstanding at December 31 | $ | 225,000 | $ | 195,000 | $ | 151,000 | ||||||
Maximum amount outstanding at any month end | $ | 276,000 | $ | 318,000 | $ | 159,000 | ||||||
Average amount outstanding (total of daily principal balances divided by days in year) | $ | 164,905 | $ | 181,232 | $ | 54,770 | ||||||
Weighted average interest rate (actual interest expense divided by average borrowings outstanding) | 6.91 | % | 5.19 | % | 5.32 | % |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. | Senior Unsecured Notes and Secured Debt |
We have $1,541,814,000 of senior unsecured notes with annual interest rates ranging from 4.75% to 8.00%. The carrying amounts of the senior unsecured notes represent the par value of $1,539,830,000 adjusted for any unamortized premiums or discounts and other basis adjustments related to hedging the debt with derivative instruments. See Note 1 for further discussion regarding derivative instruments.
In November and December 2006, we issued $345,000,000 of 4.75% senior unsecured convertible notes due December 2026, generating net proceeds of $337,517,000. The notes will be convertible, in certain circumstances, into cash and, if applicable, shares of Health Care REIT’s common stock at an initial conversion rate of 20.8833 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $47.89 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and Health Care REIT common stock for the note’s conversion value in excess of such principal amount.
We have 63 mortgage loans totaling $378,972,000, collateralized by owned properties with annual interest rates ranging from 4.89% to 8.50%. The carrying amounts of the mortgage loans represent the outstanding principal balance of $378,400,000 adjusted for any unamortized fair market value adjustments. The carrying values of the properties securing the mortgage loans totaled $752,917,000 at December 31, 2006.
We have a $52,215,000 liability to a subsidiary trust issuing trust preferred securities that was assumed in the Windrose merger. On March 24, 2006, Windrose’s wholly-owned subsidiary, Windrose Capital Trust I (the “Trust”), completed the issuance and sale in a private placement of $50,000,000 in aggregate principal amount of fixed/floating rate preferred securities. The trust preferred securities mature on March 30, 2036, are redeemable at our option beginning March 30, 2011, and require quarterly distributions of interest to the holders of the trust preferred securities. The trust preferred securities bear a fixed rate per annum equal to 7.22% through March 30, 2011, and a variable rate per annum equal to LIBOR plus 2.05% thereafter.
The common stock of the Trust was purchased by an operating partnership of Windrose for $1,000,000. The Trust used the proceeds from the sale of the trust preferred securities together with the proceeds from the sale of the common stock to purchase $51,000,000 in aggregate principal amount of unsecured fixed/floating junior subordinated notes due March 30, 2036 issued by an operating partnership. The operating partnership received approximately $49,000,000 in net proceeds, after the payment of fees and expenses, from the sale of the junior subordinated notes to the Trust. In accordance with FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, we have not consolidated the trust because the operating partnership is not considered the primary beneficiary.
Our debt agreements contain various covenants, restrictions and events of default. Among other things, these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2006, the annual principal payments on these long-term obligations are as follows (in thousands):
Trust | ||||||||||||||||
Senior | Mortgage | Preferred | ||||||||||||||
Unsecured Notes | Loans | Liability | Totals | |||||||||||||
2007 | $ | 52,500 | $ | 19,199 | $ | 0 | $ | 71,699 | ||||||||
2008 | 42,330 | 40,115 | 82,445 | |||||||||||||
2009 | 45,061 | 45,061 | ||||||||||||||
2010 | 12,504 | 12,504 | ||||||||||||||
2011 | 49,509 | 49,509 | ||||||||||||||
2012 | 250,000 | 18,558 | 268,558 | |||||||||||||
2013 | 300,000 | 56,972 | 356,972 | |||||||||||||
Thereafter | 895,000 | 136,482 | 51,000 | 1,082,482 | ||||||||||||
Totals | $ | 1,539,830 | $ | 378,400 | $ | 51,000 | $ | 1,969,230 | ||||||||
9. | Stock Incentive Plans |
Our 2005 Long-Term Incentive Plan authorizes up to 2,200,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. The 2005 Plan replaced the 1995 Stock Incentive Plan and the Stock Plan for Non-Employee Directors. The options granted to officers and key salaried employees under the 1995 Plan continue to vest through 2015 and expire ten years from the date of grant. Our non-employee directors, officers and key salaried employees are eligible to participate in the 2005 Plan. The 2005 Plan allows for the issuance of, among other things, stock options, restricted stock, deferred stock units and dividend equivalent rights.
The following summarizes the activity in the plans (shares in thousands):
Year Ended December 31 | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Number | Average | Number | Average | Number | Average | |||||||||||||||||||
of | Exercise | of | Exercise | of | Exercise | |||||||||||||||||||
Stock Options | Shares | Price | Shares | Price | Shares | Price | ||||||||||||||||||
Options at beginning of year | 685 | $ | 26.87 | 1,015 | $ | 24.86 | 1,503 | $ | 23.15 | |||||||||||||||
Options granted | 460 | 32.42 | 60 | 34.88 | 112 | 36.92 | ||||||||||||||||||
Options exercised | (227 | ) | 22.24 | (380 | ) | 22.84 | (600 | ) | 22.83 | |||||||||||||||
Options terminated | (1 | ) | 36.50 | (10 | ) | 25.24 | ||||||||||||||||||
Options at end of year | 917 | $ | 30.79 | 685 | $ | 26.87 | 1,015 | $ | 24.86 | |||||||||||||||
Options exercisable at end of year | 462 | $ | 28.83 | 257 | $ | 23.16 | 639 | $ | 23.54 | |||||||||||||||
Weighted average fair value of options granted during the year | $ | 5.26 | $ | 12.48 | $ | 12.09 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of each option grant is estimated on the date of grant using a Black-Scholes-Merton option pricing model with the following weighted-average assumptions:
2006 | 2005 | 2004 | ||||||||||
Dividend yield(1) | 6.79% | 6.88 | % | 6.34 | % | |||||||
Expected volatility | 20.3% | 22.8 | % | 22.4 | % | |||||||
Risk-free interest rate | 4.35% | 4.25 | % | 4.11 | % | |||||||
Expected life (in years) | 5 | 7 | 7 | |||||||||
Weighted-average fair value(1) | $5.26 | $ | 12.48 | $ | 12.09 |
(1) | Certain options granted to employees include dividend equivalent rights (“DERs”). The fair value of options with DERs also includes the net present value of projected future dividend payments over the expected life of the option discounted at the dividend yield rate. In 2004 and 2005, substantially all options granted included DERs, while in 2006, approximately 19.5% of options granted included DERs. |
Vesting periods for options and restricted shares range from three years for directors to five years for officers and key salaried employees. Options expire ten years from the date of grant. We granted 98,000, 85,000 and 112,000 restricted shares during 2006, 2005 and 2004, respectively, including 13,000, 16,000 and 10,000 shares to non-employee directors in 2006, 2005 and 2004, respectively. Expense, which is recognized as the shares vest based on the market value at the date of the award, totaled $6,980,000, $2,948,000 and $2,887,000, in 2006, 2005 and 2004, respectively.
The following table summarizes information about stock options outstanding at December 31, 2006 (options in thousands):
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Range of Per | Weighted | Average | Weighted | |||||||||||||||||
Share Exercise | Number | Average | Remaining | Number | Average | |||||||||||||||
Prices | Outstanding | Exercise Price | Contract Life | Exercisable | Exercise Price | |||||||||||||||
$16-$20 | 11 | $ | 16.81 | 4.0 | 11 | $ | 16.81 | |||||||||||||
$20-$25 | 111 | 24.42 | 5.0 | 98 | 24.42 | |||||||||||||||
$25-$30 | 290 | 26.20 | 7.0 | 152 | 26.55 | |||||||||||||||
$30-$40 | 505 | 35.13 | 9.2 | 201 | 33.36 | |||||||||||||||
Totals | 917 | $ | 30.79 | 7.9 | 462 | $ | 28.83 | |||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the quoted price of our common stock for the options that werein-the-money at December 31, 2006. During the year ended December 31, 2006, the aggregate intrinsic value of options exercised under our stock incentive plans was $3,140,000 determined as of the date of option exercise. During the year ended December 31, 2005, the aggregate intrinsic value of options exercised under our stock incentive plans was $4,705,000 determined as of the date of option exercise. Cash received from option exercises under our stock incentive plans for the year ended December 31, 2006 was $4,872,000. Cash received from option exercises under our stock incentive plans for the year ended December 31, 2005 was $8,690,000.
As of December 31, 2006, there was approximately $2,349,000 of total unrecognized compensation cost related to unvested stock options granted under our stock incentive plans. That cost is expected to be recognized over a weighted average period of three years. As of December 31, 2006, there was approximately $4,761,000 of total unrecognized compensation cost related to unvested restricted stock granted under our stock incentive plans. That cost is expected to be recognized over a weighted average period of three years.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes information about non-vested stock incentive awards as of December 31, 2006 and changes for the year ended December 31, 2006:
Stock Options | Restricted Stock | |||||||||||||||
Number of | Weighted Average | Number of | Weighted Average | |||||||||||||
Shares | Grant Date | Shares | Grant Date | |||||||||||||
(000’s) | Fair Value | (000’s) | Fair Value | |||||||||||||
Non-vested at December 31, 2005 | 428 | $ | 5.36 | 222 | $ | 31.56 | ||||||||||
Vested | (105 | ) | 5.23 | (72 | ) | 29.64 | ||||||||||
Granted | 155 | 5.26 | 98 | 36.51 | ||||||||||||
Terminated | 0 | 0 | ||||||||||||||
Non-vested at December 31, 2006 | 478 | $ | 5.35 | 248 | $ | 34.07 | ||||||||||
We adopted the fair value-based method of accounting for share-based payments effective January 1, 2003 using the prospective method described in Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Currently, we use the Black-Scholes-Merton option pricing model to estimate the value of stock option grants and expect to continue to use this acceptable option valuation model. Because we adopted Statement No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date of Statement No. 123), compensation cost for some previously granted awards that were not recognized under Statement No. 123 will now be recognized effective with the adoption of Statement No. 123(R) on January 1, 2006. In addition, we previously amortized compensation cost for share-based payments to the date that the awards became fully vested or to the expected retirement date, if sooner. Effective with the adoption of Statement No. 123(R), we began recognizing compensation cost to the date the awards become fully vested or to the retirement eligible date, if sooner. Compensation cost totaled $6,980,000 for the year ended December 31, 2006.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table illustrates the effect on net income available to common stockholders if we had applied the fair value recognition provisions of Statement 123 to stock-based compensation for options granted since 1995 but prior to adoption at January 1, 2003 (in thousands, except per share data):
Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
Numerator: | ||||||||
Net income available to common stockholders — as reported | $ | 62,692 | $ | 72,634 | ||||
Deduct: Additional stock-based employee compensation expense determined under fair value based method for all awards | 181 | 274 | ||||||
Net income available to common stockholders — pro forma | $ | 62,511 | $ | 72,360 | ||||
Denominator: | ||||||||
Basic weighted average shares — as reported and pro forma | 54,110 | 51,544 | ||||||
Effect of dilutive securities: | ||||||||
Employee stock options — pro forma | 365 | |||||||
Non-vested restricted shares | 208 | 161 | ||||||
Dilutive potential common shares | 208 | 526 | ||||||
Diluted weighted average shares — pro forma | 54,318 | 52,070 | ||||||
Net income available to common stockholders per share — as reported | ||||||||
Basic | $ | 1.16 | $ | 1.41 | ||||
Diluted | $ | 1.15 | $ | 1.39 | ||||
Net income available to common stockholders per share — pro forma | ||||||||
Basic | $ | 1.16 | $ | 1.40 | ||||
Diluted | $ | 1.15 | $ | 1.39 | ||||
10. | Other Equity |
Other equity consists of the following (in thousands):
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Accumulated compensation expense related to stock options | $ | 1,845 | $ | 864 | $ | 552 | ||||||
Unamortized restricted stock | 0 | (521 | ) | (1,249 | ) | |||||||
Totals | $ | 1,845 | $ | 343 | $ | (697 | ) | |||||
Unamortized restricted stock represented the unamortized value of restricted stock granted to employees and non-employee directors prior to January 1, 2003. Expense related to these grants, which is recognized as the shares vest based on the market value at the date of the award, totaled $521,000, $728,000 and $949,000 for the years ended December 31, 2006, 2005 and 2004, respectively.
11. | Preferred Stock |
In July 2003, we closed a public offering of 4,000,000 shares of 7.875% Series D Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after July 9, 2008.
In September 2003, we issued 1,060,000 shares of 6% Series E Cumulative Convertible and Redeemable Preferred Stock as partial consideration for an acquisition of assets by the Company, with the shares valued at $26,500,000 for such purposes. The shares were issued to Southern Assisted Living, Inc. and certain of its stockholders without registration in reliance upon the federal statutory exemption of Section 4(2) of the Securities Act of 1933, as amended. The shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after August 15, 2008. The preferred shares are convertible into common stock at a conversion price of $32.66 per share at any time. During the year ended December 31, 2005, certain holders of our Series E Preferred Stock converted 275,056 shares into 210,541 shares of our common stock, leaving 74,989 of such shares outstanding at December 31, 2006 and 2005.
In September 2004, we closed a public offering of 7,000,000 shares of 7.625% Series F Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after September 14, 2009.
In conjunction with the acquisition of Windrose Medical Properties Trust in December 2006, we issued 2,100,000 shares of 7.5% Series G Cumulative Convertible Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after June 30, 2010. Each Series G Preferred Share is convertible by the holder into our common stock at a conversion price of $34.93, equivalent to a conversion rate of 0.7157 common shares per Series G Preferred Share. The shares were recorded at $29.58 per share, which was deemed to be the fair value at the date of the issuance.
12. | Income Taxes and Distributions |
To qualify as a real estate investment trust for federal income tax purposes, 90% of taxable income (including 100% of capital gains) must be distributed to stockholders. Real estate investment trusts that do not distribute a certain amount of current year taxable income in the current year are also subject to a 4% federal excise tax. The principal differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.
Cash distributions paid to common stockholders, for federal income tax purposes, are as follows:
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Per Share: | ||||||||||||
Ordinary income | $ | 1.7461 | $ | 1.266 | $ | 1.189 | ||||||
Return of capital | $ | 1.1348 | 1.194 | 1.196 | ||||||||
Totals | $ | 2.8809 | $ | 2.460 | $ | 2.385 | ||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. | Commitments and Contingencies |
We have an outstanding letter of credit issued for the benefit of certain insurance companies that provide workers’ compensation insurance to one of our tenants. Our obligation under the letter of credit matures in 2009. At December 31, 2006, our obligation under the letter of credit was $2,450,000.
At December 31, 2006, we had outstanding construction financings of $138,222,000 for leased properties and were committed to providing additional financing of approximately $342,754,000 to complete construction. At December 31, 2006, we had contingent purchase obligations totaling $32,282,000. These contingent purchase obligations primarily relate to deferred acquisition fundings and capital improvements. Deferred acquisition fundings are contingent upon an operator satisfying certain conditions such as payment coverage and value tests. Amounts due from the tenant are increased to reflect the additional investment in the property.
At December 31, 2006, we had operating lease obligations of $37,378,000 relating to certain ground leases and Company office space. We incurred rental expense relating to our Company office space of $939,000, $283,000 and $292,000 for the years ended December 31, 2006, 2005 and 2004, respectively. Regarding the property leases, we have sublease agreements with certain of our operators that require the operators to reimburse us for our monthly operating lease obligations. At December 31, 2006, aggregate future minimum rentals to be received under these noncancelable subleases totaled $12,982,000.
At December 31, 2006, future minimum lease payments due under operating leases are as follows (in thousands):
2007 | $ | 2,756 | ||
2008 | 2,374 | |||
2009 | 2,290 | |||
2010 | 2,138 | |||
2011 | 1,867 | |||
Thereafter | 25,953 | |||
Totals | $ | 37,378 | ||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. | Earnings Per Share |
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Year Ended December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Numerator for basic and diluted earnings per share — net income available to common stockholders | $ | 81,287 | $ | 62,692 | $ | 72,634 | ||||||
Denominator for basic earnings per share — weighted average shares | 61,661 | 54,110 | 51,544 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock options | 136 | 181 | 377 | |||||||||
Non-vested restricted shares | 248 | 208 | 161 | |||||||||
Dilutive potential common shares | 384 | 389 | 538 | |||||||||
Denominator for diluted earnings per share — adjusted weighted average shares | 62,045 | 54,499 | 52,082 | |||||||||
Basic earnings per share | $ | 1.32 | $ | 1.16 | $ | 1.41 | ||||||
Diluted earnings per share | $ | 1.31 | $ | 1.15 | $ | 1.39 | ||||||
The diluted earnings per share calculation excludes the dilutive effect of 0, 112,000 and 112,000 options for 2006, 2005 and 2004, respectively, because the exercise price was greater than the average market price. The Series E Cumulative Convertible and Redeemable Preferred Stock was not included in the calculations for 2006, 2005 and 2004 as the effect of the conversions was anti-dilutive. The $345,000,000 senior unsecured convertible notes due December 2026 and the Series G Cumulative Convertible Preferred Stock were not included in the calculation for 2006 as the effect of the conversion was anti-dilutive.
15. | Disclosure about Fair Value of Financial Instruments |
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.
Mortgage Loans Receivable — The fair value of all mortgage loans receivable is estimated by discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Working Capital Loans and Construction Loans — The carrying amount is a reasonable estimate of fair value based on the interest rates received, which approximates current market rates.
Cash and Cash Equivalents — The carrying amount approximates fair value.
Equity Investments — Equity investments are recorded at their fair market value.
Borrowings Under Lines of Credit Arrangements — The carrying amount of the lines of credit arrangements approximates fair value because the borrowings are interest rate adjustable.
Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated by discounting the estimated future cash flows using the current borrowing rate available to the Company for similar debt.
Mortgage Loans Payable — Mortgage loans payable is a reasonable estimate of fair value based on the interest rates paid, which approximates current market rates.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest Rate Swap Agreements — Our interest rate swap agreements are recorded as assets or liabilities on the balance sheet at fair market value. Fair market value is estimated by a third party consultant, which utilizes pricing models that consider forward yield curves and discount rates.
The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):
December 31, 2006 | December 31, 2005 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Financial Assets: | ||||||||||||||||
Mortgage loans receivable | $ | 177,615 | $ | 180,537 | $ | 141,467 | $ | 150,105 | ||||||||
Working capital loans | 16,833 | 16,833 | 52,587 | 52,587 | ||||||||||||
Equity investments | 4,700 | 4,700 | 2,970 | 2,970 | ||||||||||||
Cash and cash equivalents | 36,216 | 36,216 | 36,237 | 36,237 | ||||||||||||
Interest rate swap agreements | 902 | 902 | 2,211 | 2,211 | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Borrowings under lines of credit arrangements | $ | 225,000 | $ | 225,000 | $ | 195,000 | $ | 195,000 | ||||||||
Senior unsecured notes | 1,541,814 | 1,895,672 | 1,198,278 | 1,271,370 | ||||||||||||
Mortgage loans payable | 378,972 | 378,972 | 107,540 | 107,540 | ||||||||||||
Trust preferred liability | 52,215 | 52,215 |
16. | Discontinued Operations |
Three assisted living facilities were held for sale at December 31, 2006 and were sold subsequent to year-end. During the years ended December 31, 2006, 2005 and 2004, we sold properties with carrying values of $75,789,000, $88,098,000 and $37,710,000 for net gains of $1,267,000 and $3,227,000 and net losses of $143,000, respectively. During the nine months ended September 30, 2007, we sold properties with carrying values of $63,165,000 for a net gain of $2,775,000. Also, at September 30, 2007, two properties were classified as held for sale. In accordance with Statement No. 144, we have reclassified the income and expenses attributable to these properties to discontinued operations. Expenses include an allocation of interest expense based on property carrying values and our weighted average cost of debt. The following illustrates the reclassification impact of Statement No. 144 as a result of classifying the properties as discontinued operations (in thousands):
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Revenues: | ||||||||||||
Rental Income | $ | 12,043 | $ | 23,816 | $ | 27,751 | ||||||
Expenses: | ||||||||||||
Interest expense | 3,819 | 7,102 | 7,866 | |||||||||
Depreciation and amortization | 6,284 | 11,831 | 13,594 | |||||||||
General and administrative | 1,120 | 1,086 | 787 | |||||||||
Income (loss) from discontinued operations, net | $ | 820 | $ | 3,797 | $ | 5,504 | ||||||
17. | Retirement Arrangements |
As a result of the merger with Windrose Properties Trust in December 2006, we now have two retirement plans and trusts (the “401(k) Plans”) covering all eligible employees. Under the 401(k) Plans, eligible employees may make contributions, and we may make matching contributions and a profit sharing contribution. Our contributions to the Health Care REIT, Inc. 401(k) Plan totaled $413,000, $337,000 and $289,000 in 2006, 2005 and 2004, respectively. We did not make any contributions to the Windrose Medical Properties Trust 401(k) Plan in 2006.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We have a Supplemental Executive Retirement Plan (“SERP”), a non-qualified defined benefit pension plan, which provides certain executive officers with supplemental deferred retirement benefits. The SERP provides an opportunity for participants to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded. No contributions by the Company are anticipated for the 2006 fiscal year. No benefit payments are expected to occur during the next five fiscal years and total $1,713,000 during the succeeding five fiscal years. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $1,597,000 at December 31, 2006 ($1,032,000 at December 31, 2005).
The following tables provide a reconciliation of the changes in the SERP’s benefit obligations and a statement of the funded status for the periods indicated (in thousands):
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
Reconciliation of benefit obligation: | ||||||||
Obligation at January 1 | $ | 1,255 | $ | 729 | ||||
Service cost | 352 | 286 | ||||||
Interest cost | 72 | 44 | ||||||
Actuarial (gain)/loss | (82 | ) | 196 | |||||
Obligation at December 31 | $ | 1,597 | $ | 1,255 | ||||
December 31, | ||||||||
2006 | 2005 | |||||||
Funded status: | ||||||||
Funded status at December 31 | $ | (1,597 | ) | $ | (1,255 | ) | ||
Unrecognized (gain)/loss | 0 | 223 | ||||||
Prepaid/(accrued) benefit cost | $ | (1,597 | ) | $ | (1,032 | ) | ||
The accrued benefit cost increased $135,000 during 2006 as a result of adopting SFAS 158. See Note 1 for additional information.
The following table shows the components of net periodic benefit costs for the periods indicated (in thousands):
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
Service cost | $ | 352 | $ | 286 | ||||
Interest cost | 72 | 44 | ||||||
Net actuarial loss | 8 | 0 | ||||||
Net periodic benefit cost | $ | 432 | $ | 330 | ||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides information for the SERP, which has an accumulated benefit in excess of plan assets (in thousands):
December 31, | ||||||||
2006 | 2005 | |||||||
Projected benefit obligation | $ | 1,597 | $ | 1,255 | ||||
Accumulated benefit obligation | 1,121 | 831 | ||||||
Fair value of assets | n/a | n/a |
The following table reflects the weighted-average assumptions used to determine the benefit obligations and net periodic benefit cost for the SERP:
Benefit Obligations | Net Periodic Benefit Cost | |||||||||||||||
December 31, | Year Ended December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Discount rate | 6.00 | % | 5.75 | % | 5.75 | % | 6.00 | % | ||||||||
Rate of compensation increase | 4.25 | % | 4.00 | % | 4.00 | % | 4.25 | % | ||||||||
Expected long-term return on plan assets | n/a | n/a | n/a | n/a |
18. | Segment Reporting |
Our business consists primarily of financing and leasing senior housing and health care real estate. We evaluate our business and make resource allocations on our two business segments — investment properties and operating properties. Under the investment property segment, we invest in senior housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased undertriple-net leases and we are not involved in the management of the property. Our primary investment property types include skilled nursing facilities, assisted living facilities, independent living/continuing care retirement communities and specialty care facilities. Under the operating property segment, we primarily invest in medical office buildings that are typically leased under gross leases, modified gross leases ortriple-net leases, to multiple tenants, and generally require a certain level of property management. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 1). There are no intersegment sales or transfers. We evaluate performance based upon net operating income of the combined properties in each segment.
Non-segment revenue consists mainly of interest income on non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, accounts receivable and deferred financing costs among others. Non-property specific revenues and expenses are not allocated to individual segments in determining our performance measure.
Summary information for the reportable segments during the year ended December 31, 2006 is as follows (in thousands):
Property | Net | Real Estate | ||||||||||||||||||||||||||||||||||
Rental | Interest | Other | Total | Operating | Operating | Depreciation/ | Interest | Total | ||||||||||||||||||||||||||||
Income(1) | Income | Income | Revenues | Expenses | Income(2) | Amortization | Expense | Assets | ||||||||||||||||||||||||||||
Investment Properties | $ | 302,161 | $ | 18,829 | $ | 320,990 | $ | 320,990 | $ | 96,351 | $ | 9,041 | $ | 3,156,001 | ||||||||||||||||||||||
Operating Properties | 3,474 | 3,474 | 1,115 | 2,359 | 1,213 | 600 | 974,298 | |||||||||||||||||||||||||||||
Non-segment/Corporate | 3,924 | 3,924 | 87,193 | 150,311 | ||||||||||||||||||||||||||||||||
$ | 305,635 | $ | 18,829 | $ | 3,924 | $ | 328,388 | $ | 1,115 | $ | 323,349 | $ | 97,564 | $ | 96,834 | $ | 4,280,610 | |||||||||||||||||||
(1) | Rental income includes rent from discontinued operations | |
(2) | Net operating income (“NOI”) is used to evaluate the operating performance of certain real estate properties such as medical office buildings. We define 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. We believe |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOI provides investors relevant and useful information because it measures the operating performance of our medical office buildings at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our medical office buildings. |
All assets, revenues and expenses for the years ended December 31, 2005 and 2004 were attributable to our investment property segment.
19. | Quarterly Results of Operations (Unaudited) |
The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2006 and 2005 (in thousands, except per share data):
Year Ended December 31, 2006 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter(2) | |||||||||||||
Revenues — as reported | $ | 77,413 | $ | 80,176 | $ | 80,745 | $ | 87,787 | ||||||||
Discontinued operations | (2,993 | ) | (3,121 | ) | (1,961 | ) | (1,701 | ) | ||||||||
Revenues — as adjusted(1) | $ | 74,420 | $ | 77,055 | $ | 78,784 | $ | 86,086 | ||||||||
Net income available to common stockholders | $ | 19,645 | $ | 22,668 | $ | 21,480 | $ | 17,494 | ||||||||
Net income available to common stockholders per share: | ||||||||||||||||
Basic | $ | 0.34 | $ | 0.37 | $ | 0.34 | $ | 0.27 | ||||||||
Diluted | 0.34 | 0.37 | 0.34 | 0.27 |
Year Ended December 31, 2005 | ||||||||||||||||||||
1st Quarter | 2nd Quarter(3) | 3rd Quarter | 4th Quarter | |||||||||||||||||
Revenues — as reported | $ | 68,379 | $ | 68,607 | $ | 73,065 | $ | 77,967 | ||||||||||||
Discontinued operations | (6,149 | ) | (6,223 | ) | (4,730 | ) | (3,577 | ) | ||||||||||||
Revenues — as adjusted(1) | $ | 62,230 | $ | 62,384 | $ | 68,335 | $ | 74,390 | ||||||||||||
Net income (loss) available to common stockholders | $ | 17,803 | $ | (1,606 | ) | $ | 19,908 | $ | 26,587 | |||||||||||
Net income (loss) available to common stockholders per share: | ||||||||||||||||||||
Basic | $ | 0.34 | $ | (0.03 | ) | $ | 0.37 | $ | 0.47 | |||||||||||
Diluted | 0.33 | (0.03 | ) | 0.37 | 0.47 |
(1) | In accordance with FASB Statement No. 144, we have reclassified the income attributable to the properties sold subsequent to January 1, 2002 through September 30, 2007 and attributable to the properties held for sale at September 30, 2007 to discontinued operations. See Note 16. | |
(2) | The decrease in net income and amounts per share are primarily attributable to costs associated with the Windrose merger ($5,213,000) and the write-off of a straight-line rent receivable ($5,143,000), offset by the favorable impact of prior period adjustments resulting from reassessment of straight-line rent revenue recognition policies ($3,266,000). | |
(3) | The net loss and amounts per share are primarily attributable to the loss on extinguishment of debt recorded in second quarter 2005. |
20. | Subsequent Events |
On January 11, 2007, we announced an agreement to purchase a portfolio of medical office buildings from affiliates of Rendina Companies. As part of the transaction, we also agreed to acquire Paramount Real Estate Services, the property management group of Rendina Companies. The property portfolio includes 18 medical office buildings in ten states. The transactions are subject to standard due diligence and are anticipated to close in the second quarter of 2007.
HEALTH CARE REIT, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Assisted Living Facilities: | ||||||||||||||||||||||||||||||||||||
Alhambra, CA | $ | 420 | $ | 2,534 | $ | 420 | $ | 2,534 | $ | 410 | 1999 | 1999 | ||||||||||||||||||||||||
Amarillo, TX | 390 | 5,100 | 390 | 5,100 | 302 | 2004 | 1996 | |||||||||||||||||||||||||||||
Asheboro, NC(3) | $ | 3,548 | 290 | 5,032 | $ | 21 | 290 | 5,053 | 464 | 2003 | 1998 | |||||||||||||||||||||||||
Asheville, NC | 204 | 3,489 | 204 | 3,489 | 795 | 1999 | 1999 | |||||||||||||||||||||||||||||
Asheville, NC | 280 | 1,955 | 351 | 280 | 2,306 | 234 | 2003 | 1992 | ||||||||||||||||||||||||||||
Auburn, MA(1) | 4,446 | 1,050 | 7,950 | 1,050 | 7,950 | 746 | 2003 | 1997 | ||||||||||||||||||||||||||||
Azusa, CA | 570 | 3,141 | 570 | 3,141 | 531 | 1998 | 1988 | |||||||||||||||||||||||||||||
Baltimore, MD | 510 | 4,515 | 510 | 4,515 | 485 | 2003 | 1999 | |||||||||||||||||||||||||||||
Bartlesville, OK | 100 | 1,380 | 100 | 1,380 | 432 | 1996 | 1995 | |||||||||||||||||||||||||||||
Beaumont, TX | 520 | 6,050 | 520 | 6,050 | 378 | 2004 | 1997 | |||||||||||||||||||||||||||||
Bellevue, WI | 1,740 | 18,260 | 1,740 | 18,260 | 243 | 2006 | 2004 | |||||||||||||||||||||||||||||
Bellingham, WA | 300 | 3,200 | 300 | 3,200 | 285 | 2003 | 1994 | |||||||||||||||||||||||||||||
Bluffton, SC | 700 | 5,598 | 3,085 | 700 | 8,683 | 1,226 | 1999 | 2000 | ||||||||||||||||||||||||||||
Bradenton, FL | 252 | 3,298 | 252 | 3,298 | 1,051 | 1996 | 1995 | |||||||||||||||||||||||||||||
Bradenton, FL | 100 | 1,700 | 942 | 100 | 2,642 | 863 | 1999 | 1996 | ||||||||||||||||||||||||||||
Brandon, FL | 860 | 7,140 | 860 | 7,140 | 609 | 2003 | 1990 | |||||||||||||||||||||||||||||
Bremerton, WA | 390 | 2,210 | 390 | 2,210 | 2006 | 1999 | ||||||||||||||||||||||||||||||
Burlington, NC | 280 | 4,297 | 707 | 280 | 5,004 | 446 | 2003 | 2000 | ||||||||||||||||||||||||||||
Burlington, NC(3) | 2,787 | 460 | 5,501 | 5 | 460 | 5,506 | 503 | 2003 | 1997 | |||||||||||||||||||||||||||
Butte, MT | 550 | 3,957 | 43 | 550 | 4,000 | 667 | 1998 | 1999 | ||||||||||||||||||||||||||||
Canton, OH | 300 | 2,098 | 300 | 2,098 | 483 | 1998 | 1998 | |||||||||||||||||||||||||||||
Cape Coral, FL | 530 | 3,281 | 530 | 3,281 | 437 | 2002 | 2000 | |||||||||||||||||||||||||||||
Cary, NC | 1,500 | 4,350 | 986 | 1,500 | 5,336 | 1,100 | 1998 | 1996 | ||||||||||||||||||||||||||||
Cedar Hill, TX | 171 | 1,490 | 171 | 1,490 | 436 | 1997 | 1996 | |||||||||||||||||||||||||||||
Chapel Hill, NC | 354 | 2,646 | 783 | 354 | 3,429 | 396 | 2002 | 1997 | ||||||||||||||||||||||||||||
Chelmsford, MA(2) | 9,019 | 1,040 | 10,960 | 1,040 | 10,960 | 944 | 2003 | 1997 | ||||||||||||||||||||||||||||
Chickasha, OK | 85 | 1,395 | 85 | 1,395 | 430 | 1996 | 1996 | |||||||||||||||||||||||||||||
Chubbuck, ID | 125 | 5,375 | 125 | 5,375 | 488 | 2003 | 1996 | |||||||||||||||||||||||||||||
Claremore, OK | 155 | 1,428 | 155 | 1,428 | 415 | 1996 | 1996 | |||||||||||||||||||||||||||||
Clarksville, TN | 330 | 2,292 | 330 | 2,292 | 522 | 1998 | 1998 | |||||||||||||||||||||||||||||
Coeur D’ Alene, ID | 530 | 7,570 | 530 | 7,570 | 681 | 2003 | 1987 | |||||||||||||||||||||||||||||
Columbia, TN | 341 | 2,295 | 341 | 2,295 | 519 | 1999 | 1999 | |||||||||||||||||||||||||||||
Concord, NC(3) | 4,698 | 550 | 3,921 | 78 | 550 | 3,998 | 404 | 2003 | 1997 | |||||||||||||||||||||||||||
Corpus Christi, TX | 155 | 2,935 | 15 | 155 | 2,950 | 1,221 | 1997 | 1996 | ||||||||||||||||||||||||||||
Corpus Christi, TX | 420 | 4,796 | 139 | 420 | 4,935 | 2,475 | 1996 | 1997 | ||||||||||||||||||||||||||||
Danville, VA | 410 | 3,954 | 722 | 410 | 4,676 | 433 | 2003 | 1998 | ||||||||||||||||||||||||||||
Dayton, OH | 690 | 2,970 | 1,428 | 690 | 4,398 | 743 | 2003 | 1994 | ||||||||||||||||||||||||||||
Desoto, TX | 205 | 1,383 | 205 | 1,383 | 394 | 1996 | 1996 | |||||||||||||||||||||||||||||
Duncan, OK | 103 | 1,347 | 103 | 1,347 | 408 | 1995 | 1996 | |||||||||||||||||||||||||||||
Durham, NC | 1,476 | 10,659 | 2,196 | 1,476 | 12,855 | 4,517 | 1997 | 1999 | ||||||||||||||||||||||||||||
Eden, NC(3) | 3,049 | 390 | 5,039 | 89 | 390 | 5,128 | 464 | 2003 | 1998 | |||||||||||||||||||||||||||
Edmond, OK | 175 | 1,564 | 175 | 1,564 | 465 | 1995 | 1996 | |||||||||||||||||||||||||||||
Elizabeth City, NC | 200 | 2,760 | 2,010 | 200 | 4,771 | 813 | 1998 | 1999 | ||||||||||||||||||||||||||||
Encinitas, CA | 1,460 | 7,721 | 1,460 | 7,721 | 1,420 | 2000 | 2000 | |||||||||||||||||||||||||||||
Enid, OK | 90 | 1,390 | 90 | 1,390 | 435 | 1995 | 1995 | |||||||||||||||||||||||||||||
Everett, WA | 1,400 | 5,476 | 1,400 | 5,476 | 1,160 | 1999 | 1999 | |||||||||||||||||||||||||||||
Fairfield, CA | 1,460 | 14,040 | 1,460 | 14,040 | 1,906 | 2002 | 1998 | |||||||||||||||||||||||||||||
Fairhaven, MA | 770 | 6,230 | 770 | 6,230 | 455 | 2004 | 1999 | |||||||||||||||||||||||||||||
Fayetteville, NY | 410 | 3,962 | 500 | 410 | 4,462 | 581 | 2001 | 1997 | ||||||||||||||||||||||||||||
Federal Way, WA | 540 | 3,960 | 540 | 3,960 | 352 | 2003 | 1978 | |||||||||||||||||||||||||||||
Findlay, OH | 200 | 1,800 | 200 | 1,800 | 489 | 1997 | 1997 | |||||||||||||||||||||||||||||
Flagstaff, AZ | 540 | 4,460 | 540 | 4,460 | 406 | 2003 | 1999 | |||||||||||||||||||||||||||||
Florence, NJ | 300 | 2,978 | 300 | 2,978 | 394 | 2002 | 1999 | |||||||||||||||||||||||||||||
Forest City, NC(3) | 3,121 | 320 | 4,576 | 51 | 320 | 4,628 | 429 | 2003 | 1999 | |||||||||||||||||||||||||||
Fort Myers, FL | 440 | 2,560 | 440 | 2,560 | 240 | 2003 | 1980 | |||||||||||||||||||||||||||||
Fort Worth, TX | 64 | 3,881 | 64 | 3,881 | 1,635 | 1996 | 1984 | |||||||||||||||||||||||||||||
Fredricksburg, VA(5) | 7,424 | 1,000 | 20,000 | 1,000 | 20,000 | 918 | 2005 | 1999 | ||||||||||||||||||||||||||||
Gastonia, NC(3) | 4,153 | 470 | 6,129 | 9 | 470 | 6,138 | 559 | 2003 | 1998 | |||||||||||||||||||||||||||
Gastonia, NC(3) | 1,944 | 310 | 3,096 | 38 | 310 | 3,134 | 305 | 2003 | 1994 | |||||||||||||||||||||||||||
Gastonia, NC(3) | 3,900 | 400 | 5,029 | 1 | 400 | 5,029 | 467 | 2003 | 1996 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Georgetown, TX | $ | 200 | $ | 2,100 | $ | 200 | $ | 2,100 | $ | 557 | 1997 | 1997 | ||||||||||||||||||||||||
Grand Terrace, CA | 530 | 2,770 | 530 | 2,770 | 196 | 2004 | 1982 | |||||||||||||||||||||||||||||
Greensboro, NC | 330 | 2,970 | $ | 555 | 330 | 3,524 | 334 | 2003 | 1996 | |||||||||||||||||||||||||||
Greensboro, NC | 560 | 5,507 | 1,013 | 560 | 6,520 | 614 | 2003 | 1997 | ||||||||||||||||||||||||||||
Greenville, NC(3) | $ | 3,639 | 290 | 4,393 | 20 | 290 | 4,413 | 407 | 2003 | 1998 | ||||||||||||||||||||||||||
Greenville, SC | 310 | 4,750 | 310 | 4,750 | 314 | 2004 | 1997 | |||||||||||||||||||||||||||||
Hagerstown, MD | 360 | 4,640 | 360 | 4,640 | 445 | 2003 | 1999 | |||||||||||||||||||||||||||||
Hamden, CT | 1,470 | 4,530 | 1,470 | 4,530 | 699 | 2002 | 1998 | |||||||||||||||||||||||||||||
Hamilton, NJ | 440 | 4,469 | 440 | 4,469 | 605 | 2001 | 1998 | |||||||||||||||||||||||||||||
Happy Valley, OR | 628 | 3,585 | 232 | 628 | 3,817 | 787 | 1998 | 1999 | ||||||||||||||||||||||||||||
Harlingen, TX | 92 | 2,057 | 127 | 92 | 2,184 | 866 | 1997 | 1989 | ||||||||||||||||||||||||||||
Hattiesburg, MS | 560 | 5,790 | 560 | 5,790 | 823 | 2002 | 1998 | |||||||||||||||||||||||||||||
Henderson, NV | 380 | 9,220 | 65 | 380 | 9,285 | 1,965 | 1998 | 1998 | ||||||||||||||||||||||||||||
Henderson, NV | 380 | 4,360 | 41 | 380 | 4,401 | 723 | 1999 | 2000 | ||||||||||||||||||||||||||||
Hickory, NC | 290 | 987 | 232 | 290 | 1,219 | 155 | 2003 | 1994 | ||||||||||||||||||||||||||||
High Point, NC | 560 | 4,443 | 793 | 560 | 5,236 | 488 | 2003 | 2000 | ||||||||||||||||||||||||||||
High Point, NC | 370 | 2,185 | 410 | 370 | 2,595 | 259 | 2003 | 1999 | ||||||||||||||||||||||||||||
High Point, NC(3) | 2,655 | 330 | 3,395 | 34 | 330 | 3,429 | 323 | 2003 | 1994 | |||||||||||||||||||||||||||
High Point, NC(3) | 2,996 | 430 | 4,147 | 3 | 430 | 4,150 | 387 | 2003 | 1998 | |||||||||||||||||||||||||||
Highlands Ranch, CO | 940 | 3,721 | 940 | 3,721 | 500 | 2002 | 1999 | |||||||||||||||||||||||||||||
Hilton Head Island, SC | 510 | 6,037 | 2,380 | 510 | 8,417 | 1,437 | 1998 | 1999 | ||||||||||||||||||||||||||||
Hopedale, MA | 130 | 8,170 | 130 | 8,170 | 416 | 2005 | 1999 | |||||||||||||||||||||||||||||
Houston, TX | 360 | 2,640 | 360 | 2,640 | 321 | 2002 | 1999 | |||||||||||||||||||||||||||||
Houston, TX | 360 | 2,640 | 360 | 2,640 | 317 | 2002 | 1999 | |||||||||||||||||||||||||||||
Hutchinson, KS | 600 | 10,590 | 600 | 10,590 | 631 | 2004 | 1997 | |||||||||||||||||||||||||||||
Jackson, TN | 540 | 1,633 | 177 | 540 | 1,810 | 199 | 2003 | 1998 | ||||||||||||||||||||||||||||
Jonesboro, GA | 460 | 1,304 | 460 | 1,304 | 131 | 2003 | 1992 | |||||||||||||||||||||||||||||
Kalispell, MT | 360 | 3,282 | 360 | 3,282 | 739 | 1998 | 1998 | |||||||||||||||||||||||||||||
Kenner, LA | 1,100 | 10,036 | 125 | 1,100 | 10,161 | 3,593 | 1998 | 2000 | ||||||||||||||||||||||||||||
Kirkland, WA(2) | 4,937 | 1,880 | 4,320 | 1,880 | 4,320 | 396 | 2003 | 1996 | ||||||||||||||||||||||||||||
Knoxville, TN | 314 | 2,756 | 315 | 2,754 | 320 | 2002 | 1998 | |||||||||||||||||||||||||||||
Lake Havasu City, AZ | 450 | 4,223 | 450 | 4,223 | 874 | 1998 | 1999 | |||||||||||||||||||||||||||||
Lake Havasu City, AZ | 110 | 2,244 | 136 | 110 | 2,380 | 531 | 1998 | 1994 | ||||||||||||||||||||||||||||
Lakeland, FL | 520 | 4,580 | 520 | 4,580 | 410 | 2003 | 1991 | |||||||||||||||||||||||||||||
Lakewood, NY | 470 | 8,530 | 470 | 8,530 | 740 | 2003 | 1999 | |||||||||||||||||||||||||||||
Lawton, OK | 144 | 1,456 | 144 | 1,456 | 436 | 1995 | 1996 | |||||||||||||||||||||||||||||
Lecanto, FL | 200 | 6,900 | 200 | 6,900 | 438 | 2004 | 1986 | |||||||||||||||||||||||||||||
Lenoir, NC | 190 | 3,748 | 641 | 190 | 4,389 | 407 | 2003 | 1998 | ||||||||||||||||||||||||||||
Lexington, NC | 200 | 3,900 | 1,015 | 200 | 4,915 | 554 | 2002 | 1997 | ||||||||||||||||||||||||||||
Longview, TX | 320 | 4,440 | 320 | 4,440 | 280 | 2004 | 1997 | |||||||||||||||||||||||||||||
Louisville, KY(1) | 3,305 | 490 | 7,610 | 490 | 7,610 | 717 | 2003 | 1997 | ||||||||||||||||||||||||||||
Lubbock, TX | 280 | 6,220 | 1,660 | 280 | 7,880 | 591 | 2003 | 1996 | ||||||||||||||||||||||||||||
Manassas, VA(2) | 3,757 | 750 | 7,450 | 750 | 7,450 | 653 | 2003 | 1996 | ||||||||||||||||||||||||||||
Margate, FL | 500 | 7,303 | 2,459 | 500 | 9,762 | 4,246 | 1998 | 1972 | ||||||||||||||||||||||||||||
Martinsville, NC | 349 | 349 | 2003 | |||||||||||||||||||||||||||||||||
Marysville, CA | 450 | 4,172 | 44 | 450 | 4,216 | 706 | 1998 | 1999 | ||||||||||||||||||||||||||||
Matthews, NC(3) | 3,811 | 560 | 4,869 | 183 | 560 | 5,051 | 468 | 2003 | 1998 | |||||||||||||||||||||||||||
McHenry, IL | 1,632 | 1,632 | 2006 | |||||||||||||||||||||||||||||||||
McHenry, IL | 3,550 | 15,300 | 3,550 | 15,300 | 2006 | 2004 | ||||||||||||||||||||||||||||||
Middleburg Heights, OH | 960 | 7,780 | 960 | 7,780 | 473 | 2004 | 1998 | |||||||||||||||||||||||||||||
Middleton, WI | 420 | 4,006 | 420 | 4,006 | 525 | 2001 | 1991 | |||||||||||||||||||||||||||||
Midland, TX | 400 | 4,930 | 400 | 4,930 | 303 | 2004 | 1997 | |||||||||||||||||||||||||||||
Midwest City, OK | 95 | 1,385 | 95 | 1,385 | 434 | 1996 | 1995 | |||||||||||||||||||||||||||||
Missoula, MT(4) | 6,516 | 550 | 7,490 | 550 | 7,490 | 258 | 2005 | 1998 | ||||||||||||||||||||||||||||
Monroe, NC | 470 | 3,681 | 648 | 470 | 4,329 | 412 | 2003 | 2001 | ||||||||||||||||||||||||||||
Monroe, NC | 310 | 4,799 | 857 | 310 | 5,656 | 506 | 2003 | 2000 | ||||||||||||||||||||||||||||
Monroe, NC(3) | 3,343 | 450 | 4,021 | 13 | 450 | 4,033 | 388 | 2003 | 1997 | |||||||||||||||||||||||||||
Morehead City, NC | 200 | 3,104 | 1,648 | 200 | 4,752 | 799 | 1999 | 1999 | ||||||||||||||||||||||||||||
Moses Lake, WA | 260 | 5,940 | 260 | 5,940 | 536 | 2003 | 1986 | |||||||||||||||||||||||||||||
Mt. Vernon, WA | 400 | 2,200 | 400 | 2,200 | 2006 | 2001 | ||||||||||||||||||||||||||||||
New York, NY | 1,440 | 21,460 | 1,440 | 21,460 | 2006 | 1997 | ||||||||||||||||||||||||||||||
Newark, DE | 560 | 21,220 | 560 | 21,220 | 1,243 | 2004 | 1998 | |||||||||||||||||||||||||||||
Newburyport, MA | 960 | 8,290 | 960 | 8,290 | 1,033 | 2002 | 1999 | |||||||||||||||||||||||||||||
Norman, OK | 55 | 1,484 | 55 | 1,484 | 533 | 1995 | 1995 | |||||||||||||||||||||||||||||
North Augusta, SC | 332 | 2,558 | 332 | 2,558 | 570 | 1999 | 1998 | |||||||||||||||||||||||||||||
North Miami Beach, FL | 300 | 5,709 | 2,006 | 300 | 7,715 | 3,177 | 1998 | 1987 | ||||||||||||||||||||||||||||
North Oklahoma City, OK | 87 | 1,508 | 87 | 1,508 | 432 | 1996 | 1996 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Ocean Shores, WA | $ | 770 | $ | 1,390 | $ | 770 | $ | 1,390 | $ | 101 | 2004 | 1996 | ||||||||||||||||||||||||
Ogden, UT | 360 | 6,700 | 360 | 6,700 | 412 | 2004 | 1998 | |||||||||||||||||||||||||||||
Oklahoma City, OK | 130 | 1,350 | 130 | 1,350 | 412 | 1995 | 1996 | |||||||||||||||||||||||||||||
Oklahoma City, OK | 220 | 2,943 | 220 | 2,943 | 592 | 1999 | 1999 | |||||||||||||||||||||||||||||
Ontario, OR | 90 | 2,110 | 90 | 2,110 | 188 | 2003 | 1985 | |||||||||||||||||||||||||||||
Orlando, FL | 1,390 | 4,630 | 1,390 | 4,630 | 344 | 2004 | 1973 | |||||||||||||||||||||||||||||
Oshkosh, WI | 900 | 3,800 | 900 | 3,800 | 81 | 2006 | 2005 | |||||||||||||||||||||||||||||
Owasso, OK | 215 | 1,380 | 215 | 1,380 | 400 | 1996 | 1996 | |||||||||||||||||||||||||||||
Palestine, TX | 173 | 1,410 | 173 | 1,410 | 411 | 1996 | 1996 | |||||||||||||||||||||||||||||
Palestine, TX | 180 | 4,320 | 180 | 4,320 | 51 | 2006 | 2005 | |||||||||||||||||||||||||||||
Paris, TX | 490 | 5,452 | 490 | 5,452 | 59 | 2006 | 2006 | |||||||||||||||||||||||||||||
Paso Robles, CA | 1,770 | 8,630 | 1,770 | 8,630 | 1,163 | 2002 | 1998 | |||||||||||||||||||||||||||||
Phoenix, AZ | 1,000 | 6,500 | 1,000 | 6,500 | 598 | 2003 | 1999 | |||||||||||||||||||||||||||||
Pinehurst, NC | 290 | 2,690 | $ | 484 | 290 | 3,174 | 312 | 2003 | 1998 | |||||||||||||||||||||||||||
Piqua, OH | 204 | 1,885 | 204 | 1,885 | 461 | 1997 | 1997 | |||||||||||||||||||||||||||||
Pittsburgh, PA | 1,750 | 8,572 | 115 | 1,750 | 8,687 | 426 | 2005 | 1998 | ||||||||||||||||||||||||||||
Pocatello, ID | 470 | 1,930 | 470 | 1,930 | 193 | 2003 | 1991 | |||||||||||||||||||||||||||||
Ponca City, OK | 114 | 1,536 | 114 | 1,536 | 480 | 1995 | 1995 | |||||||||||||||||||||||||||||
Quincy, MA | 2,690 | 15,410 | 2,690 | 15,410 | 812 | 2004 | 1999 | |||||||||||||||||||||||||||||
Reidsville, NC | 170 | 3,830 | 857 | 170 | 4,687 | 537 | 2002 | 1998 | ||||||||||||||||||||||||||||
Reno, NV | 1,060 | 11,440 | 1,060 | 11,440 | 695 | 2004 | 1998 | |||||||||||||||||||||||||||||
Ridgeland, MS(2) | $ | 4,772 | 520 | 7,680 | 520 | 7,680 | 674 | 2003 | 1997 | |||||||||||||||||||||||||||
Rocky Hill, CT | 1,460 | 7,040 | 1,460 | 7,040 | 983 | 2002 | 1998 | |||||||||||||||||||||||||||||
Rocky Hill, CT(1) | 4,561 | 1,090 | 6,710 | 1,090 | 6,710 | 637 | 2003 | 1996 | ||||||||||||||||||||||||||||
Romeoville, IL | 1,895 | 1,895 | 2006 | |||||||||||||||||||||||||||||||||
Roswell, GA | 620 | 2,200 | 184 | 620 | 2,384 | 320 | 2002 | 1997 | ||||||||||||||||||||||||||||
Salem, OR | 449 | 5,172 | 449 | 5,172 | 1,137 | 1999 | 1998 | |||||||||||||||||||||||||||||
Salisbury, NC(3) | 3,621 | 370 | 5,697 | 57 | 370 | 5,754 | 528 | 2003 | 1997 | |||||||||||||||||||||||||||
Salt Lake City, UT | 1,060 | 6,142 | 1,060 | 6,142 | 1,019 | 1999 | 1986 | |||||||||||||||||||||||||||||
San Angelo, TX | 260 | 8,800 | 260 | 8,800 | 524 | 2004 | 1997 | |||||||||||||||||||||||||||||
San Juan Capistrano, CA | 1,390 | 6,942 | 1,390 | 6,942 | 1,022 | 2000 | 2001 | |||||||||||||||||||||||||||||
Sarasota, FL | 475 | 3,175 | 475 | 3,175 | 1,012 | 1996 | 1995 | |||||||||||||||||||||||||||||
Sarasota, FL | 1,190 | 4,810 | 1,190 | 4,810 | 455 | 2003 | 1988 | |||||||||||||||||||||||||||||
Seven Fields, PA | 484 | 4,663 | 63 | 484 | 4,725 | 1,040 | 1999 | 1999 | ||||||||||||||||||||||||||||
Shawnee, OK | 80 | 1,400 | 80 | 1,400 | 435 | 1996 | 1995 | |||||||||||||||||||||||||||||
Sheboygan, WI | 80 | 5,320 | 80 | 5,320 | 74 | 2006 | 2006 | |||||||||||||||||||||||||||||
Sherman, TX | 700 | 5,221 | 700 | 5,221 | 2006 | 2006 | ||||||||||||||||||||||||||||||
Smithfield, NC(3) | 3,554 | 290 | 5,777 | 52 | 290 | 5,830 | 529 | 2003 | 1998 | |||||||||||||||||||||||||||
St. Charles, IL | 986 | 986 | 2006 | |||||||||||||||||||||||||||||||||
Statesville, NC | 150 | 1,447 | 267 | 150 | 1,713 | 168 | 2003 | 1990 | ||||||||||||||||||||||||||||
Statesville, NC(3) | 2,895 | 310 | 6,183 | 32 | 310 | 6,215 | 551 | 2003 | 1996 | |||||||||||||||||||||||||||
Statesville, NC(3) | 2,494 | 140 | 3,798 | 33 | 140 | 3,832 | 341 | 2003 | 1999 | |||||||||||||||||||||||||||
Staunton, VA | 140 | 8,360 | 140 | 8,360 | 763 | 2003 | 1999 | |||||||||||||||||||||||||||||
Stillwater, OK | 80 | 1,400 | 80 | 1,400 | 438 | 1995 | 1995 | |||||||||||||||||||||||||||||
Sunrise, FL | 1,480 | 15,950 | 1,480 | 15,950 | 1,010 | 2004 | 1988 | |||||||||||||||||||||||||||||
Tewksbury, MA | 1,520 | 5,480 | 1,520 | 5,480 | 468 | 2003 | 1989 | |||||||||||||||||||||||||||||
Texarkana, TX | 192 | 1,403 | 192 | 1,403 | 406 | 1996 | 1996 | |||||||||||||||||||||||||||||
Troy, OH | 200 | 2,000 | 200 | 2,000 | 533 | 1997 | 1997 | |||||||||||||||||||||||||||||
Valparaiso, IN | 112 | 2,558 | 112 | 2,558 | 395 | 2001 | 1998 | |||||||||||||||||||||||||||||
Valparaiso, IN | 108 | 2,962 | 108 | 2,962 | 447 | 2001 | 1999 | |||||||||||||||||||||||||||||
Vero Beach, FL | 262 | 3,189 | 262 | 3,189 | 477 | 2001 | 1999 | |||||||||||||||||||||||||||||
Vero Beach, FL | 297 | 3,263 | 297 | 3,263 | 493 | 2001 | 1996 | |||||||||||||||||||||||||||||
W. Hartford, CT | 2,650 | 5,980 | 2,650 | 5,980 | 467 | 2004 | 1905 | |||||||||||||||||||||||||||||
Waco, TX | 180 | 4,500 | 180 | 4,500 | 295 | 2004 | 1997 | |||||||||||||||||||||||||||||
Wake Forest, NC | 200 | 3,003 | 1,742 | 200 | 4,745 | 874 | 1998 | 1999 | ||||||||||||||||||||||||||||
Walterboro, SC | 150 | 1,838 | 337 | 150 | 2,175 | 667 | 1999 | 1992 | ||||||||||||||||||||||||||||
Waterford, CT | 1,360 | 12,540 | 1,360 | 12,540 | 1,611 | 2002 | 2000 | |||||||||||||||||||||||||||||
Waxahachie, TX | 154 | 1,430 | 154 | 1,430 | 416 | 1996 | 1996 | |||||||||||||||||||||||||||||
Westerville, OH | 740 | 8,287 | 2,736 | 740 | 11,023 | 3,152 | 1998 | 2001 | ||||||||||||||||||||||||||||
Wichita Falls, TX | 470 | 3,010 | 470 | 3,010 | 205 | 2004 | 1997 | |||||||||||||||||||||||||||||
Wilmington, NC | 210 | 2,991 | 210 | 2,991 | 651 | 1999 | 1999 | |||||||||||||||||||||||||||||
Winston-Salem, NC | 360 | 2,514 | 459 | 360 | 2,973 | 282 | 2003 | 1996 | ||||||||||||||||||||||||||||
Total Assisted Living Facilities: | 104,945 | 105,153 | 906,783 | 39,131 | 105,154 | 945,912 | 119,856 | |||||||||||||||||||||||||||||
Skilled Nursing Facilities: | ||||||||||||||||||||||||||||||||||||
Agawam, MA | 880 | 16,112 | 2,133 | 880 | 18,246 | 2,076 | 2002 | 1993 | ||||||||||||||||||||||||||||
Akron, OH | 290 | 8,219 | 290 | 8,219 | 250 | 2005 | 1961 | |||||||||||||||||||||||||||||
Akron, OH | 630 | 7,535 | 630 | 7,535 | 106 | 2006 | 1915 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Alliance, OH(6) | $ | 5,055 | $ | 270 | $ | 7,723 | $ | 270 | $ | 7,723 | $ | 169 | 2006 | 1982 | ||||||||||||||||||||||
Amarillo, TX | 540 | 7,260 | 540 | 7,260 | 319 | 2005 | 1986 | |||||||||||||||||||||||||||||
Arcadia, LA | 240 | 5,460 | 240 | 5,460 | 126 | 2006 | 2006 | |||||||||||||||||||||||||||||
Atlanta, GA | 460 | 5,540 | 460 | 5,540 | 265 | 2005 | 1972 | |||||||||||||||||||||||||||||
Auburndale, FL | 750 | 5,950 | 750 | 5,950 | 270 | 2005 | 1983 | |||||||||||||||||||||||||||||
Aurora, CO | 2,600 | 5,906 | 2,600 | 5,906 | 132 | 2006 | 1988 | |||||||||||||||||||||||||||||
Baltic, OH(6) | 4,145 | 50 | 8,709 | 50 | 8,709 | 185 | 2006 | 1983 | ||||||||||||||||||||||||||||
Baytown, TX | 450 | 6,150 | 450 | 6,150 | 781 | 2002 | 2000 | |||||||||||||||||||||||||||||
Beachwood, OH | 1,260 | 23,478 | 1,260 | 23,478 | 3,264 | 2001 | 1990 | |||||||||||||||||||||||||||||
Beattyville, KY | 100 | 6,900 | 100 | 6,900 | 241 | 2005 | 1972 | |||||||||||||||||||||||||||||
Bernice, LA | 16 | 1,017 | 16 | 1,017 | 69 | 2005 | 1969 | |||||||||||||||||||||||||||||
Birmingham, AL | 390 | 4,902 | 390 | 4,902 | 542 | 2003 | 1977 | |||||||||||||||||||||||||||||
Birmingham, AL | 340 | 5,734 | 340 | 5,734 | 586 | 2003 | 1974 | |||||||||||||||||||||||||||||
Boise, ID | 810 | 5,401 | 810 | 5,401 | 1,542 | 1998 | 1966 | |||||||||||||||||||||||||||||
Boise, ID | 600 | 7,383 | 600 | 7,383 | 1,863 | 1998 | 1997 | |||||||||||||||||||||||||||||
Boonville, IN | 190 | 5,510 | 190 | 5,510 | 724 | 2002 | 2000 | |||||||||||||||||||||||||||||
Bountiful, UT | 991 | 6,850 | 991 | 6,850 | 208 | 2005 | 1987 | |||||||||||||||||||||||||||||
Boynton Beach, FL | 980 | 8,112 | 980 | 8,112 | 578 | 2004 | 1999 | |||||||||||||||||||||||||||||
Braintree, MA | 170 | 7,157 | $ | 1,290 | 170 | 8,447 | 3,895 | 1997 | 1968 | |||||||||||||||||||||||||||
Brandon, MS | 115 | 9,549 | 115 | 9,549 | 1,000 | 2003 | 1963 | |||||||||||||||||||||||||||||
Bridgewater, NJ | 1,850 | 3,050 | 1,850 | 3,050 | 257 | 2004 | 1970 | |||||||||||||||||||||||||||||
Brighton, MA | 240 | 3,859 | 1,497 | 240 | 5,356 | 232 | 2005 | 1982 | ||||||||||||||||||||||||||||
Broadview Heights, OH | 920 | 12,400 | 920 | 12,400 | 1,729 | 2001 | 1984 | |||||||||||||||||||||||||||||
Bunnell, FL | 260 | 7,118 | 260 | 7,118 | 537 | 2004 | 1985 | |||||||||||||||||||||||||||||
Butler, AL | 90 | 3,510 | 90 | 3,510 | 282 | 2004 | 1960 | |||||||||||||||||||||||||||||
Byrdstown, TN | 2,414 | 2,414 | 443 | 2004 | 1982 | |||||||||||||||||||||||||||||||
Canton, MA | 820 | 8,201 | 263 | 820 | 8,464 | 1,126 | 2002 | 1993 | ||||||||||||||||||||||||||||
Carrollton, TX | 730 | 2,770 | 730 | 2,770 | 152 | 2005 | 1976 | |||||||||||||||||||||||||||||
Centerville, MA | 1,490 | 9,650 | 307 | 1,490 | 9,957 | 553 | 2004 | 1982 | ||||||||||||||||||||||||||||
Cheswick, PA | 384 | 6,041 | 1,293 | 384 | 7,334 | 1,805 | 1998 | 1933 | ||||||||||||||||||||||||||||
Clarksville, TN | 480 | 5,020 | 480 | 5,020 | 65 | 2006 | 1989 | |||||||||||||||||||||||||||||
Clearwater, FL | 160 | 7,218 | 160 | 7,218 | 493 | 2004 | 1961 | |||||||||||||||||||||||||||||
Clearwater, FL | 1,260 | 2,740 | 1,260 | 2,740 | 162 | 2005 | 1983 | |||||||||||||||||||||||||||||
Cleveland, MS | 1,850 | 1,850 | 648 | 2003 | 1977 | |||||||||||||||||||||||||||||||
Cleveland, TN | 350 | 5,000 | 122 | 350 | 5,122 | 768 | 2001 | 1987 | ||||||||||||||||||||||||||||
Coeur d’Alene, ID | 600 | 7,878 | 600 | 7,878 | 1,969 | 1998 | 1996 | |||||||||||||||||||||||||||||
Colorado Springs, CO | 310 | 6,290 | 310 | 6,290 | 294 | 2005 | 1985 | |||||||||||||||||||||||||||||
Columbia, TN | 590 | 3,787 | 590 | 3,787 | 450 | 2003 | 1974 | |||||||||||||||||||||||||||||
Columbus, IN | 530 | 5,170 | 1,540 | 530 | 6,710 | 751 | 2002 | 2001 | ||||||||||||||||||||||||||||
Columbus, OH | 1,070 | 11,726 | 205 | 1,070 | 11,930 | 339 | 2005 | 1968 | ||||||||||||||||||||||||||||
Columbus, OH(6) | 4,774 | 1,010 | 4,931 | 1,010 | 4,931 | 119 | 2006 | 1983 | ||||||||||||||||||||||||||||
Columbus, OH(6) | 10,699 | 1,860 | 16,624 | 1,860 | 16,624 | 363 | 2006 | 1978 | ||||||||||||||||||||||||||||
Corpus Christi, TX | 307 | 443 | 307 | 443 | 55 | 2005 | 1985 | |||||||||||||||||||||||||||||
Corpus Christi, TX | 400 | 1,916 | 400 | 1,916 | 86 | 2005 | 1985 | |||||||||||||||||||||||||||||
Dade City, FL | 250 | 7,150 | 250 | 7,150 | 495 | 2004 | 1975 | |||||||||||||||||||||||||||||
Daytona Beach, FL | 470 | 5,930 | 470 | 5,930 | 447 | 2004 | 1986 | |||||||||||||||||||||||||||||
Daytona Beach, FL | 490 | 5,710 | 490 | 5,710 | 446 | 2004 | 1961 | |||||||||||||||||||||||||||||
Daytona Beach, FL | 1,850 | 2,650 | 1,850 | 2,650 | 162 | 2005 | 1964 | |||||||||||||||||||||||||||||
DeBary, FL | 440 | 7,460 | 440 | 7,460 | 514 | 2004 | 1965 | |||||||||||||||||||||||||||||
Dedham, MA | 1,790 | 12,936 | 1,790 | 12,936 | 1,768 | 2002 | 1996 | |||||||||||||||||||||||||||||
Defuniak Springs, FL | 1,350 | 10,250 | 1,350 | 10,250 | 98 | 2006 | 1980 | |||||||||||||||||||||||||||||
DeLand, FL | 220 | 7,080 | 220 | 7,080 | 492 | 2004 | 1967 | |||||||||||||||||||||||||||||
Denton, MD | 390 | 4,010 | 390 | 4,010 | 515 | 2003 | 1982 | |||||||||||||||||||||||||||||
Denver, CO | 2,530 | 9,514 | 2,530 | 9,514 | 281 | 2005 | 1987 | |||||||||||||||||||||||||||||
Douglasville, GA | 1,350 | 7,471 | 1,350 | 7,471 | 830 | 2003 | 1975 | |||||||||||||||||||||||||||||
Easton, PA | 285 | 6,315 | 285 | 6,315 | 2,745 | 1993 | 1959 | |||||||||||||||||||||||||||||
Eight Mile, AL | 410 | 6,110 | 410 | 6,110 | 707 | 2003 | 1973 | |||||||||||||||||||||||||||||
El Paso, TX | 539 | 8,961 | 539 | 8,961 | 397 | 2005 | 1970 | |||||||||||||||||||||||||||||
El Paso, TX | 642 | 3,958 | 642 | 3,958 | 210 | 2005 | 1969 | |||||||||||||||||||||||||||||
Elizabethton, TN | 310 | 4,604 | 336 | 310 | 4,940 | 794 | 2001 | 1980 | ||||||||||||||||||||||||||||
Erin, TN | 440 | 8,060 | 134 | 440 | 8,194 | 1,180 | 2001 | 1981 | ||||||||||||||||||||||||||||
Eugene, OR | 300 | 5,316 | 300 | 5,316 | 1,442 | 1998 | 1972 | |||||||||||||||||||||||||||||
Fairfield, AL | 530 | 9,134 | 530 | 9,134 | 962 | 2003 | 1965 | |||||||||||||||||||||||||||||
Fall River, MA | 620 | 5,829 | 4,856 | 620 | 10,685 | 2,341 | 1996 | 1973 | ||||||||||||||||||||||||||||
Farmerville, LA | 147 | 4,087 | 147 | 4,087 | 161 | 2005 | 1984 | |||||||||||||||||||||||||||||
Florence, AL | 320 | 3,975 | 320 | 3,975 | 495 | 2003 | 1972 | |||||||||||||||||||||||||||||
Fort Myers, FL | 636 | 6,026 | 636 | 6,026 | 2,197 | 1998 | 1984 | |||||||||||||||||||||||||||||
Fort Pierce, FL | 440 | 3,560 | 440 | 3,560 | 141 | 2005 | 1973 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Gardnerville, NV | $ | 182 | $ | 1,718 | $ | 785 | $ | 182 | $ | 2,503 | $ | 701 | 2004 | 2000 | ||||||||||||||||||||||
Goshen, IN | 210 | 6,160 | 210 | 6,160 | 82 | 2006 | 2006 | |||||||||||||||||||||||||||||
Graceville, FL | 150 | 13,000 | 150 | 13,000 | 121 | 2006 | 1980 | |||||||||||||||||||||||||||||
Grand Prairie, TX | 574 | 3,426 | 574 | 3,426 | 182 | 2005 | 1982 | |||||||||||||||||||||||||||||
Granite City, IL | 610 | 7,143 | 842 | 610 | 7,985 | 2,781 | 1998 | 1973 | ||||||||||||||||||||||||||||
Granite City, IL | 400 | 4,303 | 707 | 400 | 5,010 | 1,700 | 1999 | 1964 | ||||||||||||||||||||||||||||
Greeneville, TN | 400 | 8,290 | 400 | 8,290 | 663 | 2004 | 1979 | |||||||||||||||||||||||||||||
Hanover, IN | 210 | 4,430 | 210 | 4,430 | 325 | 2004 | 2000 | |||||||||||||||||||||||||||||
Hardin, IL | 50 | 5,350 | 135 | 50 | 5,485 | 1,506 | 2002 | 1996 | ||||||||||||||||||||||||||||
Harriman, TN | 590 | 8,060 | 158 | 590 | 8,218 | 1,260 | 2001 | 1972 | ||||||||||||||||||||||||||||
Herculaneum, MO | 127 | 10,373 | 393 | 127 | 10,766 | 2,852 | 2002 | 1984 | ||||||||||||||||||||||||||||
Hilliard, FL | 150 | 6,990 | 150 | 6,990 | 1,657 | 1999 | 1990 | |||||||||||||||||||||||||||||
Homestead, FL | 2,750 | 11,750 | 2,750 | 11,750 | 112 | 2006 | 1994 | |||||||||||||||||||||||||||||
Houston, TX | 600 | 2,700 | 600 | 2,700 | 150 | 2005 | 1974 | |||||||||||||||||||||||||||||
Houston, TX | 630 | 5,970 | 750 | 630 | 6,720 | 811 | 2002 | 1995 | ||||||||||||||||||||||||||||
Huron, OH | 160 | 6,088 | 252 | 160 | 6,340 | 177 | 2005 | 1983 | ||||||||||||||||||||||||||||
Indianapolis, IN | 255 | 2,473 | 255 | 2,473 | 63 | 2006 | 1981 | |||||||||||||||||||||||||||||
Indianapolis, IN | 75 | 925 | 75 | 925 | 106 | 2004 | 1942 | |||||||||||||||||||||||||||||
Jackson, MS | 410 | 1,814 | 410 | 1,814 | 234 | 2003 | 1968 | |||||||||||||||||||||||||||||
Jackson, MS | 4,400 | 4,400 | 1,540 | 2003 | 1980 | |||||||||||||||||||||||||||||||
Jackson, MS | 2,150 | 2,150 | 753 | 2003 | 1970 | |||||||||||||||||||||||||||||||
Jamestown, TN | 6,707 | 6,707 | 1,230 | 2004 | 1966 | |||||||||||||||||||||||||||||||
Jefferson City, MO | 370 | 6,730 | 301 | 370 | 7,031 | 1,852 | 2002 | 1982 | ||||||||||||||||||||||||||||
Jefferson, OH | 80 | 9,120 | 80 | 9,120 | 246 | 2006 | 1984 | |||||||||||||||||||||||||||||
Jonesboro, GA | 840 | 1,921 | 840 | 1,921 | 260 | 2003 | 1992 | |||||||||||||||||||||||||||||
Kent, OH | 215 | 3,367 | 215 | 3,367 | 1,339 | 1989 | 1983 | |||||||||||||||||||||||||||||
Kissimmee, FL | 230 | 3,854 | 230 | 3,854 | 273 | 2004 | 1972 | |||||||||||||||||||||||||||||
LaBelle, FL | 60 | 4,946 | 60 | 4,946 | 380 | 2004 | 1986 | |||||||||||||||||||||||||||||
Lake Placid, FL | 150 | 12,850 | 150 | 12,850 | 910 | 2004 | 1984 | |||||||||||||||||||||||||||||
Lakeland, FL | 696 | 4,843 | 696 | 4,843 | 1,784 | 1998 | 1984 | |||||||||||||||||||||||||||||
Lee, MA | 290 | 18,135 | 926 | 290 | 19,061 | 2,440 | 2002 | 1998 | ||||||||||||||||||||||||||||
Littleton, MA | 1,240 | 2,910 | 1,240 | 2,910 | 445 | 1996 | 1975 | |||||||||||||||||||||||||||||
Longview, TX | 293 | 1,707 | 293 | 1,707 | 105 | 2005 | 1971 | |||||||||||||||||||||||||||||
Longwood, FL | 480 | 7,520 | 480 | 7,520 | 530 | 2004 | 1980 | |||||||||||||||||||||||||||||
Louisville, KY | 490 | 10,010 | 490 | 10,010 | 530 | 2005 | 1978 | |||||||||||||||||||||||||||||
Louisville, KY | 430 | 7,135 | 163 | 430 | 7,298 | 1,085 | 2002 | 1974 | ||||||||||||||||||||||||||||
Louisville, KY | 350 | 4,675 | 109 | 350 | 4,784 | 727 | 2002 | 1975 | ||||||||||||||||||||||||||||
Lowell, MA | 370 | 7,450 | 370 | 7,450 | 413 | 2004 | 1977 | |||||||||||||||||||||||||||||
Lufkin, TX | 416 | 1,184 | 416 | 1,184 | 106 | 2005 | 1919 | |||||||||||||||||||||||||||||
Manchester, NH | 340 | 4,360 | 340 | 4,360 | 186 | 2005 | 1984 | |||||||||||||||||||||||||||||
Marianna, FL | 340 | 8,910 | 340 | 8,910 | 83 | 2006 | 1997 | |||||||||||||||||||||||||||||
McComb, MS | 120 | 5,786 | 120 | 5,786 | 592 | 2003 | 1973 | |||||||||||||||||||||||||||||
Memphis, TN | 970 | 4,246 | 970 | 4,246 | 506 | 2003 | 1981 | |||||||||||||||||||||||||||||
Memphis, TN | 480 | 5,656 | 480 | 5,656 | 624 | 2003 | 1982 | |||||||||||||||||||||||||||||
Memphis, TN | 940 | 5,963 | 940 | 5,963 | 545 | 2004 | 1951 | |||||||||||||||||||||||||||||
Merrillville, IN | 643 | 7,084 | 3,526 | 643 | 10,610 | 3,045 | 1997 | 1999 | ||||||||||||||||||||||||||||
Mesa, AZ | 940 | 2,579 | 940 | 2,579 | 117 | 2005 | 1984 | |||||||||||||||||||||||||||||
Midwest City, OK | 470 | 5,673 | 470 | 5,673 | 1,898 | 1998 | 1958 | |||||||||||||||||||||||||||||
Midwest City, OK | 484 | 5,516 | 484 | 5,516 | 256 | 2005 | 1987 | |||||||||||||||||||||||||||||
Millbury, MA | 930 | 4,570 | 930 | 4,570 | 399 | 2004 | 1972 | |||||||||||||||||||||||||||||
Mobile, AL | 440 | 3,625 | 440 | 3,625 | 437 | 2003 | 1982 | |||||||||||||||||||||||||||||
Monteagle, TN | 310 | 3,318 | 310 | 3,318 | 367 | 2003 | 1980 | |||||||||||||||||||||||||||||
Monterey, TN | 4,195 | 4,195 | 769 | 2004 | 1977 | |||||||||||||||||||||||||||||||
Monticello, FL | 140 | 4,471 | 140 | 4,471 | 354 | 2004 | 1986 | |||||||||||||||||||||||||||||
Morgantown, KY | 380 | 3,705 | 380 | 3,705 | 387 | 2003 | 1965 | |||||||||||||||||||||||||||||
Moss Point, MS | 120 | 7,280 | 120 | 7,280 | 524 | 2004 | 1933 | |||||||||||||||||||||||||||||
Mountain City, TN | 220 | 5,896 | 661 | 220 | 6,556 | 1,579 | 2001 | 1976 | ||||||||||||||||||||||||||||
Naples, FL | 550 | 5,450 | 550 | 5,450 | 351 | 2004 | 1968 | |||||||||||||||||||||||||||||
Natchitoches, LA | 190 | 4,096 | 190 | 4,096 | 153 | 2005 | 1965 | |||||||||||||||||||||||||||||
Needham, MA | 1,610 | 13,715 | 365 | 1,610 | 14,081 | 1,969 | 2002 | 1994 | ||||||||||||||||||||||||||||
New Haven, CT | 160 | 4,778 | 160 | 4,778 | 11 | 2006 | 1958 | |||||||||||||||||||||||||||||
New Haven, IN | 176 | 3,524 | 176 | 3,524 | 270 | 2004 | 1981 | |||||||||||||||||||||||||||||
New Port Richey, FL | 624 | 7,307 | 624 | 7,307 | 2,644 | 1998 | 1984 | |||||||||||||||||||||||||||||
North Miami, FL | 430 | 3,918 | 430 | 3,918 | 379 | 2004 | 1968 | |||||||||||||||||||||||||||||
North Miami, FL | 440 | 4,830 | 440 | 4,830 | 382 | 2004 | 1963 | |||||||||||||||||||||||||||||
Norwalk, CT | 410 | 2,118 | 1,782 | 410 | 3,900 | 210 | 2004 | 1971 | ||||||||||||||||||||||||||||
Oklahoma City, OK | 473 | 10,729 | 473 | 10,729 | 136 | 2006 | 1979 | |||||||||||||||||||||||||||||
Ormond Beach, FL | 2,739 | 74 | 2,812 | 651 | 2002 | 1983 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Overland Park, KS | $ | 1,120 | $ | 8,360 | $ | 1,120 | $ | 8,360 | $ | 252 | 2005 | 1970 | ||||||||||||||||||||||||
Owensboro, KY | 240 | 6,760 | 240 | 6,760 | 345 | 2005 | 1966 | |||||||||||||||||||||||||||||
Owensboro, KY | 225 | 13,275 | 225 | 13,275 | 582 | 2005 | 1964 | |||||||||||||||||||||||||||||
Owenton, KY | 100 | 2,400 | 100 | 2,400 | 129 | 2005 | 1979 | |||||||||||||||||||||||||||||
Panama City, FL | 300 | 9,200 | 300 | 9,200 | 653 | 2004 | 1992 | |||||||||||||||||||||||||||||
Payson, AZ | 180 | 3,988 | 180 | 3,988 | 1,145 | 1998 | 1985 | |||||||||||||||||||||||||||||
Pigeon Forge, TN | 320 | 4,180 | $ | 117 | 320 | 4,297 | 689 | 2001 | 1986 | |||||||||||||||||||||||||||
Plano, TX | 1,305 | 9,095 | 1,305 | 9,095 | 412 | 2005 | 1977 | |||||||||||||||||||||||||||||
Pleasant Grove, AL | 480 | 4,429 | 480 | 4,429 | 529 | 2003 | 1964 | |||||||||||||||||||||||||||||
Plymouth, MA | 440 | 6,220 | 440 | 6,220 | 361 | 2004 | 1968 | |||||||||||||||||||||||||||||
Port St. Joe, FL | 370 | 2,055 | 370 | 2,055 | 271 | 2004 | 1982 | |||||||||||||||||||||||||||||
Prospect, CT | 820 | 1,441 | 2,118 | 820 | 3,559 | 151 | 2004 | 1970 | ||||||||||||||||||||||||||||
Pueblo, CO | 370 | 6,051 | 370 | 6,051 | 1,701 | 1998 | 1989 | |||||||||||||||||||||||||||||
Pueblo, CO | 250 | 9,391 | 250 | 9,391 | 289 | 2005 | 1986 | |||||||||||||||||||||||||||||
Quincy, FL | 200 | 5,333 | 200 | 5,333 | 425 | 2004 | 1983 | |||||||||||||||||||||||||||||
Quitman, MS | 60 | 10,340 | 60 | 10,340 | 701 | 2004 | 1976 | |||||||||||||||||||||||||||||
Rheems, PA | 200 | 1,575 | 200 | 1,575 | 169 | 2003 | 1996 | |||||||||||||||||||||||||||||
Richmond, VA | 1,210 | 2,889 | 1,210 | 2,889 | 434 | 2003 | 1995 | |||||||||||||||||||||||||||||
Ridgely, TN | 300 | 5,700 | 97 | 300 | 5,797 | 856 | 2001 | 1990 | ||||||||||||||||||||||||||||
Ringgold, LA | 30 | 4,174 | 30 | 4,174 | 150 | 2005 | 1984 | |||||||||||||||||||||||||||||
Rochdale, MA | 675 | 11,847 | 1,899 | 675 | 13,746 | 1,552 | 2002 | 1995 | ||||||||||||||||||||||||||||
Rockledge, FL | 360 | 4,117 | 360 | 4,117 | 815 | 2001 | 1970 | |||||||||||||||||||||||||||||
Rockwood, TN | 500 | 7,116 | 741 | 500 | 7,857 | 1,205 | 2001 | 1979 | ||||||||||||||||||||||||||||
Rogersville, TN | 350 | 3,278 | 350 | 3,278 | 363 | 2003 | 1980 | |||||||||||||||||||||||||||||
Royal Palm Beach, FL | 980 | 8,320 | 980 | 8,320 | 604 | 2004 | 1984 | |||||||||||||||||||||||||||||
Ruleville, MS | 0 | 50 | 50 | 18 | 2003 | 1978 | ||||||||||||||||||||||||||||||
Ruston, LA | 130 | 9,403 | 130 | 9,403 | 300 | 2005 | 1988 | |||||||||||||||||||||||||||||
San Antonio, TX | 560 | 7,315 | 560 | 7,315 | 936 | 2002 | 2000 | |||||||||||||||||||||||||||||
Sandwich, MA | 1,140 | 11,190 | 136 | 1,140 | 11,326 | 634 | 2004 | 1987 | ||||||||||||||||||||||||||||
Sarasota, FL | 560 | 8,474 | 560 | 8,474 | 1,685 | 1999 | 2000 | |||||||||||||||||||||||||||||
Sarasota, FL | 600 | 3,400 | 600 | 3,400 | 244 | 2004 | 1982 | |||||||||||||||||||||||||||||
Scituate, MA | 1,740 | 10,640 | 1,740 | 10,640 | 297 | 2005 | 1976 | |||||||||||||||||||||||||||||
Seville, OH | 230 | 1,770 | 230 | 1,770 | 105 | 2005 | 1981 | |||||||||||||||||||||||||||||
Shelby, MS | 60 | 5,340 | 60 | 5,340 | 373 | 2004 | 1979 | |||||||||||||||||||||||||||||
Shelbyville, KY | 630 | 3,870 | 630 | 3,870 | 172 | 2005 | 1965 | |||||||||||||||||||||||||||||
South Boston, MA | 385 | 2,002 | 5,218 | 385 | 7,220 | 1,666 | 1995 | 1961 | ||||||||||||||||||||||||||||
South Pittsburg, TN | 430 | 5,628 | 430 | 5,628 | 486 | 2004 | 1979 | |||||||||||||||||||||||||||||
Southbridge, MA | 890 | 8,110 | 762 | 890 | 8,872 | 671 | 2004 | 1976 | ||||||||||||||||||||||||||||
Spring City, TN | 420 | 6,085 | 2,579 | 420 | 8,664 | 1,232 | 2001 | 1987 | ||||||||||||||||||||||||||||
St. Louis, MO | 750 | 6,030 | 750 | 6,030 | 740 | 1995 | 1994 | |||||||||||||||||||||||||||||
Starke, FL | 120 | 10,180 | 120 | 10,180 | 717 | 2004 | 1990 | |||||||||||||||||||||||||||||
Stuart, FL | 390 | 8,110 | 390 | 8,110 | 566 | 2004 | 1985 | |||||||||||||||||||||||||||||
Swanton, OH | 330 | 6,370 | 330 | 6,370 | 388 | 2004 | 1950 | |||||||||||||||||||||||||||||
Tampa, FL | 830 | 6,370 | 830 | 6,370 | 554 | 2004 | 1968 | |||||||||||||||||||||||||||||
Torrington, CT | 360 | 1,261 | 624 | 360 | 1,885 | 112 | 2004 | 1966 | ||||||||||||||||||||||||||||
Troy, OH | 470 | 16,730 | 470 | 16,730 | 980 | 2004 | 1971 | |||||||||||||||||||||||||||||
Tucson, AZ | 930 | 13,399 | 930 | 13,399 | 385 | 2005 | 1985 | |||||||||||||||||||||||||||||
Tupelo, MS | 740 | 4,092 | 740 | 4,092 | 478 | 2003 | 1980 | |||||||||||||||||||||||||||||
Uhrichsville, OH | 24 | 6,716 | 24 | 6,716 | 159 | 2006 | 1977 | |||||||||||||||||||||||||||||
Venice, FL | 500 | 6,000 | 500 | 6,000 | 379 | 2004 | 1987 | |||||||||||||||||||||||||||||
Vero Beach, FL | 660 | 9,040 | 1,461 | 660 | 10,501 | 3,650 | 1998 | 1984 | ||||||||||||||||||||||||||||
Wareham, MA | 875 | 10,313 | 1,701 | 875 | 12,014 | 1,450 | 2002 | 1989 | ||||||||||||||||||||||||||||
Warren, OH | 240 | 3,810 | 240 | 3,810 | 180 | 2005 | 1973 | |||||||||||||||||||||||||||||
Waterbury, CT | 370 | 2,166 | 370 | 2,166 | 5 | 2006 | 1972 | |||||||||||||||||||||||||||||
Webster, MA | 234 | 3,580 | 713 | 500 | 4,026 | 2,186 | 1995 | 1986 | ||||||||||||||||||||||||||||
Webster, MA | 70 | 5,917 | 70 | 5,917 | 3,050 | 1995 | 1982 | |||||||||||||||||||||||||||||
Webster, TX | 360 | 5,940 | 360 | 5,940 | 757 | 2002 | 2000 | |||||||||||||||||||||||||||||
West Haven, CT | 580 | 1,620 | 1,034 | 580 | 2,654 | 138 | 2004 | 1971 | ||||||||||||||||||||||||||||
West Palm Beach, FL | 696 | 8,037 | 696 | 8,037 | 3,293 | 1998 | 1984 | |||||||||||||||||||||||||||||
West Worthington, OH | 510 | 5,090 | 510 | 5,090 | 135 | 2006 | 1980 | |||||||||||||||||||||||||||||
Westlake, OH | 1,330 | 17,926 | 1,330 | 17,926 | 2,532 | 2001 | 1985 | |||||||||||||||||||||||||||||
Westlake, OH | 571 | 5,411 | 571 | 5,411 | 1,464 | 1998 | 1957 | |||||||||||||||||||||||||||||
Westmoreland, TN | 330 | 1,822 | 2,635 | 330 | 4,456 | 669 | 2001 | 1994 | ||||||||||||||||||||||||||||
White Hall, IL | 50 | 5,550 | 670 | 50 | 6,220 | 1,658 | 2002 | 1971 | ||||||||||||||||||||||||||||
Whitemarsh, PA | 2,310 | 6,190 | 2,310 | 6,190 | 327 | 2005 | 1967 | |||||||||||||||||||||||||||||
Williamstown, KY | 70 | 6,430 | 70 | 6,430 | 285 | 2005 | 1987 | |||||||||||||||||||||||||||||
Winnfield, LA | 31 | 6,480 | 31 | 6,480 | 217 | 2005 | 1964 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Woodbridge, VA | $ | 680 | $ | 4,423 | $ | 680 | $ | 4,423 | $ | 590 | 2002 | 1977 | ||||||||||||||||||||||||
Worcester, MA | 1,053 | 2,265 | $ | 268 | 1,053 | 2,533 | 1,580 | 1997 | 1961 | |||||||||||||||||||||||||||
Worcester, MA | 1,100 | 5,400 | 2,497 | 1,100 | 7,897 | 516 | 2004 | 1962 | ||||||||||||||||||||||||||||
Total Skilled Nursing Facilities: | $ | 24,673 | 111,169 | 1,298,352 | 51,175 | 111,435 | 1,349,258 | 158,686 | ||||||||||||||||||||||||||||
Independent Living / CCRC Facilities: | ||||||||||||||||||||||||||||||||||||
Amelia Island, FL | 3,290 | 24,310 | 1,342 | 3,290 | 25,652 | 632 | 2005 | 1998 | ||||||||||||||||||||||||||||
Anderson, SC | 710 | 6,290 | 710 | 6,290 | 589 | 2003 | 1986 | |||||||||||||||||||||||||||||
Atlanta, GA | 2,059 | 14,914 | 2,059 | 14,914 | 4,919 | 1997 | 1999 | |||||||||||||||||||||||||||||
Aurora, CO | 1,379 | 1,379 | 2006 | |||||||||||||||||||||||||||||||||
Austin, TX | 880 | 9,520 | 880 | 9,520 | 2,149 | 1999 | 1998 | |||||||||||||||||||||||||||||
Columbia, SC | 2,120 | 4,860 | 2,185 | 2,120 | 7,045 | 601 | 2003 | 2000 | ||||||||||||||||||||||||||||
Denver, CO | 3,650 | 14,906 | 3,650 | 14,906 | 98 | 2006 | 1987 | |||||||||||||||||||||||||||||
Douglasville, GA | 90 | 217 | 90 | 217 | 25 | 2003 | 1985 | |||||||||||||||||||||||||||||
Fremont, CA | 3,400 | 25,300 | 3,400 | 25,300 | 668 | 2005 | 1988 | |||||||||||||||||||||||||||||
Gardnerville, NV | 1,144 | 10,830 | 1,144 | 10,830 | 4,170 | 1998 | 1999 | |||||||||||||||||||||||||||||
Gilroy, CA | 760 | 13,880 | 760 | 13,880 | 30 | 2006 | 2006 | |||||||||||||||||||||||||||||
Houston, TX | 4,791 | 7,100 | 4,791 | 7,100 | 924 | 2003 | 1974 | |||||||||||||||||||||||||||||
Indianapolis, IN | 495 | 6,287 | 495 | 6,287 | 110 | 2006 | 1981 | |||||||||||||||||||||||||||||
Lauderhill, FL | 1,836 | 25,216 | 1,836 | 25,216 | 1,017 | 2005 | 1976 | |||||||||||||||||||||||||||||
Manteca, CA | 1,300 | 12,125 | 1,300 | 12,125 | 329 | 2005 | 1988 | |||||||||||||||||||||||||||||
Marysville, WA | 620 | 4,780 | 620 | 4,780 | 407 | 2003 | 1998 | |||||||||||||||||||||||||||||
Mesa, AZ | 950 | 9,087 | 950 | 9,087 | 1,584 | 1999 | 2000 | |||||||||||||||||||||||||||||
Mount Airy, NC | 270 | 6,430 | 270 | 6,430 | 170 | 2005 | 1998 | |||||||||||||||||||||||||||||
Naples, FL | 1,716 | 17,306 | 1,716 | 17,306 | 8,070 | 1997 | 1999 | |||||||||||||||||||||||||||||
Ossining, NY | 1,510 | 9,490 | 1,510 | 9,490 | 1,238 | 2002 | 1967 | |||||||||||||||||||||||||||||
Pawleys Island, SC | 1,010 | 32,590 | 670 | 1,010 | 33,260 | 844 | 2005 | 1998 | ||||||||||||||||||||||||||||
Raytown, MO | 510 | 5,490 | 510 | 5,490 | 2006 | 2000 | ||||||||||||||||||||||||||||||
Rohnert Park, CA | 6,500 | 18,700 | 6,500 | 18,700 | 500 | 2005 | 1988 | |||||||||||||||||||||||||||||
Roswell, GA | 1,107 | 9,627 | 1,107 | 9,627 | 3,787 | 1997 | 1999 | |||||||||||||||||||||||||||||
Sonoma, CA | 1,100 | 18,400 | 1,100 | 18,400 | 489 | 2005 | 1988 | |||||||||||||||||||||||||||||
Spartanburg, SC | 3,350 | 15,750 | 3,350 | 15,750 | 410 | 2005 | 1998 | |||||||||||||||||||||||||||||
Terre Haute, IN | 175 | 3,499 | 3,806 | 175 | 7,305 | 1,870 | 1999 | 1999 | ||||||||||||||||||||||||||||
Twin Falls, ID | 550 | 14,740 | 550 | 14,740 | 1,674 | 2002 | 1991 | |||||||||||||||||||||||||||||
Urbana, IL | 670 | 6,780 | 670 | 6,780 | 952 | 2002 | 1998 | |||||||||||||||||||||||||||||
Vacaville, CA | 900 | 17,100 | 900 | 17,100 | 457 | 2005 | 1988 | |||||||||||||||||||||||||||||
Vallejo, CA | 4,000 | 18,000 | 4,000 | 18,000 | 479 | 2005 | 1988 | |||||||||||||||||||||||||||||
Wichita, KS | 1,400 | 11,000 | 1,400 | 11,000 | 2006 | 1997 | ||||||||||||||||||||||||||||||
Winston-Salem, NC | 2,850 | 13,550 | 175 | 2,850 | 13,725 | 368 | 2005 | 1997 | ||||||||||||||||||||||||||||
Total Independent Living / CCRC Facilities: | 0 | 57,092 | 408,074 | 8,178 | 57,092 | 416,252 | 39,560 | |||||||||||||||||||||||||||||
Specialty Care Facilities: | ||||||||||||||||||||||||||||||||||||
Amarillo, TX | 72 | 11,928 | 72 | 11,928 | 467 | 2005 | 1986 | |||||||||||||||||||||||||||||
Bellaire, TX | 3,740 | 36,966 | 3,828 | 3,740 | 40,793 | 53 | 2006 | 2005 | ||||||||||||||||||||||||||||
Braintree, MA | 300 | 13,781 | 300 | 13,781 | 4,103 | 2005 | 1918 | |||||||||||||||||||||||||||||
Chicago, IL | 3,650 | 7,505 | 11,054 | 3,650 | 18,559 | 3,333 | 2002 | 1979 | ||||||||||||||||||||||||||||
Corpus Christi, TX | 77 | 3,923 | 77 | 3,923 | 178 | 2005 | 1968 | |||||||||||||||||||||||||||||
El Paso, TX | 112 | 15,888 | 112 | 15,888 | 616 | 2005 | 1994 | |||||||||||||||||||||||||||||
Lafayette, LA | 1,383 | 6,644 | 1,674 | 1,383 | 8,318 | 15 | 2006 | 1993 | ||||||||||||||||||||||||||||
Midwest City, OK | 146 | 3,854 | 146 | 3,854 | 171 | 2005 | 1996 | |||||||||||||||||||||||||||||
New Albany, OH | 3,020 | 27,445 | 3,020 | 27,445 | 2,925 | 2002 | 2003 | |||||||||||||||||||||||||||||
Plano, TX | 195 | 14,805 | 195 | 14,805 | 574 | 2005 | 1995 | |||||||||||||||||||||||||||||
Springfield, MA | 2,100 | 22,913 | 160 | 2,100 | 23,073 | 7,202 | 2005 | 1952 | ||||||||||||||||||||||||||||
Stoughton, MA | 975 | 25,247 | 975 | 25,247 | 8,048 | 2005 | 1958 | |||||||||||||||||||||||||||||
Tulsa, OK | 1,954 | 3,809 | 1,988 | 1,954 | 5,798 | 13 | 2006 | 1992 | ||||||||||||||||||||||||||||
Webster, TX | 1,262 | 8,575 | 2,444 | 1,262 | 11,019 | 19 | 2006 | 1991 | ||||||||||||||||||||||||||||
Total Specialty Care Facilities: | 0 | 18,986 | 203,283 | 21,148 | 18,986 | 224,431 | 27,717 | |||||||||||||||||||||||||||||
Medical Office Buildings: | ||||||||||||||||||||||||||||||||||||
Arcadia, CA(7) | 10,830 | 4,796 | 27,567 | 2,416 | 4,796 | 29,983 | 31 | 2006 | 1984 | |||||||||||||||||||||||||||
Atlanta, GA | 10,760 | 12,774 | 3,311 | 10,790 | 16,056 | 30 | 2006 | 1992 | ||||||||||||||||||||||||||||
Aurora, IL | 482 | 7,859 | 1,021 | 482 | 8,880 | 13 | 2006 | 1996 | ||||||||||||||||||||||||||||
Aurora, IL | 1,740 | 1,177 | 1,062 | 1,740 | 2,239 | 5 | 2006 | 1989 | ||||||||||||||||||||||||||||
Austell, GA(7) | 4,551 | 2,704 | 5,197 | 3,341 | 2,704 | 8,538 | 23 | 2006 | 1999 | |||||||||||||||||||||||||||
Bellaire, TX | 3,657 | 27,672 | 3,547 | 3,657 | 31,219 | 44 | 2006 | 2005 | ||||||||||||||||||||||||||||
Birmingham, AL | 7,178 | 2,127 | 9,305 | 13 | 2006 | 1971 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Birmingham, AL | $ | 8,070 | $ | 1,905 | $ | 9,975 | $ | 13 | 2006 | 1985 | ||||||||||||||||||||||||||
Birmingham, AL | 15,278 | 3,393 | 18,672 | 27 | 2006 | 1989 | ||||||||||||||||||||||||||||||
Boca Raton, FL(7) | $ | 14,729 | 23,852 | 2,760 | 26,612 | 35 | 2006 | 1995 | ||||||||||||||||||||||||||||
Boynton Beach, FL(7) | 4,910 | $ | 1,446 | 6,034 | 1,400 | $ | 1,446 | 7,434 | 11 | 2006 | 1993 | |||||||||||||||||||||||||
Boynton Beach, FL(7) | 4,404 | 1,451 | 6,425 | 1,096 | 1,451 | 7,521 | 10 | 2006 | 1995 | |||||||||||||||||||||||||||
Charlotte, NC | 641 | 7,881 | 1,037 | 641 | 8,918 | 12 | 2006 | 1988 | ||||||||||||||||||||||||||||
Coral Springs, FL | 1,246 | 7,949 | 1,928 | 1,246 | 9,877 | 18 | 2006 | 1993 | ||||||||||||||||||||||||||||
Dallas, TX(7) | 16,571 | 29,208 | 5,401 | 34,608 | 58 | 2006 | 1995 | |||||||||||||||||||||||||||||
Decatur, GA | 508 | 974 | 979 | 508 | 1,953 | 6 | 2006 | 1971 | ||||||||||||||||||||||||||||
Delray Beach, FL(7) | 14,552 | 21,449 | 11,986 | 33,436 | 46 | 2006 | 1983 | |||||||||||||||||||||||||||||
Durham, NC(7) | 6,812 | 4,322 | 15,702 | 4,510 | 4,322 | 20,213 | 31 | 2006 | 1980 | |||||||||||||||||||||||||||
Edinburg, TX(7) | 6,392 | 337 | 13,375 | 649 | 337 | 14,023 | 15 | 2006 | 1996 | |||||||||||||||||||||||||||
El Paso, TX | 897 | 2,336 | 603 | 897 | 2,939 | 5 | 2006 | 1982 | ||||||||||||||||||||||||||||
El Paso, TX(7) | 11,088 | 21,915 | 2,867 | 24,782 | 28 | 2006 | 1997 | |||||||||||||||||||||||||||||
Fayetteville, GA(7) | 3,531 | 522 | 6,238 | 905 | 522 | 7,143 | 10 | 2006 | 1999 | |||||||||||||||||||||||||||
Germantown, TN | 1,962 | 9,289 | 1,790 | 1,962 | 11,079 | 16 | 2006 | 2002 | ||||||||||||||||||||||||||||
Jupiter, FL(7) | 7,740 | 1,676 | 9,345 | 1,621 | 1,676 | 10,966 | 16 | 2006 | 2001 | |||||||||||||||||||||||||||
Lakewood, CA | 10,964 | 901 | 11,865 | 12 | 2006 | 1993 | ||||||||||||||||||||||||||||||
Las Vegas, NV(7) | 4,789 | 2,052 | 9,378 | 906 | 2,052 | 10,283 | 11 | 2006 | 1991 | |||||||||||||||||||||||||||
Las Vegas, NV(7) | 8,505 | 5,730 | 47,861 | 4,761 | 5,730 | 52,622 | 65 | 2006 | 1982 | |||||||||||||||||||||||||||
Lawrenceville, GA | 1,274 | 8,140 | 1,585 | 1,274 | 9,725 | 14 | 2006 | 2001 | ||||||||||||||||||||||||||||
Lawrenceville, GA(7) | 2,511 | 603 | 3,862 | 750 | 603 | 4,612 | 7 | 2006 | 2002 | |||||||||||||||||||||||||||
Lewisville, TX | 8,133 | 914 | 9,047 | 12 | 2006 | 1997 | ||||||||||||||||||||||||||||||
Los Gatos, CA | 14,512 | 5,015 | 19,528 | 26 | 2006 | 1993 | ||||||||||||||||||||||||||||||
Loxahatchee, FL(7) | 3,519 | 1,675 | 5,171 | 804 | 1,675 | 5,975 | 7 | 2006 | 1993 | |||||||||||||||||||||||||||
Loxahatchee, FL(7) | 2,888 | 1,240 | 3,954 | 639 | 1,240 | 4,594 | 6 | 2006 | 1996 | |||||||||||||||||||||||||||
Loxahatchee, FL | 3,899 | 697 | 4,596 | 6 | 2006 | 1996 | ||||||||||||||||||||||||||||||
Middletown, NY | 13,156 | 7,759 | 20,915 | 42 | 2006 | 1998 | ||||||||||||||||||||||||||||||
Nashville, TN | 1,505 | 5,469 | 1,218 | 1,505 | 6,687 | 11 | 2006 | 1986 | ||||||||||||||||||||||||||||
North Las Vegas, NV(7) | 6,491 | 10,696 | 1,689 | 12,385 | 18 | 2006 | 2000 | |||||||||||||||||||||||||||||
Ocala, FL | 1,708 | 4,095 | 1,044 | 1,708 | 5,139 | 9 | 2006 | 1991 | ||||||||||||||||||||||||||||
Palm Bay, FL(7) | 2,063 | 1,026 | 2,322 | 1,554 | 1,026 | 3,876 | 10 | 2006 | 1997 | |||||||||||||||||||||||||||
Palm Springs, CA | 9,870 | 1,384 | 11,254 | 14 | 2006 | 1998 | ||||||||||||||||||||||||||||||
Palm Springs, FL | 832 | 5,474 | 1,112 | 840 | 6,578 | 10 | 2006 | 1997 | ||||||||||||||||||||||||||||
Palm Springs, FL(7) | 2,960 | 684 | 3,115 | 610 | 684 | 3,724 | 6 | 2006 | 1993 | |||||||||||||||||||||||||||
Pearland, TX(7) | 2,547 | 458 | 4,309 | 752 | 458 | 5,060 | 7 | 2006 | 2000 | |||||||||||||||||||||||||||
Pearland, TX(7) | 1,732 | 1,542 | 3,408 | 694 | 1,542 | 4,102 | 6 | 2006 | 2002 | |||||||||||||||||||||||||||
Pelham, AL | 688 | 2,412 | 583 | 688 | 2,995 | 5 | 2006 | 1990 | ||||||||||||||||||||||||||||
Phoenix, AZ(7) | 31,380 | 38,216 | 9,917 | 48,133 | 77 | 2006 | 1998 | |||||||||||||||||||||||||||||
Plantation, FL(7) | 10,503 | 7,892 | 6,666 | 2,226 | 7,892 | 8,892 | 17 | 2006 | 1996 | |||||||||||||||||||||||||||
Plantation, FL(7) | 9,807 | 7,860 | 3,500 | 4,559 | 7,860 | 8,058 | 29 | 2006 | 1995 | |||||||||||||||||||||||||||
Reno, NV(7) | 8,600 | 921 | 16,489 | 2,465 | 921 | 18,955 | 28 | 2006 | 1991 | |||||||||||||||||||||||||||
Sacramento, CA(7) | 5,230 | 9,015 | 3,552 | 12,566 | 15 | 2006 | 1990 | |||||||||||||||||||||||||||||
San Antonio, TX(7) | 6,881 | 1,320 | 11,395 | 3,558 | 1,320 | 14,954 | 28 | 2006 | 1999 | |||||||||||||||||||||||||||
Suwanee, GA | 1,127 | 5,116 | 1,044 | 1,127 | 6,160 | 9 | 2006 | 1998 | ||||||||||||||||||||||||||||
Suwanee, GA | 967 | 4,746 | 1,115 | 967 | 5,860 | 9 | 2006 | 2001 | ||||||||||||||||||||||||||||
Suwanee, GA | 643 | 4,423 | 609 | 643 | 5,032 | 6 | 2006 | 2003 | ||||||||||||||||||||||||||||
Tomball, TX(7) | 3,116 | 766 | 8,167 | 1,335 | 766 | 9,503 | 12 | 2006 | 1982 | |||||||||||||||||||||||||||
Trussville, AL | 759 | 1,495 | 990 | 759 | 2,485 | 6 | 2006 | 1990 | ||||||||||||||||||||||||||||
Union City, TN | 1,005 | 11,799 | 1,409 | 1,005 | 13,208 | 17 | 2006 | 1998 | ||||||||||||||||||||||||||||
Voorhees, NJ | 9,582 | 19,482 | 3,513 | 9,582 | 22,995 | 34 | 2006 | 1997 | ||||||||||||||||||||||||||||
Wellington, FL(7) | 7,574 | 12,960 | 1,417 | 14,377 | 16 | 2006 | 2002 | |||||||||||||||||||||||||||||
West Palm Beach, FL(7) | 6,498 | 10,185 | 4,068 | 14,254 | 17 | 2006 | 1995 | |||||||||||||||||||||||||||||
West Palm Beach, FL(7) | 7,838 | 10,373 | 3,247 | 13,621 | 24 | 2006 | 1993 | |||||||||||||||||||||||||||||
West Palm Beach, FL(7) | 7,240 | 11,034 | 2,305 | 13,339 | 20 | 2006 | 1991 | |||||||||||||||||||||||||||||
Yorkville, IL | 982 | 2,146 | 823 | 982 | 2,969 | 5 | 2006 | 1980 | ||||||||||||||||||||||||||||
Total Medical Office Buildings: | 248,782 | 93,988 | 662,151 | 145,178 | 94,026 | 807,294 | 1,188 | |||||||||||||||||||||||||||||
Construction in Progress: | 138,222 | 138,222 | ||||||||||||||||||||||||||||||||||
378,400 | 386,388 | 3,607,249 | 264,810 | 386,693 | 3,881,369 | 347,004 | ||||||||||||||||||||||||||||||
Assets Held for Sale | ||||||||||||||||||||||||||||||||||||
Litchfield, CT | 660 | 9,652 | 283 | 660 | 9,934 | 4,379 | 1997 | 1998 | ||||||||||||||||||||||||||||
Middletown, OH | 800 | 3,700 | 800 | 3,700 | 264 | 2004 | 2000 | |||||||||||||||||||||||||||||
Newark, OH | 410 | 5,711 | 409 | 410 | 6,120 | 2,185 | 1998 | 1987 | ||||||||||||||||||||||||||||
Total Assets Held for Sale | 0 | 1,870 | 19,063 | 692 | 1,870 | 19,754 | 6,828 | |||||||||||||||||||||||||||||
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Carried at Close of Period | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Accumulated | |||||||||||||||||||||||||||||||||||
Buildings, | Cost Capitalized | Buildings, | Depreciation | |||||||||||||||||||||||||||||||||
Intangibles & | Subsequent to | Intangibles & | and | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Amortization | Acquired | Built | |||||||||||||||||||||||||||
Total Investment in Real Property Owned | $ | 378,400 | $ | 388,258 | $ | 3,635,928 | $ | 265,502 | $ | 388,563 | $ | 3,901,123 | $ | 353,832 | ||||||||||||||||||||||
(1) | In June 2003, three wholly-owned subsidiaries of the Company completed the acquisitions of three assisted living facilities from Emeritus Corporation. The properties were subject to existing mortgage debt of $13,981,000. The three wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(2) | In September 2003, four wholly-owned subsidiaries of the Company completed the acquisitions of four assisted living facilities from Emeritus Corporation. The properties were subject to existing mortgage debt of $24,291,000. The four wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(3) | In September 2003, 17 wholly-owned subsidiaries of the Company completed the acquisitions of 17 assisted living facilities from Southern Assisted Living, Inc. The properties were subject to existing mortgage debt of $59,471,000. The 17 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(4) | In September 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $6,705,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(5) | In January 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $7,875,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(6) | In March 2006, four wholly-owned subsidiaries of the Company completed the acquisition of four skilled nursing facilities from Provider Services, Inc. The properties were subject to existing mortgage debt of $25,049,000. The wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
(7) | In December 2006, the Company completed the acquisition of Windrose Medical Properties Trust. Certain of the properties were subject to existing mortgage debt of $248,844,000 (principal only). Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries related to the aforementioned properties be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. |
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Investment in real estate: | ||||||||||||
Balance at beginning of year | $ | 2,936,800 | $ | 2,409,963 | $ | 1,893,977 | ||||||
Additions: | ||||||||||||
Acquisitions | 1,239,289 | 568,660 | 504,336 | |||||||||
Improvements | 169,811 | 31,422 | 33,538 | |||||||||
Conversions from loans receivable | 11,204 | 3,908 | 8,500 | |||||||||
Deferred acquisition payments | 2,000 | 18,125 | ||||||||||
Assumed debt | 25,049 | 22,309 | 14,555 | |||||||||
Total additions | 1,447,353 | 644,424 | 560,929 | |||||||||
Deductions: | ||||||||||||
Cost of real estate sold | (94,466 | ) | (115,179 | ) | (44,629 | ) | ||||||
Reclassification of accumulated depreciation for assets held for sale | (6,829 | ) | (2,408 | ) | ||||||||
Impairment of assets | (314 | ) | ||||||||||
Total deductions | (101,295 | ) | (117,587 | ) | (44,943 | ) | ||||||
Balance at end of year(1) | $ | 4,282,858 | $ | 2,936,800 | $ | 2,409,963 | ||||||
Accumulated depreciation: | ||||||||||||
Balance at beginning of year | $ | 274,875 | $ | 219,536 | $ | 152,440 | ||||||
Additions: | ||||||||||||
Depreciation and amortization expenses | 97,638 | 84,828 | 74,015 | |||||||||
Deductions: | ||||||||||||
Sale of properties | (18,677 | ) | (27,081 | ) | (6,919 | ) | ||||||
Reclassification of accumulated depreciation for assets held for sale | (6,829 | ) | (2,408 | ) | ||||||||
Balance at end of year | $ | 347,007 | $ | 274,875 | $ | 219,536 | ||||||
(1) | The aggregate cost for tax purposes for real property equals $4,049,675,000, $2,389,766,000 and $2,411,323,000 at December 31, 2006, 2005 and 2004, respectively. |
HEALTH CARE REIT, INC.
SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE
December 31, 2006
(In thousands) | |||||||||||||||||||||||||
Principal Amount | |||||||||||||||||||||||||
of Loans Subject | |||||||||||||||||||||||||
Final | Carrying | to Delinquent | |||||||||||||||||||||||
Interest | Maturity | Periodic Payment | Prior | Face Amount | Amount of | Principal or | |||||||||||||||||||
Description | Rate | Date | Terms | Liens | of Mortgages | Mortgages | Interest | ||||||||||||||||||
Two skilled nursing facilities in | 9.89% | 09/30/20 | Monthly Payments | $ | 34,000 | $ | 33,894 | None | |||||||||||||||||
Florida | $306,326 | ||||||||||||||||||||||||
Chicago, IL | 16.48% | 6/30/07 | Monthly Payments | 20,355 | 18,330 | None | |||||||||||||||||||
(Specialty care facility) | $234,525 | ||||||||||||||||||||||||
Lauderhill, FL | 11.50% | 09/01/12 | Monthly Payments | 12,700 | 12,453 | None | |||||||||||||||||||
(Skilled nursing facility) | $128,975 | ||||||||||||||||||||||||
Four assisted living facilities in Ohio | 8.96% | 08/01/08 | Monthly Payments | 15,965 | 11,047 | None | |||||||||||||||||||
and Pennsylvania | $82,480 | ||||||||||||||||||||||||
Six skilled nursing facilities | 5.75% | 06/30/18 | Monthly Payments | 11,000 | 11,000 | None | |||||||||||||||||||
in Illinois and Missouri | $52,708 | ||||||||||||||||||||||||
26 skilled nursing facilities and three | 13.69% | 03/31/10 | Monthly Payments | 11,143 | 9,252 | None | |||||||||||||||||||
assisted living facilities in Florida, | $275,000 | ||||||||||||||||||||||||
Pennsylvania, South Carolina, | |||||||||||||||||||||||||
Tennessee and Kentucky | |||||||||||||||||||||||||
Sun Valley, CA | 9.63% | 05/01/08 | Monthly Payments | 18,800 | 7,472 | None | |||||||||||||||||||
(Specialty care facility) | $91,547 | ||||||||||||||||||||||||
Bala, PA | 11.50% | 07/01/08 | Monthly Payments | 7,400 | 7,145 | None | |||||||||||||||||||
(Skilled nursing facility) | $68,470 | ||||||||||||||||||||||||
Plymouth, MA | 19.26% | 09/09/09 | Monthly Payments | 6,175 | 6,175 | None | |||||||||||||||||||
(Independent living facility) | $52,179 | ||||||||||||||||||||||||
Boalsburg, PA | 19.00% | 06/01/07 | Monthly Payments | 5,938 | 5,350 | None | |||||||||||||||||||
(Independent living facility) | $35,666 | ||||||||||||||||||||||||
28 mortgage loans relating to 19 skilled nursing facilities, 63 assisted living facilities, 12 independent living facilities and 2 specialty care facilities | From 3.9% to 19.26% | From 06/01/07 07/01/20 | Monthly Payments from $45 to $99,787 | 62,072 | 55,497 | None | |||||||||||||||||||
Totals | $ | 205,548 | $ | 177,615 | $ | 0 | |||||||||||||||||||
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Reconciliation of mortgage loans: | ||||||||||||
Balance at beginning of year | $ | 141,467 | $ | 155,266 | $ | 164,139 | ||||||
Additions: | ||||||||||||
New mortgage loans | 87,563 | 36,055 | 30,057 | |||||||||
229,030 | 191,321 | 194,196 | ||||||||||
Deductions: | ||||||||||||
Collections of principal(1) | 40,155 | 45,946 | 20,197 | |||||||||
Conversions to real property | 11,204 | 3,908 | 8,500 | |||||||||
Charge-offs | 56 | |||||||||||
Other(2) | 10,233 | |||||||||||
51,415 | 49,854 | 38,930 | ||||||||||
Balance at end of year | $ | 177,615 | $ | 141,467 | $ | 155,266 | ||||||
(1) | Includes collection of negative principal amortization. | |
(2) | Includes mortgage loans that were reclassified to working capital loans during the periods indicated. |