EXHIBIT 99.1
Item 2. | Properties |
We lease our corporate headquarters located at One SeaGate, Suite 1500, Toledo, Ohio 43604. We also own corporate offices in Tennessee, lease corporate offices in Florida and have ground leases relating to certain of our investment properties and medical office buildings. The following table sets forth certain information regarding the properties that comprise our investments as of December 31, 2008 (dollars in thousands):
Number of | Number of | Total | Annualized | |||||||||||||
Property Location | Properties | Units | Investment | Income(1) | ||||||||||||
Assisted Living Facilities: | ||||||||||||||||
Arizona | 3 | 132 | $ | 12,446 | $ | 1,609 | ||||||||||
California | 9 | 637 | 56,879 | 7,577 | ||||||||||||
Colorado | 1 | 46 | 3,950 | 583 | ||||||||||||
Connecticut | 5 | 529 | 38,265 | 5,509 | ||||||||||||
Delaware | 1 | 97 | 19,433 | 2,504 | ||||||||||||
Florida | 13 | 763 | 44,173 | 4,452 | ||||||||||||
Georgia | 2 | 107 | 4,098 | 558 | ||||||||||||
Illinois | 7 | 687 | 96,592 | 4,010 | ||||||||||||
Indiana | 2 | 78 | 4,585 | 718 | ||||||||||||
Iowa | 1 | 237 | 24,280 | 0 | ||||||||||||
Kansas | 1 | 119 | 9,998 | 1,287 | ||||||||||||
Louisiana | 1 | 123 | 6,669 | 1,295 | ||||||||||||
Massachusetts | 5 | 397 | 94,008 | 10,691 | ||||||||||||
Mississippi | 1 | 78 | 7,106 | 1,010 | ||||||||||||
Montana | 3 | 205 | 13,752 | 1,948 | ||||||||||||
Nevada | 4 | 494 | 54,976 | 3,246 | ||||||||||||
New Jersey | 2 | 90 | 6,780 | 1,025 | ||||||||||||
New York | 4 | 284 | 49,961 | 4,319 | ||||||||||||
North Carolina | 40 | 1,866 | 162,797 | 22,533 | ||||||||||||
Ohio | 7 | 481 | 38,562 | 5,090 | ||||||||||||
Oklahoma | 17 | 644 | 30,006 | 3,877 | ||||||||||||
Oregon | 2 | 70 | 7,634 | 1,289 | ||||||||||||
Pennsylvania | 4 | 302 | 32,029 | 1,513 | ||||||||||||
South Carolina | 2 | 124 | 6,638 | 946 | ||||||||||||
Tennessee | 5 | 322 | 45,393 | 4,255 | ||||||||||||
Texas | 24 | 1,122 | 93,284 | 10,456 | ||||||||||||
Utah | 2 | 150 | 12,110 | 1,673 | ||||||||||||
Virginia | 4 | 225 | 31,201 | 3,942 | ||||||||||||
Washington | 5 | 342 | 92,447 | 8,067 | ||||||||||||
Wisconsin | 9 | 546 | 73,696 | 6,081 | ||||||||||||
Total Assisted Living Facilities | 186 | 11,297 | 1,173,748 | 122,063 |
Number of | Number of | Total | Annualized | |||||||||||||
Property Location | Properties | Beds | Investment | Income(1) | ||||||||||||
Skilled Nursing Facilities: | ||||||||||||||||
Alabama | 7 | 1,013 | $ | 35,469 | $ | 4,742 | ||||||||||
Arizona | 2 | 342 | 16,345 | 1,696 | ||||||||||||
Colorado | 4 | 650 | 30,212 | 3,542 | ||||||||||||
Connecticut | 6 | 728 | 20,854 | 2,542 | ||||||||||||
Florida | 44 | 5,759 | 286,706 | 35,745 | ||||||||||||
Georgia | 3 | 499 | 15,252 | 1,995 | ||||||||||||
Idaho | 3 | 393 | 27,274 | 1,689 | ||||||||||||
Illinois | 4 | 406 | 28,425 | 3,001 | ||||||||||||
Indiana | 6 | 644 | 31,052 | 3,957 | ||||||||||||
Kansas | 2 | 343 | 21,827 | 901 | ||||||||||||
Kentucky | 10 | 1,311 | 59,891 | 7,760 | ||||||||||||
Louisiana | 7 | 854 | 32,009 | 3,328 | ||||||||||||
Maryland | 2 | 240 | 14,297 | 1,479 | ||||||||||||
Massachusetts | 21 | 2,997 | 209,156 | 23,555 | ||||||||||||
Michigan | 1 | 99 | 4,329 | 450 | ||||||||||||
Mississippi | 11 | 1,527 | 43,087 | 5,831 | ||||||||||||
Missouri | 3 | 407 | 16,779 | 1,729 | ||||||||||||
New Hampshire | 1 | 68 | 4,266 | 530 | ||||||||||||
New Jersey | 1 | 176 | 4,396 | 530 | ||||||||||||
Ohio | 20 | 2,740 | 180,131 | 19,766 | ||||||||||||
Oklahoma | 3 | 668 | 19,397 | 2,604 | ||||||||||||
Oregon | 1 | 111 | 3,836 | 645 | ||||||||||||
Pennsylvania | 4 | 642 | 24,253 | 3,543 | ||||||||||||
Tennessee | 22 | 3,025 | 214,289 | 26,553 | ||||||||||||
Texas | 26 | 3,668 | 169,533 | 18,063 | ||||||||||||
Utah | 1 | 120 | 7,217 | 745 | ||||||||||||
Virginia | 10 | 1,239 | 62,802 | 6,228 | ||||||||||||
Total Skilled Nursing Facilities | 225 | 30,669 | 1,583,084 | 183,149 |
Number of | Number of | Total | Annualized | |||||||||||||
Property Location | Properties | Units | Investment | Income(1) | ||||||||||||
Independent Living Facilities/CCRCs: | ||||||||||||||||
Arizona | 2 | 105 | $ | 12,084 | $ | 942 | ||||||||||
California | 8 | 1,299 | 166,988 | 18,168 | ||||||||||||
Colorado | 4 | 580 | 74,159 | 7,047 | ||||||||||||
Florida | 7 | 1,230 | 193,981 | 14,351 | ||||||||||||
Georgia | 4 | 418 | 75,197 | 7,608 | ||||||||||||
Idaho | 1 | 254 | 12,778 | 1,800 | ||||||||||||
Indiana | 3 | 597 | 101,077 | 11,290 | ||||||||||||
Kansas | 1 | 120 | 11,837 | 1,158 | ||||||||||||
Maryland | 1 | 0 | 2,667 | 0 | ||||||||||||
Massachusetts | 7 | 219 | 59,551 | 4,494 | ||||||||||||
Missouri | 1 | 65 | 5,713 | 574 | ||||||||||||
Nevada | 1 | 103 | 6,749 | 1,185 | ||||||||||||
New York | 1 | 0 | 799 | 0 | ||||||||||||
North Carolina | 3 | 343 | 46,352 | 4,098 | ||||||||||||
Ohio | 1 | 288 | 49,117 | 0 | ||||||||||||
Pennsylvania | 4 | 0 | 28,779 | 2,316 | ||||||||||||
South Carolina | 10 | 1,197 | 210,800 | 8,187 | ||||||||||||
Texas | 2 | 518 | 18,116 | 2,391 | ||||||||||||
Washington | 1 | 70 | 5,079 | 549 | ||||||||||||
Wisconsin | 1 | 138 | 23,637 | 2,113 | ||||||||||||
Total Independent Living Facilities/CCRCs | 63 | 7,544 | 1,105,460 | 88,271 |
Number of | Total | Annualized | ||||||||||||||
Property Location | Properties | Sq. Ft. | Investment | Income(1) | ||||||||||||
Medical Office Buildings: | ||||||||||||||||
Alabama | 5 | 303,316 | $ | 43,715 | $ | 4,187 | ||||||||||
Alaska | 1 | 63,383 | 28,674 | 2,505 | ||||||||||||
Arizona | 6 | 339,205 | 100,567 | 5,885 | ||||||||||||
California | 7 | 384,520 | 122,366 | 8,989 | ||||||||||||
Colorado | 1 | 36,386 | 7,221 | 585 | ||||||||||||
Florida | 27 | 935,943 | 268,853 | 18,641 | ||||||||||||
Georgia | 15 | 358,566 | 75,982 | 6,559 | ||||||||||||
Illinois | 3 | 71,345 | 16,981 | 1,558 | ||||||||||||
Indiana | 1 | 90,403 | 21,953 | 1,894 | ||||||||||||
Kentucky | 1 | 112,638 | 15,076 | 0 | ||||||||||||
Missouri | 1 | 50,156 | 16,406 | 1,412 | ||||||||||||
Nevada | 9 | 324,845 | 112,540 | 8,286 | ||||||||||||
New Jersey | 5 | 406,454 | 79,183 | 5,010 | ||||||||||||
New York | 7 | 276,104 | 59,845 | 5,801 | ||||||||||||
North Carolina | 10 | 156,251 | 23,854 | 2,239 | ||||||||||||
Ohio | 1 | 20,106 | 7,352 | 696 | ||||||||||||
Oklahoma | 1 | 44,803 | 12,373 | 1,097 | ||||||||||||
Pennsylvania | 1 | 98,132 | 22,097 | 2,030 | ||||||||||||
South Carolina | 1 | 47,114 | 16,987 | 1,335 | ||||||||||||
Tennessee | 7 | 295,017 | 67,171 | 6,123 | ||||||||||||
Texas | 16 | 839,711 | 203,671 | 14,774 | ||||||||||||
Virginia | 1 | 56,775 | 3,584 | 0 | ||||||||||||
Wisconsin | 1 | 293,629 | 53,266 | 0 | ||||||||||||
Total Medical Office Buildings | 128 | 5,604,802 | 1,379,717 | 99,606 |
Number of | Number of | Total | Annualized | |||||||||||||
Property Location | Properties | Beds | Investment | Income(1) | ||||||||||||
Specialty Care Facilities: | ||||||||||||||||
California | 5 | 569 | $ | 119,596 | $ | 7,346 | ||||||||||
Idaho | 1 | 60 | 23,929 | 2,246 | ||||||||||||
Illinois | 1 | 72 | 51,012 | 4,796 | ||||||||||||
Indiana | 2 | 90 | 30,147 | 3,203 | ||||||||||||
Kentucky | 1 | 60 | 30,110 | 2,866 | ||||||||||||
Louisiana | 1 | 50 | 11,615 | 744 | ||||||||||||
Massachusetts | 4 | 240 | 43,450 | 4,367 | ||||||||||||
Nebraska | 1 | 60 | 28,073 | 0 | ||||||||||||
New Jersey | 1 | 76 | 37,740 | 3,594 | ||||||||||||
Ohio | 2 | 84 | 40,211 | 4,725 | ||||||||||||
Oklahoma | 2 | 91 | 11,991 | 1,102 | ||||||||||||
Texas | 9 | 397 | 167,218 | 16,121 | ||||||||||||
Wisconsin | 1 | 62 | 24,578 | 2,602 | ||||||||||||
Total Specialty Care Facilities | 31 | 1,911 | 619,670 | 53,712 | ||||||||||||
Total All Properties | 633 | $ | 5,861,679 | $ | 546,801 | |||||||||||
(1) | Reflects contract rate of interest for loans, annual straight-line rent for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves if applicable. |
The following table sets forth occupancy and average annualized income for these property types:
Average Annualized | ||||||||||||||||||||
Occupancy (1) | Income (2) | |||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||
Medical office buildings | 90.4 | % | 91.3 | % | $ | 18 | $ | 17 | per sq ft | |||||||||||
Investment properties: | ||||||||||||||||||||
Independent living / CCRCs | 90.6 | % | 92.7 | % | $ | 11,701 | $ | 7,865 | per unit | |||||||||||
Assisted living facilities | 88.8 | % | 88.7 | % | $ | 10,805 | $ | 9,308 | per unit | |||||||||||
Skilled nursing facilities | 83.9 | % | 84.8 | % | $ | 5,972 | $ | 5,936 | per bed | |||||||||||
Specialty care facilities | 49.5 | % | 55.8 | % | $ | 28,107 | $ | 20,645 | per bed |
(1) | Medical office building occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month and holdover leases and excluding terminations and discontinued operations) as of December 31, 2008 and 2007. Occupancy for investment properties represents average quarterly operating occupancy based on the quarters ended September 30, 2008 and 2007 and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The Company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy for investment properties and has not independently verified the information. | |
(2) | Average annualized income represents annualized income divided by total beds, units or square feet. |
The following table sets forth information regarding lease expirations as of December 31, 2008 (dollars in thousands):
Independent | Assisted | Skilled | Specialty | Total | Medical | |||||||||||||||||||||||
Living / | Living | Nursing | Care | Investment | Office | Total Rental | ||||||||||||||||||||||
Year | CCRCs | Facilities | Facilities | Facilities | Properties | Buildings | Income (1) | |||||||||||||||||||||
2009 | $ | — | $ | — | $ | 332 | $ | — | $ | 332 | $ | 12,443 | $ | 12,775 | ||||||||||||||
2010 | — | — | — | — | — | 9,181 | 9,181 | |||||||||||||||||||||
2011 | 9 | 1,681 | 5,295 | — | 6,985 | 10,526 | 17,511 | |||||||||||||||||||||
2012 | 5,056 | 3,754 | 6,904 | — | 15,714 | 11,468 | 27,182 | |||||||||||||||||||||
2013 | 7,909 | 567 | — | — | 8,476 | 8,368 | 16,844 | |||||||||||||||||||||
2014 | — | 2,872 | 8,356 | — | 11,228 | 8,029 | 19,257 | |||||||||||||||||||||
2015 | — | — | 1,927 | — | 1,927 | 7,852 | 9,779 | |||||||||||||||||||||
2016 | — | 582 | 6,435 | — | 7,017 | 13,319 | 20,336 | |||||||||||||||||||||
2017 | — | 14,780 | 3,627 | 2,106 | 20,513 | 5,455 | 25,968 | |||||||||||||||||||||
2018 | 3,594 | 35,877 | 16,241 | 6,330 | 62,042 | 2,080 | 64,122 | |||||||||||||||||||||
Thereafter | 62,912 | 49,665 | 114,929 | 41,526 | 269,032 | 10,885 | 279,917 | |||||||||||||||||||||
Total | $ | 79,480 | $ | 109,778 | $ | 164,046 | $ | 49,962 | $ | 403,266 | $ | 99,606 | $ | 502,872 | ||||||||||||||
(1) | Rental income represents annualized base rent for effective lease agreements. The amounts are derived from the current contracted monthly base rent including straight-line for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves, if applicable. Rental income does not include common area maintenance charges or the amortization of above/below market lease intangibles. |
Item 6. | Selected Financial Data |
The following selected financial data for the five years ended December 31, 2008 are derived from our audited consolidated financial statements (in thousands, except per share data):
Year Ended December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
Operating Data | ||||||||||||||||||||
Revenues (1) | $ | 194,051 | $ | 233,580 | $ | 284,959 | $ | 449,041 | $ | 546,734 | ||||||||||
Expenses: | ||||||||||||||||||||
Interest expense (1) | 59,652 | 69,163 | 87,597 | 133,899 | 134,684 | |||||||||||||||
Depreciation and amortization (1) | 50,912 | 62,225 | 80,176 | 133,089 | 154,061 | |||||||||||||||
Property operating expenses (1) | 0 | 0 | 1,039 | 34,707 | 43,990 | |||||||||||||||
General and administrative (1) | 15,756 | 15,881 | 25,922 | 37,465 | 47,193 | |||||||||||||||
Provision for loan losses | 1,200 | 1,200 | 1,000 | 0 | 94 | |||||||||||||||
Realized loss on derivatives | 0 | 0 | 0 | 0 | 23,393 | |||||||||||||||
Loss (gain) on extinguishment of debt | 0 | 21,484 | 0 | (1,081 | ) | (2,094 | ) | |||||||||||||
Total expenses | 127,520 | 169,953 | 195,734 | 338,079 | 401,321 | |||||||||||||||
Income before income taxes | 66,531 | 63,627 | 89,225 | 110,962 | 145,413 | |||||||||||||||
Income tax (expense) benefit | (42 | ) | (282 | ) | (82 | ) | (188 | ) | (1,306 | ) | ||||||||||
Income from continuing operations | 66,489 | 63,345 | 89,143 | 110,774 | 144,107 | |||||||||||||||
Income from discontinued operations, net (1) | 18,882 | 20,941 | 13,513 | 27,819 | 139,318 | |||||||||||||||
Net income | 85,371 | 84,286 | 102,656 | 138,593 | 283,425 | |||||||||||||||
Preferred stock dividends | 12,737 | 21,594 | 21,463 | 25,130 | 23,201 | |||||||||||||||
Net income attributable to noncontrolling interests | 0 | 0 | 13 | 238 | 126 | |||||||||||||||
Net income attributable to common stockholders | $ | 72,634 | $ | 62,692 | $ | 81,180 | $ | 113,225 | $ | 260,098 | ||||||||||
Other Data | ||||||||||||||||||||
Average number of common shares outstanding: | ||||||||||||||||||||
Basic | 51,544 | 54,110 | 61,661 | 78,861 | 93,732 | |||||||||||||||
Diluted | 52,082 | 54,499 | 62,045 | 79,409 | 94,309 | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.04 | $ | 0.77 | $ | 1.10 | $ | 1.08 | $ | 1.29 | ||||||||||
Discontinued operations, net | 0.37 | 0.39 | 0.22 | 0.35 | 1.49 | |||||||||||||||
Net income attributable to common stockholders * | $ | 1.41 | $ | 1.16 | $ | 1.32 | $ | 1.44 | $ | 2.77 | ||||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.03 | $ | 0.77 | $ | 1.09 | $ | 1.08 | $ | 1.28 | ||||||||||
Discontinued operations, net | 0.36 | 0.38 | 0.22 | 0.35 | 1.48 | |||||||||||||||
Net income attributable to common stockholders * | $ | 1.39 | $ | 1.15 | $ | 1.31 | $ | 1.43 | $ | 2.76 | ||||||||||
Cash distributions per common share | $ | 2.385 | $ | 2.46 | $ | 2.8809 | $ | 2.2791 | $ | 2.70 |
* | 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 prior to or held for sale at March 31, 2009, to discontinued operations for all periods presented. See Note 4 to our audited consolidated financial statements. |
December 31 | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Net real estate investments | $ | 2,441,972 | $ | 2,849,518 | $ | 4,122,893 | $ | 5,012,620 | $ | 5,854,179 | ||||||||||
Total assets | 2,552,171 | 2,972,164 | 4,280,610 | 5,213,856 | 6,193,118 | |||||||||||||||
Total long-term obligations | 1,192,958 | 1,500,818 | 2,191,698 | 2,683,760 | 2,847,676 | |||||||||||||||
Total liabilities | 1,216,892 | 1,541,408 | 2,293,286 | 2,778,905 | 2,954,833 | |||||||||||||||
Total redeemable preferred stock | 283,751 | 276,875 | 338,993 | 330,243 | 289,929 | |||||||||||||||
Total equity | 1,335,279 | 1,430,756 | 1,987,324 | 2,434,951 | 3,238,285 |
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 contained in the Annual Report onForm 10-K for the year ended December 31, 2008. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” above.
Executive Overview
Company Overview
Health Care REIT, Inc., an S&P 500 company, is a real estate investment trust that invests in 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, 2008:
Investments | Percentage of | Number of | # Beds/Units | Investment per | ||||||||||||||||||||
Type of Property | (in thousands) | Investments | Properties | or Sq. Ft. | metric(1) | States | ||||||||||||||||||
Independent living/CCRCs | $ | 1,105,460 | 18.9 | % | 63 | 7,544 units | $ | 170,861 per unit | 20 | |||||||||||||||
Assisted living facilities | 1,173,748 | 20.0 | % | 186 | 11,297 units | 116,625 per unit | 30 | |||||||||||||||||
Skilled nursing facilities | 1,583,084 | 27.0 | % | 225 | 30,669 beds | 52,420 per bed | 27 | |||||||||||||||||
Specialty care facilities | 619,670 | 10.6 | % | 31 | 1,911 beds | 463,039 per bed | 13 | |||||||||||||||||
Medical office buildings | 1,379,717 | 23.5 | % | 128 | 5,604,802 sq. ft. | 266 per sq. ft. | 23 | |||||||||||||||||
Totals | $ | 5,861,679 | 100.0 | % | 633 | |||||||||||||||||||
(1) | Investment per metric was computed by using the total investment amount of $6,590,957,000 which includes real estate investments and unfunded construction commitments for which initial funding has commenced which amounted to $5,861,679,000 and $729,278,000, respectively. |
Health Care Industry
The demand for health care services, and consequently health care properties, is projected to reach unprecedented levels in the near future. The Centers for Medicare and Medicaid Services projects that national health expenditures will rise to $3.8 trillion in 2015 or 18.8% of gross domestic product (“GDP”). This is up from $2 trillion or 15.9% of GDP in 2005. Health expenditures per capita are projected to rise 5.8% per year from 2005 to 2015. While demographics are the primary driver of demand, economic conditions and availability of services contribute to health care service utilization rates. We believe the health care property market is less susceptible to fluctuations and economic downturns relative to other property sectors. Investor interest in the market remains strong, especially in specific sectors such as medical office, regardless of the current stringent lending environment. As a REIT, we believe we are positioned to benefit from any turbulence in the capital markets due to our access to capital.
The total U.S. population is projected to increase by 22% through 2030. The elderly are an important component of health care utilization, especially independent living services, assisted living services, skilled nursing services, inpatient and outpatient hospital services and physician ambulatory care. The elderly population aged 65 and over is projected to increase by 83% through 2030. Most health care services are provided within a health care facility such as a hospital, a physician’s office or a senior housing facility. Therefore, we believe there will be continued demand for companies such as ours with expertise in health care real estate.
The following chart illustrates the projected increase in the elderly population aged 65 and over:
Source: U.S. Census Bureau
Health care real estate investment opportunities tend to increase as demand for health care services increases. We recognize the need for health care real estate as it correlates to health care service demand. Health care providers require real estate to house their businesses and expand their services. We believe that investment opportunities in health care real estate will continue to be present due to the:
• | Specialized nature of the industry which enhances the credibility and experience of our company; | |
• | Projected population growth combined with stable or increasing health care utilization rates which ensures demand; and | |
• | On-going merger and acquisition activity. |
Economic Outlook
Beginning in late 2007 and throughout 2008, the U.S. and global economy entered a serious recession. The current economic environment is characterized by a severe residential housing slump, depressed commercial real estate valuations, weakened consumer confidence, rising unemployment and concerns regarding inflation, deflation and stagflation. Numerous financial systems around the globe have become illiquid and banks have become less willing to lend to other banks and borrowers. Further, capital markets have become and remain volatile as risk is repriced and investments are revalued. Uncertainty remains in terms of the depth and duration of these adverse economic conditions.
The conditions described above have created an environment of limited capital availability and increasing capital costs. This was most evident in the credit markets, where lending institutions cut back on loans, tightened credit standards and significantly increased interest rate spreads. The equity markets were characterized by sporadic accessibility until late 2008, when share prices in most sectors declined significantly. Continued volatility in the capital markets could limit our ability to access debt or equity funds which, in turn, could impact our ability to finance future investments and react to changing economic and business conditions. This difficult operating environment also may make it more difficult for some of our operators/tenants to meet their obligations to us.
During 2008, our focus gradually shifted from investment to capital preservation. To that end, our efforts in 2009 will be directed towards: liquidity, portfolio management and investment rationalization.
• | Liquidity. Liquidity became increasingly important and we concentrated efforts on further strengthening our balance sheet. We raised over $1 billion in funds during 2008 from a combination of three common stock offerings, our dividend reinvestment plan, our new equity shelf program, property sales and loan payoffs. As always, we will continue to closely monitor the credit and capital markets for opportunities to raise reasonably priced capital. |
• | Portfolio Management. Our investment approach has produced a portfolio that is very diverse with strong property level payment coverages. Yet, today’s adverse economic conditions can negatively impact even the strongest portfolio. Our portfolio management program is designed to maintain our portfolio’s strength through a combination of extensive industry research, stringent origination and underwriting protocols and a rigorous asset management process. | |
• | Investment Strategy. For the short-term, we expect to fund our ongoing development projects and will evaluate new investments selectively and only when funding sources are clearly identified. However, we will continue to strengthen our existing customer relationships and begin to cultivate new relationships. As we enter 2009, we remain focused on preserving liquidity, but we intend to take advantage of what we believe will be increasingly attractive investment opportunities over time. |
Business Strategy
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 collectability 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. 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, 2008, rental income and interest income represented 91% and 7%, 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 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. 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 believe our liquidity is sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and complete construction projects in process. We also anticipate evaluating opportunities to finance future investments. New investments are generally funded from temporary borrowings under our unsecured line of credit arrangement, 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 line of credit arrangement, has historically been provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt.
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 $600,000,000 in 2009, comprised of funded new development. We anticipate the sale of real property and the repayment of loans receivable totaling approximately $200,000,000 to $300,000,000 during 2009. 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 line of credit arrangement. At December 31, 2008, we had $23,370,000 of cash and cash equivalents, $154,070,000 of restricted cash and $580,000,000 of available borrowing capacity under our unsecured line of credit arrangement. Our investment activity may exceed our borrowing capacity under our unsecured line 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 2008
We completed the following key transactions during the year ended December 31, 2008:
• | our Board of Directors increased our quarterly dividend to $0.68 per share, which represents a two cent increase from the quarterly dividend of $0.66 paid for 2007. The dividend declared for the quarter ended December 31, 2008 represented the 151st consecutive dividend payment; | |
• | we completed $1,234,088,000 of gross investments offset by $194,243,000 of investment payoffs; | |
• | we recognized $163,933,000 of gains on sales of real property, generating net proceeds of approximately $287,047,000; | |
• | we completed a public offering of 3,000,000 shares of common stock with net proceeds of approximately $118,555,000 in March 2008; | |
• | we completed a public offering of 4,600,000 shares of common stock with net proceeds of approximately $193,157,000 in July 2008; | |
• | we completed a public offering of 8,050,000 shares of common stock with net proceeds of approximately $369,699,000 in September 2008; | |
• | we issued 1,546,074 shares of common stock under our dividend reinvestment plan with net proceeds of approximately $67,055,000; and | |
• | we issued 794,221 shares of common stock under our equity shelf program with net proceeds of approximately $30,272,000. |
Recent Events
S&P 500 Inclusion Offering.On February 3, 2009, we completed an offering of 5,816,870 shares of common stock for $214,352,000 of gross proceeds. The offering was made in connection with the Company’s inclusion in the S&P 500 Index at the close of trading on January 29, 2009.
LandAmerica Settlement.During 2008, we engaged in two Internal Revenue Code section 1031 like kind exchange transactions, and we retained LandAmerica 1031 Exchange Services, Inc. (“LES”) to act as a qualified intermediary. On November 26, 2008, LES and its parent, LandAmerica Financial Group, filed for bankruptcy protection. At that time, we had approximately $136,855,000 in two segregated escrow accounts (the “Exchange Funds”) held by Centennial Bank, an affiliate of LES. Although the terms of our agreements with LES required that the Exchange Funds be returned to us, the return of the Exchange Funds was stayed by the bankruptcy proceedings. On February 23, 2009, the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division, entered an order approving the stipulation and settlement agreement among LES, the unsecured creditors committees and us. Pursuant to the terms of that settlement agreement, the Exchange Funds plus $918,000 of interest were returned to us on February 23, 2009, and we made a settlement payment of $2,000,000 to the LES
bankruptcy estate. In connection with these proceedings, we incurred approximately $500,000 in expenses. The settlement payment and expenses were recorded as reductions of gains on sales in 2008.
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 and in making operating decisions.
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 net operating income (“NOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion of FFO and NOI and for reconciliations of FFO and NOI. 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, 2006 | December 31, 2007 | December 31, 2008 | ||||||||||
Net income attributable to common stockholders | $ | 81,180 | $ | 113,225 | $ | 260,098 | ||||||
Funds from operations | 177,473 | 248,070 | 258,868 | |||||||||
Net operating income | 327,273 | 455,680 | 526,136 | |||||||||
Per share data (fully diluted): | ||||||||||||
Net income attributable to common stockholders | $ | 1.31 | $ | 1.43 | $ | 2.76 | ||||||
Funds from operations | 2.86 | 3.12 | 2.74 |
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 undepreciated book capitalization and debt to market capitalization. The leverage ratios indicate how much of our balance sheet capitalization is related to total 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 adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted 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, 2006 | December 31, 2007 | December 31, 2008 | ||||||||||
Debt to book capitalization ratio | 52 | % | 52 | % | 47 | % | ||||||
Debt to undepreciated book capitalization ratio | 48 | % | 48 | % | 43 | % | ||||||
Debt to market capitalization ratio | 39 | % | 39 | % | 38 | % | ||||||
Adjusted interest coverage ratio | 3.05 | x | 2.94 | x | 3.84 | x | ||||||
Adjusted fixed charge coverage ratio | 2.45 | x | 2.41 | x | 3.20 | x |
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. Geographic mix measures the portion of our investments that relate to our top five states. The following table reflects our recent historical trends of concentration risk:
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Asset mix: | ||||||||||||
Real property | 95 | % | 92 | % | 92 | % | ||||||
Loans receivable | 5 | % | 8 | % | 8 | % | ||||||
Investment mix: | ||||||||||||
Assisted living facilities | 25 | % | 21 | % | 20 | % | ||||||
Skilled nursing facilities | 34 | % | 32 | % | 27 | % | ||||||
Independent/CCRC | 13 | % | 15 | % | 19 | % | ||||||
Specialty care facilities | 6 | % | 7 | % | 11 | % | ||||||
Medical office buildings | 22 | % | 25 | % | 23 | % | ||||||
Customer mix: | ||||||||||||
Senior Living Communities, LLC | 4 | % | 6 | % | ||||||||
Signature Healthcare LLC | 6 | % | 5 | % | ||||||||
Brookdale Senior Living Inc | 7 | % | 5 | % | 5 | % | ||||||
Life Care Centers of America, Inc. | 6 | % | 5 | % | 5 | % | ||||||
Emeritus Corporation | 9 | % | 7 | % | 4 | % | ||||||
Home Quality Management, Inc. | 6 | % | ||||||||||
Merrill Gardens L.L.C. | 4 | % | ||||||||||
Remaining portfolio | 68 | % | 73 | % | 75 | % | ||||||
Geographic mix: | ||||||||||||
Florida | 17 | % | 15 | % | 14 | % | ||||||
Texas | 11 | % | 13 | % | 11 | % | ||||||
California | 7 | % | 7 | % | 8 | % | ||||||
Massachusetts | 8 | % | 7 | % | 7 | % | ||||||
Tennessee | 6 | % | 6 | % | ||||||||
Ohio | 6 | % | ||||||||||
Remaining portfolio | 51 | % | 52 | % | 54 | % |
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” above for further discussion.
Portfolio Update
Net operating income. The primary performance measure for our properties is net operating income (“NOI”) as discussed below in “Non-GAAP Financial Measures.” The following table summarizes our net operating income for the periods indicated (in thousands):
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Net operating income: | ||||||||||||
Investment properties | $ | 324,479 | $ | 379,516 | $ | 436,811 | ||||||
Medical office buildings | 2,132 | 74,636 | 87,633 | |||||||||
Non-segment/corporate | 662 | 1,528 | 1,692 | |||||||||
Net operating income | $ | 327,273 | $ | 455,680 | $ | 526,136 | ||||||
Payment coverage. Payment coverage of the operators in our investment property portfolio have stabilized. Our overall payment coverage is at 1.96 times and represents a decrease of three basis points from 2007 and an increase of three basis point from 2006. The following table reflects our recent historical trends of portfolio coverage. 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, 2006 | September 30, 2007 | September 30, 2008 | ||||||||||||||||||||||
CBMF | CAMF | CBMF | CAMF | CBMF | CAMF | |||||||||||||||||||
Independent living/CCRCs | 1.41 | x | 1.21 | x | 1.47 | x | 1.26 | x | 1.31 | x | 1.11 | x | ||||||||||||
Assisted living facilities | 1.54 | x | 1.33 | x | 1.57 | x | 1.35 | x | 1.55 | x | 1.32 | x | ||||||||||||
Skilled nursing facilities | 2.17 | x | 1.55 | x | 2.25 | x | 1.65 | x | 2.26 | x | 1.66 | x | ||||||||||||
Specialty care facilities | 2.88 | x | 2.34 | x | 2.72 | x | 2.16 | x | 2.26 | x | 1.83 | x | ||||||||||||
Weighted averages | 1.93 | x | 1.50 | x | 1.99 | x | 1.55 | x | 1.96 | x | 1.52 | x |
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 the Internet 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 our unsecured line of credit arrangement, 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, 2006 | Dec. 31, 2007 | $ | % | Dec. 31, 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Cash and cash equivalents at beginning of period | $ | 36,237 | $ | 36,216 | $ | (21 | ) | 0 | % | $ | 30,269 | $ | (5,947 | ) | (16 | )% | $ | (5,968 | ) | (16 | )% | |||||||||||||||
Cash provided from (used in) operating activities | 216,319 | 271,461 | 55,142 | 25 | % | 335,654 | 64,193 | 24 | % | 119,335 | 55 | % | ||||||||||||||||||||||||
Cash provided from (used in) investing activities | (560,688 | ) | (892,914 | ) | (332,226 | ) | 59 | % | (1,010,496 | ) | (117,582 | ) | 13 | % | (449,808 | ) | 80 | % | ||||||||||||||||||
Cash provided from (used in) financing activities | 344,348 | 615,506 | 271,158 | 79 | % | 667,943 | 52,437 | 9 | % | 323,595 | 94 | % | ||||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 36,216 | $ | 30,269 | $ | (5,947 | ) | (16 | )% | $ | 23,370 | $ | (6,899 | ) | (23 | )% | $ | (12,846 | ) | (35 | )% | |||||||||||||||
Operating Activities. The increases in net cash provided from operating activities are primarily attributable to increases in net income, excluding non-cash items such as depreciation and amortization, stock-based compensation, impairments, capitalized interest 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, 2006 | Dec. 31, 2007 | $ | % | Dec. 31, 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Gross straight-line rental income | $ | 9,432 | $ | 17,029 | $ | 7,597 | 81 | % | $ | 20,489 | $ | 3,460 | 20 | % | $ | 11,057 | 117 | % | ||||||||||||||||||
Cash receipts due to real property sales | (3,544 | ) | (4,527 | ) | (983 | ) | 28 | % | (2,187 | ) | 2,340 | (52 | )% | 1,357 | (38 | )% | ||||||||||||||||||||
Prepaid rent receipts | (17,017 | ) | (12,942 | ) | 4,075 | (24 | )% | (26,095 | ) | (13,153 | ) | 102 | % | (9,078 | ) | 53 | % | |||||||||||||||||||
Amortization related to above/ (below) market leases, net | 60 | 792 | 732 | 1220 | % | 1,039 | 247 | 31 | % | 979 | 1632 | % | ||||||||||||||||||||||||
$ | (11,069 | ) | $ | 352 | $ | 11,421 | n/a | $ | (6,754 | ) | $ | (7,106 | ) | n/a | $ | 4,315 | (39 | )% | ||||||||||||||||||
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. 13 Accounting for Leases (“SFAS 13”) for leases with fixed rental escalators, net of collectability 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 increase in gross straight-line rental income and above/below amortization is primarily due to an increase in the number of our leases with fixed annual increases resulting primarily from the Windrose merger completed in December 2006 and the Rendina/Paramount acquisition completed in May 2007. The fluctuation in cash receipts due to real property sales is attributable to a decline in straight-line rent receivable balances on properties sold. The change in prepaid rent cash receipts is due to the mix of real property acquisitions during the periods presented. We typically receive prepaid rent in connection with investment property acquisitions.
Investing Activities. The changes in net cash used in investing activities are primarily attributable to changes in loans receivable and real property investments. The following is a summary of our investment and disposition activities (dollars in thousands):
Year Ended | ||||||||||||||||||||||||
December 31, 2006(1) | December 31, 2007(2) | December 31, 2008 | ||||||||||||||||||||||
Facilities | Amount | Facilities | Amount | Facilities | Amount | |||||||||||||||||||
Real property acquisitions: | ||||||||||||||||||||||||
Independent living/CCRCs | 5 | $ | 56,417 | 1 | $ | 43,000 | 2 | $ | 68,300 | |||||||||||||||
Assisted living facilities | 8 | 77,600 | 4 | 36,233 | 3 | 45,490 | ||||||||||||||||||
Skilled nursing facilities | 18 | 148,955 | 8 | 122,875 | 1 | 11,360 | ||||||||||||||||||
Specialty care facilities | 0 | 1 | 11,923 | 7 | 196,303 | |||||||||||||||||||
Medical office buildings | 0 | 28 | 381,134 | 7 | 121,809 | |||||||||||||||||||
Land parcels | 10,250 | 8,928 | 1 | 10,000 | ||||||||||||||||||||
Total acquisitions | 31 | 293,222 | 42 | 604,093 | 21 | 453,262 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Assumed debt | (25,049 | ) | (166,188 | ) | 0 | |||||||||||||||||||
Assumed other assets/(liabilities), net | 0 | (2,432 | ) | (1,899 | ) | |||||||||||||||||||
Cash disbursed for acquisitions | 268,173 | 435,473 | 451,363 | |||||||||||||||||||||
Construction in progress additions | 149,843 | 295,102 | 595,452 | |||||||||||||||||||||
Capital improvements to existing properties | 11,167 | 39,976 | 25,561 | |||||||||||||||||||||
Total cash invested in real property | 429,183 | 770,551 | 1,072,376 | |||||||||||||||||||||
Real property dispositions: | ||||||||||||||||||||||||
Independent living/CCRCs | 1 | 12,745 | 1 | 5,346 | 2 | 15,547 | ||||||||||||||||||
Assisted living facilities | 12 | 52,541 | 10 | 57,351 | 30 | 148,075 | ||||||||||||||||||
Skilled nursing facilities | 3 | 10,079 | 7 | 18,107 | 4 | 6,290 | ||||||||||||||||||
Specialty care facilities | 0 | 0 | 1 | 8,735 | ||||||||||||||||||||
Medical office buildings | 0 | 0 | 1 | 6,781 | ||||||||||||||||||||
Land parcels | 423 | 3,073 | 73 | |||||||||||||||||||||
Total dispositions | 16 | 75,788 | 18 | 83,877 | 38 | 185,501 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Gains on sales of real property | 1,267 | 14,437 | 163,933 | |||||||||||||||||||||
LandAmerica settlement | 0 | 0 | 2,500 | |||||||||||||||||||||
Extinguishment of other assets/(liabilities) | 0 | 0 | (116 | ) | ||||||||||||||||||||
Seller financing on sales of real property | (7,168 | ) | 0 | (64,771 | ) | |||||||||||||||||||
Proceeds from real property sales | 69,887 | 98,314 | 287,047 | |||||||||||||||||||||
Net cash investments in real property | 15 | $ | 359,296 | 24 | $ | 672,237 | (17 | ) | $ | 785,329 | ||||||||||||||
Advances on real estate loans receivable: | ||||||||||||||||||||||||
Investments in new loans | $ | 75,209 | $ | 205,770 | $ | 121,493 | ||||||||||||||||||
Draws on existing loans | 11,781 | 30,124 | 21,265 | |||||||||||||||||||||
Total gross investments in real estate loans | 86,990 | 235,894 | 142,758 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||
Seller financing on sales of real property | (59,649 | ) | ||||||||||||||||||||||
Net cash advances on real estate loans receivable | 86,990 | 235,894 | 83,109 | |||||||||||||||||||||
Receipts on real estate loans receivable: | ||||||||||||||||||||||||
Loan payoffs | 65,002 | 42,028 | 8,815 | |||||||||||||||||||||
Principal payments on loans | 17,253 | 10,318 | 9,354 | |||||||||||||||||||||
Total principal receipts on real estate loans | 82,255 | 52,346 | 18,169 | |||||||||||||||||||||
Net cash advances/(receipts) on real estate loans | $ | 4,735 | $ | 183,548 | $ | 64,940 | ||||||||||||||||||
(1) | 2006 excludes the Windrose merger. | |
(2) | 2007 includes the Rendina/Paramount acquisition. |
The investment in Windrose during 2006 primarily represented $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 were offset by $15,591,000 of cash assumed from Windrose on the effective date of the merger. The investment in Rendina/Paramount primarily represented cash consideration of $141,967,000 offset by $4,000 of cash assumed from Paramount.
Financing Activities. The changes in net cash provided from or used in financing activities are primarily attributable to changes related to our debt, common stock issuances, preferred stock issuances and cash distributions to stockholders.
The changes in our senior unsecured notes include: (i) the issuance of $345,000,000 of our 4.75% convertible senior unsecured notes in November 2006; (ii) the issuance $400,000,000 of our 4.75% convertible senior unsecured notes in July 2007; (iii) the extinguishment of $52,500,000 of 7.5% senior unsecured notes in August 2007; (iv) the extinguishment of $42,330,000 of 7.625% senior unsecured notes in March 2008.
During the year ended December 31, 2008, we extinguished eight secured debt loans totaling $50,475,000 with a weighted-average interest rate of 6.67% and recognized extinguishment gains of $2,094,000. During the year ended December 31, 2007, we extinguished five secured debt loans totaling $29,797,000 with a weighted-average interest rate of 7.34%.
In November 2007, we repurchased $50,000,000 liquidation amount of preferred securities of a subsidiary trust and, in December 2007, obtained the satisfaction and discharge of a related $51,000,000 liability of an operating partnership and recorded a $1,081,000 gain on extinguishment of debt.
The change in common stock is primarily attributable to public 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 for the years presented (dollars in thousands, except per share amounts):
Date Issued | Shares Issued | Average Price | Gross Proceeds | Net Proceeds | ||||||||||||
April 2006 public issuance | 3,222,800 | $ | 36.00 | $ | 116,021 | $ | 109,748 | |||||||||
2006 Dividend reinvestment plan issuances | 1,876,377 | 36.34 | 68,184 | 68,184 | ||||||||||||
2006 Option exercises | 226,961 | 22.62 | 5,133 | 5,049 | ||||||||||||
2006 Totals(1) | 5,326,138 | $ | 189,338 | $ | 182,981 | |||||||||||
April 2007 public issuance | 6,325,000 | $ | 44.01 | $ | 278,363 | $ | 265,294 | |||||||||
December 2007 public issuance | 3,500,000 | 42.14 | 147,490 | 147,139 | ||||||||||||
2007 Dividend reinvestment plan issuances | 1,626,000 | 41.81 | 67,985 | 67,985 | ||||||||||||
2007 Option exercises | 401,630 | 27.82 | 11,175 | 11,175 | ||||||||||||
2007 Totals | 11,852,630 | $ | 505,013 | $ | 491,593 | |||||||||||
March 2008 public issuance | 3,000,000 | $ | 41.44 | $ | 124,320 | $ | 118,555 | |||||||||
July 2008 public issuance | 4,600,000 | 44.50 | 204,700 | 193,157 | ||||||||||||
September 2008 public issuance | 8,050,000 | 48.00 | 386,400 | 369,699 | ||||||||||||
2008 Dividend reinvestment plan issuances | 1,546,074 | 43.37 | 67,055 | 67,055 | ||||||||||||
2008 Equity shelf program issuances | 794,221 | 39.28 | 31,196 | 30,272 | ||||||||||||
2008 Option exercises | 118,895 | 29.83 | 3,547 | 3,547 | ||||||||||||
2008 Totals | 18,109,190 | $ | 817,218 | $ | 782,285 | |||||||||||
(1) | 2006 excludes $912,000 of costs related to the Windrose merger. |
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 the number of outstanding common and preferred shares as discussed above, 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, 2006 | December 31, 2007 | December 31, 2008 | ||||||||||||||||||||||
Per Share | Amount | Per Share | Amount | Per Share | Amount | |||||||||||||||||||
Common Stock | $ | 2.8809 | $ | 178,365 | $ | 2.2791 | $ | 182,969 | $ | 2.70 | $ | 253,659 | ||||||||||||
Series D Preferred Stock | 1.96875 | 7,875 | 1.96875 | 7,875 | 1.96875 | 7,875 | ||||||||||||||||||
Series E Preferred Stock | 1.50 | 112 | 1.50 | 112 | 1.50 | 112 | ||||||||||||||||||
Series F Preferred Stock | 1.90625 | 13,344 | 1.90625 | 13,344 | 1.90625 | 13,344 | ||||||||||||||||||
Series G Preferred Stock | 0.0625 | 132 | 1.875 | 3,799 | 1.875 | 1,870 | ||||||||||||||||||
Totals | $ | 199,828 | $ | 208,099 | $ | 276,860 | ||||||||||||||||||
Off-Balance Sheet Arrangements
At December 31, 2008, we had four outstanding letter of credit obligations totaling $4,615,130 and expiring between 2009 and 2013. Please see Note 11 to our consolidated financial statements for additional information.
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. Our interest rate swaps are discussed below in “Results of Operations.”
Contractual Obligations
The following table summarizes our payment requirements under contractual obligations as of December 31, 2008 (in thousands):
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | 2009 | 2010-2011 | 2012-2013 | Thereafter | |||||||||||||||
Unsecured line of credit arrangement | $ | 570,000 | $ | 0 | $ | 570,000 | $ | 0 | $ | 0 | ||||||||||
Senior unsecured notes(1) | 1,845,000 | 0 | 0 | 550,000 | 1,295,000 | |||||||||||||||
Secured debt(1) | 448,378 | 39,657 | 67,434 | 75,908 | 265,379 | |||||||||||||||
Contractual interest obligations | 1,215,495 | 140,260 | 270,624 | 230,295 | 574,316 | |||||||||||||||
Capital lease obligations | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Operating lease obligations | 163,978 | 4,220 | 8,352 | 7,831 | 143,575 | |||||||||||||||
Purchase obligations | 744,556 | 209,068 | 531,296 | 4,192 | 0 | |||||||||||||||
Other long-term liabilities | 4,828 | 337 | 488 | 4,003 | 0 | |||||||||||||||
Total contractual obligations | $ | 4,992,235 | $ | 393,542 | $ | 1,448,194 | $ | 872,229 | $ | 2,278,270 | ||||||||||
(1) | Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet. |
At December 31, 2008, we had an unsecured credit arrangement with a consortium of sixteen banks providing for a revolving line of credit in the amount of $1,150,000,000, which is scheduled to expire on August 5, 2011 (with the ability to extend for one year at our discretion if we are in compliance with all covenants). Borrowings under the agreement 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 (1.07% at December 31, 2008). The applicable margin is based on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services
and was 0.6% at December 31, 2008. 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, 2008. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement. At December 31, 2008, we had $570,000,000 outstanding under the unsecured line of credit arrangement and estimated total contractual interest obligations of $18,189,000. Contractual interest obligations are estimated based on the assumption that the balance of $570,000,000 at December 31, 2008 is constant until maturity at interest rates in effect at December 31, 2008.
We have $1,845,000,000 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 $1,060,949,000 at December 31, 2008. $745,000,000 of our senior unsecured notes are convertible notes that also contain put features. Please see Note 9 to our consolidated financial statements for additional information.
Additionally, we have mortgage loans with total outstanding principal of $448,378,000, collateralized by owned properties, with fixed annual interest rates ranging from 4.89% to 8.08%, payable monthly. The carrying values of the properties securing the mortgage loans totaled $773,673,000 at December 31, 2008. Total contractual interest obligations on mortgage loans totaled $136,357,000 at December 31, 2008.
At December 31, 2008, we had operating lease obligations of $163,978,000 relating primarily to 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, 2008, we had outstanding construction financings of $639,419,000 for leased properties and were committed to providing additional financing of approximately $729,278,000 to complete construction. At December 31, 2008, we had contingent purchase obligations totaling $15,278,000. 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.
Other long-term liabilities relate to our Supplemental Executive Retirement Plan (“SERP”) and certain non-compete agreements. We have a 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 2009 fiscal year. Benefit payments are expected to total $4,003,000 during the next five fiscal years and no benefit payments are expected to occur 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 $3,109,000 at December 31, 2008 ($1,915,000 at December 31, 2007).
In connection with the Windrose merger, we entered into consulting agreements with Fred S. Klipsch and Frederick L. Farrar, which expired in December 2008. We entered into a new consulting agreement with Mr. Farrar in December 2008, which expires in December 2009 and may be terminated at any time by Mr. Farrar. Each consultant has agreed not to compete with the Company for a period of two years following termination or expiration of the agreement. In exchange for complying with the covenant not to compete, Messers. Klipsch and Farrar will receive eight quarterly payments of $75,000 and $37,500, respectively, with the first payment to be made on the date of termination or expiration of the agreement. The first payment to Mr. Klipsch was made in December 2008.
Capital Structure
As of December 31, 2008, we had total equity of $3,238,285,000 and a total outstanding debt balance of $2,847,676,000, which represents a debt to total book capitalization ratio of 47%. Our ratio of debt to market capitalization was 38% at December 31, 2008. For the twelve months ended December 31, 2008, our adjusted interest coverage ratio was 3.84 to 1.00. For the twelve months ended December 31, 2008, our adjusted fixed charge
coverage ratio was 3.20 to 1.00. Also, at December 31, 2008, we had $23,370,000 of cash and cash equivalents, $154,070,000 of restricted cash and $580,000,000 of available borrowing capacity under our unsecured line of credit arrangement.
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, 2008, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services. However, under our unsecured line of credit arrangement, these ratings on our senior unsecured notes are used to determine the fees and interest payable.
As of February 16, 2009, our senior unsecured notes were rated Baa2 (stable), BBB- (stable) and BBB (stable) 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 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. As of February 16, 2009, we had an effective registration statement on file in connection with our enhanced DRIP program under which we may issue up to 10,760,247 shares of common stock. As of February 16, 2009, 7,926,634 shares of common stock remained available for issuance under this registration statement. In November 2008, we entered into an Equity Distribution Agreement with UBS Securities LLC relating to the offer and sale from time to time of up to $250,000,000 aggregate amount of our common stock (“Equity Shelf Program”). As of February 16, 2009, we had $218,804,000 of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured line of credit arrangement.
Results of Operations
Our primary sources of revenue include rent and interest. Our primary expenses include interest expense, depreciation and amortization, property operating expenses and general and administrative expenses. These revenues and expenses are reflected in our Consolidated Statements of Income and are discussed in further detail below. The following is a summary of our results of operations (dollars in thousands except per share amounts):
Year Ended | One Year | Year Ended | One Year | Two Year | ||||||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Change | Dec. 31, | Change | Change | |||||||||||||||||||||||||||||||
2006 | 2007 | $ | % | 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 81,180 | $ | 113,225 | $ | 32,045 | 39 | % | $ | 260,098 | $ | 146,873 | 130 | % | $ | 178,918 | 220 | % | ||||||||||||||||||
Funds from operations | 177,473 | 248,070 | 70,597 | 40 | % | 258,868 | 10,798 | 4 | % | 81,395 | 46 | % | ||||||||||||||||||||||||
Net operating income | 327,273 | 455,680 | 128,407 | 39 | % | 526,136 | 70,456 | 15 | % | 198,863 | 61 | % | ||||||||||||||||||||||||
Adjusted EBITDA | 308,478 | 439,702 | 131,224 | 43 | % | 595,365 | 155,663 | 35 | % | 286,887 | 93 | % |
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, 2008:
• | $2,094,000 ($0.02 per diluted share) of net gains on extinguishments of debt; | |
• | $2,500,000 ($0.03 per diluted share) of additional other income related to a lease termination; | |
• | $2,291,000 ($0.02 per diluted share) of non-recurring terminated transaction costs; | |
• | $1,325,000 ($0.01 per diluted share) of non-recurring income tax expense; |
• | $23,393,000 ($0.25 per diluted share) of realized loss on derivatives; | |
• | $32,648,000 ($0.35 per diluted share) of impairment charges; and | |
• | $163,933,000 ($1.74 per diluted share) of gains on the sales of real property. |
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, 2007:
• | $1,750,000 ($0.02 per diluted share) of one-time acquisition finders’ fees; | |
• | $1,081,000 ($0.01 per diluted share) of net gains on extinguishments of debt; | |
• | $3,900,000 ($0.05 per diluted share) of additional other income related to the payoff of a warrant equity investment; and | |
• | $14,437,000 ($0.18 per diluted share) of gains on the sales of real property. |
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; and | |
• | $1,267,000 ($0.02 per diluted share) of gains on the sales of real property. |
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, 2006 to December 31, 2008 (in thousands):
Year Ended | ||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | ||||||||||||||
2006 | 2007 | 2008 | Totals | |||||||||||||
Beginning balance | 58,125 | 73,192 | 85,496 | 58,125 | ||||||||||||
Windrose merger | 9,679 | 0 | 0 | 9,679 | ||||||||||||
Public offerings | 3,223 | 9,825 | 16,444 | 29,492 | ||||||||||||
DRIP issuances | 1,877 | 1,626 | 1,546 | 5,049 | ||||||||||||
Preferred stock conversions | 0 | 212 | 975 | 1,187 | ||||||||||||
Option exercises | 227 | 402 | 119 | 748 | ||||||||||||
Other, net | 61 | 239 | 124 | 424 | ||||||||||||
Ending balance | 73,192 | 85,496 | 104,704 | 104,704 | ||||||||||||
Average number of common shares outstanding: | ||||||||||||||||
Basic | 61,661 | 78,861 | 93,732 | |||||||||||||
Diluted | 62,045 | 79,409 | 94,309 |
We evaluate our business and make resource allocations on our two business segments — investment properties and medical office buildings. Under the investment property segment, properties are primarily leased undertriple-net leases and we are not involved in the management of the property. Under the medical office building segment, our properties are typically leased under gross leases, modified gross leases ortriple-net leases, to multiple tenants, and generally require a certain level of property management. There are no intersegment sales or transfers. Non-segment revenue consists mainly of interest income on non-real estate investments and other income. Non-property specific revenues and expenses are not allocated to individual segments in determining net operating income. Please see Note 19 to our consolidated financial statements for additional information.
Investment Properties
The following is a summary of our results of operations for the investment properties segment (dollars in thousands):
Year Ended | One Year | Year Ended | One Year | Two Year | ||||||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Change | Dec. 31, | Change | Change | |||||||||||||||||||||||||||||||
2006 | 2007 | $ | % | 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||
Rental income | $ | 259,185 | $ | 308,633 | $ | 49,448 | 19 | % | $ | 367,187 | $ | 58,554 | 19 | % | $ | 108,002 | 42 | % | ||||||||||||||||||
Interest income | 18,829 | 25,823 | 6,994 | 37 | % | 40,063 | 14,240 | 55 | % | 21,234 | 113 | % | ||||||||||||||||||||||||
Other income | 3,262 | 8,010 | 4,748 | 146 | % | 7,899 | (111 | ) | -1 | % | 4,637 | 142 | % | |||||||||||||||||||||||
281,276 | 342,466 | 61,190 | 22 | % | 415,149 | 72,683 | 21 | % | 133,873 | 48 | % | |||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||||||
Interest expense | (3,466 | ) | (793 | ) | 2,673 | -77 | % | 2,350 | 3,143 | n/a | 5,816 | n/a | ||||||||||||||||||||||||
Depreciation and amortization | 79,164 | 90,899 | 11,735 | 15 | % | 105,590 | 14,691 | 16 | % | 26,426 | 33 | % | ||||||||||||||||||||||||
Gain on extinguishment of debt | 0 | 0 | 0 | n/a | (808 | ) | (808 | ) | n/a | (808 | ) | n/a | ||||||||||||||||||||||||
Provision for loan losses | 1,000 | 0 | (1,000 | ) | -100 | % | 94 | 94 | n/a | (906 | ) | -91 | % | |||||||||||||||||||||||
76,698 | 90,106 | 13,408 | 17 | % | 107,226 | 17,120 | 19 | % | 30,528 | 40 | % | |||||||||||||||||||||||||
Income from continuing operations before income taxes | 204,578 | 252,360 | 47,782 | 23 | % | 307,923 | 55,563 | 22 | % | 103,345 | 51 | % | ||||||||||||||||||||||||
Income tax (expense) benefit | 0 | 293 | 293 | n/a | (1,693 | ) | (1,986 | ) | n/a | (1,693 | ) | n/a | ||||||||||||||||||||||||
Income from continuing operations | 204,578 | 252,653 | 48,075 | 23 | % | 306,230 | 53,577 | 21 | % | 101,652 | 50 | % | ||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||
Gain on sales of properties | 1,267 | 14,437 | 13,170 | 1039 | % | 164,998 | 150,561 | 1043 | % | 163,731 | 12923 | % | ||||||||||||||||||||||||
Income from discontinued operations, net | 12,287 | 15,157 | 2,870 | 23 | % | 10,617 | (4,540 | ) | -30 | % | (1,670 | ) | -14 | % | ||||||||||||||||||||||
13,554 | 29,594 | 16,040 | 118 | % | 175,615 | 146,021 | 493 | % | 162,061 | 1196 | % | |||||||||||||||||||||||||
Net income | $ | 218,132 | $ | 282,247 | $ | 64,115 | 29 | % | $ | 481,845 | $ | 199,598 | 71 | % | $ | 263,713 | 121 | % | ||||||||||||||||||
The increase in rental income is primarily attributable to the acquisitions of new investment 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. 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 increased from 2007 and 2006 primarily due to an increase in the balance of outstanding loans.
Interest expense for the years ended December 31, 2008, 2007 and 2006 represents $7,176,000, $8,763,000 and $9,042,000, respectively, of secured debt interest expense offset by interest allocated to discontinued operations. The change in secured debt interest expense is due to the net effect and timing of assumptions, extinguishments and principal amortizations. During the year ended December 31, 2008, we extinguished four investment property secured debt loans and recognized extinguishment gains of $808,000. The following is a summary of our investment property secured debt principal activity (dollars in thousands):
Year Ended December 31, 2006 | Year Ended December 31, 2007 | Year Ended December 31, 2008 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
Beginning balance | $ | 107,540 | 7.328 | % | $ | 129,617 | 7.134 | % | $ | 114,543 | 7.000 | % | ||||||||||||
Debt assumed | 25,049 | 6.315 | % | |||||||||||||||||||||
Debt extinguished | (12,083 | ) | 8.421 | % | (17,821 | ) | 7.022 | % | ||||||||||||||||
Principal payments | (2,972 | ) | 7.251 | % | (2,991 | ) | 7.085 | % | (2,488 | ) | 6.974 | % | ||||||||||||
Ending balance | $ | 129,617 | 7.134 | % | $ | 114,543 | 7.000 | % | $ | 94,234 | 6.996 | % | ||||||||||||
Monthly averages | $ | 125,375 | 7.173 | % | $ | 121,562 | 7.065 | % | $ | 103,927 | 6.996 | % |
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 additional details. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.
At December 31, 2008, we had one specialty care facility that satisfied the requirements of Statement No. 144 for held for sale treatment. We did not recognize an impairment loss on this asset as the fair value less estimated costs to sell exceeded our carrying value. During the year ended December 31, 2008, we sold 30 assisted living facilities, two independent living facilities, four skilled nursing facilities, one specialty care facility and one parcel of land with carrying values of $178,720,000 for net gains of $164,998,000 and a deferred gain of $3,708,000. During the three months ended March 31, 2009, we sold two specialty care facilities and one assisted living facility. Also, at March 31, 2009, we had five assisted living facilities classified as held-for-sale. The following illustrates the reclassification impact as a result of classifying investment properties as discontinued operations for the periods presented. Please refer to Note 4 to our consolidated financial statements for further discussion.
Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Revenues: | ||||||||||||
Rental Income | $ | 43,203 | $ | 37,050 | $ | 21,662 | ||||||
Expenses: | ||||||||||||
Interest expense | 12,508 | 9,556 | 4,826 | |||||||||
Depreciation and amortization | 17,288 | 12,337 | 6,219 | |||||||||
General and adminstrative | 1,120 | 0 | 0 | |||||||||
Income (loss) from discontinued operations, net | $ | 12,287 | $ | 15,157 | $ | 10,617 | ||||||
During the three months ended December 31, 2007, we recognized $3,900,000 of additional other income related to the payoff of a warrant equity investment. During the three months ended March 31, 2008, we determined that $1,325,000 of income taxes were due in connection with that investment gain. During the three months ended December 31, 2008, we recognized $2,500,000 of additional other income related to a lease termination.
As a result of our quarterly evaluations, we recorded a $94,000 addition to the allowance for loan losses at December 31, 2008. 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.”
Medical Office Buildings
The following is a summary of our results of operations for the medical office building segment (dollars in thousands):
Year Ended | One Year | Year Ended | One Year | Two Year | ||||||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Change | Dec. 31, | Change | Change | |||||||||||||||||||||||||||||||
2006 | 2007 | $ | % | 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||
Rental income | $ | 3,021 | $ | 104,550 | $ | 101,529 | 3361 | % | $ | 128,963 | $ | 24,413 | 23 | % | $ | 125,942 | 4169 | % | ||||||||||||||||||
Other income | 0 | 497 | 497 | n/a | 930 | 433 | 87 | % | 930 | n/a | ||||||||||||||||||||||||||
3,021 | 105,047 | 102,026 | 3377 | % | 129,893 | 24,846 | 24 | % | 126,872 | 4200 | % | |||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||||||
Interest expense | 519 | 21,407 | 20,888 | 4025 | % | 20,279 | (1,128 | ) | -5 | % | 19,760 | 3807 | % | |||||||||||||||||||||||
Property operating expenses | 1,039 | 34,707 | 33,668 | 3240 | % | 43,990 | 9,283 | 27 | % | 42,951 | 4134 | % | ||||||||||||||||||||||||
Depreciation and amortization | 1,012 | 42,190 | 41,178 | 4069 | % | 48,471 | 6,281 | 15 | % | 47,459 | 4690 | % | ||||||||||||||||||||||||
Gain on extinguishment of debt | 0 | (1,081 | ) | (1,081 | ) | n/a | (1,286 | ) | (205 | ) | 19 | % | (1,286 | ) | n/a | |||||||||||||||||||||
2,570 | 97,223 | 94,653 | 3683 | % | 111,454 | 14,231 | 15 | % | 108,884 | 4237 | % | |||||||||||||||||||||||||
Income from continuing operations before income taxes | 451 | 7,824 | 7,373 | 1635 | % | 18,439 | 10,615 | 136 | % | 17,988 | 3988 | % | ||||||||||||||||||||||||
Income tax (expense) benefit | 0 | 12 | 12 | n/a | (51 | ) | (63 | ) | n/a | (51 | ) | n/a | ||||||||||||||||||||||||
Income from continuing operations | 451 | 7,836 | 7,385 | 1637 | % | 18,388 | 10,552 | 135 | % | 17,937 | 3977 | % | ||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||
Loss on sales of properties | 0 | 0 | 0 | n/a | (1,065 | ) | (1,065 | ) | n/a | (1,065 | ) | n/a | ||||||||||||||||||||||||
Impairment of assets | 0 | 0 | 0 | n/a | (32,648 | ) | (32,648 | ) | n/a | (32,648 | ) | n/a | ||||||||||||||||||||||||
Income from discontinued operations, net | (41 | ) | (1,775 | ) | (1,734 | ) | 4229 | % | (2,584 | ) | (809 | ) | 46 | % | (2,543 | ) | 6202 | % | ||||||||||||||||||
(41 | ) | (1,775 | ) | (1,734 | ) | 4229 | % | (36,297 | ) | (34,522 | ) | 1945 | % | (36,256 | ) | 88429 | % | |||||||||||||||||||
Net income (loss) | 410 | 6,061 | 5,651 | 1378 | % | (17,909 | ) | (23,970 | ) | n/a | (18,319 | ) | n/a | |||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | 13 | 238 | 225 | 1731 | % | 126 | (112 | ) | -47 | % | 113 | 869 | % | |||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | 397 | $ | 5,823 | $ | 5,426 | 1367 | % | $ | (18,035 | ) | $ | (23,858 | ) | n/a | $ | (18,432 | ) | n/a | |||||||||||||||||
As discussed in Note 2 to our consolidated financial statements, we completed our merger with Windrose Medical Properties Trust on December 20, 2006. These operations are the principal component of our medical office building segment and represent the primary component of the change in results of operations for this segment from 2006 to 2007. Additionally, in May 2007, we completed the acquisition of 17 medical office buildings and Paramount Real Estate Services, a property management company, from affiliates of Rendina Companies. The results of operations for these properties and Paramount have been included in our consolidated results of operations from the date of acquisition and represent the primary component of change in results of operations for this segment from 2007 to 2008.
The increase in rental income is primarily attributable to the acquisitions of medical office buildings 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 Index. 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. If the Consumer Price Index does 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. The increase in other income is attributable to third party management fee income.
Interest expense for the years ended December 31, 2008, 2007 and 2006 represents $21,828,000, $20,174,000 and $498,000, respectively, of secured debt interest expense offset by interest allocated to discontinued operations. Interest expense for the years ended December 31, 2007 and 2006 also includes $3,104,000 and $112,000, respectively, of interest expense related to the subsidiary trust liability. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. During the year ended December 31, 2008, we extinguished four medical office building secured debt loans and recognized extinguishment gains of $1,286,000. The following is a summary of our medical office building secured debt principal activity (dollars in thousands):
Year Ended December 31, 2006 | Year Ended December 31, 2007 | Year Ended December 31, 2008 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
Beginning balance | $ | 0 | 0.000 | % | $ | 248,783 | 5.939 | % | $ | 392,430 | 5.854 | % | ||||||||||||
Debt assumed | 248,844 | 5.939 | % | 166,331 | 5.808 | % | ||||||||||||||||||
Debt extinguished | (17,713 | ) | 6.599 | % | (32,653 | ) | 6.473 | % | ||||||||||||||||
Principal payments | (61 | ) | 5.939 | % | (4,971 | ) | 5.881 | % | (5,631 | ) | 5.741 | % | ||||||||||||
Ending balance | $ | 248,783 | 5.939 | % | $ | 392,430 | 5.854 | % | $ | 354,146 | 5.799 | % | ||||||||||||
Monthly averages | $ | 248,813 | 5.939 | % | $ | 335,234 | 5.892 | % | $ | 365,661 | 5.802 | % |
At December 31, 2006, we had $51,000,000 of trust preferred liability principal outstanding with a fixed annual interest rate of 7.22%. On November 6, 2007, we purchased all $50,000,000 of the outstanding trust preferred securities at par for the purpose of unwinding this financing arrangement and extinguishing the liability of the operating partnership to the subsidiary trust and recorded a $1,081,000 gain on extinguishment of debt.
The increase in property operating expenses is primarily attributable to the acquisition of new medical office buildings for which we incur certain property operating expenses offset by property operating expenses associated with discontinued operations.
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 additional details. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.
Income tax expense is related to third party management fee income.
Noncontrolling interests primarily relate to certain joint venture properties acquired in connection with the Windrose merger in December 2006.
At December 31, 2008, we had 14 medical office buildings that satisfied the requirements of Statement No. 144 for held for sale treatment. In determining the fair value of the assets, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was less than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value. During the year ended December 31, 2008, we sold one medical office building with a carrying value of $6,781,000 for a loss of $1,065,000. The following illustrates the reclassification impact as a result of classifying these medical office buildings as
discontinued operations for the periods presented. Please refer to Note 4 to our consolidated financial statements for further discussion.
Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Revenues: | ||||||||||||
Rental Income | $ | 226 | $ | 7,064 | $ | 4,369 | ||||||
Expenses: | ||||||||||||
Interest expense | 91 | 1,871 | 1,549 | |||||||||
Property operating expenses | 76 | 2,768 | 2,639 | |||||||||
Depreciation and amortization | 100 | 4,200 | 2,765 | |||||||||
Income (loss) from discontinued operations, net | $ | (41 | ) | $ | (1,775 | ) | $ | (2,584 | ) | |||
Non-Segment/Corporate
The following is a summary of our results of operations for the non-segment/corporate activities (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2006 | Dec. 31, 2007 | $ | % | Dec. 31, 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||
Other income | $ | 662 | $ | 1,528 | $ | 866 | 131 | % | $ | 1,692 | $ | 164 | 11 | % | $ | 1,030 | 156 | % | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||||||
Interest expense | 90,544 | 113,285 | 22,741 | 25 | % | 112,055 | (1,230 | ) | -1 | % | 21,511 | 24 | % | |||||||||||||||||||||||
General and administrative | 25,922 | 37,465 | 11,543 | 45 | % | 47,193 | 9,728 | 26 | % | 21,271 | 82 | % | ||||||||||||||||||||||||
Realized loss on derivatives | 0 | 0 | 0 | n/a | 23,393 | 23,393 | n/a | 23,393 | n/a | |||||||||||||||||||||||||||
116,466 | 150,750 | 34,284 | 29 | % | 182,641 | 31,891 | 21 | % | 66,175 | 57 | % | |||||||||||||||||||||||||
Loss on continuing operations before income taxes | (115,804 | ) | (149,222 | ) | (33,418 | ) | 29 | % | (180,949 | ) | (31,727 | ) | 21 | % | (65,145 | ) | 56 | % | ||||||||||||||||||
Income tax (expense) benefit | (82 | ) | (493 | ) | (411 | ) | 501 | % | 438 | 931 | n/a | 520 | n/a | |||||||||||||||||||||||
Loss on continuing operations | (115,886 | ) | (149,715 | ) | (33,829 | ) | 29 | % | (180,511 | ) | (30,796 | ) | 21 | % | (64,625 | ) | 56 | % | ||||||||||||||||||
Preferred stock dividends | 21,463 | 25,130 | 3,667 | 17 | % | 23,201 | (1,929 | ) | -8 | % | 1,738 | 8 | % | |||||||||||||||||||||||
Loss attributable to common stockholders | $ | (137,349 | ) | $ | (174,845 | ) | $ | (37,496 | ) | 27 | % | $ | (203,712 | ) | $ | (28,867 | ) | 17 | % | $ | (66,363 | ) | 48 | % | ||||||||||||
Other income primarily represents income from non-real estate activities such as interest earned on temporary investments of cash reserves.
The following is a summary of our non-segment/corporate interest expense (dollars in thousands):
Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
Dec. 31, 2006 | Dec. 31, 2007 | $ | % | Dec. 31, 2008 | $ | % | $ | % | ||||||||||||||||||||||||||||
Senior unsecured notes | $ | 80,176 | $ | 104,665 | $ | 24,489 | 31 | % | $ | 111,544 | $ | 6,879 | 7 | % | $ | 31,368 | 39 | % | ||||||||||||||||||
Unsecured lines of credit | 11,397 | 15,653 | 4,256 | 37 | % | 18,878 | 3,225 | 21 | % | 7,481 | 66 | % | ||||||||||||||||||||||||
Capitalized interest | (4,470 | ) | (12,526 | ) | (8,056 | ) | 180 | % | (25,029 | ) | (12,503 | ) | 100 | % | (20,559 | ) | 460 | % | ||||||||||||||||||
SWAP losses (savings) | 197 | (89 | ) | (286 | ) | n/a | (161 | ) | (72 | ) | 81 | % | (358 | ) | n/a | |||||||||||||||||||||
Loan expense | 3,244 | 5,582 | 2,338 | 72 | % | 6,823 | 1,241 | 22 | % | 3,579 | 110 | % | ||||||||||||||||||||||||
Totals | $ | 90,544 | $ | 113,285 | $ | 22,741 | 25 | % | $ | 112,055 | $ | (1,230 | ) | -1 | % | $ | 21,511 | 24 | % | |||||||||||||||||
The change in interest expense on senior unsecured notes is due to the net effect and timing of issuances and extinguishments. The following is a summary of our senior unsecured notes activity (dollars in thousands):
Year Ended December 31, 2006 | Year Ended December 31, 2007 | Year Ended December 31, 2008 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
Beginning balance | $ | 1,194,830 | 6.566 | % | $ | 1,539,830 | 6.159 | % | $ | 1,887,330 | 5.823 | % | ||||||||||||
Debt issued | 345,000 | 4.750 | % | 400,000 | 4.750 | % | ||||||||||||||||||
Debt extinguished | (52,500 | ) | 7.500 | % | (42,330 | ) | 7.625 | % | ||||||||||||||||
Ending balance | $ | 1,539,830 | 6.159 | % | $ | 1,887,330 | 5.823 | % | $ | 1,845,000 | 5.782 | % | ||||||||||||
Monthly averages | $ | 1,244,445 | 6.494 | % | $ | 1,704,253 | 5.991 | % | $ | 1,854,768 | 5.792 | % |
The change in interest expense on unsecured lines of credit arrangements is due primarily to changes in average amounts outstanding and fluctuating variable interest rates. The following is a summary of our unsecured lines of credit arrangements (dollars in thousands):
Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Balance outstanding at December 31 | $ | 225,000 | $ | 307,000 | $ | 570,000 | ||||||
Maximum amount outstanding at any month end | 276,000 | 434,000 | 744,000 | |||||||||
Average amount outstanding (total of daily principal balances divided by days in year) | 164,905 | 234,392 | 500,561 | |||||||||
Weighted average interest rate (actual interest expense divided by average borrowings outstanding) | 6.91 | % | 6.68 | % | 3.77 | % |
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, 2006, 2007 and 2008 totaled $4,470,000, $12,526,000 and $25,029,000, respectively.
On May 6, 2004, we entered into two interest rate swap agreements (the “2004 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 2004 Swaps were treated as fair-value hedges for accounting purposes and we utilized the short-cut method to assess effectiveness. The 2004 Swaps were with highly rated counterparties in which we received a fixed rate of 6.0% and paid 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 the 2004 Swaps that was recorded as an addition to interest expense. For the year ended December 31, 2007, we generated $89,000 of savings related to the 2004 Swaps that was recorded as a reduction of interest expense. On September 12, 2007, we terminated the 2004 Swaps and we received a $2,125,000 cash settlement. The unamortized amount of this settlement at December 31, 2008 was $1,634,000 ($1,973,000 at December 31, 2007) and is recorded as an adjustment to the hedged item. This amount will be amortized to interest expense over the life of the hedged debt using the effective interest method. For the year ended December 31, 2008, $339,000 of amortization was recognized as a reduction to senior unsecured notes interest expense.
On July 2, 2007, we entered into two forward-starting interest rate swaps (the “July 2007 Swaps”), with an aggregate notional amount of $200,000,000 that were designated as cash flow hedges of the variability in forecasted interest payments attributable to changes in the LIBOR swap rate, on long-term fixed rate debt forecasted to be issued in 2007. The July 2007 Swaps had the economic effect of fixing $200,000,000 of our debt at 4.913% for five years. The July 2007 Swaps were settled on July 17, 2007, which was the date that the forecasted debt was priced. The cash settlement value of these contracts at July 17, 2007 was $733,000. This amount represented the effective portion of the hedges as there was no hedge ineffectiveness. Therefore, the $733,000 settlement value was deferred in accumulated other comprehensive income (“AOCI”) and will be amortized to interest expense using the effective interest method. The unamortized amount of AOCI related to these contracts at December 31, 2008 is $521,000
($668,000 at December 31, 2007). For the years ended December 31, 2008 and 2007, we reclassified $147,000 and $65,000, respectively, out of AOCI as a reduction of interest expense.
On September 12, 2007, we entered into two forward-starting interest rate swaps (the “September 2007 Swaps”) for a total notional amount of $250,000,000 to hedge 10 years of interest payments associated with a long-term borrowing that was expected to occur in 2008. The September 2007 Swaps each had an effective date of September 12, 2008 and a maturity date of September 12, 2018. We expected to settle the 2007 Swaps when the debt was to be priced. The September 2007 Swaps were to have the economic effect of fixing $250,000,000 of our future debt at 4.469% plus a credit spread for 10 years. The September 2007 Swaps had been designated as cash flow hedges and we expected the 2007 Swaps to be highly effective at offsetting changes in cash flows of interest payments on $250,000,000 of our future debt due to changes in the LIBOR swap rate. Therefore, effective changes in the fair value of the September 2007 Swaps were recorded in AOCI and were to be reclassified to interest expense when the hedged forecasted transactions affected earnings (as interest payments are made on the expected debt issuance). The ineffective portion of the changes in fair value was to be recorded directly in earnings.
At December 31, 2007, the September 2007 Swaps were reported at their fair value of $7,990,000 and were included in other liabilities and AOCI. During the year ended December 31, 2008, as a result of the severe dislocation in the credit markets, we terminated plans to issue debt and also terminated the September 2007 Swaps for $23,393,000. Amounts previously recorded in AOCI were reclassified to realized loss on derivatives resulting in $23,393,000 of expense as the forecasted transaction was no longer probable to occur.
Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. The change in loan expense is primarily due to costs associated with the issuance of $345,000,000 of senior unsecured convertible notes in November and December 2006, the issuance of $400,000,000 of senior unsecured convertible notes in July 2007 and costs associated with the extension and expansion of our unsecured line of credit in August 2007.
General and administrative expenses as a percentage of revenues (including revenues from discontinued operations) for the year ended December 31, 2008 were 8.24%, as compared with 7.64% and 8.26% for the same periods in 2007 and 2006. The increase from 2006 to 2007 is primarily related to the Windrose merger completed on December 20, 2006, the Paramount acquisition completed in May 2007, $1,750,000 of acquisition finders’ fees paid during the three months ended June 30, 2007 and costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. During the quarter ended June 30, 2007, we recorded $1,750,000 of one-time acquisition finders’ fees paid to former Windrose management in connection with the closing of the Rendina/Paramount transaction. These fees relate to services rendered prior to the consummation of the Windrose merger in December 2006. Due to the recipients’ current employment status with the company, the fees have been expensed as compensation rather than included in the purchase price of the acquisition, as is typical with such fees. The increase from 2007 to 2008 is primarily due to $2,291,000 of non-recurring terminated transaction costs and costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. The terminated transaction costs primarily related to the termination of the Arcapita/Sunrise agreement.
The change in preferred dividends is primarily due to the change in average outstanding preferred shares. The following is a summary of our preferred stock activity:
Year Ended December 31, 2006 | Year Ended December 31, 2007 | Year Ended December 31, 2008 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Shares | Dividend Rate | Shares | Dividend Rate | Shares | Dividend Rate | |||||||||||||||||||
Beginning balance | 11,074,989 | 7.704 | % | 13,174,989 | 7.672 | % | 12,879,189 | 7.676 | % | |||||||||||||||
Shares issued | 2,100,000 | 7.500 | % | |||||||||||||||||||||
Shares converted | (295,800 | ) | 7.500 | % | (1,362,887 | ) | 7.500 | % | ||||||||||||||||
Ending balance | 13,174,989 | 7.672 | % | 12,879,189 | 7.676 | % | 11,516,302 | 7.696 | % | |||||||||||||||
Monthly averages | 11,236,527 | 7.701 | % | 13,129,481 | 7.672 | % | 12,138,161 | 7.686 | % |
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, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider FFO to be a useful supplemental measure 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.
Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties 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 properties.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. A covenant in our line of credit arrangement contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy this covenant could result in an event of default that 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. Due to the materiality of this debt agreement and the financial covenant, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge ratio of at least 1.75 times.
Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial measures 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, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant of our line of credit arrangement and is not being presented for use by investors for any other purpose. None of our supplemental measures 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, the supplemental reporting measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Multi-period amounts may not equal the sum of the individual quarterly amounts due to rounding.
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 include 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, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
FFO Reconciliation: | ||||||||||||
Net income attributable to common stockholders | $ | 81,180 | $ | 113,225 | $ | 260,098 | ||||||
Depreciation and amortization | 97,564 | 149,626 | 163,045 | |||||||||
Loss (gain) on sales of properties | (1,267 | ) | (14,437 | ) | (163,933 | ) | ||||||
Noncontrolling interests | (4 | ) | (344 | ) | (342 | ) | ||||||
Funds from operations | $ | 177,473 | $ | 248,070 | $ | 258,868 | ||||||
Average common shares outstanding: | ||||||||||||
Basic | 61,661 | 78,861 | 93,732 | |||||||||
Diluted | 62,045 | 79,409 | 94,309 | |||||||||
Per share data: | ||||||||||||
Net income attributable to common stockholders | ||||||||||||
Basic | $ | 1.32 | $ | 1.44 | $ | 2.77 | ||||||
Diluted | 1.31 | 1.43 | 2.76 | |||||||||
Funds from operations | ||||||||||||
Basic | $ | 2.88 | $ | 3.15 | $ | 2.76 | ||||||
Diluted | 2.86 | 3.12 | 2.74 |
The table below reflects the reconciliation of NOI for the periods presented. All amounts include amounts from discontinued operations, if applicable. Amounts are in thousands.
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
NOI Reconciliation: | ||||||||||||
Total revenues: | ||||||||||||
Investment properties: | ||||||||||||
Rental income: | ||||||||||||
Independent living/CCRCs | $ | 36,474 | $ | 43,072 | $ | 66,402 | ||||||
Assisted living facilities | 103,899 | 108,475 | 117,009 | |||||||||
Skilled nursing facilities | 149,248 | 167,718 | 161,642 | |||||||||
Specialty care facilities | 12,767 | 26,418 | 43,796 | |||||||||
Investment property rental income | 302,388 | 345,683 | 388,849 | |||||||||
Interest income | 18,829 | 25,823 | 40,063 | |||||||||
Other income | 3,262 | 8,010 | 7,899 | |||||||||
Total investment property revenues | 324,479 | 379,516 | 436,811 | |||||||||
Medical office buildings: | ||||||||||||
Rental income | 3,247 | 111,614 | 133,332 | |||||||||
Other income | 0 | 497 | 930 | |||||||||
Total medical office building revenues | 3,247 | 112,111 | 134,262 | |||||||||
Corporate other income | 662 | 1,528 | 1,692 | |||||||||
Total revenues | 328,388 | 493,155 | 572,765 | |||||||||
Property operating expenses: | ||||||||||||
Investment properties | 0 | 0 | 0 | |||||||||
Medical office buildings | 1,115 | 37,475 | 46,629 | |||||||||
Non-segment/corporate | 0 | 0 | 0 | |||||||||
Total property operating expenses | 1,115 | 37,475 | 46,629 | |||||||||
Net operating income: | ||||||||||||
Investment properties | 324,479 | 379,516 | 436,811 | |||||||||
Medical office buildings | 2,132 | 74,636 | 87,633 | |||||||||
Non-segment/corporate | 662 | 1,528 | 1,692 | |||||||||
Net operating income | $ | 327,273 | $ | 455,680 | $ | 526,136 | ||||||
The table below reflects the reconciliation of Adjusted 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 include discontinued operations. Dollars are in thousands.
Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Adjusted EBITDA Reconciliation: | ||||||||||||
Net income | $ | 102,656 | $ | 138,593 | $ | 283,425 | ||||||
Interest expense | 100,196 | 145,326 | 141,059 | |||||||||
Tax expense/(benefit) | 82 | 188 | 1,306 | |||||||||
Depreciation and amortization | 97,564 | 149,626 | 163,045 | |||||||||
Stock-based compensation expense | 6,980 | 7,050 | 8,530 | |||||||||
Provision for loan losses | 1,000 | 0 | 94 | |||||||||
Loss/(gain) on extinguishment of debt, net | 0 | (1,081 | ) | (2,094 | ) | |||||||
Adjusted EBITDA | $ | 308,478 | $ | 439,702 | $ | 595,365 | ||||||
Interest Coverage Ratio: | ||||||||||||
Interest expense | $ | 100,196 | $ | 145,326 | $ | 141,059 | ||||||
Non-cash interest expense | (3,403 | ) | (8,413 | ) | (11,231 | ) | ||||||
Capitalized interest | 4,470 | 12,526 | 25,029 | |||||||||
Total interest | 101,263 | 149,439 | 154,857 | |||||||||
Adjusted EBITDA | $ | 308,478 | $ | 439,702 | $ | 595,365 | ||||||
Adjusted interest coverage ratio | 3.05 | x | 2.94 | x | 3.84 | x | ||||||
Fixed Charge Coverage Ratio: | ||||||||||||
Total interest | $ | 101,263 | $ | 149,439 | $ | 154,857 | ||||||
Secured debt prinicipal amortization | 3,033 | 7,950 | 8,119 | |||||||||
Preferred dividends | 21,463 | 25,130 | 23,201 | |||||||||
Total fixed charges | 125,759 | 182,519 | 186,177 | |||||||||
Adjusted EBITDA | $ | 308,478 | $ | 439,702 | $ | 595,365 | ||||||
Adjusted fixed charge coverage ratio | 2.45 | x | 2.41 | x | 3.20 | 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 2008.
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 Losses on Loans Receivable | ||
We maintain an allowance for losses on loans receivable 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 collectability 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 collectability of loan payments and principal. We evaluate the collectability 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. As a result of our quarterly evaluation, we recorded a $94,000 addition to the allowance for losses on loans receivable at December 31, 2008, resulting in an allowance of $7,500,000 relating to loans with outstanding balances of $121,893,000. Also at December 31, 2008, we had loans with outstanding balances of $72,770,000 on non-accrual status. | |
Business Combinations 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. | 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 and five to 15 years for improvements. Lives for intangibles are based on the remaining term of the underlying leases. For the year ended December 31, 2008, we recorded $118,204,000, $32,212,000 and $12,629,000 as provisions for depreciation and amortization relating to buildings, improvements and intangibles, respectively, including amounts reclassified as discontinued operations. The average useful life of our buildings, improvements and intangibles was 35.5 years, 10.6 years and 6.6 years, respectively, for the year ended December 31, 2008. | |
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 (“SFAS 144”). 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. When assets are identified that meet the criteria for held for sale classification in accordance with SFAS 144 an analysis is completed that compares the estimated fair value (estimated sales value less cost of sales) to the carrying value of the assets. If it is determined that the carrying value of these assets is in excess of the estimated fair value, the assets are reduced to the estimated 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. At December 31, 2008, it was determined that 14 medical office buildings met the criteria for the held for sale classification. In determining the fair value of the assets, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was less than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value. |
Nature of Critical | Assumptions/ | |
Accounting Estimate | Approach Used | |
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 (“SFAS 133”), as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. SFAS 133, 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 utilizing 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. We were not party to any derivative instruments as of December 31, 2008. | |
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 collectability. If the collectability 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 collectability risk. Substantially all of our operating leases contain fixed and/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 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 collectability of our revenues and related receivables on an on-going basis. We evaluate collectability 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 collectability 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, 2008, we recognized $40,063,000 of interest income and $522,181,000 of rental income, including discontinued operations. Cash receipts on leases with deferred revenue provisions were $28,282,000 as compared to gross straight-line rental income recognized of $20,489,000 for the twelve months ended December 31, 2008. At December 31, 2008, our straight-line receivable balance was $44,963,000, net of reserves totaling $251,000. Also at December 31, 2008, we had loans with outstanding balances of $72,770,000 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
The Board of Directors and Shareholders of Health Care REIT, Inc.
We have audited the accompanying consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in Item 15(a) (2) of the Annual Report on Form 10-K for the year ended December 31, 2008. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements 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, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, 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.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2008, 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 27, 2009 (not included herein) expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Toledo, Ohio
February 27, 2009,
except for Notes 4 and 22, as to which the date is May 6, 2009
except for Notes 4 and 22, as to which the date is May 6, 2009
HEALTH CARE REIT, INC.
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Real property owned | ||||||||
Land and land improvements | $ | 504,907 | $ | 447,029 | ||||
Buildings and improvements | 4,653,871 | 4,224,955 | ||||||
Acquired lease intangibles | 133,324 | 131,312 | ||||||
Real property held for sale, net of accumulated depreciation | 48,054 | 0 | ||||||
Construction in progress | 639,419 | 313,709 | ||||||
5,979,575 | 5,117,005 | |||||||
Less accumulated depreciation and amortization | (600,781 | ) | (478,373 | ) | ||||
Total real property owned | 5,378,794 | 4,638,632 | ||||||
Loans receivable | 482,885 | 381,394 | ||||||
Less allowance for losses on loans receivable | (7,500 | ) | (7,406 | ) | ||||
475,385 | 373,988 | |||||||
Net real estate investments | 5,854,179 | 5,012,620 | ||||||
Other assets: | ||||||||
Equity investments | 1,030 | 1,408 | ||||||
Deferred loan expenses | 23,579 | 30,499 | ||||||
Cash and cash equivalents | 23,370 | 30,269 | ||||||
Restricted cash | 154,070 | 17,575 | ||||||
Receivables and other assets | 136,890 | 121,485 | ||||||
338,939 | 201,236 | |||||||
Total assets | $ | 6,193,118 | $ | 5,213,856 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Borrowings under unsecured lines of credit arrangements | $ | 570,000 | $ | 307,000 | ||||
Senior unsecured notes | 1,831,151 | 1,869,284 | ||||||
Secured debt | 446,525 | 507,476 | ||||||
Accrued expenses and other liabilities | 107,157 | 95,145 | ||||||
Total liabilities | 2,954,833 | 2,778,905 | ||||||
Equity: | ||||||||
Preferred stock, $1.00 par value: | 289,929 | 330,243 | ||||||
Authorized — 50,000,000 shares | ||||||||
Issued and outstanding — 11,516,302 shares in 2008 and 12,879,189 shares in 2007 at liquidation preference | ||||||||
Common stock, $1.00 par value: | 104,635 | 85,412 | ||||||
Authorized — 225,000,000 shares | ||||||||
Issued — 104,835,626 shares in 2008 and 85,600,333 shares in 2007 | ||||||||
Outstanding — 104,703,702 shares in 2008 and 85,496,164 shares in 2007 | ||||||||
Capital in excess of par value | 3,204,690 | 2,394,099 | ||||||
Treasury stock | (5,145 | ) | (3,952 | ) | ||||
Cumulative net income | 1,354,400 | 1,071,101 | ||||||
Cumulative dividends | (1,723,819 | ) | (1,446,959 | ) | ||||
Accumulated other comprehensive income | (1,113 | ) | (7,381 | ) | ||||
Other equity | 4,105 | 2,701 | ||||||
Total Health Care REIT, Inc. stockholders’ equity | 3,227,682 | 2,425,264 | ||||||
Noncontrolling interests | 10,603 | 9,687 | ||||||
Total equity | 3,238,285 | 2,434,951 | ||||||
Total liabilities and equity | $ | 6,193,118 | $ | 5,213,856 | ||||
See accompanying notes
HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Rental income | $ | 496,150 | $ | 413,183 | $ | 262,206 | ||||||
Interest income | 40,063 | 25,823 | 18,829 | |||||||||
Other income | 10,521 | 10,035 | 3,924 | |||||||||
546,734 | 449,041 | 284,959 | ||||||||||
Expenses: | ||||||||||||
Interest expense | 134,684 | 133,899 | 87,597 | |||||||||
Property operating expenses | 43,990 | 34,707 | 1,039 | |||||||||
Depreciation and amortization | 154,061 | 133,089 | 80,176 | |||||||||
General and administrative | 47,193 | 37,465 | 25,922 | |||||||||
Realized loss on derivatives | 23,393 | 0 | 0 | |||||||||
Loss (gain) on extinguishment of debt | (2,094 | ) | (1,081 | ) | 0 | |||||||
Provision for loan losses | 94 | 0 | 1,000 | |||||||||
401,321 | 338,079 | 195,734 | ||||||||||
Income from continuing operations before income taxes | 145,413 | 110,962 | 89,225 | |||||||||
Income tax (expense) benefit | (1,306 | ) | (188 | ) | (82 | ) | ||||||
Income from continuing operations | 144,107 | 110,774 | 89,143 | |||||||||
Discontinued operations: | ||||||||||||
Gain (loss) on sales of properties | 163,933 | 14,437 | 1,267 | |||||||||
Impairment of assets | (32,648 | ) | 0 | 0 | ||||||||
Income from discontinued operations, net | 8,033 | 13,382 | 12,246 | |||||||||
139,318 | 27,819 | 13,513 | ||||||||||
Net income | 283,425 | 138,593 | 102,656 | |||||||||
Less: Preferred stock dividends | 23,201 | 25,130 | 21,463 | |||||||||
Net income attributable to noncontrolling interests | 126 | 238 | 13 | |||||||||
Net income attributable to common stockholders | $ | 260,098 | $ | 113,225 | $ | 81,180 | ||||||
Average number of common shares outstanding: | ||||||||||||
Basic | 93,732 | 78,861 | 61,661 | |||||||||
Diluted | 94,309 | 79,409 | 62,045 | |||||||||
Earnings per share: | ||||||||||||
Basic: | ||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.29 | $ | 1.08 | $ | 1.10 | ||||||
Discontinued operations, net | 1.49 | 0.35 | 0.22 | |||||||||
Net income attributable to common stockholders* | $ | 2.77 | $ | 1.44 | $ | 1.32 | ||||||
Diluted: | ||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.28 | $ | 1.08 | $ | 1.09 | ||||||
Discontinued operations, net | 1.48 | 0.35 | 0.22 | |||||||||
Net income attributable to common stockholders* | $ | 2.76 | $ | 1.43 | $ | 1.31 | ||||||
* | Amounts may not sum due to rounding |
See accompanying notes
HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Accumulated | ||||||||||||||||||||||||||||||||||||||||
Capital in | Other | |||||||||||||||||||||||||||||||||||||||
Preferred | Common | Excess of | Treasury | Cumulative | Cumulative | Comprehensive | Other | Noncontrolling | ||||||||||||||||||||||||||||||||
Stock | Stock | Par Value | Stock | Net Income | Dividends | Income | Equity | Interest | Total | |||||||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2005 | $ | 276,875 | $ | 58,050 | $ | 1,306,471 | $ | (2,054 | ) | $ | 830,103 | $ | (1,039,032 | ) | $ | 0 | $ | 343 | $ | 0 | $ | 1,430,756 | ||||||||||||||||||
Net income | 102,643 | 13 | 102,656 | |||||||||||||||||||||||||||||||||||||
Total comprehensive income | 102,656 | |||||||||||||||||||||||||||||||||||||||
Adjustment to adopt SFAS 158 | (135 | ) | (135 | ) | ||||||||||||||||||||||||||||||||||||
Adjustment to adopt FSP14-1 | 6,410 | 6,410 | ||||||||||||||||||||||||||||||||||||||
Amounts related to 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 | 2,215 | 460,267 | |||||||||||||||||||||||||||||||||||
Proceeds from issuance of common stock | 3,223 | 106,525 | 109,748 | |||||||||||||||||||||||||||||||||||||
SFAS123(R) reclassification | (521 | ) | 521 | 0 | ||||||||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||||||
Common stock-$2.8809 per share | (178,365 | ) | (178,365 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series D-$1.96875 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series E-$1.50 per share | (112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series F-$1.90625 per share | (13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series G-$0.0625 per share | (132 | ) | (132 | ) | ||||||||||||||||||||||||||||||||||||
Balances at December 31, 2006 | 338,993 | 73,152 | 1,880,221 | (2,866 | ) | 932,746 | (1,238,860 | ) | (135 | ) | 1,845 | 2,228 | 1,987,324 | |||||||||||||||||||||||||||
Net income | 138,355 | 238 | 138,593 | |||||||||||||||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on equity investments | (192 | ) | (192 | ) | ||||||||||||||||||||||||||||||||||||
Unrealized actuarial gain/(loss) | 140 | 140 | ||||||||||||||||||||||||||||||||||||||
Cash flow hedge activity | (7,194 | ) | (7,194 | ) | ||||||||||||||||||||||||||||||||||||
Total comprehensive income | 131,347 | |||||||||||||||||||||||||||||||||||||||
Adjustment to adopt FSP14-1 | 17,652 | 17,652 | ||||||||||||||||||||||||||||||||||||||
Contributions by noncontrolling interests | 7,640 | 7,640 | ||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | (419 | ) | (419 | ) | ||||||||||||||||||||||||||||||||||||
Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures | 2,223 | 85,080 | (1,086 | ) | (250 | ) | 85,967 | |||||||||||||||||||||||||||||||||
Conversion of preferred stock | (8,750 | ) | 212 | 8,538 | 0 | |||||||||||||||||||||||||||||||||||
Option compensation expense | 1,106 | 1,106 | ||||||||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | 9,825 | 402,608 | 412,433 | |||||||||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||||||
Common stock-$2.2791 per share | (182,969 | ) | (182,969 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series D-$1.96875 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series E-$1.50 per share | (112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series F-$1.90625 per share | (13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series G-$1.875 per share | (3,799 | ) | (3,799 | ) | ||||||||||||||||||||||||||||||||||||
Balances at December 31, 2007 | 330,243 | 85,412 | 2,394,099 | (3,952 | ) | 1,071,101 | (1,446,959 | ) | (7,381 | ) | 2,701 | 9,687 | 2,434,951 | |||||||||||||||||||||||||||
Net income | 283,299 | 126 | 283,425 | |||||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on equity investments | (846 | ) | (846 | ) | ||||||||||||||||||||||||||||||||||||
Unrecognized actuarial gain/(loss) | (715 | ) | (715 | ) | ||||||||||||||||||||||||||||||||||||
Cash flow hedge activity | 7,829 | 7,829 | ||||||||||||||||||||||||||||||||||||||
Total comprehensive income | 289,693 | |||||||||||||||||||||||||||||||||||||||
Contributions by noncontrolling interests | 3,556 | 3,556 | ||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | (2,766 | ) | (2,766 | ) | ||||||||||||||||||||||||||||||||||||
Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures | 1,804 | 76,013 | (1,193 | ) | (99 | ) | 76,525 | |||||||||||||||||||||||||||||||||
Conversion of preferred stock | (40,314 | ) | 975 | 39,339 | 0 | |||||||||||||||||||||||||||||||||||
Option compensation expense | 1,503 | 1,503 | ||||||||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | 16,444 | 695,239 | 711,683 | |||||||||||||||||||||||||||||||||||||
Cash dividends: | ||||||||||||||||||||||||||||||||||||||||
Common stock-$2.70 per share | (253,659 | ) | (253,659 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series D-$1.96875 per share | (7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series E-$1.50 per share | (112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series F-$1.90625 per share | (13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock, Series G-$1.875 per share | (1,870 | ) | (1,870 | ) | ||||||||||||||||||||||||||||||||||||
Balances at December 31, 2008 | $ | 289,929 | $ | 104,635 | $ | 3,204,690 | $ | (5,145 | ) | $ | 1,354,400 | $ | (1,723,819 | ) | $ | (1,113 | ) | $ | 4,105 | $ | 10,603 | $ | 3,238,285 | |||||||||||||||||
See accompanying notes
HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Operating activities | ||||||||||||
Net income | $ | 283,425 | $ | 138,593 | $ | 102,656 | ||||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||||||
Depreciation and amortization | 163,045 | 149,626 | 97,564 | |||||||||
Other amortization expenses | 14,837 | 9,065 | 3,197 | |||||||||
Stock-based compensation expense | 8,530 | 7,050 | 6,980 | |||||||||
Capitalized interest | (25,029 | ) | (12,526 | ) | (4,470 | ) | ||||||
Provision for loan losses | 94 | 0 | 1,000 | |||||||||
Impairment of assets | 32,648 | 0 | 0 | |||||||||
Loss (gain) on extinguishment of debt, net | (2,094 | ) | (1,081 | ) | 0 | |||||||
Gain on investment | 0 | (3,900 | ) | 0 | ||||||||
Amortization of above/below market leases, net | (1,039 | ) | (792 | ) | (60 | ) | ||||||
Rental income less than (in excess of) cash received | 7,793 | 440 | 11,129 | |||||||||
Loss (gain) on sales of properties | (163,933 | ) | (14,437 | ) | (1,267 | ) | ||||||
Deferred gain on sales of properties | 3,708 | 0 | 0 | |||||||||
Increase (decrease) in accrued expenses and other liabilities | 17,363 | (3,253 | ) | 5,810 | ||||||||
Decrease (increase) in receivables and other assets | (3,694 | ) | 2,676 | (6,220 | ) | |||||||
Net cash provided from (used in) operating activities | 335,654 | 271,461 | 216,319 | |||||||||
Investing activities | ||||||||||||
Investment in real property | (1,072,376 | ) | (631,209 | ) | (429,183 | ) | ||||||
Investment in loans receivable | (83,109 | ) | (235,894 | ) | (86,990 | ) | ||||||
Other investments, net of payments | (12,458 | ) | (22,998 | ) | (11,761 | ) | ||||||
Principal collected on loans receivable | 18,169 | 52,346 | 82,255 | |||||||||
Investment in Windrose, net of cash assumed | 0 | 0 | (182,571 | ) | ||||||||
Investment in Rendina/Paramount, net of cash assumed | 0 | (141,963 | ) | 0 | ||||||||
Decrease (increase) in restricted cash | (138,502 | ) | (7,578 | ) | 127 | |||||||
Proceeds from sales of properties | 287,047 | 98,314 | 69,887 | |||||||||
Other | (9,267 | ) | (3,932 | ) | (2,452 | ) | ||||||
Net cash provided from (used in) investing activities | (1,010,496 | ) | (892,914 | ) | (560,688 | ) | ||||||
Financing activities | ||||||||||||
Net increase (decrease) under unsecured lines of credit arrangements | 263,000 | 82,000 | 30,000 | |||||||||
Proceeds from derivative transactions | 0 | 2,858 | 0 | |||||||||
Proceeds from issuance of senior unsecured notes | 0 | 388,943 | 337,517 | |||||||||
Payments to extinguish senior unsecured notes | (42,330 | ) | (52,500 | ) | 0 | |||||||
Payments to extinguish liability to subsidiary trust issuing preferred securities | 0 | (50,000 | ) | 0 | ||||||||
Principal payments on secured debt | (58,594 | ) | (37,758 | ) | (3,033 | ) | ||||||
Net proceeds from the issuance of common stock | 782,285 | 491,593 | 182,069 | |||||||||
Contributions by noncontrolling interests | 3,556 | 2,865 | 0 | |||||||||
Distributions to noncontrolling interests | (2,766 | ) | (419 | ) | 0 | |||||||
Decrease (increase) in deferred loan expense | (348 | ) | (3,977 | ) | (2,377 | ) | ||||||
Cash distributions to stockholders | (276,860 | ) | (208,099 | ) | (199,828 | ) | ||||||
Net cash provided from (used in) financing activities | 667,943 | 615,506 | 344,348 | |||||||||
Increase (decrease) in cash and cash equivalents | (6,899 | ) | (5,947 | ) | (21 | ) | ||||||
Cash and cash equivalents at beginning of year | 30,269 | 36,216 | 36,237 | |||||||||
Cash and cash equivalents at end of year | $ | 23,370 | $ | 30,269 | $ | 36,216 | ||||||
See accompanying notes
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Accounting Policies and Related Matters |
Industry
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is an equity real estate investment trust (“REIT”) that invests in senior housing and health care real estate. Our full service platform also offers property management and development services to our customers. As of December 31, 2008, our broadly diversified portfolio consisted of 633 properties in 39 states. Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities. More information is available on the Internet at www.hcreit.com.
Principles of Consolidation
The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries and the accounts of our majority owned and controlled joint ventures. All material intercompany accounts and transactions have been eliminated.
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 collectability. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability 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 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.
Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.
Restricted Cash
Restricted cash primarily consists of amounts held in escrow for use in an Internal Revenue Code Section 1031 exchange. Restricted cash also includes amounts held by lenders to provide future payments for real estate taxes, insurance, tenant and capital improvements and amounts held in escrow relating to acquisitions we are entitled to receive over a period of time as outlined in the escrow agreement.
Deferred Loan Expenses
Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of debt arrangements. We amortize these costs over the term of the debt using the straight-line method, which approximates the effective interest method.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Equity Investments
Equity investments at December 31, 2008 and 2007 include an investment in a public company that has a readily determinable fair market value. We classify this equity investment as available-for-sale and, accordingly, record this investment at its fair market value with unrealized gains and losses included in accumulated other comprehensive income, a separate component of stockholders’ equity. Additionally, equity investments at December 31, 2008 include an investment in a private company. We do not have the ability to exercise influence over the company, so the investment was accounted for under the cost method. Under the cost method of accounting, investments in private companies are carried at cost and are adjusted only for other-than-temporary declines in fair value, return of capital and additional investments. These equity investments represented a minimal ownership interest in these companies.
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. 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 expected to be recognized over a weighted average period of 28.9 years and is as follows for the periods indicated (in thousands):
2009 | $ | 11,791 | ||
2010 | 10,079 | |||
2011 | 8,031 | |||
2012 | 6,305 | |||
2013 | 5,337 | |||
Thereafter | 60,329 | |||
Totals | $ | 101,872 | ||
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 is reduced to the estimated fair market value.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 $25,029,000, $12,526,000, and $4,470,000 during 2008, 2007 and 2006, 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.
Gain on Sale of Assets
We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectability of the sales price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate.
Real Estate Loans Receivable
Real estate loans receivable consist of mortgage loans and other real estate loans. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risks. The loans are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guarantiesand/or personal guaranties.
Allowance for Losses on Loans Receivable
The allowance for losses on loans receivable 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 collectability of loan payments. We evaluate the collectability 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 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, 2008, we had loans with outstanding balances of $72,770,000 on non-accrual status ($799,000 at December 31, 2007). To the extent circumstances improve and the risk of collectability 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 principal balance.
Fair Value of Derivative Instruments
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 utilizing 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. See Note 10 for additional information.
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
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
requirements for qualification as such for each taxable year. Our taxable REIT subsidiaries are subject to federal, state and local income taxes. See Note 14 for additional information.
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.
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 medical office buildings. See Note 19 for additional information.
New Accounting Standards
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS 141(R)”) and Statement of Financial Accounting Standards No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). SFAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. Early adoption is prohibited for both standards. The provisions of SFAS 141(R) and SFAS 160, effective on January 1, 2009, are to be applied prospectively; however, the disclosure provisions of SFAS 160 are to be applied retrospectively. In accordance with SFAS 141(R), we have elected to expense all development costs for projects in progress when it was determined they would not be completed prior to the adoption of SFAS 141(R). The amount expensed during the three months ended December 31, 2008 was de minimis. See Note 22 for additional information.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements in SFAS 133 concerning an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. Adoption of SFAS 161 is not expected to have a material impact on our consolidated financial position, although additional disclosures may be required.
In May 2008, the FASB issued FASB Staff Position APB14-1 (“FSP”), which provides guidance on accounting for debt that may be settled in cash upon conversion. The FSP requires bifurcation of the convertible debt instrument into a debt component and an equity component. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature. The difference between the contractual principal on the debt and the value allocated to the debt is recorded as an equity component and represents the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value is amortized to interest expense using the effective interest method over the life of the debt. The equity component remains on the balance sheet until it is derecognized through either the payoff or conversion. The FSP is effective for fiscal years beginning after December 16, 2008, and interim periods within those fiscal years. Earlier application is not permitted. Retrospective application is required for all periods presented in the annual financial statements for
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
instruments that were outstanding during any periods presented in the annual financial statements. See Note 22 for additional information.
Reclassifications
Certain amounts in prior years have been reclassified to conform to the current year presentation.
2. | Business Combinations |
Windrose Medical Properties Trust Merger
We completed our merger with Windrose Medical Properties Trust on December 20, 2006. These operations are the principal component of our medical office building segment (see Note 19). During the year ended December 31, 2007, we finalized the purchase price allocation for the Windrose merger, as required by Statement of Financial Accounting Standards No. 141, Business Combinations. The purchase price allocation reflects reallocations between identifiable tangible and intangible assets. However, these adjustments did not have a significant impact on our consolidated results of operations.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the purchase price calculation and the allocation to assets acquired and liabilities assumed, based upon their estimated fair values (in thousands):
Common stock | $ | 396,846 | ||
Preferred stock | 62,118 | |||
Cash consideration | 183,139 | |||
Assumed debt | 301,641 | |||
Assumed liabilities and minority interests | 26,034 | |||
Acquisition costs | 29,139 | |||
Purchase price | 998,917 | |||
Merger-related expenses | 5,213 | |||
Capitalized equity issuance costs | 912 | |||
Net purchase price | $ | 992,792 | ||
Land and land improvements | $ | 126,079 | ||
Buildings and improvements | 774,634 | |||
Acquired lease intangibles | 42,595 | |||
Above market lease intangibles | 32,352 | |||
Cash and cash equivalents | 15,587 | |||
Receivables and other assets | 22,526 | |||
Total assets acquired | 1,013,773 | |||
Below market lease intangibles | 20,981 | |||
Net purchase price | 992,792 | |||
Secured debt | 249,424 | |||
Liability to subsidiary trust issuing preferred securities | 52,217 | |||
Accrued expenses and other liabilities | 19,044 | |||
Total liabilities assumed | 320,685 | |||
Minority interests | 6,989 | |||
Net assets acquired | $ | 665,118 | ||
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):
Year Ended December 31, 2006 | ||||
(Unaudited) | ||||
Revenues | $ | 416,311 | ||
Income from continuing operations available to common stockholders | 62,481 | |||
Income from continuing operations available to common stockholders per share — basic | 0.88 | |||
Income from continuing operations available to common stockholders per share — diluted | 0.87 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. | Real Property Owned |
The following is a summary of our real property investment activity for the periods presented (in thousands):
Year Ended | ||||||||||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | December 31, 2006 | ||||||||||||||||||||||||||||||
Medical | Medical | |||||||||||||||||||||||||||||||
Investment | Office | Investment | Office | Investment | ||||||||||||||||||||||||||||
Properties | Buildings | Totals | Properties | Buildings | Totals(2) | Properties | Totals(1) | |||||||||||||||||||||||||
Real property acquisitions: | ||||||||||||||||||||||||||||||||
Independent living/CCRCs | $ | 68,300 | $ | 68,300 | $ | 43,000 | $ | 43,000 | $ | 56,417 | $ | 56,417 | ||||||||||||||||||||
Assisted living facilities | 45,490 | 45,490 | 36,233 | 36,233 | 77,600 | 77,600 | ||||||||||||||||||||||||||
Skilled nursing facilities | 11,360 | 11,360 | 122,875 | 122,875 | 148,955 | 148,955 | ||||||||||||||||||||||||||
Specialty care facilities | 196,303 | 196,303 | 11,923 | 11,923 | 0 | |||||||||||||||||||||||||||
Medical office buildings | $ | 121,809 | 121,809 | $ | 381,134 | 381,134 | 0 | |||||||||||||||||||||||||
Land parcels | 10,000 | 10,000 | 8,928 | 8,928 | 10,250 | 10,250 | ||||||||||||||||||||||||||
Total acquisitions | 331,453 | 121,809 | 453,262 | 222,959 | 381,134 | 604,093 | 293,222 | 293,222 | ||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Assumed debt | 0 | (166,188 | ) | (166,188 | ) | (25,049 | ) | (25,049 | ) | |||||||||||||||||||||||
Assumed other assets/(liabilities) | (1,899 | ) | (1,899 | ) | (2,432 | ) | (2,432 | ) | 0 | |||||||||||||||||||||||
Cash disbursed for acquisitions | 331,453 | 119,910 | 451,363 | 222,959 | 212,514 | 435,473 | 268,173 | 268,173 | ||||||||||||||||||||||||
Construction in progress additions: | ||||||||||||||||||||||||||||||||
Independent living/CCRCs | 272,136 | 272,136 | 154,648 | 154,648 | 58,335 | 58,335 | ||||||||||||||||||||||||||
Assisted living facilities | 147,486 | 147,486 | 55,929 | 55,929 | 69,218 | 69,218 | ||||||||||||||||||||||||||
Skilled nursing facilities | 29,429 | 29,429 | 21,924 | 21,924 | 20,270 | 20,270 | ||||||||||||||||||||||||||
Specialty care facilities | 77,642 | 77,642 | 60,326 | 60,326 | 6,464 | 6,464 | ||||||||||||||||||||||||||
Medical office buildings | 93,907 | 93,907 | 14,688 | 14,688 | 0 | |||||||||||||||||||||||||||
Total CIP additions | 526,693 | 93,907 | 620,600 | 292,827 | 14,688 | 307,515 | 154,287 | 154,287 | ||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Capitalized interest | (22,716 | ) | (2,313 | ) | (25,029 | ) | (12,134 | ) | (279 | ) | (12,413 | ) | (4,444 | ) | (4,444 | ) | ||||||||||||||||
Capitalized other | (119 | ) | (119 | ) | 0 | 0 | ||||||||||||||||||||||||||
Cash disbursed for CIP | 503,858 | 91,594 | 595,452 | 280,693 | 14,409 | 295,102 | 149,843 | 149,843 | ||||||||||||||||||||||||
Capital improvements | 17,468 | 8,093 | 25,561 | 34,680 | 5,296 | 39,976 | 11,167 | 11,167 | ||||||||||||||||||||||||
Total cash invested in real property | $ | 852,779 | $ | 219,597 | $ | 1,072,376 | $ | 538,332 | $ | 232,219 | $ | 770,551 | $ | 429,183 | $ | 429,183 | ||||||||||||||||
(1) | 2006 excludes the Windrose merger. | |
(2) | 2007 includes the Rendina/Paramount acquisition. |
The following is a summary of the development projects that were placed into service and began earning rent during the periods presented (in thousands):
Year Ended | ||||||||||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | December 31, 2006 | ||||||||||||||||||||||||||||||
Medical | Medical | |||||||||||||||||||||||||||||||
Investment | Office | Investment | Office | Investment | ||||||||||||||||||||||||||||
Properties | Buildings | Totals | Properties | Buildings | Totals | Properties | Totals | |||||||||||||||||||||||||
Construction in progress conversions: | ||||||||||||||||||||||||||||||||
Development projects: | ||||||||||||||||||||||||||||||||
Independent living/CCRCs | $ | 144,088 | $ | 144,088 | $ | 22,601 | $ | 22,601 | $ | 0 | ||||||||||||||||||||||
Assisted living facilities | 45,956 | 45,956 | 56,599 | 56,599 | $ | 15,813 | 15,813 | |||||||||||||||||||||||||
Skilled nursing facilities | 16,918 | 16,918 | 16,568 | 16,568 | 6,330 | 6,330 | ||||||||||||||||||||||||||
Medical office buildings | $ | 11,823 | 11,823 | $ | 0 | 0 | 0 | |||||||||||||||||||||||||
Specialty care facilities | 35,151 | 35,151 | 33,771 | 33,771 | 0 | |||||||||||||||||||||||||||
Total development projects | 242,113 | 11,823 | 253,936 | 129,539 | 0 | 129,539 | 22,143 | 22,143 | ||||||||||||||||||||||||
Expansion projects | 40,954 | 40,954 | 2,489 | 2,489 | 2,187 | 2,187 | ||||||||||||||||||||||||||
Total construction conversions | $ | 283,067 | $ | 11,823 | $ | 294,890 | $ | 132,028 | $ | 0 | $ | 132,028 | $ | 24,330 | $ | 24,330 | ||||||||||||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes certain information about our real property owned as of December 31, 2008 (dollars in thousands):
Building, | Accumulated | |||||||||||||||||||
Number of | Intangibles & | Gross | Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Assisted Living Facilities: | ||||||||||||||||||||
Arizona | 3 | $ | 3,060 | $ | 10,493 | $ | 13,553 | $ | 1,836 | |||||||||||
California | 8 | 8,390 | 50,629 | 59,019 | 10,036 | |||||||||||||||
Colorado | 1 | 940 | 3,721 | 4,661 | 711 | |||||||||||||||
Connecticut | 5 | 8,030 | 36,799 | 44,829 | 6,565 | |||||||||||||||
Delaware | 1 | 560 | 21,220 | 21,780 | 2,347 | |||||||||||||||
Florida | 10 | 3,877 | 47,260 | 51,137 | 16,074 | |||||||||||||||
Georgia | 2 | 1,080 | 3,688 | 4,768 | 670 | |||||||||||||||
Illinois | 5 | 8,817 | 37,147 | 45,964 | 929 | |||||||||||||||
Indiana | 2 | 220 | 5,520 | 5,740 | 1,155 | |||||||||||||||
Kansas | 1 | 600 | 10,590 | 11,190 | 1,192 | |||||||||||||||
Louisiana | 1 | 1,100 | 10,161 | 11,261 | 4,592 | |||||||||||||||
Massachusetts | 5 | 5,590 | 49,051 | 54,641 | 6,296 | |||||||||||||||
Mississippi | 1 | 520 | 7,675 | 8,195 | 1,089 | |||||||||||||||
Montana | 3 | 1,460 | 14,772 | 16,232 | 2,480 | |||||||||||||||
Nevada | 3 | 1,820 | 25,126 | 26,946 | 4,727 | |||||||||||||||
New Jersey | 2 | 740 | 7,447 | 8,187 | 1,407 | |||||||||||||||
New York | 3 | 1,930 | 31,917 | 33,847 | 2,126 | |||||||||||||||
North Carolina | 40 | 15,514 | 181,381 | 196,895 | 34,100 | |||||||||||||||
Ohio | 7 | 3,294 | 30,984 | 34,278 | 8,844 | |||||||||||||||
Oklahoma | 16 | 2,374 | 30,403 | 32,777 | 8,113 | |||||||||||||||
Oregon | 2 | 1,077 | 8,989 | 10,066 | 2,431 | |||||||||||||||
Pennsylvania | 2 | 2,234 | 13,409 | 15,643 | 2,229 | |||||||||||||||
South Carolina | 2 | 642 | 7,308 | 7,950 | 1,312 | |||||||||||||||
Tennessee | 5 | 6,436 | 41,579 | 48,015 | 2,623 | |||||||||||||||
Texas | 23 | 9,282 | 93,366 | 102,648 | 14,483 | |||||||||||||||
Utah | 2 | 1,420 | 12,842 | 14,262 | 2,152 | |||||||||||||||
Virginia | 4 | 2,509 | 32,425 | 34,934 | 3,732 | |||||||||||||||
Washington | 5 | 5,010 | 35,051 | 40,061 | 2,887 | |||||||||||||||
Wisconsin | 7 | 5,010 | 54,633 | 59,643 | 3,534 | |||||||||||||||
Construction in progress | 13 | 0 | 0 | 163,106 | 0 | |||||||||||||||
184 | 103,536 | 915,586 | 1,182,228 | 150,672 | ||||||||||||||||
Independent Living/CCRC Facilities: | ||||||||||||||||||||
Arizona | 1 | $ | 950 | $ | 9,086 | $ | 10,036 | $ | 2,104 | |||||||||||
California | 8 | 20,174 | 156,951 | 177,125 | 10,137 | |||||||||||||||
Colorado | 3 | 8,690 | 57,179 | 65,869 | 1,895 | |||||||||||||||
Florida | 4 | 9,772 | 127,059 | 136,831 | 16,217 | |||||||||||||||
Georgia | 4 | 9,696 | 74,819 | 84,515 | 11,818 | |||||||||||||||
Idaho | 1 | 550 | 14,740 | 15,290 | 2,512 | |||||||||||||||
Indiana | 3 | 3,120 | 100,623 | 103,743 | 2,666 | |||||||||||||||
Kansas | 1 | 1,400 | 11,000 | 12,400 | 563 | |||||||||||||||
Missouri | 1 | 510 | 5,490 | 6,000 | 287 | |||||||||||||||
Nevada | 1 | 1,144 | 10,831 | 11,975 | 5,226 | |||||||||||||||
North Carolina | 3 | 15,970 | 32,195 | 48,165 | 1,814 | |||||||||||||||
South Carolina | 4 | 8,200 | 71,062 | 79,262 | 5,906 | |||||||||||||||
Texas | 2 | 5,670 | 16,620 | 22,290 | 4,174 | |||||||||||||||
Washington | 1 | 620 | 4,780 | 5,400 | 664 | |||||||||||||||
Wisconsin | 1 | 400 | 23,237 | 23,637 | 0 | |||||||||||||||
Construction in progress | 7 | 0 | 0 | 281,927 | 0 | |||||||||||||||
45 | 86,866 | 715,672 | 1,084,465 | 65,983 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Building, | Accumulated | |||||||||||||||||||
Number of | Intangibles & | Gross | Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Skilled Nursing Facilities: | ||||||||||||||||||||
Alabama | 7 | $ | 2,520 | $ | 36,990 | $ | 39,510 | $ | 6,392 | |||||||||||
Arizona | 2 | 1,870 | 15,978 | 17,848 | 1,503 | |||||||||||||||
Colorado | 4 | 3,460 | 31,246 | 34,706 | 4,493 | |||||||||||||||
Connecticut | 6 | 2,700 | 22,738 | 25,438 | 4,583 | |||||||||||||||
Florida | 42 | 23,312 | 280,503 | 303,815 | 50,313 | |||||||||||||||
Georgia | 3 | 2,650 | 14,932 | 17,582 | 2,330 | |||||||||||||||
Idaho | 3 | 4,110 | 27,496 | 31,606 | 4,333 | |||||||||||||||
Illinois | 4 | 1,110 | 24,700 | 25,810 | 10,955 | |||||||||||||||
Indiana | 6 | 1,959 | 36,904 | 38,863 | 7,811 | |||||||||||||||
Kansas | 1 | 1,120 | 8,360 | 9,480 | 755 | |||||||||||||||
Kentucky | 10 | 3,015 | 65,433 | 68,448 | 8,556 | |||||||||||||||
Louisiana | 7 | 784 | 34,717 | 35,501 | 3,491 | |||||||||||||||
Maryland | 2 | 840 | 14,760 | 15,600 | 1,303 | |||||||||||||||
Massachusetts | 21 | 19,690 | 221,388 | 241,078 | 36,798 | |||||||||||||||
Mississippi | 11 | 1,625 | 52,651 | 54,276 | 11,189 | |||||||||||||||
Missouri | 3 | 1,247 | 23,827 | 25,074 | 8,295 | |||||||||||||||
New Hampshire | 1 | 340 | 4,360 | 4,700 | 434 | |||||||||||||||
New Jersey | 1 | 1,850 | 3,050 | 4,900 | 504 | |||||||||||||||
Ohio | 20 | 11,785 | 192,144 | 203,929 | 23,800 | |||||||||||||||
Oklahoma | 3 | 1,464 | 21,883 | 23,347 | 3,951 | |||||||||||||||
Oregon | 1 | 300 | 5,316 | 5,616 | 1,779 | |||||||||||||||
Pennsylvania | 3 | 2,979 | 19,839 | 22,818 | 6,010 | |||||||||||||||
Tennessee | 22 | 8,730 | 122,604 | 131,334 | 25,545 | |||||||||||||||
Texas | 19 | 11,222 | 145,770 | 156,992 | 13,272 | |||||||||||||||
Utah | 1 | 991 | 6,850 | 7,841 | 624 | |||||||||||||||
Virginia | 10 | 7,121 | 58,779 | 65,900 | 3,098 | |||||||||||||||
Construction in progress | 2 | 0 | 0 | 22,105 | 0 | |||||||||||||||
215 | 118,794 | 1,493,218 | 1,634,117 | 242,117 | ||||||||||||||||
Specialty Care Facilities: | ||||||||||||||||||||
California | 3 | $ | 6,200 | $ | 72,103 | $ | 78,303 | $ | 903 | |||||||||||
Idaho | 1 | 3,600 | 20,802 | 24,402 | 473 | |||||||||||||||
Illinois | 1 | 3,650 | 19,915 | 23,565 | 6,343 | |||||||||||||||
Indiana | 2 | 870 | 19,931 | 20,801 | 428 | |||||||||||||||
Kentucky | 1 | 3,800 | 26,700 | 30,500 | 390 | |||||||||||||||
Louisiana | 1 | 1,928 | 10,509 | 12,437 | 821 | |||||||||||||||
Massachusetts | 2 | 3,075 | 48,320 | 51,395 | 21,495 | |||||||||||||||
New Jersey | 1 | 0 | 38,300 | 38,300 | 560 | |||||||||||||||
Ohio | 1 | 1,200 | 12,800 | 14,000 | 0 | |||||||||||||||
Oklahoma | 2 | 3,149 | 9,898 | 13,047 | 1,057 | |||||||||||||||
Texas | 8 | 9,825 | 156,711 | 166,536 | 10,075 | |||||||||||||||
Wisconsin | 1 | 4,700 | 20,669 | 25,369 | 791 | |||||||||||||||
Construction in progress | 3 | 0 | 0 | 75,509 | 0 | |||||||||||||||
Assets held for sale | 1 | 0 | 0 | 26,211 | 0 | |||||||||||||||
28 | 41,997 | 456,658 | 600,375 | 43,336 |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Building, | Accumulated | |||||||||||||||||||
Number of | Intangibles & | Gross | Depreciation | |||||||||||||||||
Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
Medical Office Buildings: | ||||||||||||||||||||
Alabama | 5 | $ | 2,902 | $ | 44,542 | $ | 47,444 | $ | 3,729 | |||||||||||
Alaska | 1 | 217 | 30,492 | 30,709 | 2,036 | |||||||||||||||
Arizona | 6 | 17,456 | 92,064 | 109,520 | 8,953 | |||||||||||||||
California | 7 | 7,560 | 125,407 | 132,967 | 10,601 | |||||||||||||||
Colorado | 1 | 877 | 6,708 | 7,585 | 363 | |||||||||||||||
Florida | 25 | 39,686 | 246,041 | 285,727 | 22,313 | |||||||||||||||
Georgia | 7 | 13,264 | 61,212 | 74,476 | 6,462 | |||||||||||||||
Illinois | 3 | 4,762 | 13,624 | 18,386 | 1,405 | |||||||||||||||
Indiana | 1 | 0 | 22,134 | 22,134 | 181 | |||||||||||||||
Missouri | 1 | 336 | 17,247 | 17,583 | 1,177 | |||||||||||||||
Nevada | 9 | 16,804 | 104,108 | 120,912 | 8,372 | |||||||||||||||
New Jersey | 4 | 9,804 | 46,653 | 56,457 | 2,119 | |||||||||||||||
New York | 7 | 4,173 | 60,782 | 64,955 | 5,109 | |||||||||||||||
North Carolina | 10 | 7,816 | 19,149 | 26,965 | 3,111 | |||||||||||||||
Ohio | 1 | 610 | 7,420 | 8,030 | 677 | |||||||||||||||
Oklahoma | 1 | 132 | 13,008 | 13,140 | 767 | |||||||||||||||
Pennsylvania | 1 | 86 | 23,230 | 23,316 | 1,219 | |||||||||||||||
South Carolina | 1 | 171 | 18,362 | 18,533 | 1,546 | |||||||||||||||
Tennessee | 5 | 9,266 | 60,500 | 69,766 | 4,460 | |||||||||||||||
Texas | 14 | 17,792 | 193,378 | 211,170 | 14,073 | |||||||||||||||
Construction in progress | 4 | 0 | 0 | 96,772 | 0 | |||||||||||||||
Assets held for sale | 14 | 0 | 0 | 21,843 | 0 | |||||||||||||||
128 | 153,714 | 1,206,061 | 1,478,390 | 98,673 | ||||||||||||||||
Total Real Property Owned | 600 | $ | 504,907 | $ | 4,787,195 | $ | 5,979,575 | $ | 600,781 | |||||||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of our real estate intangibles as of the dates indicated (dollars in thousands):
December 31, 2008 | December 31, 2007 | |||||||
Assets: | ||||||||
In place lease intangibles | $ | 81,500 | $ | 81,068 | ||||
Above market tenant leases | 9,658 | 9,592 | ||||||
Below market ground leases | 39,806 | 40,652 | ||||||
Lease commissions | 2,360 | 0 | ||||||
Gross historical cost | 133,324 | 131,312 | ||||||
Accumulated amortization | (31,452 | ) | (18,289 | ) | ||||
Net book value | $ | 101,872 | $ | 113,023 | ||||
Weighted-average amortization period in years | 28.9 | 28.4 | ||||||
Liabilities: | ||||||||
Below market tenant leases | $ | 25,265 | $ | 25,186 | ||||
Above market ground leases | 3,419 | 3,499 | ||||||
Gross historical cost | 28,684 | 28,685 | ||||||
Accumulated amortization | (8,671 | ) | (4,446 | ) | ||||
Net book value | $ | 20,013 | $ | 24,239 | ||||
Weighted-average amortization period in years | 8.9 | 10.0 |
At December 31, 2008, future minimum lease payments receivable under operating leases are as follows (in thousands):
2009 | $ | 479,984 | ||
2010 | 473,333 | |||
2011 | 464,948 | |||
2012 | 453,132 | |||
2013 | 438,081 | |||
Thereafter | 2,835,888 | |||
Totals | $ | 5,145,366 | ||
We purchased $23,097,000 and $11,204,000 of real property that had previously been financed by the Company with loans in 2008 and 2006, respectively. We acquired properties, which included the assumption of debt totaling $166,188,000 and $326,690,000 in 2007 and 2006, respectively. Certain of our acquisitions included deferred acquisition payments totaling $2,000,000 for 2006. These non-cash activities are appropriately not reflected in the accompanying statements of cash flows. See Note 18 for non-cash investing activity related to the Windrose merger.
4. | Dispositions, Assets Held for Sale and Discontinued Operations |
During the year ended December 31, 2008, we completed the sale of 38 properties and recognized $163,933,000 of net gains on sales. At December 31, 2008, we had one specialty care facility and 14 medical office buildings that satisfied the requirements of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) for held for sale treatment. We did not recognize any impairment loss on the specialty care facility as the fair value less estimated costs to sell exceeded our carrying value. The fair value was estimated based on a third party offer to purchase. In determining the fair value of
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the medical office buildings, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected net operating income and published capitalization rates. Management’s estimates projected that the carrying value of the assets was greater than the estimated fair value and an impairment charge of $32,648,000 was recorded to reduce the properties to their estimated fair value less costs to sell. The following is a summary of our real property disposition activity for the periods presented (in thousands):
Year Ended | ||||||||||||||||||||||||||||||||
December 31, 2008 | December 31, 2007 | December 31, 2006 | ||||||||||||||||||||||||||||||
Medical | Medical | |||||||||||||||||||||||||||||||
Investment | Office | �� | Investment | Office | Investment | |||||||||||||||||||||||||||
Properties | Buildings | Totals | Properties | Buildings | Totals | Properties | Totals | |||||||||||||||||||||||||
Real property dispositions: | ||||||||||||||||||||||||||||||||
Independent living/CCRCs | $ | 15,547 | $ | 15,547 | $ | 5,346 | $ | 5,346 | $ | 12,745 | $ | 12,745 | ||||||||||||||||||||
Assisted living facilities | 148,075 | 148,075 | 57,351 | 57,351 | 52,541 | 52,541 | ||||||||||||||||||||||||||
Skilled nursing facilities | 6,290 | 6,290 | 18,107 | 18,107 | 10,079 | 10,079 | ||||||||||||||||||||||||||
Medical office buildings | $ | 6,781 | 6,781 | $ | 0 | 0 | 0 | |||||||||||||||||||||||||
Specialty care facilities | 8,735 | 8,735 | 0 | 0 | ||||||||||||||||||||||||||||
Land parcels | 73 | 73 | 3,073 | 3,073 | 423 | 423 | ||||||||||||||||||||||||||
Total dispositions | 178,720 | 6,781 | 185,501 | 83,877 | 0 | 83,877 | 75,788 | 75,788 | ||||||||||||||||||||||||
Adjusted for: | ||||||||||||||||||||||||||||||||
Gain/(loss) on sales | 164,998 | (1,065 | ) | 163,933 | 14,437 | 14,437 | 1,267 | 1,267 | ||||||||||||||||||||||||
LandAmerica settlement | 2,500 | 2,500 | 0 | 0 | ||||||||||||||||||||||||||||
Other assets/(liabilities) disposal | (116 | ) | (116 | ) | 0 | 0 | ||||||||||||||||||||||||||
Seller financing | (59,649 | ) | (5,122 | ) | (64,771 | ) | 0 | (7,168 | ) | (7,168 | ) | |||||||||||||||||||||
Proceeds from real property sales | $ | 286,569 | $ | 478 | $ | 287,047 | $ | 98,314 | $ | 0 | $ | 98,314 | $ | 69,887 | $ | 69,887 | ||||||||||||||||
During the year ended December 31, 2008, we completed the sale of 29 properties to Emeritus Corporation for $299,413,000, consisting of $249,413,000 in cash proceeds and $50,000,000 of seller financing, and we recognized a gain on sale of $145,646,000. Total funds of $299,413,000 were held in escrow for use in an Internal Revenue Code Section 1031 exchange, of which $162,558,000 was utilized during the year ended December 31, 2008. Please see Note 21 for additional information.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the three months ended March 31, 2009, we sold two specialty care facilities and one assisted living facility. Also, at March 31, 2009, we had five assisted living facilities classified as held-for-sale. In accordance with SFAS 144, we have reclassified the income and expenses attributable to all properties sold prior to or held for sale at March 31, 2009 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 SFAS 144 as a result of classifying properties as discontinued operations for the periods presented (in thousands):
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenues: | ||||||||||||
Rental Income | $ | 26,031 | $ | 44,114 | $ | 43,429 | ||||||
Expenses: | ||||||||||||
Interest expense | 6,375 | 11,427 | 12,599 | |||||||||
Property operating expenses | 2,639 | 2,768 | 76 | |||||||||
Depreciation and amortization | 8,984 | 16,537 | 17,388 | |||||||||
General and adminstrative | 0 | 0 | 1,120 | |||||||||
Income (loss) from discontinued operations, net | $ | 8,033 | $ | 13,382 | $ | 12,246 | ||||||
5. | Real Estate Loans Receivable |
The following is a summary of real estate loans receivable (in thousands):
December 31, | ||||||||
2008 | 2007 | |||||||
Mortgage loans | $ | 137,292 | $ | 143,091 | ||||
Other real estate loans | 345,593 | 238,303 | ||||||
Totals | $ | 482,885 | $ | 381,394 | ||||
All real estate loans receivable are in our investment property segment. The following is a summary of our real estate loan activity for the periods presented (in thousands):
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Amount | Amount | Amount | ||||||||||
Advances on real estate loans receivable: | ||||||||||||
Investments in new loans | $ | 121,493 | $ | 205,770 | $ | 75,209 | ||||||
Draws on existing loans | 21,265 | 30,124 | 11,781 | |||||||||
Total gross investments in real estate loans | 142,758 | 235,894 | 86,990 | |||||||||
Less: Seller financing on sales of real property | (59,649 | ) | 0 | 0 | ||||||||
Net cash advances on real estate loans receivable | 83,109 | 235,894 | 86,990 | |||||||||
Receipts on real estate loans receivable: | ||||||||||||
Loan payoffs | 8,815 | 42,028 | 65,002 | |||||||||
Principal payments on loans | 9,354 | 10,318 | 17,253 | |||||||||
Total principal receipts on real estate loans | 18,169 | 52,346 | 82,255 | |||||||||
Net cash advances (receipts) on real estate loans receivable | $ | 64,940 | $ | 183,548 | $ | 4,735 | ||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of mortgage loans at December 31, 2008:
Final | Number | Principal | ||||||||||||
Payment | of | Amount at | Carrying | |||||||||||
Due | Loans | Payment Terms | Inception | Amount | ||||||||||
(In thousands) | ||||||||||||||
2009 | 12 | Monthly payments from $8,099 to $83,355, including interest from 4.46% to 19.26% | $ | 59,099 | $ | 49,599 | ||||||||
2010 | 1 | Monthly payments of $20,310, including interest of 9.25% | 2,635 | 2,635 | ||||||||||
2011 | 3 | Monthly payments from $2,960 to $26,072, including interest from 11.84% to 19.26% | 6,127 | 6,702 | ||||||||||
2012 | 3 | Monthly payments from $26,278 to $132,889, including interest from 7.00% to 19.26% | 28,741 | 18,506 | ||||||||||
2013 | 2 | Monthly payments from $18,403 to $114,960, including interest from 5.32% to 7.60% | 22,300 | 21,951 | ||||||||||
2015 | 1 | Monthly payments of $2,734, including interest of 9.00% | 65 | 365 | ||||||||||
2020 | 2 | Monthly payments from $37,493 to $317,978, including interest of 10.39% | 38,500 | 37,534 | ||||||||||
Totals | $ | 157,467 | $ | 137,292 | ||||||||||
6. | Allowance for Losses on Loans Receivable |
The following is a summary of the allowance for losses on loans receivable (in thousands):
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Balance at beginning of year | $ | 7,406 | $ | 7,406 | $ | 6,461 | ||||||
Provision for loan losses | 94 | 0 | 1,000 | |||||||||
Charge-offs | 0 | 0 | (55 | ) | ||||||||
Balance at end of year | $ | 7,500 | $ | 7,406 | $ | 7,406 | ||||||
The following is a summary of our loan impairments (in thousands):
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Balance of impaired loans at year end | $ | 72,770 | $ | 799 | $ | 10,529 | ||||||
Allowance for loan losses | 7,500 | 7,406 | 7,406 | |||||||||
Balance of impaired loans not reserved(1) | $ | 65,270 | $ | 0 | $ | 3,123 | ||||||
Average impaired loans for the year | $ | 36,785 | $ | 5,664 | $ | 13,650 | ||||||
Interest recognized on impaired loans(2) | 3,288 | 0 | 2,495 |
(1) | At December 31, 2007, the allowance for losses on loans receivable exceeds the balance of impaired loans. See Note 1 for additional information. | |
(2) | Represents interest recognized prior to placement on non-accrual status. |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7. | Concentration of Risk |
As of December 31, 2008, long-term care facilities, which include skilled nursing, independent living/continuing care retirement communities and assisted living facilities, comprised 66% (68% at December 31, 2007) of our real estate investments and were located in 39 states. The following table summarizes certain information about our customer concentration as of December 31, 2008 (dollars in thousands):
Number of | Total | Percent of | ||||||||||
Properties | Investment | Investment(1) | ||||||||||
Concentration by investment: | ||||||||||||
Senior Living Communities, LLC | 10 | $ | 345,974 | 6 | % | |||||||
Signature Healthcare LLC | 34 | 317,284 | 5 | % | ||||||||
Brookdale Senior Living, Inc | 86 | 298,143 | 5 | % | ||||||||
Life Care Centers of America, Inc. | 25 | 264,578 | 5 | % | ||||||||
Emeritus Corporation | 21 | 245,741 | 4 | % | ||||||||
Remaining portfolio | 457 | 4,389,959 | 75 | % | ||||||||
Totals | 633 | $ | 5,861,679 | 100 | % | |||||||
Number of | Total | Percent of | ||||||||||
Properties | Revenue(2) | Revenue(3) | ||||||||||
Concentration by revenue(4): | ||||||||||||
Signature Healthcare LLC | 34 | $ | 41,291 | 7 | % | |||||||
Emeritus Corporation | 21 | 40,553 | 7 | % | ||||||||
Brookdale Senior Living, Inc | 86 | 38,065 | 7 | % | ||||||||
Life Care Centers of America, Inc. | 25 | 27,671 | 5 | % | ||||||||
Merrill Gardens LLC | 13 | 19,816 | 3 | % | ||||||||
Remaining portfolio | 454 | 394,848 | 69 | % | ||||||||
Other income | n/a | 10,521 | 2 | % | ||||||||
Totals | 633 | $ | 572,765 | 100 | % | |||||||
(1) | Investments with top five customers comprised 27% of total investments at December 31, 2007. | |
(2) | Revenues include gross revenues and revenues from discontinued operations for the year ended December 31, 2008. | |
(3) | Revenues from top five customers were 30% and 43% for the years ended December 31, 2007 and 2006, respectively. | |
(4) | All of our top five customers are in our investment properties segment. |
8. | Borrowings Under Line of Credit Arrangement and Related Items |
At December 31, 2008, we had an unsecured credit arrangement with a consortium of sixteen banks providing for a revolving line of credit in the amount of $1,150,000,000, which is scheduled to expire on August 5, 2011 (with the ability to extend for one year at our discretion if we are in compliance with all covenants). Borrowings under the agreement 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 (1.07% at December 31, 2008). The applicable margin is based on our ratings with Moody’s Investors Service and Standard & Poor’s Ratings Services and was 0.6% at December 31, 2008. 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, 2008. We also pay an annual agent’s fee of $50,000. Principal is due upon expiration of the agreement.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following information relates to aggregate borrowings under the unsecured lines of credit arrangements (dollars in thousands):
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Balance outstanding at December 31 | $ | 570,000 | $ | 307,000 | $ | 225,000 | ||||||
Maximum amount outstanding at any month end | $ | 744,000 | $ | 434,000 | $ | 276,000 | ||||||
Average amount outstanding (total of daily principal balances divided by days in year) | $ | 500,561 | $ | 234,392 | $ | 164,905 | ||||||
Weighted average interest rate (actual interest expense divided by average borrowings outstanding) | 3.77 | % | 6.68 | % | 6.91 | % |
9. | Senior Unsecured Notes and Secured Debt |
We have $1,831,151,000 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 $1,845,000,000 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 are convertible, in certain circumstances, into cash and, if applicable, shares of 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 common stock for the note’s conversion value in excess of such principal amount. In addition, on each of December 1, 2011, December 1, 2016 and December 1, 2021, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.
In July 2007, we issued $400,000,000 of 4.75% senior unsecured convertible notes due July 2027, generating net proceeds of $388,943,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of our common stock at an initial conversion rate of 20.0000 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $50.00 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 common stock for the note’s conversion value in excess of such principal amount. In addition, on each of July 15, 2012, July 15, 2017 and July 15, 2022, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.
We have mortgage loans totaling $446,525,000, collateralized by owned properties, with annual interest rates ranging from 4.89% to 8.08%. The carrying amounts of the mortgages represent the par value of $448,378,000 adjusted for any unamortized fair value adjustments. The carrying values of the properties securing the mortgage loans totaled $773,673,000 at December 31, 2008.
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, 2008, we were in compliance with all of the covenants under our debt agreements.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2008, the annual principal payments on these debt obligations are as follows (in thousands):
Senior | Secured | |||||||||||
Unsecured Notes(1) | Debt(1) | Totals | ||||||||||
2009 | $ | 0 | $ | 39,657 | $ | 39,657 | ||||||
2010 | 0 | 15,120 | 15,120 | |||||||||
2011 | 0 | 52,314 | 52,314 | |||||||||
2012 | 250,000 | 13,710 | 263,710 | |||||||||
2013 | 300,000 | 62,198 | 362,198 | |||||||||
Thereafter | 1,295,000 | 265,379 | 1,560,379 | |||||||||
Totals | $ | 1,845,000 | $ | 448,378 | $ | 2,293,378 | ||||||
(1) | Amounts above represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet. |
10. | Derivative Instruments |
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, 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. Derivatives are recorded at fair market value on the balance sheet as assets or liabilities.
On May 6, 2004, we entered into two interest rate swap agreements (the “2004 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 2004 Swaps were treated as fair-value hedges for accounting purposes and we utilized the short-cut method to assess effectiveness. The 2004 Swaps were with highly rated counterparties in which we received a fixed rate of 6.0% and paid 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 the 2004 Swaps that was recorded as an addition to interest expense. For the year ended December 31, 2007, we generated $89,000 of savings related to the 2004 Swaps that was recorded as a reduction of interest expense. On September 12, 2007, we terminated the 2004 Swaps and we received a $2,125,000 cash settlement. The unamortized amount of this settlement at December 31, 2008 was $1,634,000 ($1,973,000 at December 31, 2007) and is recorded as an adjustment to the hedged item. This amount will be amortized to interest expense over the life of the hedged debt using the effective interest method. For the year ended December 31, 2008, $339,000 of amortization was recognized as a reduction to senior unsecured notes interest expense.
On July 2, 2007, we entered into two forward-starting interest rate swaps (the “July 2007 Swaps”), with an aggregate notional amount of $200,000,000 that were designated as cash flow hedges of the variability in forecasted interest payments attributable to changes in the LIBOR swap rate, on long-term fixed rate debt forecasted to be issued in 2007. The July 2007 Swaps had the economic effect of fixing $200,000,000 of our debt at 4.913% for five years. The July 2007 Swaps were settled on July 17, 2007, which was the date that the forecasted debt was priced. The cash settlement value of these contracts at July 17, 2007 was $733,000. This amount represented the effective portion of the hedges as there was no hedge ineffectiveness. Therefore, the $733,000 settlement value was deferred in accumulated other comprehensive income (“AOCI”) and will be amortized to interest expense using the effective interest method. The unamortized amount of AOCI related to these contracts at December 31, 2008 is $521,000 ($668,000 at December 31, 2007). For the years ended December 31, 2008 and 2007, we reclassified $147,000 and $65,000, respectively, out of AOCI as a reduction of interest expense.
On September 12, 2007, we entered into two forward-starting interest rate swaps (the “September 2007 Swaps”) for a total notional amount of $250,000,000 to hedge 10 years of interest payments associated with a long-
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
term borrowing that was expected to occur in 2008. The September 2007 Swaps each had an effective date of September 12, 2008 and a maturity date of September 12, 2018. We expected to settle the 2007 Swaps when the debt was to be priced. The September 2007 Swaps were to have the economic effect of fixing $250,000,000 of our future debt at 4.469% plus a credit spread for 10 years. The September 2007 Swaps had been designated as cash flow hedges and we expected the 2007 Swaps to be highly effective at offsetting changes in cash flows of interest payments on $250,000,000 of our future debt due to changes in the LIBOR swap rate. Therefore, effective changes in the fair value of the September 2007 Swaps were recorded in AOCI and were to be reclassified to interest expense when the hedged forecasted transactions affected earnings (as interest payments are made on the expected debt issuance). The ineffective portion of the changes in fair value was to be recorded directly in earnings.
At December 31, 2007, the September 2007 Swaps were reported at their fair value of $7,990,000 and were included in other liabilities and AOCI. During the year ended December 31, 2008, as a result of the severe dislocation in the credit markets, we terminated plans to issue debt and also terminated the September 2007 Swaps for $23,393,000. Amounts previously recorded in AOCI were reclassified to realized loss on derivatives resulting in $23,393,000 of expense as the forecasted transaction was no longer probable to occur.
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 utilizing 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.
11. | 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 to provide the letter of credit terminates in 2009. At December 31, 2008, our obligation under the of credit was $2,450,000.
We have an outstanding letter of credit issued for the benefit of certain insurance companies that provide liability and property insurance to one of our tenants. Our obligation to provide the letter of credit terminates in 2013. At December 31, 2008, our obligation under the letter of credit was $1,000,000.
We have an outstanding letter of credit issued for the benefit of a village in Illinois that secures the completion and installation of certain public improvements by one of our tenants in connection with the development of a facility. Our obligation to provide the letter of credit terminates in 2010. At December 31, 2008, our obligation under the letter of credit was $679,320.
We have an outstanding letter of credit issued for the benefit of a municipality in Pennsylvania in connection with the completion and installation of certain facility improvements by one of our subsidiaries. The improvements are expected to be completed in 2009. At December 31, 2008, our obligation under the letter of credit was $485,810.
At December 31, 2008, we had outstanding construction financings of $639,419,000 for leased properties and were committed to providing additional financing of approximately $729,278,000 to complete construction. At December 31, 2008, we had contingent purchase obligations totaling $15,278,000. 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, 2008, we had operating lease obligations of $163,978,000 relating to certain ground leases and Company office space. We incurred rental expense relating to our Company office space of $1,452,000, $678,000 and $939,000 for the years ended December 31, 2008, 2007 and 2006, 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, 2008, aggregate future minimum rentals to be received under these noncancelable subleases totaled $31,234,000.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2008, future minimum lease payments due under operating leases are as follows (in thousands):
2009 | $ | 4,220 | ||
2010 | 4,123 | |||
2011 | 4,229 | |||
2012 | 3,910 | |||
2013 | 3,921 | |||
Thereafter | 143,575 | |||
Totals | $ | 163,978 | ||
12. | Stockholders’ Equity |
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 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. At December 31, 2008 and 2007, there were 74,989 of such shares outstanding.
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 Series G Preferred Shares require cumulative distributions. During the year ended December 31, 2007, certain holders of our Series G Preferred Stock converted 295,800 shares into 211,702 shares of our common stock, leaving 1,804,200 of such shares outstanding at December 31, 2007. During the year ended December 31, 2008, certain holders of our Series G Preferred Stock converted 1,362,887 shares into 975,397 shares of our common stock, leaving 441,313 of such shares outstanding at December 31, 2008.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Common Stock
The following is a summary of our common stock issuances for the years presented (dollars in thousands, except per share amounts):
Date Issued | Shares Issued | Average Price | Gross Proceeds | Net Proceeds | ||||||||||||
April 2006 public issuance | 3,222,800 | $ | 36.00 | $ | 116,021 | $ | 109,748 | |||||||||
2006 Dividend reinvestment plan issuances | 1,876,377 | 36.34 | 68,184 | 68,184 | ||||||||||||
2006 Option exercises | 226,961 | 22.62 | 5,133 | 5,049 | ||||||||||||
2006 Totals(1) | 5,326,138 | $ | 189,338 | $ | 182,981 | |||||||||||
April 2007 public issuance | 6,325,000 | $ | 44.01 | $ | 278,363 | $ | 265,294 | |||||||||
December 2007 public issuance | 3,500,000 | 42.14 | 147,490 | 147,139 | ||||||||||||
2007 Dividend reinvestment plan issuances | 1,626,000 | 41.81 | 67,985 | 67,985 | ||||||||||||
2007 Option exercises | 401,630 | 27.82 | 11,175 | 11,175 | ||||||||||||
2007 Totals | 11,852,630 | $ | 505,013 | $ | 491,593 | |||||||||||
March 2008 public issuance | 3,000,000 | $ | 41.44 | $ | 124,320 | $ | 118,555 | |||||||||
July 2008 public issuance | 4,600,000 | 44.50 | 204,700 | 193,157 | ||||||||||||
September 2008 public issuance | 8,050,000 | 48.00 | 386,400 | 369,699 | ||||||||||||
2008 Dividend reinvestment plan issuances | 1,546,074 | 43.37 | 67,055 | 67,055 | ||||||||||||
2008 Equity shelf program issuances | 794,221 | 39.28 | 31,196 | 30,272 | ||||||||||||
2008 Option exercises | 118,895 | 29.83 | 3,547 | 3,547 | ||||||||||||
2008 Totals | 18,109,190 | $ | 817,218 | $ | 782,285 | |||||||||||
(1) | 2006 excludes $912,000 of costs related to the Windrose merger. |
Accumulated Other Comprehensive Income
The following is a summary of accumulated other comprehensive income (loss) as of the dates indicated (in thousands):
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Fair value of cash flow hedges | $ | 635 | $ | (7,194 | ) | |||
Unrecognized gains (losses) on equity investments | (1,038 | ) | (192 | ) | ||||
Unrecognized actuarial gains (losses) | (710 | ) | 5 | |||||
Totals | $ | (1,113 | ) | $ | (7,381 | ) | ||
Please see Note 10 for a discussion of cash flow hedge activity. For the years ended December 31, 2008 and 2007, we recognized $846,000 and $192,000, respectively, of unrealized losses on equity investments. Additionally, for the years ended December 31, 2008 and 2007, we recognized $715,000 of unrealized actuarial losses and $140,000 of unrealized actuarial gains, respectively.
Other Equity
Other equity consists of accumulated option compensation expense which represents the amount of amortized compensation costs related to stock options awarded to employees and directors subsequent to January 1, 2003.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Expense, which is recognized as the options vest based on the market value at the date of the award, totaled $1,503,000, $1,106,000 and $1,066,000 for the years ended December 31, 2008, 2007 and 2006, respectively.
13. | 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 employees under the 1995 Plan continue to vest through 2010 and expire ten years from the date of grant. Our non-employee directors, officers and key 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. Vesting periods for options, deferred stock units and restricted shares generally range from three years for non-employee directors to five years for officers and key employees. Options expire ten years from the date of grant. We granted 161,101, 272,057 and 97,815 restricted shares during 2008, 2007 and 2006, respectively, including 14,504, 10,717 and 13,426 shares to non-employee directors in 2008, 2007 and 2006, respectively.
Option Valuation Assumptions
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:
2008 | 2007 | 2006 | ||||||||||
Dividend yield(1) | 6.47 | % | 5.60 | % | 6.79 | % | ||||||
Expected volatility | 20.5 | % | 19.9 | % | 20.3 | % | ||||||
Risk-free interest rate | 3.42 | % | 4.74 | % | 4.35 | % | ||||||
Expected life (in years) | 6.5 | 5.0 | 5.0 | |||||||||
Weighted-average fair value(1) | $ | 6.25 | $ | 8.31 | $ | 5.26 |
(1) | Certain options granted to employees include dividend equivalent rights. 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. |
The dividend yield represented the dividend yield of our common stock on the dates of grant. Our computation of expected volatility was based on historical volatility. The risk-free interest rates used were the7-year U.S. Treasury Notes yield on the date of grant for the 2008 grants and the5-year U.S. Treasury Notes yield on the date of grant for the 2007 and 2006 grants. The expected life was based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations regarding future employee behavior.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Option Award Activity
The following table summarizes information about stock option activity for the periods indicated (shares in thousands):
Year Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Number | �� | Weighted Average | Number | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Stock Options | of Shares | Exercise Price | of Shares | Exercise Price | of Shares | Exercise Price | ||||||||||||||||||
Options at beginning of year | 637 | $ | 35.54 | 917 | $ | 30.79 | 685 | $ | 26.87 | |||||||||||||||
Options granted | 307 | 40.83 | 124 | 45.73 | 460 | 32.42 | ||||||||||||||||||
Options exercised | (119 | ) | 29.83 | (402 | ) | 27.82 | (227 | ) | 22.24 | |||||||||||||||
Options terminated | (8 | ) | 42.00 | (2 | ) | 39.72 | (1 | ) | 36.50 | |||||||||||||||
Options at end of year | 817 | $ | 38.29 | 637 | $ | 35.54 | 917 | $ | 30.79 | |||||||||||||||
Options exercisable at end of year | 281 | $ | 33.94 | 256 | $ | 32.26 | 462 | $ | 28.83 | |||||||||||||||
Weighted average fair value of options granted during the year | $ | 6.25 | $ | 8.31 | $ | 5.26 |
The following table summarizes information about stock options outstanding at December 31, 2008 (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 | 8 | $ | 16.81 | 2.0 | 8 | $ | 16.81 | |||||||||||||
$20-$30 | 66 | 25.63 | 4.7 | 66 | 25.63 | |||||||||||||||
$30-$40 | 321 | 36.28 | 7.1 | 185 | 36.27 | |||||||||||||||
$40 + | 422 | 42.22 | 9.7 | 22 | 45.73 | |||||||||||||||
Totals | 817 | $ | 38.29 | 8.2 | 281 | $ | 33.94 | |||||||||||||
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 were in-the-money at December 31, 2008. During the years ended December 31, 2008, 2007 and 2006, the aggregate intrinsic value of options exercised under our stock incentive plans was $2,042,000, $6,600,000 and $3,140,000, respectively, determined as of the date of option exercise. Cash received from option exercises under our stock incentive plans for the years ended December 31, 2008, 2007 and 2006 was $3,547,000, $17,775,000 and $4,872,000, respectively.
As of December 31, 2008, there was approximately $2,091,000 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, 2008, there was approximately $8,869,000 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, 2008 and changes for the year ended December 31, 2008:
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, 2007 | 382 | $ | 7.20 | 398 | $ | 40.94 | ||||||||||
Vested | (147 | ) | 6.02 | (112 | ) | 37.03 | ||||||||||
Granted | 307 | 6.25 | 161 | 41.05 | ||||||||||||
Terminated | (8 | ) | 7.04 | (4 | ) | 42.11 | ||||||||||
Non-vested at December 31, 2008 | 534 | $ | 6.98 | 443 | $ | 41.95 | ||||||||||
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 $8,530,000, $7,050,000 and $6,980,000 for the years ended December 31, 2008, 2007 and 2006, respectively.
14. | 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 main 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. At December 31, 2008, we had U.S. federal tax losses of $17,182,000, as well as apportioned state tax losses of $17,260,000 available for carryforward. Valuation allowances have been provided for those items for which, based upon an assessment, it is more likely than not that some portion may not be realized. The U.S. federal and state tax loss carryforwards expire from 2009 through 2029.
Cash distributions paid to common stockholders, for federal income tax purposes, are as follows:
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Per Share: | ||||||||||||
Ordinary income | $ | 1.6196 | $ | 1.8295 | $ | 1.7461 | ||||||
Return of capital | 0.8904 | 0.3596 | 1.1348 | |||||||||
1250 gains | 0.1900 | 0.0900 | 0.0000 | |||||||||
Totals | $ | 2.7000 | $ | 2.2791 | $ | 2.8809 | ||||||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the three months ended December 31, 2007, we recognized $3,900,000 of additional other income related to the payoff of a warrant equity investment. During the three months ended March 31, 2008, we determined that $1,325,000 of income taxes were due in connection with that investment gain.
15. | 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, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Numerator for basic and diluted earnings per share — net income attributable to common stockholders | $ | 260,098 | $ | 113,225 | $ | 81,180 | ||||||
Denominator for basic earnings per share — weighted average shares | 93,732 | 78,861 | 61,661 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock options | 82 | 150 | 136 | |||||||||
Non-vested restricted shares | 443 | 398 | 248 | |||||||||
Convertible senior unsecured notes | 52 | 0 | 0 | |||||||||
Potentially dilutive common shares | 577 | 548 | 384 | |||||||||
Denominator for diluted earnings per share — adjusted weighted average shares | 94,309 | 79,409 | 62,045 | |||||||||
Basic earnings per share | $ | 2.77 | $ | 1.44 | $ | 1.32 | ||||||
Diluted earnings per share | $ | 2.76 | $ | 1.43 | $ | 1.31 | ||||||
The diluted earnings per share calculation excludes the dilutive effect of 123,000 options for 2007 because the exercise price was greater than the average market price. The Series E Cumulative Convertible and Redeemable Preferred Stock and the Series G Cumulative Convertible Preferred Stock were not included in the calculations for 2008, 2007 and 2006 as the effect of the conversions was anti-dilutive to income from continuing operations available to common stockholders (the “control number” as defined by Statement of Financial Accounting Standards No. 128). The $345,000,000 Convertible Senior Notes due December 2026 were not included in the calculation for 2007 and 2006 as the effect of the conversion was anti-dilutive. The $400,000,000 Convertible Senior Notes due July 2027 were not included in the calculation for 2008 and 2007 as the effect of the conversion was anti-dilutive.
16. | 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 and Other Real Estate Loan Receivable — The fair value of mortgage loans and other real estate loans receivable is generally 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.
Cash and Cash Equivalents — The carrying amount approximates fair value.
Equity Investments — Equity investments are recorded at their fair market value.
Borrowings Under Unsecured Lines of Credit Arrangements — The carrying amount of the unsecured line of credit arrangement approximates fair value because the borrowings are interest rate adjustable.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated based on publicly available trading prices.
Secured Debt — The fair value of all secured debt 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.
Interest Rate Swap Agreements — Interest rate swap agreements, if any, 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, 2008 | December 31, 2007 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Financial Assets: | ||||||||||||||||
Mortgage loans receivable | $ | 137,292 | $ | 143,285 | $ | 143,091 | $ | 149,144 | ||||||||
Other real estate loans receivable | 345,593 | 302,584 | 238,303 | 239,951 | ||||||||||||
Equity investments | 1,030 | 1,030 | 1,408 | 1,408 | ||||||||||||
Cash and cash equivalents | 23,370 | 23,370 | 30,269 | 30,269 | ||||||||||||
Interest rate swap agreements | 0 | 0 | (7,990 | ) | (7,990 | ) | ||||||||||
Financial Liabilities: | ||||||||||||||||
Borrowings under unsecured lines of credit arrangements | $ | 570,000 | $ | 570,000 | $ | 307,000 | $ | 307,000 | ||||||||
Senior unsecured notes | 1,831,151 | 1,605,770 | 1,869,284 | 1,902,031 | ||||||||||||
Secured debt | 446,525 | 452,262 | 507,476 | 515,989 |
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 introduces a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. SFAS 157 for financial assets and liabilities is effective for fiscal years beginning after November 15, 2007, and was adopted as the standard for those assets and liabilities as of January 1, 2008. The impact of adoption was not significant. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Interest rate swap agreements are valued using models that assume a hypothetical transaction to sell the asset or transfer the liability in the principal market for the asset or liability based on market data derived from interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment timing, loss severities, credit risks and default rates.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The market approach is utilized to measure fair value for our financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Fair Value Measurements as of December 31, 2008 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Equity investments(1) | $ | 561 | $ | 561 | $ | 0 | $ | 0 | ||||||||
Totals | $ | 561 | $ | 561 | $ | 0 | $ | 0 | ||||||||
(1) | Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date. |
17. | Retirement Arrangements |
Under the retirement plan and trust (the “401(k) Plan”), eligible employees may make contributions, and we may make matching contributions and a profit sharing contribution. Our contributions to the 401(k) Plan totaled $864,000, $441,000 and $413,000 in 2008, 2007 and 2006, respectively.
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 2009 fiscal year. Benefit payments are expected to total $4,003,000 during the next five fiscal years and no benefit payments are expected to occur 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 $3,109,000 at December 31, 2008 ($1,915,000 at December 31, 2007).
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, | ||||||||
2008 | 2007 | |||||||
Reconciliation of benefit obligation: | ||||||||
Obligation at January 1 | $ | 1,915 | $ | 1,597 | ||||
Service cost | 364 | 362 | ||||||
Interest cost | 115 | 96 | ||||||
Actuarial (gain)/loss | 715 | (140 | ) | |||||
Obligation at December 31 | $ | 3,109 | $ | 1,915 | ||||
December 31, | ||||||||
2008 | 2007 | |||||||
Funded status: | ||||||||
Funded status at December 31 | $ | (3,109 | ) | $ | (1,915 | ) | ||
Unrecognized (gain)/loss | 0 | 0 | ||||||
Prepaid/(accrued) benefit cost | $ | (3,109 | ) | $ | (1,915 | ) | ||
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows the components of net periodic benefit costs for the periods indicated (in thousands):
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
Service cost | $ | 364 | $ | 362 | ||||
Interest cost | 115 | 96 | ||||||
Net actuarial loss | 0 | 0 | ||||||
Net periodic benefit cost | $ | 479 | $ | 458 | ||||
The following table provides information for the SERP, which has an accumulated benefit in excess of plan assets (in thousands):
December 31, | ||||||||
2008 | 2007 | |||||||
Projected benefit obligation | $ | 3,109 | $ | 1,915 | ||||
Accumulated benefit obligation | 2,026 | 1,420 | ||||||
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 | Net Periodic Benefit Cost | |||||||||||||||
Obligations | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Discount rate | 6.25 | % | 6.00 | % | 6.00 | % | 6.00 | % | ||||||||
Rate of compensation increase | 4.50 | % | 4.25 | % | 4.25 | % | 4.25 | % | ||||||||
Expected long-term return on plan assets | n/a | n/a | n/a | n/a |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
18. | Supplemental Cash Flow Information |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Supplemental cash flow information — interest paid | $ | 156,914 | $ | 140,166 | $ | 98,890 | ||||||
Supplemental cash flow information — taxes paid | 1,789 | 238 | 126 | |||||||||
Supplemental schedule of non-cash activities: | ||||||||||||
Assets and liabilities assumed from real property acquisitions: | ||||||||||||
Secured debt | $ | 0 | $ | 19,731 | $ | 25,049 | ||||||
Other liabilities | 1,899 | 3,597 | 0 | |||||||||
Other assets | 0 | 712 | 0 | |||||||||
Assets and liabilities assumed from business combinations: | ||||||||||||
Real estate investments | $ | 0 | $ | 285,302 | $ | 975,660 | ||||||
Other assets acquired | 0 | 10,050 | 22,526 | |||||||||
Secured debt | 0 | 146,457 | 249,424 | |||||||||
Liability to subsidiary trust issuing preferred securities | 0 | 0 | 52,217 | |||||||||
Other liabilities | 0 | 6,932 | 40,025 | |||||||||
Minority interests | 0 | 0 | 6,989 | |||||||||
Issuance of common stock | 0 | 0 | 396,846 | |||||||||
Issuance of preferred stock | 0 | 0 | 62,118 |
19. | Segment Reporting |
We invest in senior housing and health care real estate. We evaluate our business and make resource allocations on our two business segments — investment properties and medical office buildings. 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 medical office building segment, our properties 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 in 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, deferred loan expenses and corporate office equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining net operating income.
During the year ended December 31, 2008, we changed the name of the operating properties segment to medical office buildings and reclassified certain assets and related revenues. Four specialty care facilities that were formerly classified as operating properties have been reclassified to investment properties. Accordingly, we have reclassified the following 2007 amounts to be consistent with the current year classification: (i) rental income of $7,673,000; (ii) real estate depreciation/amortization of $2,604,000; and (iii) total assets of $83,283,000. We have also reclassified the following 2006 amounts to be consistent with the current year classification: (i) rental income of $227,000; (ii) real estate depreciation/amortization of $101,000; and (iii) other income of $2,911,000.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Additionally, we have restated the following 2007 non-segment/corporate assets and revenues to be included in the related business segments to be consistent with the current year classification: (i) $5,597,000 of other income has been reclassified to investment properties; (ii) $76,324,000 of total assets has been reclassified to investment properties; and (iii) $51,682,000 of total assets has been reclassified to medical office buildings.
Summary information for the reportable segments is as follows (in thousands):
Property | Net | Real Estate | ||||||||||||||||||||||||||||||||||
Rental | Interest | Other | Total | Operating | Operating | Depreciation/ | Interest | Total | ||||||||||||||||||||||||||||
Income (1) | Income | Income | Revenues | Expenses (1) | Income (2) | Amortization (1) | Expense (1) | Assets | ||||||||||||||||||||||||||||
Year ended December 31, 2008: | ||||||||||||||||||||||||||||||||||||
Investment properties | $ | 388,849 | $ | 40,063 | $ | 7,899 | $ | 436,811 | $ | 0 | $ | 436,811 | $ | 111,809 | $ | 7,176 | $ | 4,698,807 | ||||||||||||||||||
Medical office buildings | 133,332 | 0 | 930 | 134,262 | 46,629 | 87,633 | 51,236 | 21,828 | 1,421,548 | |||||||||||||||||||||||||||
Non-segment/corporate | 0 | 0 | 1,692 | 1,692 | 0 | 1,692 | 0 | 112,055 | 72,763 | |||||||||||||||||||||||||||
$ | 522,181 | $ | 40,063 | $ | 10,521 | $ | 572,765 | $ | 46,629 | $ | 526,136 | $ | 163,045 | $ | 141,059 | $ | 6,193,118 | |||||||||||||||||||
Property | Net | Real Estate | ||||||||||||||||||||||||||||||||||
Rental | Interest | Other | Total | Operating | Operating | Depreciation/ | Interest | Total | ||||||||||||||||||||||||||||
Income (1) | Income | Income | Revenues | Expenses (1) | Income (2) | Amortization (1) | Expense (1) | Assets | ||||||||||||||||||||||||||||
Year ended December 31, 2007: | ||||||||||||||||||||||||||||||||||||
Investment properties | $ | 345,683 | $ | 25,823 | $ | 8,010 | $ | 379,516 | $ | 0 | $ | 379,516 | $ | 103,236 | $ | 8,763 | $ | 3,864,296 | ||||||||||||||||||
Medical office buildings | 111,614 | 0 | 497 | 112,111 | 37,475 | 74,636 | 46,390 | 23,278 | 1,276,330 | |||||||||||||||||||||||||||
Non-segment/corporate | 0 | 0 | 1,528 | 1,528 | 0 | 1,528 | 0 | 113,285 | 73,230 | |||||||||||||||||||||||||||
$ | 457,297 | $ | 25,823 | $ | 10,035 | $ | 493,155 | $ | 37,475 | $ | 455,680 | $ | 149,626 | $ | 145,326 | $ | 5,213,856 | |||||||||||||||||||
Property | Net | Real Estate | ||||||||||||||||||||||||||||||
Rental | Interest | Other | Total | Operating | Operating | Depreciation/ | Interest | |||||||||||||||||||||||||
Income (1) | Income | Income | Revenues | Expenses (1) | Income (2) | Amortization (1) | Expense (1) | |||||||||||||||||||||||||
Year ended December 31, 2006: | ||||||||||||||||||||||||||||||||
Investment properties | $ | 302,388 | $ | 18,829 | $ | 3,262 | $ | 324,479 | $ | 0 | $ | 324,479 | $ | 96,452 | $ | 9,042 | ||||||||||||||||
Medical office buildings | 3,247 | 0 | 0 | 3,247 | 1,115 | 2,132 | 1,112 | 610 | ||||||||||||||||||||||||
Non-segment/corporate | 0 | 0 | 662 | 662 | 0 | 662 | 0 | 90,544 | ||||||||||||||||||||||||
$ | 305,635 | $ | 18,829 | $ | 3,924 | $ | 328,388 | $ | 1,115 | $ | 327,273 | $ | 97,564 | $ | 100,196 | |||||||||||||||||
(1) | Includes amounts from discontinued operations. | |
(2) | Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties 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 properties. |
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
20. | Quarterly Results of Operations (Unaudited) |
The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2008 and 2007 (in thousands, except per share data). The sum of individual quarterly amounts may not agree to the annual amounts per the consolidated statements of income due to rounding.
Year Ended December 31, 2008 | ||||||||||||||||
1st Quarter | 2nd Quarter(2) | 3rd Quarter | 4th Quarter(3) | |||||||||||||
Revenues — as reported | $ | 135,852 | $ | 135,888 | $ | 145,096 | $ | 147,123 | ||||||||
Discontinued operations | (9,219 | ) | (3,953 | ) | (2,992 | ) | (1,062 | ) | ||||||||
Revenues — as adjusted(1) | $ | 126,633 | $ | 131,935 | $ | 142,104 | $ | 146,061 | ||||||||
Net income attributable to common stockholders | $ | 29,249 | $ | 155,410 | $ | 53,589 | $ | 21,850 | ||||||||
Net income attributable to common stockholders per share: | ||||||||||||||||
Basic | $ | 0.34 | $ | 1.74 | $ | 0.56 | $ | 0.21 | ||||||||
Diluted | 0.34 | 1.73 | 0.55 | 0.21 |
Year Ended December 31, 2007 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter(4) | |||||||||||||
Revenues — as reported | $ | 112,645 | $ | 119,252 | $ | 125,076 | $ | 133,532 | ||||||||
Discontinued operations | (11,525 | ) | (10,741 | ) | (9,821 | ) | (9,377 | ) | ||||||||
Revenues — as adjusted(1) | $ | 101,120 | $ | 108,511 | $ | 115,255 | $ | 124,155 | ||||||||
Net income attributable to common stockholders | $ | 23,036 | $ | 25,299 | $ | 23,326 | $ | 41,565 | ||||||||
Net income attributable to common stockholders per share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.32 | $ | 0.29 | $ | 0.50 | ||||||||
Diluted | 0.31 | 0.32 | 0.29 | 0.50 |
(1) | In accordance with FASB Statement No. 144, we have reclassified the income attributable to the properties sold prior to or held for sale at March 31, 2009 to discontinued operations. See Note 4. | |
(2) | The increases in net income and amounts per share are primarily attributable to gains on sales of real property ($118,168,000). | |
(3) | The decreases in net income and amounts per share are primarily attributable to impairment charges ($32,648,000) and realized loss on derivatives ($23,393,000) offset by gains on sales of real property ($33,120,000). | |
(4) | The increases in net income and amounts per share are primarily attributable to gains on sales of real property ($11,662,000), additional other income related to the payoff of a warrant equity investment ($3,900,000) and gains on extinguishment of debt ($1,081,000). |
21. | Subsequent Events |
Management Changes.On January 29, 2009, we announced that Raymond W. Braun entered into a consulting agreement with the Company effective February 1, 2009. Mr. Braun no longer serves as President of the Company and has resigned from the Board of Directors. Mr. Braun has agreed to provide consulting services through December 31, 2009 and will receive a base consulting fee of $800,000 during the term of the agreement. Additionally, we expect to recognize $3,909,000 of non-recurring expenses during the three months ended March 31, 2009 in connection with the departure of Mr. Braun.
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
S&P 500 Inclusion Offering.On February 3, 2009, we completed an offering of 5,816,870 shares of common stock for $214,352,000 of gross proceeds. The offering was made in connection with the Company’s inclusion in the S&P 500 Index at the close of trading on January 29, 2009.
LandAmerica Settlement.During 2008, we engaged in two Internal Revenue Code section 1031 like kind exchange transactions, and we retained LandAmerica 1031 Exchange Services, Inc. (“LES”) to act as a qualified intermediary. On November 26, 2008, LES and its parent, LandAmerica Financial Group, filed for bankruptcy protection. At that time, we had approximately $136,855,000 in two segregated escrow accounts (the “Exchange Funds”) held by Centennial Bank, an affiliate of LES. Although the terms of our agreements with LES required that the Exchange Funds be returned to us, the return of the Exchange Funds was stayed by the bankruptcy proceedings. On February 23, 2009, the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division, entered an order approving the stipulation and settlement agreement among LES, the unsecured creditors committees and us. Pursuant to the terms of that settlement agreement, the Exchange Funds plus $918,000 of interest were returned to us on February 23, 2009, and we made a settlement payment of $2,000,000 to the LES bankruptcy estate. In connection with these proceedings, we incurred approximately $500,000 in expenses. The settlement payment and expenses were recorded as reductions of gains on sales in 2008.
22. Retrospective Adoption of New Accounting Standards
We adopted FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”), and FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP 14-1”), effective January 1, 2009, each of which required retrospective application. SFAS 160 changed the accounting and reporting for minority interests, which have been re-characterized as non-controlling interests and classified as a component of equity. FSP 14-1 provides guidance on accounting for convertible debt that may be settled in cash upon conversion. It requires bifurcation of the convertible debt instrument into a debt component and an equity component. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature. The difference between the contractual principal on the debt and the value allocated to the debt is recorded as an equity component and represents the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value is amortized to interest expense using the effective interest method over the period used to estimate the fair value. The following tables illustrate the retrospective restatement of our previously reported consolidated balance sheet amounts to reflect the application of SFAS 160 and FSP 14-1for the periods indicated (in thousands):
As of December 31, 2008 | ||||||||||||||||
As Previously | FSP 14-1 | SFAS 160 | As | |||||||||||||
Reported | Adjustment | Adjustment | Adjusted | |||||||||||||
Liabilities: | ||||||||||||||||
Borrowings under unsecured lines of credit arrangements | $ | 570,000 | $ | 570,000 | ||||||||||||
Senior unsecured notes | 1,847,247 | $ | (16,096 | ) | 1,831,151 | |||||||||||
Secured debt | 446,525 | 446,525 | ||||||||||||||
Accrued expenses and other liabilities | 107,157 | 107,157 | ||||||||||||||
Total liabilities | 2,970,929 | (16,096 | ) | 0 | 2,954,833 | |||||||||||
Minority interests | 10,603 | (10,603 | ) | 0 | ||||||||||||
Equity: | ||||||||||||||||
Preferred stock | 289,929 | 289,929 | ||||||||||||||
Common stock | 104,635 | 104,635 | ||||||||||||||
Capital in excess of par value | 3,180,628 | 24,062 | 3,204,690 | |||||||||||||
Treasury stock | (5,145 | ) | (5,145 | ) | ||||||||||||
Cumulative net income | 1,362,366 | (7,966 | ) | 1,354,400 | ||||||||||||
Cumulative dividends | (1,723,819 | ) | (1,723,819 | ) | ||||||||||||
Accumulated other comprehensive income | (1,113 | ) | (1,113 | ) | ||||||||||||
Other equity | 4,105 | 4,105 | ||||||||||||||
Total Health Care REIT, Inc. stockholders’ equity | 3,211,586 | 16,096 | 0 | 3,227,682 | ||||||||||||
Noncontrolling interests | 0 | 10,603 | 10,603 | |||||||||||||
Total equity | 3,211,586 | 16,096 | 10,603 | 3,238,285 | ||||||||||||
Total liabilities and equity | $ | 6,193,118 | $ | 0 | $ | 0 | $ | 6,193,118 | ||||||||
As of December 31, 2007 | ||||||||||||||||
As Previously | FSP 14-1 | SFAS 160 | As | |||||||||||||
Reported | Adjustment | Adjustment | Adjusted | |||||||||||||
Liabilities: | ||||||||||||||||
Borrowings under unsecured lines of credit arrangements | $ | 307,000 | $ | 307,000 | ||||||||||||
Senior unsecured notes | 1,890,192 | $ | (20,908 | ) | 1,869,284 | |||||||||||
Secured debt | 507,476 | 507,476 | ||||||||||||||
Accrued expenses and other liabilities | 95,145 | 95,145 | ||||||||||||||
Total liabilities | 2,799,813 | (20,908 | ) | 0 | 2,778,905 | |||||||||||
Minority interests | 9,687 | (9,687 | ) | 0 | ||||||||||||
Equity: | ||||||||||||||||
Preferred stock | 330,243 | 330,243 | ||||||||||||||
Common stock | 85,412 | 85,412 | ||||||||||||||
Capital in excess of par value | 2,370,037 | 24,062 | 2,394,099 | |||||||||||||
Treasury stock | (3,952 | ) | (3,952 | ) | ||||||||||||
Cumulative net income | 1,074,255 | (3,154 | ) | 1,071,101 | ||||||||||||
Cumulative dividends | (1,446,959 | ) | (1,446,959 | ) | ||||||||||||
Accumulated other comprehensive income | (7,381 | ) | (7,381 | ) | ||||||||||||
Other equity | 2,701 | 2,701 | ||||||||||||||
Total Health Care REIT, Inc. stockholders’ equity | 2,404,356 | 20,908 | 0 | 2,425,264 | ||||||||||||
Noncontrolling interests | 0 | 9,687 | 9,687 | |||||||||||||
Total equity | 2,404,356 | 20,908 | 9,687 | 2,434,951 | ||||||||||||
Total liabilities and equity | $ | 5,213,856 | $ | 0 | $ | 0 | $ | 5,213,856 | ||||||||
The following tables illustrate the retrospective restatement of our previously reported consolidated statements of income amounts to reflect the application of SFAS 160 and FSP 14-1 as well as the SFAS 144 discontinued operation reclassifications for the periods indicated (amounts in thousands, except per share amounts):
Year Ended December 31, 2008 | ||||||||||||||||||||
As Previously | FSP 14-1 | SFAS 160 | SFAS 144 | As | ||||||||||||||||
Reported | Adjustment | Adjustment | Adjustment | Adjusted | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 500,630 | $ | 0 | $ | 0 | $ | (4,480 | ) | $ | 496,150 | |||||||||
Interest income | 40,063 | 40,063 | ||||||||||||||||||
Other income | 10,521 | 10,521 | ||||||||||||||||||
551,214 | 0 | 0 | (4,480 | ) | 546,734 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Interest expense | 130,813 | 4,812 | (941 | ) | 134,684 | |||||||||||||||
Property operating expenses | 43,990 | 43,990 | ||||||||||||||||||
Depreciation and amortization | 156,154 | (2,093 | ) | 154,061 | ||||||||||||||||
General and administrative | 47,193 | 47,193 | ||||||||||||||||||
Realized loss on derivatives | 23,393 | 23,393 | ||||||||||||||||||
Loss (gain) on extinguishment of debt | (2,094 | ) | (2,094 | ) | ||||||||||||||||
Provision for loan losses | 94 | 94 | ||||||||||||||||||
399,543 | 4,812 | 0 | (3,034 | ) | 401,321 | |||||||||||||||
Income from continuing operations before income taxes and minority interests | 151,671 | (4,812 | ) | 0 | (1,446 | ) | 145,413 | |||||||||||||
Income tax (expense) benefit | (1,306 | ) | (1,306 | ) | ||||||||||||||||
Income before minority interests | 150,365 | (4,812 | ) | 0 | (1,446 | ) | 144,107 | |||||||||||||
Minority interests | (126 | ) | 126 | 0 | ||||||||||||||||
Income from continuing operations | 150,239 | (4,812 | ) | 126 | (1,446 | ) | 144,107 | |||||||||||||
Discontinued operations: | ||||||||||||||||||||
Gain (loss) on sales of properties | 163,933 | 163,933 | ||||||||||||||||||
Impairment of assets | (32,648 | ) | (32,648 | ) | ||||||||||||||||
Income from discontinued operations, net | 6,587 | 1,446 | 8,033 | |||||||||||||||||
137,872 | 0 | 0 | 1,446 | 139,318 | ||||||||||||||||
Net income | 288,111 | (4,812 | ) | 126 | 0 | 283,425 | ||||||||||||||
Less: Preferred stock dividends | 23,201 | 23,201 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 0 | 126 | 126 | |||||||||||||||||
Net income attributable to common stockholders | $ | 264,910 | $ | (4,812 | ) | $ | 0 | $ | 0 | $ | 260,098 | |||||||||
Average number of common shares outstanding: | ||||||||||||||||||||
Basic | 93,732 | 93,732 | 93,732 | 93,732 | 93,732 | |||||||||||||||
Diluted | 94,309 | 94,309 | 94,309 | 94,309 | 94,309 | |||||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.36 | $ | (0.05 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 1.29 | ||||||||
Discontinued operations, net | 1.47 | 0.00 | 0.00 | 0.02 | 1.49 | |||||||||||||||
Net income attributable to common stockholders* | $ | 2.83 | $ | (0.05 | ) | $ | 0.00 | $ | 0.00 | $ | 2.77 | |||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.35 | $ | (0.05 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 1.28 | ||||||||
Discontinued operations, net | 1.46 | 0.00 | 0.00 | 0.02 | 1.48 | |||||||||||||||
Net income attributable to common stockholders* | $ | 2.81 | $ | (0.05 | ) | $ | 0.00 | $ | 0.00 | $ | 2.76 | |||||||||
Year Ended December 31, 2007 | ||||||||||||||||||||
As Previously | FSP 14-1 | SFAS 160 | SFAS 144 | As | ||||||||||||||||
Reported | Adjustment | Adjustment | Adjustment | Adjusted | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 417,673 | $ | 0 | $ | 0 | $ | (4,490 | ) | $ | 413,183 | |||||||||
Interest income | 25,823 | 25,823 | ||||||||||||||||||
Other income | 10,035 | 10,035 | ||||||||||||||||||
453,531 | 0 | 0 | (4,490 | ) | 449,041 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Interest expense | 131,893 | 3,047 | (1,041 | ) | 133,899 | |||||||||||||||
Property operating expenses | 34,707 | 34,707 | ||||||||||||||||||
Depreciation and amortization | 135,224 | (2,135 | ) | 133,089 | ||||||||||||||||
General and administrative | 37,465 | 37,465 | ||||||||||||||||||
Loss (gain) on extinguishment of debt | (1,081 | ) | (1,081 | ) | ||||||||||||||||
338,208 | 3,047 | 0 | (3,176 | ) | 338,079 | |||||||||||||||
Income from continuing operations before income taxes and minority interests | 115,323 | (3,047 | ) | 0 | (1,314 | ) | 110,962 | |||||||||||||
Income tax (expense) benefit | (188 | ) | (188 | ) | ||||||||||||||||
Income before minority interests | 115,135 | (3,047 | ) | 0 | (1,314 | ) | 110,774 | |||||||||||||
Minority interests | (238 | ) | 238 | 0 | ||||||||||||||||
Income from continuing operations | 114,897 | (3,047 | ) | 238 | (1,314 | ) | 110,774 | |||||||||||||
Discontinued operations: | ||||||||||||||||||||
Gain (loss) on sales of properties | 14,437 | 14,437 | ||||||||||||||||||
Income from discontinued operations, net | 12,068 | 1,314 | 13,382 | |||||||||||||||||
26,505 | 0 | 0 | 1,314 | 27,819 | ||||||||||||||||
Net income | 141,402 | (3,047 | ) | 238 | 0 | 138,593 | ||||||||||||||
Less: Preferred stock dividends | 25,130 | 25,130 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 0 | 238 | 238 | |||||||||||||||||
Net income attributable to common stockholders | $ | 116,272 | $ | (3,047 | ) | $ | 0 | $ | 0 | $ | 113,225 | |||||||||
Average number of common shares outstanding: | ||||||||||||||||||||
Basic | 78,861 | 78,861 | 78,861 | 78,861 | 78,861 | |||||||||||||||
Diluted | 79,409 | 79,409 | 79,409 | 79,409 | 79,409 | |||||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.14 | $ | (0.04 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 1.08 | ||||||||
Discontinued operations, net | 0.34 | 0.00 | 0.00 | 0.02 | 0.35 | |||||||||||||||
Net income attributable to common stockholders* | $ | 1.47 | $ | (0.04 | ) | $ | 0.00 | $ | 0.00 | $ | 1.44 | |||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.13 | $ | (0.04 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 1.08 | ||||||||
Discontinued operations, net | 0.33 | 0.00 | 0.00 | 0.02 | 0.35 | |||||||||||||||
Net income attributable to common stockholders* | $ | 1.46 | $ | (0.04 | ) | $ | 0.00 | $ | 0.00 | $ | 1.43 | |||||||||
Year Ended December 31, 2006 | ||||||||||||||||||||
As Previously | FSP 14-1 | SFAS 160 | SFAS 144 | As | ||||||||||||||||
Reported | Adjustment | Adjustment | Adjustment | Adjusted | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 265,489 | $ | 0 | $ | 0 | $ | (3,283 | ) | $ | 262,206 | |||||||||
Interest income | 18,829 | 18,829 | ||||||||||||||||||
Other income | 3,924 | 3,924 | ||||||||||||||||||
288,242 | 0 | 0 | (3,283 | ) | 284,959 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Interest expense | 88,383 | 107 | (893 | ) | 87,597 | |||||||||||||||
Property operating expenses | 1,039 | 1,039 | ||||||||||||||||||
Depreciation and amortization | 81,828 | (1,652 | ) | 80,176 | ||||||||||||||||
General and administrative | 25,922 | 25,922 | ||||||||||||||||||
Provision for loan losses | 1,000 | 1,000 | ||||||||||||||||||
198,172 | 107 | 0 | (2,545 | ) | 195,734 | |||||||||||||||
Income from continuing operations before income taxes and minority interests | 90,070 | (107 | ) | 0 | (738 | ) | 89,225 | |||||||||||||
Income tax (expense) benefit | (82 | ) | (82 | ) | ||||||||||||||||
Income before minority interests | 89,988 | (107 | ) | 0 | (738 | ) | 89,143 | |||||||||||||
Minority interests | (13 | ) | 13 | 0 | ||||||||||||||||
Income from continuing operations | 89,975 | (107 | ) | 13 | (738 | ) | 89,143 | |||||||||||||
Discontinued operations: | ||||||||||||||||||||
Gain (loss) on sales of properties | 1,267 | 1,267 | ||||||||||||||||||
Income from discontinued operations, net | 11,508 | 738 | 12,246 | |||||||||||||||||
12,775 | 0 | 0 | 738 | 13,513 | ||||||||||||||||
Net income | 102,750 | (107 | ) | 13 | 0 | 102,656 | ||||||||||||||
Less: Preferred stock dividends | 21,463 | 21,463 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 0 | 13 | 13 | |||||||||||||||||
Net income attributable to common stockholders | $ | 81,287 | $ | (107 | ) | $ | 0 | $ | 0 | $ | 81,180 | |||||||||
Average number of common shares outstanding: | ||||||||||||||||||||
Basic | 61,661 | 61,661 | 61,661 | 61,661 | 61,661 | |||||||||||||||
Diluted | 62,045 | 62,045 | 62,045 | 62,045 | 62,045 | |||||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.11 | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | 1.10 | |||||||||
Discontinued operations, net | 0.21 | 0.00 | 0.00 | 0.01 | 0.22 | |||||||||||||||
Net income attributable to common stockholders* | $ | 1.32 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 1.32 | ||||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations attributable to common stockholders | $ | 1.10 | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | 1.09 | |||||||||
Discontinued operations, net | 0.21 | 0.00 | 0.00 | 0.01 | 0.22 | |||||||||||||||
Net income attributable to common stockholders* | $ | 1.31 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 1.31 | ||||||||||
* | Amounts may not sum due to rounding |
In addition to the changes noted above for consolidated balance sheets and statements of income, conforming revisions have been made to the consolidated statements of stockholders’ equity and the consolidated statements of cash flows as well as Notes 1, 4, 9, 15, 16, 19 and 20 to the consolidated financial statements. The following is a summary of comprehensive income for the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flow hedge activity | $ | 7,829 | $ | (7,194 | ) | $ | 0 | |||||
Unrecognized losses on equity investments | (846 | ) | (192 | ) | 0 | |||||||
Unrecognized actuarial gains/(losses) | (715 | ) | 140 | 0 | ||||||||
Total other comprehensive income | 6,268 | (7,246 | ) | 0 | ||||||||
Net income attributable to controlling interests | 283,299 | 138,355 | 102,643 | |||||||||
Comprehensive income attributable to controlling interests | 289,567 | 131,109 | 102,643 | |||||||||
Net and comprehensive income attributable to noncontrolling interests | 126 | 238 | 13 | |||||||||
Total comprehensive income | $ | 289,693 | $ | 131,347 | $ | 102,656 | ||||||
We adopted FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“EITF 03-6-1”), effective January 1, 2009, which required retrospective application. EITF 03-6-1 clarifies that instruments granted in share-based payment transactions that are considered to be participating securities prior to vesting should be included in the earnings allocation under the two-class method of calculating earnings per share. We determined that our restricted shares granted under our long-term incentive plans are participating securities because the restricted shares participate in non-forfeitable dividends prior to vesting. Applying EITF 03-6-1 did not have an impact on previously reported amounts on any period presented.
HEALTH CARE REIT, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2008
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2008
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Assisted Living Facilities: | ||||||||||||||||||||||||||||||||||||
Alhambra, CA | $ | 0 | $ | 420 | $ | 2,534 | $ | 0 | $ | 420 | $ | 2,534 | $ | 552 | 1999 | 1999 | ||||||||||||||||||||
Asheboro, NC(2) | 3,397 | 290 | 5,032 | 165 | 290 | 5,197 | 754 | 2003 | 1998 | |||||||||||||||||||||||||||
Asheville, NC | 0 | 204 | 3,489 | 0 | 204 | 3,489 | 1,002 | 1999 | 1999 | |||||||||||||||||||||||||||
Asheville, NC | 0 | 280 | 1,955 | 351 | 280 | 2,306 | 379 | 2003 | 1992 | |||||||||||||||||||||||||||
Azusa, CA | 0 | 570 | 3,141 | 0 | 570 | 3,141 | 716 | 1998 | 1988 | |||||||||||||||||||||||||||
Bartlesville, OK | 0 | 100 | 1,380 | 0 | 100 | 1,380 | 505 | 1996 | 1995 | |||||||||||||||||||||||||||
Bellevue, WI | 0 | 1,740 | 18,260 | 0 | 1,740 | 18,260 | 1,215 | 2006 | 2004 | |||||||||||||||||||||||||||
Bradenton, FL | 0 | 252 | 3,298 | 0 | 252 | 3,298 | 1,225 | 1996 | 1995 | |||||||||||||||||||||||||||
Bradenton, FL | 0 | 100 | 1,700 | 942 | 100 | 2,642 | 1,215 | 1999 | 1996 | |||||||||||||||||||||||||||
Bremerton, WA | 0 | 390 | 2,210 | 123 | 390 | 2,333 | 119 | 2006 | 1999 | |||||||||||||||||||||||||||
Burlington, NC | 0 | 280 | 4,297 | 707 | 280 | 5,004 | 720 | 2003 | 2000 | |||||||||||||||||||||||||||
Burlington, NC | 0 | 460 | 5,467 | 0 | 460 | 5,467 | 812 | 2003 | 1997 | |||||||||||||||||||||||||||
Butte, MT | 0 | 550 | 3,957 | 43 | 550 | 4,000 | 890 | 1998 | 1999 | |||||||||||||||||||||||||||
Canton, OH | 0 | 300 | 2,098 | 0 | 300 | 2,098 | 602 | 1998 | 1998 | |||||||||||||||||||||||||||
Cape Coral, FL | 0 | 530 | 3,281 | 0 | 530 | 3,281 | 621 | 2002 | 2000 | |||||||||||||||||||||||||||
Cary, NC | 0 | 1,500 | 4,350 | 986 | 1,500 | 5,336 | 1,389 | 1998 | 1996 | |||||||||||||||||||||||||||
Cedar Hill, TX | 0 | 171 | 1,490 | 0 | 171 | 1,490 | 525 | 1997 | 1996 | |||||||||||||||||||||||||||
Chapel Hill, NC | 0 | 354 | 2,646 | 783 | 354 | 3,429 | 595 | 2002 | 1997 | |||||||||||||||||||||||||||
Chelmsford, MA(1) | 8,514 | 1,040 | 10,951 | 0 | 1,040 | 10,951 | 1,525 | 2003 | 1997 | |||||||||||||||||||||||||||
Chickasha, OK | 0 | 85 | 1,395 | 0 | 85 | 1,395 | 505 | 1996 | 1996 | |||||||||||||||||||||||||||
Claremore, OK | 0 | 155 | 1,428 | 0 | 155 | 1,428 | 496 | 1996 | 1996 | |||||||||||||||||||||||||||
Clarksville, TN | 0 | 330 | 2,292 | 0 | 330 | 2,292 | 651 | 1998 | 1998 | |||||||||||||||||||||||||||
Cleburne, TX | 0 | 520 | 5,369 | 0 | 520 | 5,369 | 219 | 2006 | 2007 | |||||||||||||||||||||||||||
Columbia, TN | 0 | 341 | 2,295 | 0 | 341 | 2,295 | 654 | 1999 | 1999 | |||||||||||||||||||||||||||
Concord, NC(2) | 4,478 | 550 | 3,921 | 55 | 550 | 3,976 | 654 | 2003 | 1997 | |||||||||||||||||||||||||||
Corpus Christi, TX | 0 | 155 | 2,935 | 15 | 155 | 2,950 | 1,806 | 1997 | 1996 | |||||||||||||||||||||||||||
Corpus Christi, TX | 0 | 420 | 4,796 | 139 | 420 | 4,935 | 3,405 | 1996 | 1997 | |||||||||||||||||||||||||||
Crystal Lake, IL | 0 | 840 | 7,290 | 0 | 840 | 7,290 | 51 | 2007 | 2008 | |||||||||||||||||||||||||||
Danville, VA | 0 | 410 | 3,954 | 722 | 410 | 4,676 | 701 | 2003 | 1998 | |||||||||||||||||||||||||||
Dayton, OH | 0 | 690 | 2,970 | 1,428 | 690 | 4,398 | 1,271 | 2003 | 1994 | |||||||||||||||||||||||||||
DeForest, WI | 0 | 250 | 5,350 | 0 | 250 | 5,350 | 247 | 2007 | 2006 | |||||||||||||||||||||||||||
Desoto, TX | 0 | 205 | 1,383 | 0 | 205 | 1,383 | 474 | 1996 | 1996 | |||||||||||||||||||||||||||
Duncan, OK | 0 | 103 | 1,347 | 0 | 103 | 1,347 | 482 | 1995 | 1996 | |||||||||||||||||||||||||||
Durham, NC | 0 | 1,476 | 10,659 | 2,196 | 1,476 | 12,855 | 5,747 | 1997 | 1999 | |||||||||||||||||||||||||||
Eden, NC(2) | 2,904 | 390 | 4,877 | 0 | 390 | 4,877 | 743 | 2003 | 1998 | |||||||||||||||||||||||||||
Edmond, OK | 0 | 175 | 1,564 | 0 | 175 | 1,564 | 550 | 1995 | 1996 | |||||||||||||||||||||||||||
Elizabeth City, NC | 0 | 200 | 2,760 | 2,011 | 200 | 4,771 | 1,086 | 1998 | 1999 | |||||||||||||||||||||||||||
Encinitas, CA | 0 | 1,460 | 7,721 | 0 | 1,460 | 7,721 | 1,883 | 2000 | 2000 | |||||||||||||||||||||||||||
Enid, OK | 0 | 90 | 1,390 | 0 | 90 | 1,390 | 508 | 1995 | 1995 | |||||||||||||||||||||||||||
Everett, WA | 0 | 1,400 | 5,476 | 0 | 1,400 | 5,476 | 1,464 | 1999 | 1999 | |||||||||||||||||||||||||||
Fairfield, CA | 0 | 1,460 | 14,040 | 0 | 1,460 | 14,040 | 2,708 | 2002 | 1998 | |||||||||||||||||||||||||||
Fairhaven, MA | 0 | 770 | 6,230 | 0 | 770 | 6,230 | 786 | 2004 | 1999 | |||||||||||||||||||||||||||
Fayetteville, NY | 0 | 410 | 3,962 | 500 | 410 | 4,462 | 826 | 2001 | 1997 | |||||||||||||||||||||||||||
Findlay, OH | 0 | 200 | 1,800 | 0 | 200 | 1,800 | 589 | 1997 | 1997 | |||||||||||||||||||||||||||
Florence, NJ | 0 | 300 | 2,978 | 0 | 300 | 2,978 | 560 | 2002 | 1999 | |||||||||||||||||||||||||||
Forest City, NC(2) | 2,977 | 320 | 4,497 | 0 | 320 | 4,497 | 689 | 2003 | 1999 | |||||||||||||||||||||||||||
Fredericksburg, VA(4) | 6,882 | 1,000 | 20,000 | 303 | 1,000 | 20,303 | 1,976 | 2005 | 1999 | |||||||||||||||||||||||||||
Gastonia, NC | 0 | 310 | 3,096 | 22 | 310 | 3,118 | 492 | 2003 | 1994 | |||||||||||||||||||||||||||
Gastonia, NC(2) | 3,959 | 470 | 6,129 | 0 | 470 | 6,129 | 903 | 2003 | 1998 | |||||||||||||||||||||||||||
Gastonia, NC(2) | 3,790 | 400 | 5,029 | 120 | 400 | 5,149 | 759 | 2003 | 1996 | |||||||||||||||||||||||||||
Georgetown, TX | 0 | 200 | 2,100 | 0 | 200 | 2,100 | 672 | 1997 | 1997 | |||||||||||||||||||||||||||
Greenfield, WI | 0 | 600 | 6,626 | 0 | 600 | 6,626 | 252 | 2006 | 2006 | |||||||||||||||||||||||||||
Greensboro, NC | 0 | 330 | 2,970 | 554 | 330 | 3,524 | 542 | 2003 | 1996 | |||||||||||||||||||||||||||
Greensboro, NC | 0 | 560 | 5,507 | 1,013 | 560 | 6,520 | 994 | 2003 | 1997 | |||||||||||||||||||||||||||
Greenville, NC(2) | 3,484 | 290 | 4,393 | 168 | 290 | 4,561 | 662 | 2003 | 1998 | |||||||||||||||||||||||||||
Greenville, SC | 0 | 310 | 4,750 | 0 | 310 | 4,750 | 594 | 2004 | 1997 | |||||||||||||||||||||||||||
Hamden, CT | 0 | 1,470 | 4,530 | 0 | 1,470 | 4,530 | 1,009 | 2002 | 1998 | |||||||||||||||||||||||||||
Hamilton, NJ | 0 | 440 | 4,469 | 0 | 440 | 4,469 | 846 | 2001 | 1998 | |||||||||||||||||||||||||||
Harlingen, TX | 0 | 92 | 2,057 | 127 | 92 | 2,184 | 1,304 | 1997 | 1989 | |||||||||||||||||||||||||||
Hemet, CA | 0 | 870 | 3,405 | 0 | 870 | 3,405 | 152 | 2007 | 1996 | |||||||||||||||||||||||||||
Henderson, NV | 0 | 380 | 9,220 | 65 | 380 | 9,285 | 2,450 | 1998 | 1998 | |||||||||||||||||||||||||||
Henderson, NV | 0 | 380 | 4,360 | 41 | 380 | 4,401 | 964 | 1999 | 2000 | |||||||||||||||||||||||||||
Hickory, NC | 0 | 290 | 987 | 232 | 290 | 1,219 | 251 | 2003 | 1994 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Highlands Ranch, CO | $ | 0 | $ | 940 | $ | 3,721 | $ | 0 | $ | 940 | $ | 3,721 | $ | 711 | 2002 | 1999 | ||||||||||||||||||||
High Point, NC | 0 | 560 | 4,443 | 793 | 560 | 5,236 | 790 | 2003 | 2000 | |||||||||||||||||||||||||||
High Point, NC | 0 | 370 | 2,185 | 410 | 370 | 2,595 | 419 | 2003 | 1999 | |||||||||||||||||||||||||||
High Point, NC(2) | 2,531 | 330 | 3,395 | 28 | 330 | 3,423 | 521 | 2003 | 1994 | |||||||||||||||||||||||||||
High Point, NC(2) | 2,856 | 430 | 4,143 | 0 | 430 | 4,143 | 625 | 2003 | 1998 | |||||||||||||||||||||||||||
Hopedale, MA | 0 | 130 | 8,170 | 0 | 130 | 8,170 | 850 | 2005 | 1999 | |||||||||||||||||||||||||||
Houston, TX | 0 | 360 | 2,640 | 0 | 360 | 2,640 | 481 | 2002 | 1999 | |||||||||||||||||||||||||||
Houston, TX | 0 | 360 | 2,640 | 0 | 360 | 2,640 | 475 | 2002 | 1999 | |||||||||||||||||||||||||||
Hutchinson, KS | 0 | 600 | 10,590 | 0 | 600 | 10,590 | 1,192 | 2004 | 1997 | |||||||||||||||||||||||||||
Irving, TX | 0 | 1,030 | 6,823 | 0 | 1,030 | 6,823 | 48 | 2007 | 2008 | |||||||||||||||||||||||||||
Jackson, TN | 0 | 540 | 1,633 | 3,015 | 540 | 4,648 | 443 | 2003 | 1998 | |||||||||||||||||||||||||||
Jonesboro, GA | 0 | 460 | 1,304 | 0 | 460 | 1,304 | 206 | 2003 | 1992 | |||||||||||||||||||||||||||
Kalispell, MT | 0 | 360 | 3,282 | 0 | 360 | 3,282 | 919 | 1998 | 1998 | |||||||||||||||||||||||||||
Kenner, LA | 0 | 1,100 | 10,036 | 125 | 1,100 | 10,161 | 4,592 | 1998 | 2000 | |||||||||||||||||||||||||||
Kent, WA | 0 | 940 | 20,318 | 253 | 940 | 20,571 | 542 | 2007 | 2000 | |||||||||||||||||||||||||||
Kirkland, WA(1) | 4,660 | 1,880 | 4,315 | 0 | 1,880 | 4,315 | 639 | 2003 | 1996 | |||||||||||||||||||||||||||
Knoxville, TN | 0 | 315 | 2,754 | 0 | 315 | 2,754 | 476 | 2002 | 1998 | |||||||||||||||||||||||||||
Lake Havasu City, AZ | 0 | 450 | 4,223 | 0 | 450 | 4,223 | 1,109 | 1998 | 1999 | |||||||||||||||||||||||||||
Lake Havasu City, AZ | 0 | 110 | 2,244 | 136 | 110 | 2,380 | 665 | 1998 | 1994 | |||||||||||||||||||||||||||
Lecanto, FL | 0 | 200 | 6,900 | 0 | 200 | 6,900 | 828 | 2004 | 1986 | |||||||||||||||||||||||||||
Lenoir, NC | 0 | 190 | 3,748 | 641 | 190 | 4,389 | 658 | 2003 | 1998 | |||||||||||||||||||||||||||
Lexington, NC | 0 | 200 | 3,900 | 1,015 | 200 | 4,915 | 832 | 2002 | 1997 | |||||||||||||||||||||||||||
Longview, TX | 0 | 610 | 5,520 | 0 | 610 | 5,520 | 236 | 2006 | 2007 | |||||||||||||||||||||||||||
Manassas, VA(1) | 3,547 | 750 | 7,446 | 0 | 750 | 7,446 | 1,055 | 2003 | 1996 | |||||||||||||||||||||||||||
Mansfield, TX | 0 | 660 | 5,251 | 0 | 660 | 5,251 | 227 | 2006 | 2007 | |||||||||||||||||||||||||||
Margate, FL | 0 | 500 | 7,303 | 2,459 | 500 | 9,762 | 5,426 | 1998 | 1972 | |||||||||||||||||||||||||||
Martinsville, NC | 0 | 349 | 0 | 0 | 349 | 0 | 0 | 2003 | ||||||||||||||||||||||||||||
Marysville, CA | 0 | 450 | 4,172 | 44 | 450 | 4,216 | 941 | 1998 | 1999 | |||||||||||||||||||||||||||
Matthews, NC(2) | 3,630 | 560 | 4,738 | 0 | 560 | 4,738 | 747 | 2003 | 1998 | |||||||||||||||||||||||||||
McHenry, IL | 0 | 1,632 | 0 | 0 | 1,632 | 0 | 0 | 2006 | ||||||||||||||||||||||||||||
McHenry, IL | 0 | 3,550 | 15,300 | 6,510 | 3,550 | 21,810 | 822 | 2006 | 2004 | |||||||||||||||||||||||||||
Menomonee Falls, WI | 0 | 1,020 | 6,984 | 0 | 1,020 | 6,984 | 234 | 2006 | 2007 | |||||||||||||||||||||||||||
Miami, FL | 0 | 960 | 4,037 | 0 | 960 | 4,037 | 91 | 2008 | 1987 | |||||||||||||||||||||||||||
Middleburg Heights, OH | 0 | 960 | 7,780 | 0 | 960 | 7,780 | 894 | 2004 | 1998 | |||||||||||||||||||||||||||
Middleton, WI | 0 | 420 | 4,006 | 600 | 420 | 4,606 | 750 | 2001 | 1991 | |||||||||||||||||||||||||||
Midwest City, OK | 0 | 95 | 1,385 | 0 | 95 | 1,385 | 507 | 1996 | 1995 | |||||||||||||||||||||||||||
Missoula, MT(3) | 6,218 | 550 | 7,490 | 0 | 550 | 7,490 | 671 | 2005 | 1998 | |||||||||||||||||||||||||||
Monroe, NC | 0 | 470 | 3,681 | 648 | 470 | 4,329 | 666 | 2003 | 2001 | |||||||||||||||||||||||||||
Monroe, NC | 0 | 310 | 4,799 | 857 | 310 | 5,656 | 819 | 2003 | 2000 | |||||||||||||||||||||||||||
Monroe, NC(2) | 3,248 | 450 | 4,021 | 114 | 450 | 4,135 | 630 | 2003 | 1997 | |||||||||||||||||||||||||||
Morehead City, NC | 0 | 200 | 3,104 | 1,648 | 200 | 4,752 | 1,072 | 1999 | 1999 | |||||||||||||||||||||||||||
Mt. Vernon, WA | 0 | 400 | 2,200 | 156 | 400 | 2,356 | 123 | 2006 | 2001 | |||||||||||||||||||||||||||
Nacogdoches, TX | 0 | 390 | 5,754 | 0 | 390 | 5,754 | 234 | 2006 | 2007 | |||||||||||||||||||||||||||
Nashville, TN | 0 | 4,910 | 29,590 | 0 | 4,910 | 29,590 | 398 | 2008 | 2007 | |||||||||||||||||||||||||||
New York, NY | 0 | 1,440 | 21,460 | 975 | 1,440 | 22,435 | 1,130 | 2006 | 1959 | |||||||||||||||||||||||||||
Newark, DE | 0 | 560 | 21,220 | 0 | 560 | 21,220 | 2,347 | 2004 | 1998 | |||||||||||||||||||||||||||
Newburyport, MA | 0 | 960 | 8,290 | 0 | 960 | 8,290 | 1,511 | 2002 | 1999 | |||||||||||||||||||||||||||
Norman, OK | 0 | 55 | 1,484 | 0 | 55 | 1,484 | 626 | 1995 | 1995 | |||||||||||||||||||||||||||
North Augusta, SC | 0 | 332 | 2,558 | 0 | 332 | 2,558 | 718 | 1999 | 1998 | |||||||||||||||||||||||||||
North Miami Beach, FL | 0 | 300 | 5,709 | 2,006 | 300 | 7,715 | 4,161 | 1998 | 1987 | |||||||||||||||||||||||||||
North Oklahoma City, OK | 0 | 87 | 1,508 | 0 | 87 | 1,508 | 518 | 1996 | 1996 | |||||||||||||||||||||||||||
Ogden, UT | 0 | 360 | 6,700 | 0 | 360 | 6,700 | 778 | 2004 | 1998 | |||||||||||||||||||||||||||
Oklahoma City, OK | 0 | 130 | 1,350 | 0 | 130 | 1,350 | 484 | 1995 | 1996 | |||||||||||||||||||||||||||
Oklahoma City, OK | 0 | 220 | 2,943 | 0 | 220 | 2,943 | 770 | 1999 | 1999 | |||||||||||||||||||||||||||
Oklahoma City, OK | 0 | 590 | 7,513 | 0 | 590 | 7,513 | 104 | 2007 | 2008 | |||||||||||||||||||||||||||
Oneonta, NY | 0 | 80 | 5,020 | 0 | 80 | 5,020 | 170 | 2007 | 1996 | |||||||||||||||||||||||||||
Oshkosh, WI | 0 | 900 | 3,800 | 3,687 | 900 | 7,487 | 472 | 2006 | 2005 | |||||||||||||||||||||||||||
Oswego, IL | 0 | 900 | 8,047 | 0 | 900 | 8,047 | 56 | 2006 | 2008 | |||||||||||||||||||||||||||
Owasso, OK | 0 | 215 | 1,380 | 0 | 215 | 1,380 | 479 | 1996 | 1996 | |||||||||||||||||||||||||||
Palestine, TX | 0 | 173 | 1,410 | 0 | 173 | 1,410 | 491 | 1996 | 1996 | |||||||||||||||||||||||||||
Palestine, TX | 0 | 180 | 4,320 | 0 | 180 | 4,320 | 297 | 2006 | 2005 | |||||||||||||||||||||||||||
Paris, TX | 0 | 490 | 5,452 | 0 | 490 | 5,452 | 786 | 2005 | 2006 | |||||||||||||||||||||||||||
Paso Robles, CA | 0 | 1,770 | 8,630 | 0 | 1,770 | 8,630 | 1,654 | 2002 | 1998 | |||||||||||||||||||||||||||
Pinehurst, NC | 0 | 290 | 2,690 | 484 | 290 | 3,174 | 506 | 2003 | 1998 | |||||||||||||||||||||||||||
Piqua, OH | 0 | 204 | 1,885 | 0 | 204 | 1,885 | 566 | 1997 | 1997 | |||||||||||||||||||||||||||
Pittsburgh, PA | 0 | 1,750 | 8,572 | 115 | 1,750 | 8,687 | 917 | 2005 | 1998 | |||||||||||||||||||||||||||
Ponca City, OK | 0 | 114 | 1,536 | 0 | 114 | 1,536 | 557 | 1995 | 1995 | |||||||||||||||||||||||||||
Portland, OR | 0 | 628 | 3,585 | 232 | 628 | 3,817 | 1,000 | 1998 | 1999 | |||||||||||||||||||||||||||
Quincy, MA | 0 | 2,690 | 15,410 | 0 | 2,690 | 15,410 | 1,624 | 2004 | 1999 | |||||||||||||||||||||||||||
Reidsville, NC | 0 | 170 | 3,830 | 857 | 170 | 4,687 | 805 | 2002 | 1998 | |||||||||||||||||||||||||||
Reno, NV | 0 | 1,060 | 11,440 | 0 | 1,060 | 11,440 | 1,313 | 2004 | 1998 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Ridgeland, MS(1) | $ | 4,505 | $ | 520 | $ | 7,675 | $ | 0 | $ | 520 | $ | 7,675 | $ | 1,089 | 2003 | 1997 | ||||||||||||||||||||
Rocky Hill, CT | 0 | 1,460 | 7,040 | 0 | 1,460 | 7,040 | 1,420 | 2002 | 1998 | |||||||||||||||||||||||||||
Rocky Hill, CT | 0 | 1,090 | 6,710 | 0 | 1,090 | 6,710 | 1,001 | 2003 | 1996 | |||||||||||||||||||||||||||
Romeroville, IL | 0 | 1,895 | 0 | 0 | 1,895 | 0 | 0 | 2006 | ||||||||||||||||||||||||||||
Roswell, GA | 0 | 620 | 2,200 | 184 | 620 | 2,384 | 464 | 2002 | 1997 | |||||||||||||||||||||||||||
Salem, OR | 0 | 449 | 5,172 | 0 | 449 | 5,172 | 1,432 | 1999 | 1998 | |||||||||||||||||||||||||||
Salisbury, NC(2) | 3,519 | 370 | 5,697 | 168 | 370 | 5,865 | 856 | 2003 | 1997 | |||||||||||||||||||||||||||
Salt Lake City, UT | 0 | 1,060 | 6,142 | 0 | 1,060 | 6,142 | 1,374 | 1999 | 1986 | |||||||||||||||||||||||||||
San Angelo, TX | 0 | 260 | 8,800 | 0 | 260 | 8,800 | 990 | 2004 | 1997 | |||||||||||||||||||||||||||
San Juan Capistrano, CA | 0 | 1,390 | 6,942 | 0 | 1,390 | 6,942 | 1,430 | 2000 | 2001 | |||||||||||||||||||||||||||
Sarasota, FL | 0 | 475 | 3,175 | 0 | 475 | 3,175 | 1,179 | 1996 | 1995 | |||||||||||||||||||||||||||
Scottsdale, AZ | 0 | 2,500 | 3,890 | 0 | 2,500 | 3,890 | 62 | 2008 | 1999 | |||||||||||||||||||||||||||
Seven Fields, PA | 0 | 484 | 4,663 | 59 | 484 | 4,722 | 1,313 | 1999 | 1999 | |||||||||||||||||||||||||||
Shawnee, OK | 0 | 80 | 1,400 | 0 | 80 | 1,400 | 508 | 1996 | 1995 | |||||||||||||||||||||||||||
Sheboygan, WI | 0 | 80 | 5,320 | 0 | 80 | 5,320 | 364 | 2006 | 2006 | |||||||||||||||||||||||||||
Sherman, TX | 0 | 700 | 5,221 | 0 | 700 | 5,221 | 283 | 2005 | 2006 | |||||||||||||||||||||||||||
Smithfield, NC(2) | 3,389 | 290 | 5,680 | 0 | 290 | 5,680 | 850 | 2003 | 1998 | |||||||||||||||||||||||||||
Statesville, NC | 0 | 150 | 1,447 | 266 | 150 | 1,713 | 272 | 2003 | 1990 | |||||||||||||||||||||||||||
Statesville, NC | 0 | 310 | 6,183 | 8 | 310 | 6,191 | 890 | 2003 | 1996 | |||||||||||||||||||||||||||
Statesville, NC(2) | 2,376 | 140 | 3,627 | 0 | 140 | 3,627 | 545 | 2003 | 1999 | |||||||||||||||||||||||||||
Stillwater, OK | 0 | 80 | 1,400 | 0 | 80 | 1,400 | 512 | 1995 | 1995 | |||||||||||||||||||||||||||
Texarkana, TX | 0 | 192 | 1,403 | 0 | 192 | 1,403 | 486 | 1996 | 1996 | |||||||||||||||||||||||||||
Troy, OH | 0 | 200 | 2,000 | 0 | 200 | 2,000 | 643 | 1997 | 1997 | |||||||||||||||||||||||||||
Tyler, TX | 0 | 650 | 5,268 | 0 | 650 | 5,268 | 226 | 2006 | 2007 | |||||||||||||||||||||||||||
Valparaiso, IN | 0 | 112 | 2,557 | 1 | 112 | 2,558 | 541 | 2001 | 1998 | |||||||||||||||||||||||||||
Valparaiso, IN | 0 | 108 | 2,962 | 0 | 108 | 2,962 | 614 | 2001 | 1999 | |||||||||||||||||||||||||||
Vero Beach, FL | 0 | 263 | 3,187 | 0 | 263 | 3,187 | 654 | 2001 | 1999 | |||||||||||||||||||||||||||
Vero Beach, FL | 0 | 297 | 3,263 | 0 | 297 | 3,263 | 676 | 2001 | 1996 | |||||||||||||||||||||||||||
W. Hartford, CT | 0 | 2,650 | 5,980 | 0 | 2,650 | 5,980 | 807 | 2004 | 1905 | |||||||||||||||||||||||||||
Wake Forest, NC | 0 | 200 | 3,003 | 1,742 | 200 | 4,745 | 1,146 | 1998 | 1999 | |||||||||||||||||||||||||||
Waterford, CT | 0 | 1,360 | 12,539 | 0 | 1,360 | 12,539 | 2,328 | 2002 | 2000 | |||||||||||||||||||||||||||
Waxahachie, TX | 0 | 154 | 1,429 | 0 | 154 | 1,429 | 497 | 1996 | 1996 | |||||||||||||||||||||||||||
Waxahachie, TX | 0 | 650 | 5,763 | 0 | 650 | 5,763 | 93 | 2007 | 2008 | |||||||||||||||||||||||||||
Weatherford, TX | 0 | 660 | 5,261 | 0 | 660 | 5,261 | 228 | 2006 | 2007 | |||||||||||||||||||||||||||
Westerville, OH | 0 | 740 | 8,287 | 2,736 | 740 | 11,023 | 4,280 | 1998 | 2001 | |||||||||||||||||||||||||||
Wilmington, NC | 0 | 210 | 2,991 | 0 | 210 | 2,991 | 821 | 1999 | 1999 | |||||||||||||||||||||||||||
Winston-Salem, NC | 0 | 360 | 2,514 | 459 | 360 | 2,973 | 456 | 2003 | 1996 | |||||||||||||||||||||||||||
Total Assisted Living Facilities | 80,864 | 103,536 | 868,344 | 47,242 | 103,536 | 915,586 | 150,672 | |||||||||||||||||||||||||||||
Skilled Nuring Facilities: | ||||||||||||||||||||||||||||||||||||
Agawam, MA | 0 | 880 | 16,112 | 2,134 | 880 | 18,246 | 3,121 | 2002 | 1993 | |||||||||||||||||||||||||||
Akron, OH | 0 | 290 | 8,219 | 491 | 290 | 8,710 | 772 | 2005 | 1961 | |||||||||||||||||||||||||||
Akron, OH | 0 | 630 | 7,535 | 184 | 630 | 7,719 | 540 | 2006 | 1915 | |||||||||||||||||||||||||||
Alexandria, VA | 0 | 1,330 | 7,820 | 0 | 1,330 | 7,820 | 0 | 2008 | 1955 | |||||||||||||||||||||||||||
Alliance, OH(5) | 4,856 | 270 | 7,723 | 107 | 270 | 7,830 | 627 | 2006 | 1982 | |||||||||||||||||||||||||||
Amarillo, TX | 0 | 540 | 7,260 | 0 | 540 | 7,260 | 745 | 2005 | 1986 | |||||||||||||||||||||||||||
Arcadia, LA | 0 | 240 | 5,460 | 0 | 240 | 5,460 | 504 | 2006 | 2006 | |||||||||||||||||||||||||||
Atlanta, GA | 0 | 460 | 5,540 | 0 | 460 | 5,540 | 618 | 2005 | 1972 | |||||||||||||||||||||||||||
Auburndale, FL | 0 | 750 | 5,950 | 0 | 750 | 5,950 | 631 | 2005 | 1983 | |||||||||||||||||||||||||||
Austin, TX | 0 | 730 | 18,970 | 0 | 730 | 18,970 | 893 | 2007 | 2006 | |||||||||||||||||||||||||||
Baltic, OH(5) | 3,980 | 50 | 8,709 | 189 | 50 | 8,898 | 694 | 2006 | 1983 | |||||||||||||||||||||||||||
Baytown, TX | 0 | 450 | 6,150 | 0 | 450 | 6,150 | 1,148 | 2002 | 2000 | |||||||||||||||||||||||||||
Beachwood, OH | 0 | 1,260 | 23,478 | 0 | 1,260 | 23,478 | 4,570 | 2001 | 1990 | |||||||||||||||||||||||||||
Beattyville, KY | 0 | 100 | 6,900 | 0 | 100 | 6,900 | 654 | 2005 | 1972 | |||||||||||||||||||||||||||
Bernice, LA | 0 | 16 | 1,017 | 0 | 16 | 1,017 | 197 | 2005 | 1969 | |||||||||||||||||||||||||||
Birmingham, AL | 0 | 390 | 4,902 | 0 | 390 | 4,902 | 852 | 2003 | 1977 | |||||||||||||||||||||||||||
Birmingham, AL | 0 | 340 | 5,734 | 0 | 340 | 5,734 | 937 | 2003 | 1974 | |||||||||||||||||||||||||||
Boise, ID | 0 | 810 | 5,401 | 0 | 810 | 5,401 | 1,903 | 1998 | 1966 | |||||||||||||||||||||||||||
Boonville, IN | 0 | 190 | 5,510 | 0 | 190 | 5,510 | 1,034 | 2002 | 2000 | |||||||||||||||||||||||||||
Bountiful, UT | 0 | 991 | 6,850 | 0 | 991 | 6,850 | 624 | 2005 | 1987 | |||||||||||||||||||||||||||
Boynton Beach, FL | 0 | 980 | 8,112 | 0 | 980 | 8,112 | 1,040 | 2004 | 1999 | |||||||||||||||||||||||||||
Braintree, MA | 0 | 170 | 7,157 | 1,290 | 170 | 8,447 | 4,906 | 1997 | 1968 | |||||||||||||||||||||||||||
Brandon, MS | 0 | 115 | 9,549 | 0 | 115 | 9,549 | 1,571 | 2003 | 1963 | |||||||||||||||||||||||||||
Bridgewater, NJ | 0 | 1,850 | 3,050 | 0 | 1,850 | 3,050 | 504 | 2004 | 1970 | |||||||||||||||||||||||||||
Brighton, MA | 0 | 240 | 3,859 | 2,126 | 240 | 5,985 | 591 | 2005 | 1982 | |||||||||||||||||||||||||||
Broadview Heights, OH | 0 | 920 | 12,400 | 0 | 920 | 12,400 | 2,420 | 2001 | 1984 | |||||||||||||||||||||||||||
Bunnell, FL | 0 | 260 | 7,118 | 0 | 260 | 7,118 | 966 | 2004 | 1985 | |||||||||||||||||||||||||||
Butler, AL | 0 | 90 | 3,510 | 0 | 90 | 3,510 | 516 | 2004 | 1960 | |||||||||||||||||||||||||||
Byrdstown, TN | 0 | 0 | 2,414 | 0 | 0 | 2,414 | 764 | 2004 | 1982 | |||||||||||||||||||||||||||
Canton, MA | 0 | 820 | 8,201 | 263 | 820 | 8,464 | 1,674 | 2002 | 1993 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Carrollton, TX | $ | 0 | $ | 730 | $ | 2,770 | $ | 0 | $ | 730 | $ | 2,770 | $ | 356 | 2005 | 1976 | ||||||||||||||||||||
Centerville, MA | 0 | 1,490 | 9,650 | 8,443 | 1,490 | 18,093 | 1,363 | 2004 | 1982 | |||||||||||||||||||||||||||
Cheswick, PA | 0 | 384 | 6,041 | 1,293 | 384 | 7,334 | 2,225 | 1998 | 1933 | |||||||||||||||||||||||||||
Clarksville, TN | 0 | 480 | 5,020 | 0 | 480 | 5,020 | 374 | 2006 | 1989 | |||||||||||||||||||||||||||
Clearwater, FL | 0 | 160 | 7,218 | 0 | 160 | 7,218 | 887 | 2004 | 1961 | |||||||||||||||||||||||||||
Clearwater, FL | 0 | 1,260 | 2,740 | 0 | 1,260 | 2,740 | 378 | 2005 | 1983 | |||||||||||||||||||||||||||
Cleveland, MS | 0 | 0 | 1,850 | 0 | 0 | 1,850 | 1,018 | 2003 | 1977 | |||||||||||||||||||||||||||
Cleveland, TN | 0 | 350 | 5,000 | 122 | 350 | 5,122 | 1,073 | 2001 | 1987 | |||||||||||||||||||||||||||
Coeur d’Alene, ID | 0 | 600 | 7,878 | 0 | 600 | 7,878 | 2,430 | 1998 | 1996 | |||||||||||||||||||||||||||
Colorado Springs, CO | 0 | 310 | 6,290 | 0 | 310 | 6,290 | 685 | 2005 | 1985 | |||||||||||||||||||||||||||
Columbia, TN | 0 | 590 | 3,787 | 0 | 590 | 3,787 | 735 | 2003 | 1974 | |||||||||||||||||||||||||||
Columbus, IN | 0 | 530 | 5,170 | 1,540 | 530 | 6,710 | 1,122 | 2002 | 2001 | |||||||||||||||||||||||||||
Columbus, OH | 0 | 1,070 | 11,726 | 1,204 | 1,070 | 12,930 | 1,062 | 2005 | 1968 | |||||||||||||||||||||||||||
Columbus, OH | 0 | 1,860 | 16,624 | 1,077 | 1,860 | 17,701 | 1,366 | 2006 | 1978 | |||||||||||||||||||||||||||
Columbus, OH(5) | 4,533 | 1,010 | 4,931 | 91 | 1,010 | 5,022 | 441 | 2006 | 1983 | |||||||||||||||||||||||||||
Corpus Christi, TX | 0 | 307 | 443 | 0 | 307 | 443 | 129 | 2005 | 1985 | |||||||||||||||||||||||||||
Corpus Christi, TX | 0 | 400 | 1,916 | 0 | 400 | 1,916 | 259 | 2005 | 1985 | |||||||||||||||||||||||||||
Dade City, FL | 0 | 250 | 7,150 | 0 | 250 | 7,150 | 905 | 2004 | 1975 | |||||||||||||||||||||||||||
Daytona Beach, FL | 0 | 470 | 5,930 | 0 | 470 | 5,930 | 817 | 2004 | 1986 | |||||||||||||||||||||||||||
Daytona Beach, FL | 0 | 490 | 5,710 | 0 | 490 | 5,710 | 816 | 2004 | 1961 | |||||||||||||||||||||||||||
Daytona Beach, FL | 0 | 1,850 | 2,650 | 0 | 1,850 | 2,650 | 379 | 2005 | 1964 | |||||||||||||||||||||||||||
DeBary, FL | 0 | 440 | 7,460 | 0 | 440 | 7,460 | 940 | 2004 | 1965 | |||||||||||||||||||||||||||
Dedham, MA | 0 | 1,360 | 9,830 | 0 | 1,360 | 9,830 | 2,008 | 2002 | 1996 | |||||||||||||||||||||||||||
Defuniak Springs, FL | 0 | 1,350 | 10,250 | 0 | 1,350 | 10,250 | 688 | 2006 | 1980 | |||||||||||||||||||||||||||
DeLand, FL | 0 | 220 | 7,080 | 0 | 220 | 7,080 | 900 | 2004 | 1967 | |||||||||||||||||||||||||||
Denton, MD | 0 | 390 | 4,010 | 0 | 390 | 4,010 | 778 | 2003 | 1982 | |||||||||||||||||||||||||||
Denver, CO | 0 | 2,530 | 9,514 | 0 | 2,530 | 9,514 | 842 | 2005 | 1986 | |||||||||||||||||||||||||||
Douglasville, GA | 0 | 1,350 | 7,471 | 0 | 1,350 | 7,471 | 1,304 | 2003 | 1975 | |||||||||||||||||||||||||||
Easton, PA | 0 | 285 | 6,315 | 0 | 285 | 6,315 | 3,023 | 1993 | 1959 | |||||||||||||||||||||||||||
Eight Mile, AL | 0 | 410 | 6,110 | 0 | 410 | 6,110 | 1,111 | 2003 | 1973 | |||||||||||||||||||||||||||
El Paso, TX | 0 | 539 | 8,961 | 0 | 539 | 8,961 | 926 | 2005 | 1970 | |||||||||||||||||||||||||||
El Paso, TX | 0 | 642 | 3,958 | 1,100 | 642 | 5,058 | 496 | 2005 | 1969 | |||||||||||||||||||||||||||
Elizabethton, TN | 0 | 310 | 4,604 | 336 | 310 | 4,940 | 1,082 | 2001 | 1980 | |||||||||||||||||||||||||||
Erin, TN | 0 | 440 | 8,060 | 134 | 440 | 8,194 | 1,647 | 2001 | 1981 | |||||||||||||||||||||||||||
Eugene, OR | 0 | 300 | 5,316 | 0 | 300 | 5,316 | 1,779 | 1998 | 1972 | |||||||||||||||||||||||||||
Fairfield, AL | 0 | 530 | 9,134 | 0 | 530 | 9,134 | 1,512 | 2003 | 1965 | |||||||||||||||||||||||||||
Fall River, MA | 0 | 620 | 5,829 | 4,856 | 620 | 10,685 | 2,937 | 1996 | 1973 | |||||||||||||||||||||||||||
Farmerville, LA | 0 | 147 | 4,087 | 0 | 147 | 4,087 | 457 | 2005 | 1984 | |||||||||||||||||||||||||||
Florence, AL | 0 | 320 | 3,975 | 0 | 320 | 3,975 | 778 | 2003 | 1972 | |||||||||||||||||||||||||||
Fork Union, VA | 0 | 310 | 2,490 | 0 | 310 | 2,490 | 0 | 2008 | 1990 | |||||||||||||||||||||||||||
Fort Myers, FL | 0 | 636 | 6,026 | 0 | 636 | 6,026 | 2,785 | 1998 | 1984 | |||||||||||||||||||||||||||
Fort Pierce, FL | 0 | 440 | 3,560 | 0 | 440 | 3,560 | 365 | 2005 | 1973 | |||||||||||||||||||||||||||
Goochland, VA | 0 | 350 | 3,697 | 0 | 350 | 3,697 | 0 | 2008 | 1991 | |||||||||||||||||||||||||||
Goshen, IN | 0 | 210 | 6,120 | 0 | 210 | 6,120 | 473 | 2005 | 2006 | |||||||||||||||||||||||||||
Graceville, FL | 0 | 150 | 13,000 | 0 | 150 | 13,000 | 848 | 2006 | 1980 | |||||||||||||||||||||||||||
Grand Prairie, TX | 0 | 574 | 3,426 | 0 | 574 | 3,426 | 425 | 2005 | 1982 | |||||||||||||||||||||||||||
Granite City, IL | 0 | 610 | 7,143 | 842 | 610 | 7,985 | 3,792 | 1998 | 1973 | |||||||||||||||||||||||||||
Granite City, IL | 0 | 400 | 4,303 | 707 | 400 | 5,010 | 2,325 | 1999 | 1964 | |||||||||||||||||||||||||||
Greeneville, TN | 0 | 400 | 8,290 | 0 | 400 | 8,290 | 1,145 | 2004 | 1979 | |||||||||||||||||||||||||||
Hanover, IN | 0 | 210 | 4,430 | 0 | 210 | 4,430 | 587 | 2004 | 2000 | |||||||||||||||||||||||||||
Hardin, IL | 0 | 50 | 5,350 | 135 | 50 | 5,485 | 2,290 | 2002 | 1996 | |||||||||||||||||||||||||||
Harriman, TN | 0 | 590 | 8,060 | 158 | 590 | 8,218 | 1,759 | 2001 | 1972 | |||||||||||||||||||||||||||
Herculaneum, MO | 0 | 127 | 10,373 | 393 | 127 | 10,766 | 4,367 | 2002 | 1984 | |||||||||||||||||||||||||||
Hilliard, FL | 0 | 150 | 6,990 | 0 | 150 | 6,990 | 2,078 | 1999 | 1990 | |||||||||||||||||||||||||||
Homestead, FL | 0 | 2,750 | 11,750 | 0 | 2,750 | 11,750 | 784 | 2006 | 1994 | |||||||||||||||||||||||||||
Houston, TX | 0 | 600 | 2,700 | 0 | 600 | 2,700 | 351 | 2005 | 1974 | |||||||||||||||||||||||||||
Houston, TX | 0 | 860 | 18,715 | 0 | 860 | 18,715 | 630 | 2007 | 2006 | |||||||||||||||||||||||||||
Houston, TX | 0 | 630 | 5,970 | 750 | 630 | 6,720 | 1,204 | 2002 | 1995 | |||||||||||||||||||||||||||
Huron, OH | 0 | 160 | 6,088 | 252 | 160 | 6,340 | 543 | 2005 | 1983 | |||||||||||||||||||||||||||
Jackson, MS | 0 | 410 | 1,814 | 0 | 410 | 1,814 | 367 | 2003 | 1968 | |||||||||||||||||||||||||||
Jackson, MS | 0 | 0 | 4,400 | 0 | 0 | 4,400 | 2,420 | 2003 | 1980 | |||||||||||||||||||||||||||
Jackson, MS | 0 | 0 | 2,150 | 0 | 0 | 2,150 | 1,183 | 2003 | 1970 | |||||||||||||||||||||||||||
Jamestown, TN | 0 | 0 | 6,707 | 0 | 0 | 6,707 | 2,124 | 2004 | 1966 | |||||||||||||||||||||||||||
Jefferson, OH | 0 | 80 | 9,120 | 0 | 80 | 9,120 | 783 | 2006 | 1984 | |||||||||||||||||||||||||||
Jefferson City, MO | 0 | 370 | 6,730 | 301 | 370 | 7,031 | 2,840 | 2002 | 1982 | |||||||||||||||||||||||||||
Jonesboro, GA | 0 | 840 | 1,921 | 0 | 840 | 1,921 | 409 | 2003 | 1992 | |||||||||||||||||||||||||||
Kalida, OH | 0 | 480 | 8,173 | 0 | 480 | 8,173 | 306 | 2006 | 2007 | |||||||||||||||||||||||||||
Kissimmee, FL | 0 | 230 | 3,854 | 0 | 230 | 3,854 | 492 | 2004 | 1972 | |||||||||||||||||||||||||||
LaBelle, FL | 0 | 60 | 4,946 | 0 | 60 | 4,946 | 685 | 2004 | 1986 | |||||||||||||||||||||||||||
Lake Placid, FL | 0 | 150 | 12,850 | 0 | 150 | 12,850 | 1,662 | 2004 | 1984 | |||||||||||||||||||||||||||
Lakeland, FL | 0 | 696 | 4,843 | 0 | 696 | 4,843 | 2,254 | 1998 | 1984 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Lawrenceville, VA | $ | 0 | $ | 170 | $ | 4,780 | $ | 0 | $ | 170 | $ | 4,780 | $ | 0 | 2008 | 1989 | ||||||||||||||||||||
Lee, MA | 0 | 290 | 18,135 | 927 | 290 | 19,062 | 3,486 | 2002 | 1998 | |||||||||||||||||||||||||||
Littleton, MA | 0 | 1,240 | 2,910 | 0 | 1,240 | 2,910 | 654 | 1996 | 1975 | |||||||||||||||||||||||||||
Longview, TX | 0 | 293 | 1,707 | 0 | 293 | 1,707 | 246 | 2005 | 1971 | |||||||||||||||||||||||||||
Longwood, FL | 0 | 480 | 7,520 | 0 | 480 | 7,520 | 969 | 2004 | 1980 | |||||||||||||||||||||||||||
Louisville, KY | 0 | 490 | 10,010 | 0 | 490 | 10,010 | 1,237 | 2005 | 1978 | |||||||||||||||||||||||||||
Louisville, KY | 0 | 430 | 7,135 | 163 | 430 | 7,298 | 1,538 | 2002 | 1974 | |||||||||||||||||||||||||||
Louisville, KY | 0 | 350 | 4,675 | 110 | 350 | 4,785 | 1,029 | 2002 | 1975 | |||||||||||||||||||||||||||
Lowell, MA | 0 | 370 | 7,450 | 1,550 | 370 | 9,000 | 850 | 2004 | 1977 | |||||||||||||||||||||||||||
Lufkin, TX | 0 | 416 | 1,184 | (74 | ) | 342 | 1,184 | 248 | 2005 | 1919 | ||||||||||||||||||||||||||
Manchester, NH | 0 | 340 | 4,360 | 0 | 340 | 4,360 | 434 | 2005 | 1984 | |||||||||||||||||||||||||||
Marianna, FL | 0 | 340 | 8,910 | 0 | 340 | 8,910 | 580 | 2006 | 1997 | |||||||||||||||||||||||||||
McComb, MS | 0 | 120 | 5,786 | 0 | 120 | 5,786 | 930 | 2003 | 1973 | |||||||||||||||||||||||||||
Memphis, TN | 0 | 970 | 4,246 | 0 | 970 | 4,246 | 795 | 2003 | 1981 | |||||||||||||||||||||||||||
Memphis, TN | 0 | 480 | 5,656 | 0 | 480 | 5,656 | 980 | 2003 | 1982 | |||||||||||||||||||||||||||
Memphis, TN | 0 | 940 | 5,963 | 0 | 940 | 5,963 | 941 | 2004 | 1951 | |||||||||||||||||||||||||||
Merrillville, IN | 0 | 643 | 7,084 | 3,526 | 643 | 10,610 | 4,068 | 1997 | 1999 | |||||||||||||||||||||||||||
Mesa, AZ | 0 | 940 | 2,579 | 0 | 940 | 2,579 | 350 | 2005 | 1985 | |||||||||||||||||||||||||||
Midwest City, OK | 0 | 470 | 5,673 | 0 | 470 | 5,673 | 2,554 | 1998 | 1958 | |||||||||||||||||||||||||||
Midwest City, OK | 0 | 484 | 5,516 | 0 | 484 | 5,516 | 596 | 2005 | 1987 | |||||||||||||||||||||||||||
Millbury, MA | 0 | 930 | 4,570 | 0 | 930 | 4,570 | 681 | 2004 | 1972 | |||||||||||||||||||||||||||
Mobile, AL | 0 | 440 | 3,625 | 0 | 440 | 3,625 | 687 | 2003 | 1982 | |||||||||||||||||||||||||||
Monteagle, TN | 0 | 310 | 3,318 | 0 | 310 | 3,318 | 598 | 2003 | 1980 | |||||||||||||||||||||||||||
Monterey, TN | 0 | 0 | 4,195 | 0 | 0 | 4,195 | 1,328 | 2004 | 1977 | |||||||||||||||||||||||||||
Monticello, FL | 0 | 140 | 4,471 | 0 | 140 | 4,471 | 637 | 2004 | 1986 | |||||||||||||||||||||||||||
Morgantown, KY | 0 | 380 | 3,705 | 0 | 380 | 3,705 | 631 | 2003 | 1965 | |||||||||||||||||||||||||||
Moss Point, MS | 0 | 120 | 7,280 | 0 | 120 | 7,280 | 958 | 2004 | 1933 | |||||||||||||||||||||||||||
Mountain City, TN | 0 | 220 | 5,896 | 660 | 220 | 6,556 | 2,318 | 2001 | 1976 | |||||||||||||||||||||||||||
Naples, FL | 0 | 550 | 5,450 | 0 | 550 | 5,450 | 688 | 2004 | 1968 | |||||||||||||||||||||||||||
Natchitoches, LA | 0 | 190 | 4,096 | 0 | 190 | 4,096 | 435 | 2005 | 1975 | |||||||||||||||||||||||||||
Needham, MA | 0 | 1,610 | 13,715 | 366 | 1,610 | 14,081 | 2,838 | 2002 | 1994 | |||||||||||||||||||||||||||
New Haven, CT | 0 | 160 | 4,778 | 1,266 | 160 | 6,044 | 1,046 | 2006 | 1958 | |||||||||||||||||||||||||||
New Haven, IN | 0 | 176 | 3,524 | 0 | 176 | 3,524 | 528 | 2004 | 1981 | |||||||||||||||||||||||||||
New Port Richey, FL | 0 | 624 | 7,307 | 0 | 624 | 7,307 | 3,361 | 1998 | 1984 | |||||||||||||||||||||||||||
North Miami, FL | 0 | 430 | 3,918 | 0 | 430 | 3,918 | 682 | 2004 | 1968 | |||||||||||||||||||||||||||
North Miami, FL | 0 | 440 | 4,830 | 0 | 440 | 4,830 | 687 | 2004 | 1963 | |||||||||||||||||||||||||||
Norwalk, CT | 0 | 410 | 2,118 | 2,201 | 410 | 4,319 | 981 | 2004 | 1971 | |||||||||||||||||||||||||||
Oklahoma City, OK | 0 | 510 | 10,694 | 0 | 510 | 10,694 | 800 | 1998 | 1979 | |||||||||||||||||||||||||||
Ormond Beach, FL | 0 | 0 | 2,739 | 73 | 0 | 2,812 | 932 | 2002 | 1983 | |||||||||||||||||||||||||||
Overland Park, KS | 0 | 1,120 | 8,360 | 0 | 1,120 | 8,360 | 755 | 2005 | 1970 | |||||||||||||||||||||||||||
Owensboro, KY | 0 | 240 | 6,760 | 0 | 240 | 6,760 | 739 | 1993 | 1966 | |||||||||||||||||||||||||||
Owensboro, KY | 0 | 225 | 13,275 | 0 | 225 | 13,275 | 1,359 | 2005 | 1964 | |||||||||||||||||||||||||||
Owenton, KY | 0 | 100 | 2,400 | 0 | 100 | 2,400 | 302 | 2005 | 1979 | |||||||||||||||||||||||||||
Panama City, FL | 0 | 300 | 9,200 | 0 | 300 | 9,200 | 1,194 | 2004 | 1992 | |||||||||||||||||||||||||||
Pasadena, TX | 0 | 720 | 24,080 | 0 | 720 | 24,080 | 1,117 | 2007 | 2005 | |||||||||||||||||||||||||||
Pigeon Forge, TN | 0 | 320 | 4,180 | 117 | 320 | 4,297 | 963 | 2001 | 1986 | |||||||||||||||||||||||||||
Pikesville, MD | 0 | 450 | 10,750 | 0 | 450 | 10,750 | 525 | 2007 | 1983 | |||||||||||||||||||||||||||
Plano, TX | 0 | 1,305 | 9,095 | 0 | 1,305 | 9,095 | 962 | 2005 | 1977 | |||||||||||||||||||||||||||
Plymouth, MA | 0 | 440 | 6,220 | 2,330 | 440 | 8,550 | 756 | 2004 | 1968 | |||||||||||||||||||||||||||
Port St. Joe, FL | 0 | 370 | 2,055 | 0 | 370 | 2,055 | 468 | 2004 | 1982 | |||||||||||||||||||||||||||
Post Falls, ID | 0 | 2,700 | 14,217 | 0 | 2,700 | 14,217 | 0 | 2007 | 2008 | |||||||||||||||||||||||||||
Prospect, CT | 0 | 820 | 1,441 | 2,407 | 820 | 3,848 | 835 | 2004 | 1970 | |||||||||||||||||||||||||||
Pueblo, CO | 0 | 370 | 6,051 | 0 | 370 | 6,051 | 2,099 | 1998 | 1989 | |||||||||||||||||||||||||||
Pueblo, CO | 0 | 250 | 9,391 | 0 | 250 | 9,391 | 867 | 2005 | 1985 | |||||||||||||||||||||||||||
Quincy, FL | 0 | 200 | 5,333 | 0 | 200 | 5,333 | 765 | 2004 | 1983 | |||||||||||||||||||||||||||
Quitman, MS | 0 | 60 | 10,340 | 0 | 60 | 10,340 | 1,281 | 2004 | 1976 | |||||||||||||||||||||||||||
Richmond, VA | 0 | 1,211 | 2,889 | 0 | 1,211 | �� | 2,889 | 665 | 2003 | 1995 | ||||||||||||||||||||||||||
Richmond, VA | 0 | 760 | 12,640 | 0 | 760 | 12,640 | 630 | 2007 | 1969 | |||||||||||||||||||||||||||
Ridgely, TN | 0 | 300 | 5,700 | 97 | 300 | 5,797 | 1,195 | 2001 | 1990 | |||||||||||||||||||||||||||
Ringgold, LA | 0 | 30 | 4,174 | 0 | 30 | 4,174 | 428 | 2005 | 1984 | |||||||||||||||||||||||||||
Rochdale, MA | 0 | 675 | 11,847 | 2,024 | 800 | 13,746 | 2,341 | 2002 | 1995 | |||||||||||||||||||||||||||
Rockledge, FL | 0 | 360 | 4,117 | 0 | 360 | 4,117 | 1,102 | 2001 | 1970 | |||||||||||||||||||||||||||
Rockwood, TN | 0 | 500 | 7,116 | 741 | 500 | 7,857 | 1,643 | 2001 | 1979 | |||||||||||||||||||||||||||
Rogersville, TN | 0 | 350 | 3,278 | 0 | 350 | 3,278 | 593 | 2003 | 1980 | |||||||||||||||||||||||||||
Royal Palm Beach, FL | 0 | 980 | 8,320 | 0 | 980 | 8,320 | 1,104 | 2004 | 1984 | |||||||||||||||||||||||||||
Ruleville, MS | 0 | 0 | 50 | 0 | 0 | 50 | 28 | 2003 | 1978 | |||||||||||||||||||||||||||
Ruston, LA | 0 | 130 | 9,403 | 0 | 130 | 9,403 | 854 | 2005 | 1965 | |||||||||||||||||||||||||||
San Antonio, TX | 0 | 560 | 7,315 | 0 | 560 | 7,315 | 1,377 | 2002 | 2000 | |||||||||||||||||||||||||||
San Antonio, TX | 0 | 640 | 13,360 | 0 | 640 | 13,360 | 647 | 2007 | 2004 | |||||||||||||||||||||||||||
Sandwich, MA | 0 | 1,140 | 11,190 | 335 | 1,140 | 11,525 | 1,154 | 2004 | 1987 | |||||||||||||||||||||||||||
Sarasota, FL | 0 | 560 | 8,474 | 0 | 560 | 8,474 | 2,194 | 1999 | 2000 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Sarasota, FL | $ | 0 | $ | 600 | $ | 3,400 | $ | 0 | $ | 600 | $ | 3,400 | $ | 478 | 2004 | 1982 | ||||||||||||||||||||
Scituate, MA | 0 | 1,740 | 10,640 | 0 | 1,740 | 10,640 | 890 | 2005 | 1976 | |||||||||||||||||||||||||||
Seville, OH | 0 | 230 | 1,770 | 0 | 230 | 1,770 | 246 | 2005 | 1981 | |||||||||||||||||||||||||||
Shelby, MS | 0 | 60 | 5,340 | 0 | 60 | 5,340 | 682 | 2004 | 1979 | |||||||||||||||||||||||||||
Shelbyville, KY | 0 | 630 | 3,870 | 0 | 630 | 3,870 | 401 | 2005 | 1965 | |||||||||||||||||||||||||||
South Boston, MA | 0 | 385 | 2,002 | 5,218 | 385 | 7,220 | 2,064 | 1995 | 1961 | |||||||||||||||||||||||||||
South Pittsburg, TN | 0 | 430 | 5,628 | 0 | 430 | 5,628 | 840 | 2004 | 1979 | |||||||||||||||||||||||||||
Southbridge, MA | 0 | 890 | 8,110 | 3,000 | 890 | 11,110 | 1,267 | 2004 | 1976 | |||||||||||||||||||||||||||
Spring City, TN | 0 | 420 | 6,085 | 2,580 | 420 | 8,665 | 1,704 | 2001 | 1987 | |||||||||||||||||||||||||||
St. Louis, MO | 0 | 750 | 6,030 | 0 | 750 | 6,030 | 1,088 | 1995 | 1994 | |||||||||||||||||||||||||||
Starke, FL | 0 | 120 | 10,180 | 0 | 120 | 10,180 | 1,310 | 2004 | 1990 | |||||||||||||||||||||||||||
Staunton, VA | 0 | 310 | 11,090 | 0 | 310 | 11,090 | 559 | 2007 | 1959 | |||||||||||||||||||||||||||
Stuart, FL | 0 | 390 | 8,110 | 0 | 390 | 8,110 | 1,035 | 2004 | 1985 | |||||||||||||||||||||||||||
Swanton, OH | 0 | 330 | 6,370 | 0 | 330 | 6,370 | 760 | 2004 | 1950 | |||||||||||||||||||||||||||
Tampa, FL | 0 | 830 | 6,370 | 0 | 830 | 6,370 | 1,012 | 2004 | 1968 | |||||||||||||||||||||||||||
Torrington, CT | 0 | 360 | 1,261 | 829 | 360 | 2,090 | 469 | 2004 | 1966 | |||||||||||||||||||||||||||
Troy, OH | 0 | 470 | 16,730 | 0 | 470 | 16,730 | 1,921 | 2004 | 1971 | |||||||||||||||||||||||||||
Tucson, AZ | 0 | 930 | 13,399 | 0 | 930 | 13,399 | 1,154 | 2005 | 1985 | |||||||||||||||||||||||||||
Tupelo, MS | 0 | 740 | 4,092 | 0 | 740 | 4,092 | 751 | 2003 | 1980 | |||||||||||||||||||||||||||
Uhrichsville, OH | 0 | 24 | 6,716 | 0 | 24 | 6,716 | 542 | 2006 | 1977 | |||||||||||||||||||||||||||
Venice, FL | 0 | 500 | 6,000 | 0 | 500 | 6,000 | 744 | 2004 | 1987 | |||||||||||||||||||||||||||
Vero Beach, FL | 0 | 660 | 9,040 | 1,462 | 660 | 10,502 | 4,725 | 1998 | 1984 | |||||||||||||||||||||||||||
Wareham, MA | 0 | 875 | 10,313 | 1,701 | 875 | 12,014 | 2,183 | 2002 | 1989 | |||||||||||||||||||||||||||
Warren, OH | 0 | 240 | 3,810 | 0 | 240 | 3,810 | 420 | 2005 | 1973 | |||||||||||||||||||||||||||
Waterbury, CT | 0 | 370 | 2,166 | 1,416 | 370 | 3,582 | 621 | 2006 | 1972 | |||||||||||||||||||||||||||
Webster, TX | 0 | 360 | 5,940 | 0 | 360 | 5,940 | 1,114 | 2002 | 2000 | |||||||||||||||||||||||||||
West Haven, CT | 0 | 580 | 1,620 | 1,235 | 580 | 2,855 | 629 | 2004 | 1971 | |||||||||||||||||||||||||||
West Palm Beach, FL | 0 | 696 | 8,037 | 0 | 696 | 8,037 | 4,346 | 1998 | 1984 | |||||||||||||||||||||||||||
West Worthington, OH | 0 | 510 | 5,090 | 0 | 510 | 5,090 | 434 | 2006 | 1980 | |||||||||||||||||||||||||||
Westlake, OH | 0 | 1,330 | 17,926 | 0 | 1,330 | 17,926 | 3,545 | 2001 | 1985 | |||||||||||||||||||||||||||
Westlake, OH | 0 | 571 | 5,411 | 0 | 571 | 5,411 | 1,807 | 1998 | 1957 | |||||||||||||||||||||||||||
Westmoreland, TN | 0 | 330 | 1,822 | 2,634 | 330 | 4,456 | 944 | 2001 | 1994 | |||||||||||||||||||||||||||
White Hall, IL | 0 | 50 | 5,550 | 670 | 50 | 6,220 | 2,549 | 2002 | 1971 | |||||||||||||||||||||||||||
Whitemarsh, PA | 0 | 2,310 | 6,190 | 0 | 2,310 | 6,190 | 762 | 2005 | 1967 | |||||||||||||||||||||||||||
Williamsburg, VA | 0 | 1,360 | 7,440 | 0 | 1,360 | 7,440 | 376 | 2007 | 1970 | |||||||||||||||||||||||||||
Williamstown, KY | 0 | 70 | 6,430 | 0 | 70 | 6,430 | 665 | 2005 | 1987 | |||||||||||||||||||||||||||
Winchester, VA | 0 | 640 | 1,510 | 0 | 640 | 1,510 | 0 | 2008 | 1964 | |||||||||||||||||||||||||||
Winnfield, LA | 0 | 31 | 6,480 | 0 | 31 | 6,480 | 617 | 2005 | 1964 | |||||||||||||||||||||||||||
Woodbridge, VA | 0 | 680 | 4,423 | 0 | 680 | 4,423 | 868 | 2002 | 1977 | |||||||||||||||||||||||||||
Worcester, MA | 0 | 1,100 | 5,400 | 2,750 | 1,100 | 8,150 | 968 | 2004 | 1962 | |||||||||||||||||||||||||||
Worcester, MA | 0 | 2,300 | 9,060 | 0 | 2,300 | 9,060 | 64 | 2008 | 1993 | |||||||||||||||||||||||||||
Total Skilled Nursing Facilities | 13,369 | 118,743 | 1,420,437 | 72,832 | 118,794 | 1,493,218 | 242,117 | |||||||||||||||||||||||||||||
Independent Living Facilities: | ||||||||||||||||||||||||||||||||||||
Amelia Island, FL | 0 | 3,290 | 24,310 | 18,195 | 3,290 | 42,505 | 2,071 | 2005 | 1998 | |||||||||||||||||||||||||||
Anderson, SC | 0 | 710 | 6,290 | 0 | 710 | 6,290 | 951 | 2003 | 1986 | |||||||||||||||||||||||||||
Atlanta, GA | 0 | 2,059 | 14,914 | 0 | 2,059 | 14,914 | 6,444 | 1997 | 1999 | |||||||||||||||||||||||||||
Aurora, CO | 0 | 2,600 | 5,906 | 7,915 | 2,600 | 13,821 | 818 | 2006 | 1988 | |||||||||||||||||||||||||||
Aurora, CO | 0 | 1,379 | 0 | 29,233 | 2,440 | 28,172 | 189 | 2006 | 2006 | |||||||||||||||||||||||||||
Austin, TX | 0 | 880 | 9,520 | 0 | 880 | 9,520 | 2,695 | 1999 | 1998 | |||||||||||||||||||||||||||
Carmel, IN | 0 | 2,370 | 57,175 | 0 | 2,370 | 57,175 | 854 | 2006 | 2007 | |||||||||||||||||||||||||||
Columbia, SC | 0 | 2,120 | 4,860 | 2,185 | 2,120 | 7,045 | 1,002 | 2003 | 2000 | |||||||||||||||||||||||||||
Denver, CO | 0 | 3,650 | 14,906 | 280 | 3,650 | 15,186 | 888 | 2006 | 1987 | |||||||||||||||||||||||||||
Douglasville, GA | 0 | 90 | 217 | 0 | 90 | 217 | 39 | 2003 | 1985 | |||||||||||||||||||||||||||
Fremont, CA | 0 | 3,400 | 25,300 | 0 | 3,400 | 25,300 | 2,003 | 2005 | 1987 | |||||||||||||||||||||||||||
Gardnerville, NV | 0 | 1,144 | 10,831 | 0 | 1,144 | 10,831 | 5,226 | 1998 | 1999 | |||||||||||||||||||||||||||
Gilroy, CA | 0 | 760 | 13,880 | 23,860 | 760 | 37,740 | 1,179 | 2006 | 2007 | |||||||||||||||||||||||||||
Houston, TX | 0 | 4,790 | 7,100 | 0 | 4,790 | 7,100 | 1,479 | 2003 | 1974 | |||||||||||||||||||||||||||
Indianapolis, IN | 0 | 495 | 6,287 | 22,565 | 495 | 28,852 | 1,381 | 2006 | 1981 | |||||||||||||||||||||||||||
Indianapolis, IN | 0 | 255 | 2,473 | 12,123 | 255 | 14,596 | 431 | 2006 | 1981 | |||||||||||||||||||||||||||
Lauderhill, FL | 0 | 1,836 | 25,216 | 0 | 1,836 | 25,216 | 2,372 | 2002 | 1976 | |||||||||||||||||||||||||||
Loma Linda, CA | 0 | 2,214 | 9,586 | 0 | 2,214 | 9,586 | 190 | 2008 | 1976 | |||||||||||||||||||||||||||
Manteca, CA | 0 | 1,300 | 12,125 | 0 | 1,300 | 12,125 | 986 | 2005 | 1985 | |||||||||||||||||||||||||||
Marysville, WA | 0 | 620 | 4,780 | 0 | 620 | 4,780 | 664 | 2003 | 1998 | |||||||||||||||||||||||||||
Mesa, AZ | 0 | 950 | 9,087 | 0 | 950 | 9,087 | 2,104 | 1999 | 2000 | |||||||||||||||||||||||||||
Mount Airy, NC | 0 | 270 | 6,430 | 0 | 270 | 6,430 | 510 | 2005 | 1998 | |||||||||||||||||||||||||||
Naples, FL | 0 | 1,716 | 17,306 | 0 | 1,716 | 17,306 | 10,283 | 1997 | 1999 | |||||||||||||||||||||||||||
Oshkosh, WI | 0 | 400 | 23,237 | 0 | 400 | 23,237 | 0 | 2007 | 2008 | |||||||||||||||||||||||||||
Pawleys Island, SC | 0 | 1,010 | 32,590 | 5,421 | 2,020 | 37,001 | 2,650 | 2005 | 1997 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Raleigh, NC | $ | 0 | $ | 10,000 | $ | 0 | $ | 0 | $ | 10,000 | $ | 0 | $ | 0 | 2008 | |||||||||||||||||||||
Raytown, MO | 0 | 510 | 5,490 | 0 | 510 | 5,490 | 287 | 2006 | 2000 | |||||||||||||||||||||||||||
Rohnert Park, CA | 0 | 6,500 | 18,700 | 0 | 6,500 | 18,700 | 1,501 | 2005 | 1985 | |||||||||||||||||||||||||||
Roswell, GA | 0 | 1,107 | 9,627 | 0 | 1,107 | 9,627 | 4,695 | 1997 | 1999 | |||||||||||||||||||||||||||
Sonoma, CA | 0 | 1,100 | 18,400 | 0 | 1,100 | 18,400 | 1,468 | 2005 | 1988 | |||||||||||||||||||||||||||
Spartanburg, SC | 0 | 3,350 | 15,750 | 4,975 | 3,350 | 20,725 | 1,303 | 2005 | 1997 | |||||||||||||||||||||||||||
St. Simon’s Island, GA | 0 | 6,440 | 50,060 | 0 | 6,440 | 50,060 | 640 | 2008 | 2007 | |||||||||||||||||||||||||||
Twin Falls, ID | 0 | 550 | 14,740 | 0 | 550 | 14,740 | 2,512 | 2002 | 1991 | |||||||||||||||||||||||||||
Vacaville, CA | 0 | 900 | 17,100 | 0 | 900 | 17,100 | 1,372 | 2005 | 1986 | |||||||||||||||||||||||||||
Vallejo, CA | 0 | 4,000 | 18,000 | 0 | 4,000 | 18,000 | 1,438 | 2005 | 1989 | |||||||||||||||||||||||||||
Vero Beach, FL | 0 | 2,930 | 40,070 | 1,963 | 2,930 | 42,033 | 1,491 | 2007 | 2003 | |||||||||||||||||||||||||||
Wichita, KS | 0 | 1,400 | 11,000 | 0 | 1,400 | 11,000 | 563 | 2006 | 1997 | |||||||||||||||||||||||||||
Winston-Salem, NC | 0 | 2,850 | 13,550 | 15,065 | 5,700 | 25,765 | 1,304 | 2005 | 1997 | |||||||||||||||||||||||||||
Total Independent Living Facilities | 0 | 81,945 | 576,813 | 143,780 | 86,866 | 715,672 | 65,983 | |||||||||||||||||||||||||||||
Specialty Care Facilities: | ||||||||||||||||||||||||||||||||||||
Amarillo, TX | 0 | 72 | 11,928 | 1,399 | 72 | 13,327 | 1,100 | 2005 | 1986 | |||||||||||||||||||||||||||
Bellaire, TX | 0 | 4,028 | 45,900 | 205 | 4,551 | 46,105 | 2,656 | 2006 | 2005 | |||||||||||||||||||||||||||
Boardman, OH | 0 | 1,200 | 12,800 | 0 | 1,200 | 12,800 | 0 | 2008 | 2008 | |||||||||||||||||||||||||||
Bowling Green, KY | 0 | 3,800 | 26,700 | 0 | 3,800 | 26,700 | 390 | 2008 | 1992 | |||||||||||||||||||||||||||
Chicago, IL | 0 | 3,650 | 7,505 | 12,410 | 3,650 | 19,915 | 6,343 | 2002 | 1979 | |||||||||||||||||||||||||||
Corpus Christi, TX | 0 | 77 | 3,923 | 0 | 77 | 3,923 | 415 | 2005 | 1968 | |||||||||||||||||||||||||||
Crown Point, IN | 0 | 700 | 11,699 | 0 | 700 | 11,699 | 187 | 2007 | 2008 | |||||||||||||||||||||||||||
El Paso, TX | 0 | 112 | 15,888 | 0 | 112 | 15,888 | 1,437 | 2005 | 1994 | |||||||||||||||||||||||||||
El Paso, TX | 0 | 2,400 | 32,800 | 0 | 2,400 | 32,800 | 1,056 | 2008 | 2003 | |||||||||||||||||||||||||||
Fresno, CA | 0 | 2,500 | 35,800 | 0 | 2,500 | 35,800 | 523 | 2008 | 1991 | |||||||||||||||||||||||||||
Ft. Wayne, IN | 0 | 170 | 8,232 | 0 | 170 | 8,232 | 241 | 2006 | 2006 | |||||||||||||||||||||||||||
Lafayette, LA | 0 | 1,928 | 10,483 | 26 | 1,928 | 10,509 | 821 | 2006 | 1993 | |||||||||||||||||||||||||||
Marlton, NJ | 0 | 0 | 38,300 | 0 | 0 | 38,300 | 560 | 2008 | 1994 | |||||||||||||||||||||||||||
Meridian, ID | 0 | 3,600 | 20,802 | 0 | 3,600 | 20,802 | 473 | 2006 | 2008 | |||||||||||||||||||||||||||
Midwest City, OK | 0 | 146 | 3,854 | 0 | 146 | 3,854 | 398 | 2005 | 1996 | |||||||||||||||||||||||||||
Plano, TX | 0 | 195 | 14,805 | 500 | 195 | 15,305 | 1,343 | 2005 | 1995 | |||||||||||||||||||||||||||
San Antonio, TX | 0 | 0 | 17,303 | 0 | 0 | 17,303 | 1,038 | 2007 | 2007 | |||||||||||||||||||||||||||
San Bernardino, CA | 0 | 3,700 | 14,300 | 0 | 3,700 | 14,300 | 149 | 2008 | 1993 | |||||||||||||||||||||||||||
San Diego, CA | 0 | 0 | 22,003 | 0 | 0 | 22,003 | 230 | 2008 | 1992 | |||||||||||||||||||||||||||
Springfield, MA | 0 | 2,100 | 22,913 | 160 | 2,100 | 23,073 | 10,178 | 1996 | 1952 | |||||||||||||||||||||||||||
Stoughton, MA | 0 | 975 | 25,247 | 0 | 975 | 25,247 | 11,318 | 1996 | 1958 | |||||||||||||||||||||||||||
Tulsa, OK | 0 | 3,003 | 6,025 | 19 | 3,003 | 6,044 | 659 | 2006 | 1992 | |||||||||||||||||||||||||||
Waukesha, WI | 0 | 4,700 | 20,669 | 0 | 4,700 | 20,669 | 791 | 2007 | 2007 | |||||||||||||||||||||||||||
Webster, TX | 0 | 2,418 | 12,028 | 32 | 2,418 | 12,060 | 1,030 | 2006 | 1991 | |||||||||||||||||||||||||||
Total Specialty Care Facilitiies | 0 | 41,474 | 441,907 | 14,751 | 41,997 | 456,658 | 43,336 | |||||||||||||||||||||||||||||
Medical Office Buildings: | ||||||||||||||||||||||||||||||||||||
Arcadia, CA(6) | 10,513 | 5,408 | 23,219 | 563 | 5,618 | 23,782 | 2,235 | 2006 | 1984 | |||||||||||||||||||||||||||
Atlanta, GA | 0 | 4,931 | 18,720 | 491 | 4,983 | 19,211 | 2,026 | 2006 | 1992 | |||||||||||||||||||||||||||
Aurora, IL | 0 | 540 | 9,023 | 17 | 540 | 9,040 | 661 | 2006 | 1996 | |||||||||||||||||||||||||||
Aurora, IL | 0 | 2,803 | 1,711 | 34 | 2,803 | 1,745 | 434 | 2006 | 1989 | |||||||||||||||||||||||||||
Austell, GA(6) | 4,433 | 2,223 | 8,362 | 12 | 2,223 | 8,374 | 1,446 | 2006 | 1999 | |||||||||||||||||||||||||||
Bartlett, TN(7) | 8,747 | 0 | 15,015 | 152 | 187 | 15,167 | 1,082 | 2007 | 2004 | |||||||||||||||||||||||||||
Bellaire, TX | 0 | 2,972 | 33,445 | 181 | 2,972 | 33,626 | 2,202 | 2006 | 2005 | |||||||||||||||||||||||||||
Birmingham, AL | 0 | 651 | 39,552 | 1,316 | 651 | 40,868 | 3,074 | 2006 | �� | 1971 | ||||||||||||||||||||||||||
Boca Raton, FL(6) | 14,298 | 109 | 34,002 | 481 | 109 | 34,483 | 2,622 | 2006 | 1995 | |||||||||||||||||||||||||||
Boynton Beach, FL(6) | 4,349 | 0 | 6,574 | 143 | 214 | 6,717 | 421 | 2007 | 2004 | |||||||||||||||||||||||||||
Boynton Beach, FL(6) | 4,766 | 2,048 | 7,692 | 21 | 2,048 | 7,713 | 839 | 2006 | 1995 | |||||||||||||||||||||||||||
Boynton Beach, FL(7) | 4,275 | 2,048 | 7,403 | 174 | 2,048 | 7,577 | 636 | 2006 | 1997 | |||||||||||||||||||||||||||
Boynton Beach, FL(7) | 6,384 | 0 | 11,235 | 291 | 109 | 11,526 | 919 | 2007 | 1996 | |||||||||||||||||||||||||||
Claremore, OK(7) | 8,557 | 0 | 12,829 | 179 | 132 | 13,008 | 767 | 2007 | 2005 | |||||||||||||||||||||||||||
Coral Springs, FL | 0 | 1,598 | 10,627 | 136 | 1,600 | 10,763 | 1,127 | 2006 | 1993 | |||||||||||||||||||||||||||
Dallas, TX(6) | 16,081 | 137 | 29,357 | 232 | 137 | 29,589 | 3,400 | 2006 | 1995 | |||||||||||||||||||||||||||
Decatur, GA | 0 | 934 | 1,837 | 83 | 934 | 1,920 | 621 | 2006 | 1971 | |||||||||||||||||||||||||||
Delray Beach, FL | 0 | 1,882 | 34,767 | 996 | 1,941 | 35,763 | 3,351 | 2006 | 1985 | |||||||||||||||||||||||||||
Denton, TX(7) | 12,623 | 0 | 19,407 | 0 | 0 | 19,407 | 955 | 2007 | 2005 | |||||||||||||||||||||||||||
Durham, NC | 0 | 6,814 | 10,825 | 926 | 6,854 | 11,751 | 2,236 | 2006 | 1980 | |||||||||||||||||||||||||||
Durham, NC | 0 | 0 | 0 | 39 | 1 | 39 | 5 | 2006 | 1980 | |||||||||||||||||||||||||||
El Paso, TX | 0 | 600 | 6,700 | 0 | 600 | 6,700 | 0 | 2008 | 2003 | |||||||||||||||||||||||||||
El Paso, TX(6) | 10,765 | 677 | 17,075 | 217 | 677 | 17,292 | 1,389 | 2006 | 1997 | |||||||||||||||||||||||||||
Fayetteville, GA(6) | 3,438 | 959 | 7,540 | 269 | 959 | 7,809 | 678 | 2006 | 1999 | |||||||||||||||||||||||||||
Franklin, TN | 0 | 2,338 | 12,138 | 0 | 2,338 | 12,138 | 822 | 2007 | 1988 | |||||||||||||||||||||||||||
Frisco, TX | 0 | 0 | 15,309 | 308 | 0 | 15,617 | 900 | 2007 | 2004 | |||||||||||||||||||||||||||
Frisco, TX(7) | 9,587 | 0 | 18,635 | 0 | 0 | 18,635 | 1,088 | 2007 | 2004 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Germantown, TN | $ | 0 | $ | 3,049 | $ | 12,456 | $ | 561 | $ | 3,049 | $ | 13,017 | $ | 898 | 2006 | 2002 | ||||||||||||||||||||
Glendale, CA(7) | 8,627 | 0 | 18,558 | 0 | 37 | 18,558 | 1,188 | 2007 | 2002 | |||||||||||||||||||||||||||
Greeley, CO | 0 | 877 | 6,711 | 0 | 877 | 6,711 | 365 | 2007 | 1997 | |||||||||||||||||||||||||||
Jupiter, FL(6) | 7,511 | 2,252 | 11,415 | 22 | 2,252 | 11,437 | 977 | 2006 | 2001 | |||||||||||||||||||||||||||
Jupiter, FL(7) | 4,681 | 0 | 5,858 | 0 | 2,825 | 5,858 | 430 | 2007 | 2004 | |||||||||||||||||||||||||||
Lakeway, TX | 0 | 2,801 | 0 | 0 | 2,801 | 0 | 0 | 2007 | ||||||||||||||||||||||||||||
Lakewood, CA | 0 | 146 | 14,885 | 62 | 146 | 14,947 | 1,137 | 2006 | 1993 | |||||||||||||||||||||||||||
Las Vegas , NV(6) | 6,287 | 74 | 15,287 | 69 | 74 | 15,356 | 1,416 | 2006 | 2000 | |||||||||||||||||||||||||||
Las Vegas, NV | 0 | 6,127 | 0 | 0 | 6,127 | 0 | 0 | 2007 | ||||||||||||||||||||||||||||
Las Vegas, NV | 0 | 6,734 | 54,886 | 89 | 6,734 | 54,975 | 3,614 | 2006 | 1991 | |||||||||||||||||||||||||||
Las Vegas, NV(6) | 4,663 | 2,319 | 4,612 | 55 | 2,319 | 4,667 | 493 | 2006 | 1991 | |||||||||||||||||||||||||||
Las Vegas, NV(7) | 3,215 | 0 | 6,921 | 0 | 433 | 6,921 | 439 | 2007 | 1997 | |||||||||||||||||||||||||||
Lawrenceville, GA | 0 | 2,279 | 10,732 | 20 | 2,279 | 10,752 | 859 | 2006 | 2001 | |||||||||||||||||||||||||||
Lawrenceville, GA(6) | 2,437 | 1,054 | 4,974 | 9 | 1,054 | 4,983 | 414 | 2006 | 2002 | |||||||||||||||||||||||||||
Los Alamitos, CA(7) | 8,763 | 0 | 18,635 | 28 | 39 | 18,663 | 1,116 | 2007 | 2003 | |||||||||||||||||||||||||||
Los Gatos, CA | 0 | 488 | 22,832 | 170 | 488 | 23,002 | 2,646 | 2006 | 1993 | |||||||||||||||||||||||||||
Loxahatchee, FL | 0 | 1,340 | 6,509 | 6 | 1,340 | 6,515 | 503 | 2006 | 1993 | |||||||||||||||||||||||||||
Loxahatchee, FL | 0 | 1,637 | 5,048 | 170 | 1,646 | 5,218 | 329 | 2006 | 1997 | |||||||||||||||||||||||||||
Loxahatchee, FL(6) | 2,804 | 1,553 | 4,694 | 109 | 1,562 | 4,803 | 322 | 2006 | 1994 | |||||||||||||||||||||||||||
Merrillville, IN | 0 | 0 | 22,134 | 0 | 0 | 22,134 | 181 | 2008 | 2006 | |||||||||||||||||||||||||||
Mesa, AZ | 0 | 1,558 | 9,561 | 0 | 1,558 | 9,561 | 428 | 2008 | 1989 | |||||||||||||||||||||||||||
Middletown, NY | 0 | 1,756 | 20,364 | 71 | 1,756 | 20,435 | 2,493 | 2006 | 1998 | |||||||||||||||||||||||||||
Morrow, GA | 0 | 818 | 8,064 | 99 | 833 | 8,163 | 417 | 2007 | 1990 | |||||||||||||||||||||||||||
Mount Juliet, TN(9) | 6,032 | 1,566 | 12,885 | 0 | 1,566 | 12,885 | 824 | 2007 | 2005 | |||||||||||||||||||||||||||
Nashville , TN | 0 | 1,806 | 7,165 | 128 | 1,806 | 7,293 | 833 | 2006 | 1986 | |||||||||||||||||||||||||||
Niagra Falls, NY | 0 | 1,335 | 17,702 | 164 | 1,335 | 17,866 | 1,368 | 2007 | 1990 | |||||||||||||||||||||||||||
Ocala, FL | 0 | 885 | 4,982 | 37 | 885 | 5,019 | 670 | 2006 | 1991 | |||||||||||||||||||||||||||
Okatie, SC(7) | 8,271 | 0 | 18,282 | 80 | 171 | 18,362 | 1,546 | 2007 | 1998 | |||||||||||||||||||||||||||
Orange Village, OH | 0 | 610 | 7,419 | 0 | 610 | 7,419 | 677 | 2007 | 1985 | |||||||||||||||||||||||||||
Palm Springs , CA | 0 | 365 | 12,396 | 951 | 365 | 13,347 | 1,323 | 2006 | 1998 | |||||||||||||||||||||||||||
Palm Springs, FL | 0 | 1,174 | 7,834 | 71 | 1,182 | 7,905 | 930 | 2006 | 1997 | |||||||||||||||||||||||||||
Palm Springs, FL(6) | 2,872 | 733 | 4,078 | 7 | 739 | 4,085 | 372 | 2006 | 1993 | |||||||||||||||||||||||||||
Palmer, AK(7) | 19,980 | 0 | 29,705 | 787 | 217 | 30,492 | 2,036 | 2007 | 2006 | |||||||||||||||||||||||||||
Pearland, TX(6) | 2,477 | 781 | 5,522 | 5 | 781 | 5,527 | 524 | 2006 | 2000 | |||||||||||||||||||||||||||
Pearland, TX(6) | 1,523 | 948 | 4,599 | 19 | 948 | 4,618 | 450 | 2006 | 2002 | |||||||||||||||||||||||||||
Pelham, AL | 0 | 915 | 1,455 | 23 | 915 | 1,478 | 247 | 2006 | 1990 | |||||||||||||||||||||||||||
Phoenix, AZ | 0 | 11,872 | 0 | 0 | 11,872 | 0 | 0 | 2007 | ||||||||||||||||||||||||||||
Phoenix, AZ(6) | 30,348 | 1,149 | 49,586 | 142 | 1,150 | 49,728 | 6,447 | 2006 | 1998 | |||||||||||||||||||||||||||
Pineville, NC | 0 | 961 | 6,974 | 385 | 961 | 7,359 | 871 | 2006 | 1988 | |||||||||||||||||||||||||||
Plano, TX | 0 | 5,423 | 20,752 | 0 | 5,423 | 20,752 | 346 | 2008 | 2007 | |||||||||||||||||||||||||||
Plantation, FL(6) | 10,182 | 8,563 | 10,666 | 459 | 8,563 | 11,125 | 1,184 | 2006 | 1997 | |||||||||||||||||||||||||||
Plantation, FL(6) | 9,494 | 8,848 | 9,423 | 47 | 8,896 | 9,470 | 2,117 | 2006 | 1996 | |||||||||||||||||||||||||||
Reno, NV | 0 | 1,117 | 22,090 | 103 | 1,117 | 22,193 | 2,410 | 2006 | 1991 | |||||||||||||||||||||||||||
Sacramento, CA(6) | 5,086 | 866 | 12,756 | 352 | 866 | 13,108 | 955 | 2006 | 1990 | |||||||||||||||||||||||||||
San Antonio, TX(6) | 6,690 | 2,050 | 16,251 | 194 | 2,050 | 16,445 | 1,935 | 2006 | 1999 | |||||||||||||||||||||||||||
Somerville, NJ | 0 | 3,400 | 22,244 | 0 | 3,400 | 22,244 | 232 | 2008 | 2007 | |||||||||||||||||||||||||||
St. Louis, MO(7) | 7,892 | 0 | 17,247 | 0 | 336 | 17,247 | 1,177 | 2007 | 2001 | |||||||||||||||||||||||||||
Tempe, AZ(7) | 5,715 | 0 | 9,112 | 84 | 1,486 | 9,196 | 832 | 2007 | 1996 | |||||||||||||||||||||||||||
Tomball, TX(6) | 3,030 | 1,404 | 5,142 | 25 | 1,404 | 5,167 | 884 | 2006 | 1982 | |||||||||||||||||||||||||||
Trussville, AL | 0 | 1,336 | 2,177 | 19 | 1,336 | 2,196 | 408 | 2006 | 1990 | |||||||||||||||||||||||||||
Tucson, AZ | 0 | 1,302 | 4,925 | 0 | 1,302 | 4,925 | 176 | 2008 | 1995 | |||||||||||||||||||||||||||
Tucson, AZ(7) | 10,673 | 89 | 18,339 | 314 | 89 | 18,653 | 1,069 | 2007 | 2004 | |||||||||||||||||||||||||||
Union City, TN | 0 | 320 | 0 | 0 | 320 | 0 | 0 | 2006 | 1999 | |||||||||||||||||||||||||||
Voorhees, NJ | 0 | 6,404 | 24,251 | 158 | 6,404 | 24,409 | 1,887 | 2006 | 1997 | |||||||||||||||||||||||||||
Warrington, PA | 0 | 85 | 23,231 | 0 | 85 | 23,231 | 1,219 | 2008 | 2001 | |||||||||||||||||||||||||||
Wellington , FL(7) | 6,579 | 0 | 13,697 | 0 | 381 | 13,697 | 783 | 2007 | 2003 | |||||||||||||||||||||||||||
Wellington, FL(6) | 7,335 | 107 | 16,933 | 14 | 107 | 16,947 | 1,319 | 2006 | 2000 | |||||||||||||||||||||||||||
West Palm Beach, FL(6) | 6,900 | 610 | 14,618 | 9 | 610 | 14,627 | 1,351 | 2006 | 1991 | |||||||||||||||||||||||||||
West Palm Beach, FL(6) | 7,472 | 628 | 14,740 | 52 | 628 | 14,792 | 1,112 | 2006 | 1993 | |||||||||||||||||||||||||||
West Seneca, NY(8) | 13,276 | 917 | 22,435 | 44 | 1,082 | 22,479 | 1,248 | 2007 | 1990 | |||||||||||||||||||||||||||
Yorkville, IL | 0 | 1,419 | 2,816 | 23 | 1,419 | 2,839 | 310 | 2006 | 1980 | |||||||||||||||||||||||||||
Total Medical Office Buildings | 339,631 | 146,522 | 1,192,564 | 13,497 | 153,714 | 1,206,061 | 98,673 | |||||||||||||||||||||||||||||
Construction in Progress | 0 | 0 | 639,419 | 0 | 0 | 639,419 | 0 | |||||||||||||||||||||||||||||
433,864 | 492,220 | 5,139,484 | 292,102 | 504,907 | 5,426,614 | 600,781 | ||||||||||||||||||||||||||||||
Assets Held For Sale: | ||||||||||||||||||||||||||||||||||||
Edinburg, TX(6),(10) | 6,204 | 431 | 3,517 | 0 | 431 | 3,517 | 0 | 2006 | 1996 | |||||||||||||||||||||||||||
Lewisville, TX(10) | 0 | 142 | 2,484 | 0 | 142 | 2,484 | 0 | 2006 | 1997 | |||||||||||||||||||||||||||
New Albany, OH | 0 | 3,020 | 27,445 | 0 | 3,020 | 27,445 | 4,254 | 2002 | 2003 |
Gross Amount at Which | ||||||||||||||||||||||||||||||||||||
Initial Cost to Company | Cost Capitalized | Carried at Close of Period | ||||||||||||||||||||||||||||||||||
Buildings & | Subsequent to | Buildings & | Accumulated | Year | Year | |||||||||||||||||||||||||||||||
Description | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Palm Bay, FL(6),(10) | $ | 2,002 | $ | 790 | $ | 1,075 | $ | 0 | $ | 790 | $ | 1,075 | $ | 0 | 2006 | 1997 | ||||||||||||||||||||
Suwanee, GA(10) | 0 | 1,776 | 469 | 0 | 1,776 | 469 | 0 | 2006 | 1998 | |||||||||||||||||||||||||||
Suwanee, GA(10) | 0 | 1,437 | 2,042 | 0 | 1,437 | 2,042 | 0 | 2006 | 2001 | |||||||||||||||||||||||||||
Suwanee, GA(10) | 0 | 1,046 | 1,199 | 0 | 1,046 | 1,199 | 0 | 2006 | 2003 | |||||||||||||||||||||||||||
Union City, TN(10) | 0 | 130 | 1,735 | 0 | 130 | 1,735 | 0 | 2006 | 1999 | |||||||||||||||||||||||||||
West Palm Beach, FL(6),(10) | 6,308 | 780 | 2,790 | 0 | 780 | 2,790 | 0 | 2006 | 1995 | |||||||||||||||||||||||||||
Total Assets Held For Sale | 14,514 | 9,552 | 42,756 | 0 | 9,552 | 42,756 | 4,254 | |||||||||||||||||||||||||||||
Total Investment in Real Property Owned | $ | 448,378 | $ | 501,772 | $ | 5,182,240 | $ | 292,102 | $ | 514,459 | $ | 5,469,370 | $ | 605,035 | ||||||||||||||||||||||
(1) | 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. | |
(2) | In September 2003, 15 wholly-owned subsidiaries of the Company completed the acquisitions of 15 assisted living facilities from Southern Assisted Living, Inc. The properties were subject to existing mortgage debt of $54,492,000. The 15 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 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. | |
(4) | 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. | |
(5) | In March 2006, three wholly-owned subsidiaries of the Company completed the acquisition of three skilled nursing facilities from Provider Services, Inc. The properties were subject to existing mortgage debt of $14,193,000. 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. | |
(6) | 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. 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. | |
(7) | In May 2007, a wholly-owned subsidiary of the Company completed the acquisition of 17 medical office buildings from Rendina Companies. Certain of the properties were subject to existing mortgage debt of $146,335,000. 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. | |
(8) | In August 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from C06 Holdings, LLC. The property was subject to existing mortgage debt of $13,623,000. 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. | |
(9) | In December 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from Sports Docs, L.L.C. The property was subject to existing mortgage debt of $6,374,000. 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. |
(10) | In December 2008, the Company recognized $32,648,000 of impairment charges related to medical office buildings that it intends to sell. This charge was treated as a reduction of the initial cost to the Company. |
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Investment in real estate: | ||||||||||||
Balance at beginning of year | $ | 5,117,005 | $ | 4,282,858 | $ | 2,936,800 | ||||||
Additions: | ||||||||||||
Acquisitions | 451,363 | 435,473 | 913,160 | |||||||||
Improvements | 646,161 | 333,520 | 169,811 | |||||||||
Conversions from loans receivable | 23,097 | 0 | 11,204 | |||||||||
Deferred acquisition payments | 0 | 0 | 2,000 | |||||||||
Assumed other assets/(liabilities), net | 1,899 | 2,432 | 24,488 | |||||||||
Assumed debt | 0 | 166,188 | 326,690 | |||||||||
SFAS 141 adjustments | 0 | 2,189 | 0 | |||||||||
Reclassification of lease commissions | 2,359 | 0 | 0 | |||||||||
Total additions | 1,124,879 | 939,802 | 1,447,353 | |||||||||
Deductions: | ||||||||||||
Cost of real estate sold | (219,079 | ) | (105,655 | ) | (94,466 | ) | ||||||
Reclassification of accumulated depreciation for assets held for sale | (10,582 | ) | 0 | (6,829 | ) | |||||||
Impairment of assets | (32,648 | ) | 0 | 0 | ||||||||
Total deductions | (262,309 | ) | (105,655 | ) | (101,295 | ) | ||||||
Balance at end of year(1) | $ | 5,979,575 | $ | 5,117,005 | $ | 4,282,858 | ||||||
Accumulated depreciation: | ||||||||||||
Balance at beginning of year | $ | 478,373 | $ | 347,007 | $ | 274,875 | ||||||
Additions: | ||||||||||||
Depreciation and amortization expenses | 163,045 | 149,626 | 97,638 | |||||||||
Amortization of above market leases | 3,477 | 3,518 | 0 | |||||||||
Reclassification of lease commissions | 423 | 0 | 0 | |||||||||
Total additions | 166,945 | 153,144 | 97,638 | |||||||||
Deductions: | ||||||||||||
Sale of properties | (33,578 | ) | (21,778 | ) | (18,677 | ) | ||||||
Reclassification of accumulated depreciation for assets held for sale | (10,959 | ) | 0 | (6,829 | ) | |||||||
Total deductions | (44,537 | ) | (21,778 | ) | (25,506 | ) | ||||||
Balance at end of year | $ | 600,781 | $ | 478,373 | $ | 347,007 | ||||||
(1) | The aggregate cost for tax purposes for real property equals $5,977,346,000, $5,110,696,000 and $4,049,675,000 at December 31, 2008, 2007 and 2006, respectively. |
HEALTH CARE REIT, INC.
SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE
December 31, 2008
(In thousands) | ||||||||||||||||||||||||||
Principal Amount | ||||||||||||||||||||||||||
of Loans Subject | ||||||||||||||||||||||||||
Final | Periodic | Carrying | to Delinquent | |||||||||||||||||||||||
Interest | Maturity | Payment | Prior | Face Amount | Amount of | Principal or | ||||||||||||||||||||
Description | Rate | Date | Terms | Liens | of Mortgages | Mortgages | Interest(1) | |||||||||||||||||||
First mortgage loan relating to | 10.39% | 09/30/20 | Monthly Payments | $ | 0 | $ | 34,000 | $ | 33,205 | $ | 0 | |||||||||||||||
two skilled nursing facilities in Florida | $317,978 | |||||||||||||||||||||||||
First mortgage loan relating to | 7.600% | 06/30/13 | Monthly Payments | 0 | 40,000 | 17,800 | 0 | |||||||||||||||||||
one assisted living facility in New York | $114,960 | |||||||||||||||||||||||||
First mortgage loan relating to | 11.95% | 09/01/12 | Monthly Payments | 0 | 12,700 | 12,201 | 0 | |||||||||||||||||||
one skilled nursing facility in Florida | $132,889 | |||||||||||||||||||||||||
First mortgage loan relating to | 4.46% | 09/07/09 | Monthly Payments | 0 | 12,000 | 11,550 | 0 | |||||||||||||||||||
one specialty care facility in Massachusetts | $42,928 | |||||||||||||||||||||||||
First mortgage loan relating to | 15.21% | 07/01/09 | Monthly Payments | 0 | 7,400 | 7,145 | 0 | |||||||||||||||||||
one skilled nursing facility in Pennsylvania | $83,355 | |||||||||||||||||||||||||
Second mortgage loan realting to | 19.26% | 09/09/09 | Monthly Payments | 13,764 | 5,700 | 5,700 | 1,165 | |||||||||||||||||||
one independent living facility in Massachusetts | $48,165 | |||||||||||||||||||||||||
First mortgage loan relating to | 9.63% | 05/01/09 | Monthly Payments | 0 | 18,800 | 5,518 | 500 | |||||||||||||||||||
one specialty care facility in California | $44,282 | |||||||||||||||||||||||||
First mortgage loan realting to | 19.26% | 03/31/09 | Monthly Payments | 0 | 5,410 | 5,410 | 1,106 | |||||||||||||||||||
one independent living facility in Massachusetts | $45,715 | |||||||||||||||||||||||||
First mortgage loan realting to | 10.39% | 07/01/20 | Monthly Payments | 0 | 4,500 | 4,329 | 0 | |||||||||||||||||||
one skilled nursing facility in Michigan | $37,493 | |||||||||||||||||||||||||
First mortgage loan realting to | 5.32% | 01/01/13 | Monthly Payments | 0 | 4,500 | 4,151 | 0 | |||||||||||||||||||
one independent living facility in Arizona | $18,403 | |||||||||||||||||||||||||
Four first mortgage loans | From | From | Monthly Payments | 0 | 21,087 | 8,862 | 79 | |||||||||||||||||||
relating to one independent | 7.00% to | 09/1/09 to | from $2,734 | |||||||||||||||||||||||
living facility, one assisted living facility, and seven skilled nursing facilities | 19.00% | 12/01/15 | to $76,514 | |||||||||||||||||||||||
Eight second mortgage loans | From | From | Monthly Payments | 15,881 | 20,741 | 18,407 | 1,560 | |||||||||||||||||||
relating to six independent | 11.84% to | 04/08/09 to | from $2,960 | |||||||||||||||||||||||
living facilities, one skilled nursing facility and one specialty care facility | 19.26% | 01/31/12 | to $26,278 | |||||||||||||||||||||||
Two third mortgage loans | From | From | Monthly Payments | 3,945 | 3,109 | 3,014 | 352 | |||||||||||||||||||
relating to two independent | 19.00% to | 06/30/09 to | from $10,093 | |||||||||||||||||||||||
living facilities | 19.26% | 12/31/09 | to $12,675 | |||||||||||||||||||||||
Totals | $ | 33,590 | $ | 189,947 | $ | 137,292 | $ | 4,762 | ||||||||||||||||||
(1) | Represents allocation of allowance for losses on loans receivable, if applicable. |
HEALTH CARE REIT, INC.
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Reconciliation of mortgage loans: | ||||||||||||
Balance at beginning of year | $ | 143,091 | $ | 177,615 | $ | 141,467 | ||||||
Additions: | ||||||||||||
New mortgage loans | 22,142 | 55,692 | 87,563 | |||||||||
Reclass from non real estate loans | 0 | 1,607 | 0 | |||||||||
Total additions | 22,142 | 57,299 | 87,563 | |||||||||
Deductions: | ||||||||||||
Collections of principal(1) | (4,844 | ) | (19,296 | ) | (40,155 | ) | ||||||
Conversions to real property | (23,097 | ) | 0 | (11,204 | ) | |||||||
Charge-offs | 0 | 0 | (56 | ) | ||||||||
Reclass to other real estate loans(2) | 0 | (72,527 | ) | 0 | ||||||||
Total deductions | (27,941 | ) | (91,823 | ) | (51,415 | ) | ||||||
Balance at end of year | $ | 137,292 | $ | 143,091 | $ | 177,615 | ||||||
(1) | Includes collection of negative principal amortization. | |
(2) | In 2007, the Company reclassified all loans that did not have a first, second or third mortgage lien to other real estate loans. |