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News Release: HCP Announces Results for the Quarter Ended September 30, 2017

NEWS PROVIDED BY HCP, Inc.

Nov 02, 2017, 07:02 ET

IRVINE, Calif.Nov. 2, 2017 /PRNewswire/ — HCP, Inc. (NYSE: HCP) announced results for the quarter ended September 30, 2017.

THIRD QUARTER 2017 AND RECENT HIGHLIGHTS

–      EPS, FFO and FFO as adjusted per share, were ($0.02)$0.33 and $0.48, respectively
–      Achieved year-over-year three-month SPP Cash NOI growth of 3.2%, including 5.3% in the SHOP portfolio
–      Entered into transactions which provide a path to reduce Brookdale concentration to approximately 15.7%
–      Reentering the Boston life science market with $228 million acquisition of the Hayden Research Campus, bringing our year-to-date announced acquisitions and developments to $447 million
–      Announced launch of sales process for remaining UK holdings
–      As previously announced, repurchased $500 million of our 5.375% senior notes due 2021
–      Promoted Tom Klaritch to Chief Operating Officer and appointed Shawn Johnston as Chief Accounting Officer
–      Increased 2017 FFO as adjusted guidance range and reaffirmed aggregate 2017 SPP Cash NOI growth guidance

Three Months Ended
September 30, 2017

Three Months Ended
September 30, 2016

(in thousands, except per share amounts)

Amount

Diluted
Per Share

Amount

Diluted
Per Share

Per Share
Change

Net income (loss)

$

(7,788)

$

(0.02)

$

150,924

$

0.32

$

(0.34)

FFO

$

155,248

$

0.33

$

304,387

$

0.65

$

(0.32)

Other impairments (recoveries), net(1)

2,738

0.01

0.01

Severance and related charges(2)

3,889

0.01

14,464

0.03

(0.02)

Loss on debt extinguishments(3)

54,227

0.11

0.11

Transaction-related items

580

17,568

0.04

(0.04)

Casualty-related charges (recoveries), net(4)

8,925

0.02

0.02

Other(5)

2,162

94

FFO as adjusted

$

227,769

$

0.48

$

336,513

$

0.72

$

(0.24)

FFO as adjusted from QCP

(101,549)

(0.22)

0.22

Comparable FFO as adjusted(6)

$

227,769

$

0.48

$

234,964

$

0.50

$

(0.02)

FAD

$

202,407

$

317,540

_______________________________________

(1)

Relates to the impairment of our Tandem Health Care Loan.

(2)

For the three months ended September 30, 2017, primarily relates to the departure of our former Executive Vice President and Chief Accounting Officer. For the three months ended September 30, 2016, primarily relates to the departure of our former President and Chief Executive Officer.

(3)

Represents the premium associated with the prepayment of $500 million of senior unsecured notes.

(4)

Includes $11 million of casualty-related charges and a $2 million deferred income tax benefit.

(5)

Includes $2 million of litigation costs.

(6)

Represents FFO as adjusted excluding FFO as adjusted from QCP and interest expense related to debt repaid using proceeds from the spin-off, assuming these transactions occurred at the beginning of the earliest period presented. Comparable FFO as adjusted allows management to evaluate the performance of our remaining real estate portfolio following the completion of the QCP spin-off.

FFO, FFO as adjusted, FAD, Comparable FFO as adjusted, SPP Cash NOI and SPP NOI are supplemental non-GAAP financial measures that we believe are useful in evaluating the operating performance of real estate investment trusts. See “Discussion and Reconciliation of Non-GAAP Financial Measures” for the quarter ended September 30, 2017 for definitions, discussions of their uses and inherent limitations, and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP on the Investor Relations section of our website at http://ir.hcpi.com/financial-reconciliation.

SAME PROPERTY PORTFOLIO OPERATING SUMMARY

The table below outlines the three-month same property portfolio operating results for the quarter:

Year-Over-Year

Occupancy

SPP Growth

3Q17

3Q16

NOI

Cash NOI

Senior housing triple-net

85.5%

87.1%

3.0%

2.7%

Senior housing operating portfolio (“SHOP”)(1)

86.3%

88.8%

3.9%

5.3%

Life science

96.3%

97.1%

2.2%

4.0%

Medical office

91.7%

92.2%

1.5%

2.5%

Other non-reportable segments (“Other”)(2)

N/A

N/A

1.7%

1.3%

Total Portfolio

2.5%

3.2%

_______________________________________

(1)

SHOP SPP Cash NOI growth consists of the following components: Assisted Living / Independent Living 4.4% and CCRC joint venture 12.0%.

(2)

Other primarily includes our hospitals and U.K. real estate investments. See our Supplemental Report for additional details.

BROOKDALE TRANSACTIONS

We have reached agreements to sell six assets to Brookdale Senior Living, Inc. (“Brookdale“) for $275 million and purchase Brookdale’s 10% interest in two joint ventures for $99 million. Additionally, HCP and Brookdale have agreed to terminate management agreements on 36 senior housing operating properties and leases on 32 triple-net leased communities. Brookdale has agreed to waive fees on all management agreement terminations and we have agreed to modify the rent on the remaining Brookdale triple-net portfolio, providing a $5 million annual rent reduction. We intend to either transition to other operators or sell the aforementioned 68 properties during 2018. The anticipated sales are expected to generate $600 million to $900 million of net proceeds to us depending on the mix of asset sales versus transitions to new operators.

We have also agreed to sell our remaining investments in the RIDEA II senior housing joint venture (“RIDEA II”) to an investor group led by Columbia Pacific Advisors, LLC (“CPA”) for $332 million. RIDEA II owns 49 communities, of which 46 are managed by Brookdale.

Combined, these transactions provide a path to reduce our Brookdale concentration, on a pro forma basis, from 27.0% of Cash NOI and Interest Income (excluding the previously announced planned sale or transition of 25 Brookdale assets) to approximately 15.7%. We intend to use the proceeds from the dispositions primarily to repay debt and for general corporate purposes.

A copy of the corresponding press release and investor presentation with additional details is available on the Investor Relations section of our website at http://ir.hcpi.com.

REENTERING BOSTON LIFE SCIENCE MARKET

In October, we entered into definitive agreements to acquire a $228 million value-add life science campus known as the Hayden Research Campus located in the Boston suburb of Lexington, Massachusetts. The Hayden acquisition allows us to reenter the Boston life science market with immediate scale and align with a leading local developer, owner and operator, King Street Properties (“King Street“). We will own an interest in this campus through a consolidated joint venture with King Street. The campus includes two existing buildings totaling 400,000 square feet and is currently 66% leased, anchored by major life science tenants including Shire US, Inc., a subsidiary of Shire plc, and Merck, Sharp and Dohme, a subsidiary of Merck and Co., Inc. Additionally, King Street is currently seeking approvals for the joint venture to develop 209,000 square feet of life science space on the campus.

HCP LAUNCHES SALE PROCESS FOR REMAINING UK HOLDINGS

We have launched a formal sales process for our remaining UK holdings. We expect the sale to be completed during the first half of 2018.

OTHER TRANSACTION ACTIVITY

ACQUISITIONS

During the third quarter, we announced $113 million of additional acquisitions, bringing our year-to-date announced acquisitions and developments to $447 million. Significant acquisition activity during the third quarter includes:

  • As previously disclosed, in July, we acquired a portfolio of three medical office buildings in Texas for $49 million.
  • In August, we acquired 6000 Shoreline Court, a 139,000 square foot life science office building in South San Francisco, California for $64 million. 6000 Shoreline is adjacent to our Sierra Point development site.

DISPOSITIONS

During the third quarter, we sold two triple-net senior housing assets leased to Brookdale for $15 million.

DEVELOPMENT UPDATE

During the quarter, we placed $101 million of development in service, including $94 million at Phase II of The Cove. At quarter end, our development pipeline totaled $870 million, which includes $288 million that has been placed in service.

During the third quarter, we added $63 million of new projects to our development and redevelopment pipelines.

BALANCE SHEET AND NEW CREDIT FACILITY

As previously announced, in July, we repurchased $500 million of our 5.375% senior notes due 2021 using capital recycling proceeds from the HC-One loan repayment and Brookdale 64 disposition. In connection with the tender offer, we incurred an extinguishment of debt charge of approximately $54 million in the third quarter.

At September 30, 2017, we had $1.5 billion of liquidity from a combination of cash and availability under our $2.0 billion credit facility and no major senior notes or secured debt maturities until early 2019.

On October 19, 2017, we closed on a new $2.0 billion unsecured revolving credit facility. The new facility reduces our funded interest cost for committed loans by five basis points and has a maturity date of October 19, 2021. Based on our current senior unsecured long-term debt ratings, the facility bears interest annually at LIBOR plus 100 basis points and has a facility fee of 20 basis points. The facility also includes two six-month extension options at our discretion and the ability to increase the commitments by an aggregate amount up to $750 million, subject to customary conditions.

HURRICANE UPDATE 

As a result of Hurricane Harvey and Hurricane Irma during the third quarter of 2017, we recorded $11 million of casualty losses, net of a small insurance recovery. The losses are comprised of $6 million of property damage and $5 million of other associated costs, including storm preparation, clean up, relocation, and other costs.  In addition, we recorded a $2 million deferred tax benefit associated with the casualty-related losses. These items are excluded from FFO as adjusted.

EXECUTIVE LEADERSHIP

As previously announced, Tom Klaritch was promoted to Chief Operating Officer in August 2017. Mr. Klaritch will oversee our streamlined office platform, with the life science and medical office businesses reporting to him, and will work closely with the respective teams to continue to advance the competitive performance and growth of the specialty office platform. In addition, Mr. Klaritch will manage our development projects and capital expenditures, oversee the IT department focusing on automation and system integration across the platform, and establish consistent operational reporting standards across our verticals. Mr. Klaritch is an 18-year Company veteran with 34 years of operational and financial management experience in the medical office and hospital sectors.

In August, Shawn Johnston joined HCP as Senior Vice President and Chief Accounting Officer. Mr. Johnston joined HCP from a leading multifamily real estate investment trust, where he was Chief Accounting Officer.

DIVIDEND

On October 26, 2017, our Board of Directors declared a quarterly cash dividend of $0.37 per common share. The dividend will be paid on November 21, 2017 to stockholders of record as of the close of business on November 6, 2017.

SUSTAINABILITY

HCP’s leadership in Environmental, Social and Governance (ESG) standards was again recognized by two influential ESG benchmarking institutions, the Dow Jones Sustainability Indices and Global Real Estate Sustainability Benchmark (GRESB).

HCP was named to the Dow Jones Sustainability Index (DJSI) North America and the DJSI World, for the fifth and third consecutive years, respectively. In addition, we achieved the “Green Star” designation from GRESB for the sixth year in a row, representing the highest quadrant of achievement in GRESB’s annual sustainability survey.

More information about HCP’s sustainability efforts can be found on our website at www.hcpi.com/sustainability.

OUTLOOK 

For full-year 2017, we expect EPS to range between $1.16 and $1.20; FFO per share to range between $1.74 and $1.78; and FFO as adjusted per share to range between $1.92 and $1.96, representing a $0.02 per share increase at the mid-point. In addition, we expect 2017 SPP Cash NOI to increase between 2.5% and 3.5%. EPS and FFO per share guidance do not yet reflect the non-cash accounting impact of the Brookdale transactions. Additionally, these estimates do not reflect the potential impact from unannounced future transactions other than capital recycling activities. For additional detail and information regarding these estimates, refer to the “Projected Full Year 2017 SPP NOI and SPP Cash NOI” table below, and the 2017 Guidance section of our corresponding Supplemental Report, available in the Investor Relations section of our website at http://ir.hcpi.com.

Projected Full Year 2017

SPP NOI

SPP Cash NOI

Low

High

Low

High

Senior housing triple-net

2.0%

3.0%

5.0%

6.0%

SHOP

(2.9)%

(0.9)%

(2.0)%

—%

Life science

2.0%

3.0%

3.5%

4.5%

Medical office

1.4%

2.4%

2.5%

3.5%

Other(1)

2.0%

3.0%

0.8%

1.8%

SPP Growth

1.2%

2.2%

2.5%

3.5%

_______________________________________

(1)

Other primarily includes our hospitals and U.K. real estate investments. See our Supplemental Report for additional details.

COMPANY INFORMATION

HCP has scheduled a conference call and webcast for Thursday, November 2, 2017 at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) to present its performance and operating results for the quarter ended September 30, 2017. The conference call is accessible by dialing (888) 317-6003 (U.S.) or (412) 317-6061 (International). The conference ID number is 0914328. You may also access the conference call via webcast at www.hcpi.com. This link can be found in the “News and Events” section, which is under “Investor Relations”. Through November 17, 2017, an archive of the webcast will be available on our website, and a telephonic replay can be accessed by dialing (877) 344-7529 (U.S.) or (412) 317-0088 (International) and entering conference ID number 10112667. Our Supplemental Report for the current period is available, with this earnings release, on our website in the “Financial Information” section under “Investor Relations”.

ABOUT HCP

HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests primarily in real estate serving the healthcare industry in the United States. HCP owns a large-scale portfolio diversified across multiple sectors, led by senior housing, life science and medical office. Recognized as a global leader in sustainability, HCP has been a publicly-traded company since 1985 and was the first healthcare REIT selected to the S&P 500 index. For more information regarding HCP, visit www.hcpi.com.

FORWARD-LOOKING STATEMENTS

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, (i) all statements under the heading “Outlook,” including without limitation with respect to expected EPS, FFO per share, FFO as adjusted per share, SPP NOI, SPP Cash NOI and other financial projections and assumptions, including those in the “Projected Full Year 2017 SPP NOI and SPP Cash NOI” table in this release, as well as comparable statements included in other sections of this release; (ii) statements regarding the payment of a quarterly cash dividend; (iii) statements regarding timing, outcomes and other details relating to current, pending or contemplated acquisitions, dispositions, developments, joint venture transactions, capital recycling and financing activities, and other transactions discussed in this release, including without limitation those described under the heading “Development Update”‘; and (iv) statements with respect to the executive leadership updates described under the heading “Executive Leadership.” These statements are made as of the date hereof, are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of our and our management’s control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our reliance on a concentration of a small number of tenants and operators for a significant percentage of our revenues, with our concentration of assets operated by Brookdaleincreasing as a result of the consummation of the spin-off of QCP on October 31, 2016; the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases and borrowers’ loans; the ability of our existing and future tenants, operators and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations; competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases; our concentration in the healthcare property sector, particularly in senior housing, life sciences, medical office buildings and hospitals, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; availability of suitable properties to acquire at favorable prices, the competition for the acquisition and financing of those properties, and the costs of associated property development; our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to foreclose on loan collateral or replace an existing tenant or operator upon default; the risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners’ financial condition and continued cooperation; our ability to achieve the benefits of acquisitions and other investments, including those discussed above, within expected time frames or at all, or within expected cost projections; operational risks associated with third party management contracts, including the additional regulation and liabilities of our RIDEA lease structures; the potential impact on us and our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments; the effect on our tenants and operators of legislation, executive orders and other legal requirements, including the Affordable Care Act and licensure, certification and inspection requirements, as well as laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements; changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations, of our tenants and operators; volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions; changes in global, national and local economic or other conditions, including currency exchange rates; our ability to manage our indebtedness level and changes in the terms of such indebtedness; competition for skilled management and other key personnel; the ability to maintain our qualification as a real estate investment trust; and other risks and uncertainties described from time to time in our Securities and Exchange Commission filings. You should not place undue reliance on any forward-looking statements. We assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.

CONTACT

Andrew Johns
Vice President – Finance and Investor Relations
949-407-0400

HCP, Inc.

Consolidated Balance Sheets

In thousands, except share and per share data

(unaudited)

September 30,
2017

December 31,
2016

Assets

Real Estate:

Buildings and improvements

$

11,052,578

$

11,692,654

Development costs and construction in progress

429,459

400,619

Land

1,752,890

1,881,487

Accumulated depreciation and amortization

(2,699,174)

(2,648,930)

Net real estate

10,535,753

11,325,830

Net investment in direct financing leases

715,104

752,589

Loans receivable, net

402,152

807,954

Investments in and advances to unconsolidated joint ventures

822,369

571,491

Accounts receivable, net of allowance of $4,312 and $4,459, respectively

34,571

45,116

Cash and cash equivalents

133,887

94,730

Restricted cash

27,135

42,260

Intangible assets, net

400,867

479,805

Assets held for sale, net

216,074

927,866

Other assets, net

616,169

711,624

Total assets

$

13,904,081

$

15,759,265

Liabilities and Equity

Bank line of credit

$

605,837

$

899,718

Term loans

226,205

440,062

Senior unsecured notes

6,393,926

7,133,538

Mortgage debt

145,417

623,792

Other debt

94,818

92,385

Intangible liabilities, net

53,427

58,145

Liabilities of assets held for sale, net

8,653

3,776

Accounts payable and accrued liabilities

381,189

417,360

Deferred revenue

140,378

149,181

Total liabilities

8,049,850

9,817,957

Commitments and contingencies

Common stock, $1.00 par value: 750,000,000 shares authorized; 469,034,877 and 468,081,489 shares issued and outstanding, respectively

469,035

468,081

Additional paid-in capital

8,224,531

8,198,890

Cumulative dividends in excess of earnings

(3,137,642)

(3,089,734)

Accumulated other comprehensive income (loss)

(24,491)

(29,642)

Total stockholders’ equity

5,531,433

5,547,595

Joint venture partners

145,496

214,377

Non-managing member unitholders

177,302

179,336

Total noncontrolling interests

322,798

393,713

Total equity

5,854,231

5,941,308

Total liabilities and equity

$

13,904,081

$

15,759,265

HCP, Inc.

Consolidated Statements of Operations

In thousands, except per share data

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Revenues:

Rental and related revenues

$

266,109

$

290,280

$

816,147

$

872,828

Tenant recoveries

36,860

34,809

105,794

99,715

Resident fees and services

126,040

170,752

391,688

500,717

Income from direct financing leases

13,240

14,234

40,516

44,791

Interest income

11,774

20,482

50,974

71,298

Total revenues

454,023

530,557

1,405,119

1,589,349

Costs and expenses:

Interest expense

71,328

117,860

235,834

361,255

Depreciation and amortization

130,588

141,407

397,893

421,181

Operating

155,338

187,714

467,582

542,751

General and administrative

23,523

34,781

67,287

83,011

Acquisition and pursuit costs

580

2,763

2,504

6,061

Impairments (recoveries), net

25,328

82,010

Total costs and expenses

406,685

484,525

1,253,110

1,414,259

Other income (expense):

Gain (loss) on sales of real estate, net

5,182

(9)

322,852

119,605

Loss on debt extinguishments

(54,227)

(54,227)

Other income (expense), net

(10,556)

1,432

40,723

5,064

Total other income (expense), net

(59,601)

1,423

309,348

124,669

Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures

(12,263)

47,455

461,357

299,759

Income tax benefit (expense)

5,481

424

14,630

(1,101)

Equity income (loss) from unconsolidated joint ventures

1,062

(2,053)

4,571

(4,028)

Income (loss) from continuing operations

(5,720)

45,826

480,558

294,630

Discontinued operations:

Income (loss) before transaction costs and income taxes

121,229

360,226

Transaction costs

(14,805)

(28,509)

Income tax benefit (expense)

1,789

(47,721)

Total discontinued operations

108,213

283,996

Net income (loss)

(5,720)

154,039

480,558

578,626

Noncontrolling interests’ share in earnings

(1,937)

(2,789)

(7,687)

(9,540)

Net income (loss) attributable to HCP, Inc.

(7,657)

151,250

472,871

569,086

Participating securities’ share in earnings

(131)

(326)

(560)

(977)

Net income (loss) applicable to common shares

$

(7,788)

$

150,924

$

472,311

$

568,109

Earnings per common share:

Basic

$

(0.02)

$

0.32

$

1.01

$

1.22

Diluted

$

(0.02)

$

0.32

$

1.01

$

1.22

Weighted average shares used to calculate earnings per common share:

Basic

468,975

467,628

468,642

466,931

Diluted

468,975

467,835

468,828

467,132

HCP, Inc.

Funds From Operations

In thousands, except per share data

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net income (loss) applicable to common shares

$

(7,788)

$

150,924

$

472,311

$

568,109

Real estate related depreciation and amortization

130,588

142,874

397,893

425,582

Real estate related depreciation and amortization on unconsolidated joint ventures

16,358

12,607

47,711

36,347

Real estate related depreciation and amortization on noncontrolling interests and other

(3,678)

(5,270)

(11,711)

(15,708)

Other depreciation and amortization(1)

2,360

2,986

7,718

8,922

Loss (gain) on sales of real estate, net

(5,182)

9

(322,852)

(119,605)

Loss (gain) on sales of real estate, net on unconsolidated joint ventures

(215)

Loss (gain) on sales of real estate, net on noncontrolling interests

(2)

Taxes associated with real estate dispositions(2)

257

(5,498)

53,434

Impairments (recoveries) of real estate, net(3)

22,590

22,590

FFO applicable to common shares

$

155,248

$

304,387

$

608,162

$

956,864

Distributions on dilutive convertible units and other

2,376

5,250

10,622

Diluted FFO applicable to common shares

$

155,248

$

306,763

$

613,412

$

967,486

Diluted FFO per common share

$

0.33

$

0.65

$

1.30

$

2.05

Weighted average shares used to calculate diluted FFO per common share

469,156

471,994

473,519

473,011

Impact of adjustments to FFO:

    Transaction-related items(4)

$

580

$

17,568

$

2,476

$

34,570

  Other impairments (recoveries), net(5)

2,738

8,526

  Severance and related charges(6)

3,889

14,464

3,889

14,464

  Loss on debt extinguishments(7)

54,227

54,227

  Litigation costs

2,303

7,507

Casualty-related charges (recoveries), net(8)

8,925

8,925

Foreign currency remeasurement losses (gains)

(141)

94

(986)

268

$

72,521

$

32,126

$

84,564

$

49,302

FFO as adjusted applicable to common shares

$

227,769

$

336,513

$

692,726

$

1,006,166

Distributions on dilutive convertible units and other

1,493

3,467

5,095

10,549

Diluted FFO as adjusted applicable to common shares

$

229,262

$

339,980

$

697,821

$

1,016,715

Per common share impact of adjustments on diluted FFO

$

0.15

$

0.07

$

0.17

$

0.10

Diluted FFO as adjusted per common share

$

0.48

$

0.72

$

1.47

$

2.15

Weighted average shares used to calculate diluted FFO as adjusted per common share

473,836

473,692

473,519

473,011

FFO as adjusted from QCP

$

$

101,549

$

$

301,393

Diluted Comparable FFO as adjusted applicable to common shares(9)

$

229,262

$

238,431

$

697,821

$

715,322

FFO as adjusted from QCP per common share

$

$

(0.22)

$

$

(0.64)

Diluted Comparable FFO as adjusted per common share

$

0.48

$

0.50

$

1.47

$

1.51

_______________________________________

(1)

Other depreciation and amortization includes DFL depreciation and lease incentive amortization (reduction of straight-line rents) for the consideration given to terminate the 30 purchase options on the 153-property amended lease portfolio in the 2014 Brookdale transaction.

(2)

For the nine months ended September 30, 2017, represents income tax benefit associated with the disposition of real estate assets in our RIDEA II transaction. For the nine months ended September 30, 2016, represents income tax expense associated with the state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCRMC real estate portfolio.

(3)

Represents impairments on 11 senior housing triple-net facilities.

(4)

On January 1, 2017, we early adopted the Financial Accounting Standards Board Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which prospectively results in recognizing the majority of our real estate acquisitions as asset acquisitions rather than business combinations. Acquisition and pursuit costs relating to completed asset acquisitions are capitalized, including those costs incurred prior to January 1, 2017. Real estate acquisitions completed prior to January 1, 2017 were deemed business combinations and the related acquisition and pursuit costs were expensed as incurred. For the three and nine months ended September 30, 2016, primarily relates to the QCP spin-off. 

(5)

For the three months ended September 30, 2017, relates to the impairment of our Tandem Mezzanine Loan. For the nine months ended September 30, 2017, relates to the impairments of our Tandem Mezzanine Loan, net of the impairment recovery upon the sale of our Four Seasons Notes in the first quarter of 2017.

(6)

For the three months ended September 30, 2017, primarily relates to the departure of our former Executive Vice President and Chief Accounting Officer. For the three months ended September 30, 2016, primarily relates to the departure of our former President and Chief Executive Officer.

(7)

Represents the premium associated with the prepayment of $500 million of senior unsecured notes.

(8)

Includes $11 million of casualty-related charges and a $2 million deferred income tax benefit.

(9)

Excludes FFO as adjusted from QCP and interest expense related to debt repaid using proceeds from the spin-off, assuming these transactions occurred at the beginning of the earliest period presented. Comparable FFO as adjusted allows management to evaluate the performance of our remaining real estate portfolio following the completion of the QCP spin-off.

HCP, Inc.

Funds Available for Distribution

In thousands

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

FFO as adjusted applicable to common shares

$

227,769

$

336,513

$

692,726

$

1,006,166

Amortization of deferred compensation(1)

3,237

3,389

10,329

12,894

Amortization of deferred financing costs

3,439

5,037

11,141

15,598

Straight-line rents

(4,060)

(3,295)

(12,236)

(14,412)

Other depreciation and amortization

(2,360)

(2,986)

(7,718)

(8,921)

Leasing costs, tenant improvements, and recurring capital expenditures(2)

(28,783)

(23,822)

(79,903)

(66,176)

Lease restructure payments

311

1,868

1,165

14,480

CCRC entrance fees(3)

6,074

4,975

14,436

16,524

Deferred income taxes(4)

(3,807)

(3,431)

(10,523)

(8,977)

Other FAD adjustments

587

(708)

1,692

(2,739)

FAD applicable to common shares

$

202,407

$

317,540

$

621,109

$

964,437

Distributions on dilutive convertible units and other

1,596

3,513

5,250

10,622

Diluted FAD applicable to common shares

$

204,003

$

321,053

$

626,359

$

975,059

 _______________________________________

(1)

Excludes $0.5 million related to the acceleration of deferred compensation for restricted stock units that vested upon the departure of our former Executive Vice President and Chief Accounting Officer, which is included in the severance and related charges for the three and nine months ended September 30, 2017. Excludes $6 million related to the acceleration of deferred compensation for restricted stock units and stock options that vested upon the departure of our former President and Chief Executive Officer, which is included in severance and related charges for the three and nine months ended September 30, 2016.

(2)

Includes our share of leasing costs and tenant and capital improvements from unconsolidated joint ventures.

(3)

Represents our 49% share of non-refundable entrance fees as the fees are collected by our CCRC JV, net of reserves and CCRC JV entrance fee amortization.

(4)

Excludes $2 million of deferred tax benefit from the casualty-related charges, which is included in casualty-related charges (recoveries), net for the three and nine months ended September 30, 2017.

 

SOURCE HCP, Inc.

Related Links

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