Health Care REIT Inc., (HCN) a real estate investment trust, has recently updated its FFO (funds from operations) guidance for full year 2011. Health Care increased its FFO guidance from the prior range of $3.25 to $3.35 per diluted share to a range of $3.32 to $3.42 per diluted share for the full year 2011.
Funds from operations, a widely used metric, is obtained after adding depreciation and amortization and other non-cash expenses to net income and is considered a key measure of a real estate investment trust’s performance.
Health Care increased its FFO guidance by 7 cents per share which represents an increase of 8% -11% from full year 2010 driven by the closure of the acquisition of Genesis Health Care and other financing activities.
Upon closing this deal, Health Care REIT acquired full ownership of all the real estate assets of Genesis Health Care for $2.4 billion. Genesis operates rehabilitation and nursing facilities and going forward Health Care REIT will own 147 post-acute, skilled nursing and assisted living facilities across 11 North East and Mid-Atlantic states. After the closing of this transaction in the first year of its operations, Health Care REIT also expects to earn a rental income of $198 million. Going forward, the acquisition of Genesis is expected to be highly accretive to earnings.
Health Care is a real estate investment trust that invests across the full spectrum of senior housing and health care real estate. The long-term triple-net leases of the company are a steady revenue source. Health Care 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. One of its competitors, Nationwide Health Properties Inc. (NHP), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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