HCN Quarterly FFO Improves – Analyst Blog

Health Care REIT Inc. (HCN), a real estate investment trust (REIT) that operates senior housing and health care real estate, has reported fourth quarter 2009 FFO (fund from operations) of 44 cents per share compared to 30 cents in the year-earlier quarter.

 

Fund from operations, 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. For full year 2009, Health Care REIT reported an FFO of $2.53 per share compared to $2.74 in the previous year.

 

During the quarter, Health Care REIT completed $208.9 million of gross new investments in large senior housing properties and state-of-the-art medical facilities. For full year 2009, the company completed gross new investments worth $716.6 million. Year-till-date, the company had also announced gross new investments totaling over $568 million.

 

During 2009, Health Care REIT raised $327.8 million in proceeds from asset sale and loan payoffs, generating $45.8 million of gains and prepayment fees. The company also raised $997.5 million in equity and debt capital during 2009, the bulk of which was utilized to repay debt and strengthen its balance sheet. Consequently, Health Care REIT reduced debt to undepreciated book capitalization from 43% at the beginning of 2009 to 35% at year-end.

 

Health Care REIT paid a cash dividend of 68 cents per share during the quarter, which marks the 155th consecutive quarterly dividend payment. For full year 2010, the company has decided to maintain its quarterly dividend at 68 cents per share ($2.72 on an annualized basis). The company expects normalized FFO for full year 2010 in the range of $3.10 − $3.25 per share.

 

Subsequent to the quarter end, Health Care REIT completed the acquisition of 17 medical office buildings in Wisconsin totaling 1.15 million square feet through a joint venture with Hammes Company. The company also formed a joint venture with Forest City Enterprises Inc. (FCE.A) and acquired a 49% interest in a seven-building life sciences campus spanning across 1.2 million square feet in University Park in Cambridge, Massachusetts.

 

Health Care REIT is continually investing in assisted and independent living facilities as demand for these facilities is set to increase with an aging Baby Boomer generation. Furthermore, the health care sector is one of the more recession-proof real estate sectors and has persistently fared better than other sectors during the commercial real estate downturn. This offers a strong upside potential for the company.