U.S. Markets closed

HCP Adjusted FFO in Line

Zacks Equity Research

HCP, Inc (HCP), a real estate investment trust (:REIT), reported third quarter 2012 FFO (funds from operations) of $290.2 million or 67 cents per share compared with $259.6 million or 63 cents per share in the year-earlier quarter.

Excluding non-recurring items, FFO for the reported quarter was $298.1 million or 69 cents per share compared with 275.0 million or 67 cents per share in the year-ago quarter. Recurring FFO in the reported quarter was in line with the Zacks Consensus Estimate.

HCP reported total revenue of $475.5 million during the quarter compared with $441.2 million in the year-ago period. Total revenue in the reported quarter was  marginally ahead of the Zacks Consensus Estimate of $475.0 million. Adjusted same-property net operating income (:NOI) of the company stood at $344.2 million in the quarter versus $332.2 million in the year-ago period.
During the reported quarter, HCP invested about $63 million to fund development and other capital projects, primarily in the life science, medical office and senior housing segments.  The company acquired a portfolio of 12 medical office building MOBs (spanning 758,000 square feet) from The Boyer Company for $186 million during the months of July to October. HCP also completed the acquisition of eight on-campus MOBs for $81 million from Scottsdale Healthcare and an additional MOB for $14 million.  At the same time, HCP closed a $205 million mezzanine loan facility.

Subsequent to the end of the quarter, HCP entered into an agreement to acquire 133 senior housing communities for $1.73 billion .The properties would be acquired from a joint venture between Emeritus Corp (ESC) and an affiliate company of The Blackstone Group LP (BX). Spread across a wide geographical area spanning 29 states, the acquired portfolio includes a diversified mix of healthcare facilities totaling 10,350 units. By segment the properties comprise a mix of 61% for assisted living, 25% independent living, 13% memory care and 1% for skilled nursing.  In accordance with the acquisition, Emeritus will purchase 9 communities from the Blackstone JV, for a secured debt financing of $52 million.

During the quarter, the company issued $300 million of 3.15% senior unsecured notes scheduled to mature in 2022. The transaction generated net proceeds of approximately $293.7 million. Also the company entered into an into a credit agreement for a four-year 1.81% unsecured loan worth $215 million.

Subsequent to the quarter-end, the company completed an equity offering of 22 million shares and generated proceeds of $979 million.

At the end of the quarter, the company had cash and cash equivalents of $96.5 million. For full-year 2012, HCP expects adjusted FFO in the range of $2.75 to $2.81  per share. The company also expects cash same-property NOI to be in the range of 4.0%-4.5%.

HCP currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Read the Full Research Report on HCP

Read the Full Research Report on ESC

Read the Full Research Report on BX

Zacks Investment Research

More From Zacks.com