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Health Care REIT Q4 FFO & Revs Beat Ests

Zacks Equity Research

Health Care REIT Inc. (HCN), a real estate investment trust (:REIT), reported fourth-quarter 2013 normalized funds from operations (:FFO) of 99 cents per share, 2 cents ahead of the Zacks Consensus Estimate and up 14 cents year over year.

The 16.5% year-over-year increase is primarily attributable to robust revenue growth, decent same-store cash NOI (net operating income) and notable portfolio restructuring activity.

Normalized Funds available for distribution (FAD) in the reported quarter stood at 86 cents per share, up from 74 cents per share in the year-ago period.

Total revenue reached $788.6 million, escalating 58.7% year over year. The figure also comfortably exceeded the Zacks Consensus Estimate of $784 million.

For full-year 2013, Healthcare REIT reported normalized FFO per share of $3.81 on revenues of $2.88 billion. Results were substantially higher than the prior-year normalized FFO per share of $3.52 on revenues of $1.81 billion. Additionally, normalized FAD for 2013 was $3.36 per share, up from $3.11 per share in 2012.

Inside the Headlines

Total same-store cash NOI in the fourth quarter increased 3.1% from the year-ago period. This included a 6.2% rise in the seniors housing operating portfolio.

During the quarter, Health Care REIT bought 12 properties for about $277.5 million. Also, the company completed 6 asset developments and 2 expansions for $89 million (at a blended yield of 8.0%) during the said quarter.

Additionally, Health Care REIT sold 5 seniors housing triple-net properties and 12 medical office buildings for $112 million. The dispositions also included a loan payoff.


Health Care REIT exited 2013 with cash and cash equivalents of $158.8 million, compared with $1.03 billion as of the prior-year end.

2014 Outlook

Health Care REIT provided outlook for 2013 normalized FFO per share in a range of $3.93 – $4.03. The Zacks Consensus Estimate of $4.01 for the same is at par with the company’s guided range.

Also, Health Care REIT introduced guidance for normalized FAD per share in the range of $3.53 – $3.63.


The board of directors at Health Care REIT declared a quarterly cash dividend of 79.5 cents per share, marking a rise of 4% over the year-ago dividend of 76.5 cents. This marked the company’s 171st consecutive quarterly dividend payment. It will be paid on Feb 20, 2014, to stockholders of record as of Feb 10.

Our Take

We are encouraged with the strong results at Health Care REIT. The company boasts a strong portfolio of senior housing, long-term care and medical office facilities. Moreover, the completion of premium properties acquisitions and developments are expected to further enhance the company’s high-quality senior housing portfolio and extend its reach in the high-barriers-to-entry affluent markets.

However, intense competition in the healthcare industry and the company’s acquisition spree is expected to raise the upfront operating expenses.

Health Care REIT currently carries a Zacks Rank #3 (Hold). Better­­­–ranked stocks in the REIT-Equity Trust-Other industry include Sabra Health Care REIT, Inc. (SBRA), Omega Healthcare Investors Inc. (OHI) and Healthcare Trust of America, Inc. (HTA). Sabra Health Care carries a Zacks Rank #1 (Strong Buy), while Omega Healthcare and Healthcare Trust of America hold a Zacks Rank #2 (Buy).

Note: 1. FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

2. FAD, a measure to ascertain the ability of REITs to generate cash, is derived by subtracting straight-line rent and non-recurring real estate expenses from funds from operations.

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