EX-99.1 2 a17-3808_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

HCP Announces Results for the Quarter and Year Ended December 31, 2016

 

 

 

FOURTH QUARTER 2016 AND RECENT HIGHLIGHTS

 

--

EPS, FFO and FFO as adjusted per share, were $0.12, $0.35 and $0.59, respectively

--

Achieved year-over-year three-month SPP Cash NOI and SPP NOI growth of 2.6% and 2.4%, respectively

--

Completed the spin-off of Quality Care Properties, Inc. (“QCP”) (NYSE:QCP) on October 31, 2016

--

Completed $345 million of acquisitions and loan fundings and $472 million of dispositions in the fourth quarter; in January, we completed the previously announced sale and related financing of a 40% interest in our RIDEA II joint venture generating $480 million in proceeds

--

Signed a 115,000 sq. ft. lease at Phase II of The Cove development in South San Francisco, bringing Phases I and II to 86% leased

--

Commenced the $211 million development of Phase III of The Cove, representing up to 336,000 sq. ft.

--

Repaid $1.7 billion of debt during the fourth quarter and an additional $440 million through February 13, 2017, using proceeds generated primarily from QCP financing and our RIDEA II transaction; on track with previously disclosed deleveraging plan and targeted credit metrics

--

Appointed Tom Herzog as Chief Executive Officer and as a member of the Board of Directors, Justin Hutchens as President, and Peter Scott as EVP and Chief Financial Officer

--

Reset the quarterly dividend to $0.37 per share, as previously announced

FULL YEAR 2016 HIGHLIGHTS

--

EPS, FFO and FFO as adjusted per share were $1.34, $2.39 and $2.74, respectively

--

Achieved year-over-year SPP Cash NOI and SPP NOI growth of 3.7% and 2.6%, respectively

--

Entered into definitive agreements to sell 64 communities triple-net leased to Brookdale Senior Living, Inc. (“Brookdale”) for $1.125 billion and announced other planned transactions, resulting in improved lease coverage, reduced tenant concentration, and a stronger balance sheet

--

Completed $723 million of acquisitions and loan fundings and $770 million of dispositions, excluding the spin-off of QCP

--

Placed $271 million of development and redevelopment projects in service, and commenced $580 million of new development and redevelopment projects

--

Executed 4.1 million sq. ft. of leasing in our life science and MOB portfolios

2017 GUIDANCE

--

Full year guidance for EPS of $1.32 – $1.38, FFO per share of $1.88 – $1.94 and FFO as adjusted per share of $1.89 – $1.95, in-line with preliminary Outlook provided on November 1, 2016

--

Full year guidance for SPP Cash NOI growth of 2.5% – 3.5%, in-line with preliminary Outlook provided on November 1, 2016

 

Page 1 of 15


 

IRVINE, CA, February 13, 2017 /PRNewswire/ – HCP (NYSE:HCP) announced results for the quarter and year ended December 31, 2016.

 

FOURTH QUARTER COMPARISON

 

 

Three Months Ended December 31, 2016

 

Three Months Ended December 31, 2015

 

Per Share

 

(in thousands, except per share amounts)

 

Amount

 

Per Share

 

Amount

 

Per Share

 

Change

 

Net income (loss)

 

$

58,440

 

$

0.12

 

$

(599,164

)

$

(1.29

)

$

1.41

 

FFO

 

$

162,265

 

$

0.35

 

$

(458,678

)

$

(0.99

)

$

1.34

 

Other impairments, net(1)

 

—

 

—

 

829,593

 

1.78

 

(1.78

)

Transaction-related items(2)

 

62,016

 

0.13

 

3,959

 

0.01

 

0.12

 

Loss on debt extinguishments(3)

 

46,020

 

0.10

 

—

 

—

 

0.10

 

Other(4)

 

5,899

 

0.01

 

60

 

—

 

0.01

 

FFO as adjusted

 

$

276,200

 

$

0.59

 

$

374,934

 

$

0.80

 

$

(0.21

)

FFO as adjusted from QCP

 

(26,948

)

(0.06

)

(138,875

)

(0.29

)

0.23

 

Comparable FFO as adjusted(5)

 

$

249,252

 

$

0.53

 

$

236,059

 

$

0.51

 

$

0.02

 

FAD

 

$

251,251

 

 

 

$

313,588

 

 

 

 

 

________________________________________

 

(1)

Other impairments, net in the prior period include: (i) $817 million related to our previous HCR ManorCare, Inc. (“HCRMC”) direct financing lease (“DFL”) investments and (ii) $19 million related to our previous equity investment in HCRMC, partially offset by an impairment recovery of $6 million related to a loan payoff.

(2)

Transaction-related items for the three months ended December 31, 2016 primarily consist of costs incurred for the QCP spin-off.

(3)

Represents penalties of $46 million from the prepayment of $1.1 billion of senior unsecured notes and $108 million of mortgage debt using proceeds from the QCP spin-off.

(4)

For the three months ended December 31, 2016, Other includes: (i) $3 million of severance-related charges, (ii) $3 million of litigation expense related to shareholder lawsuits and (iii) $0.3 million of foreign currency remeasurement losses. For the three months ended December 31, 2015, Other includes $60,000 of foreign currency remeasurement losses.

(5)

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 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.

 

In addition to the items discussed above, fourth quarter 2016 net income included net gain on sales of real estate of $0.14 per share (of which $0.04 per share is reflected in equity income from unconsolidated joint ventures). During the fourth quarter 2015, operating results included non-cash HCRMC income of $0.08 per share. Additionally, fourth quarter 2015 net income included: (i) $0.01 per share of interest income from monetizing a senior housing development loan and (ii) $0.03 per share of net gain on sales of real estate from HCP Ventures III and IV, which is reflected in equity income from unconsolidated joint ventures.

 

FULL YEAR COMPARISON

 

 

Year Ended
December 31, 2016

 

Year Ended
December 31, 2015

 

Per Share

 

(in thousands, except per share amounts)

 

Amount

 

Per Share

 

Amount

 

Per Share

 

Change

 

Net income (loss)

 

$

626,549

 

$

1.34

 

$

(560,552

)

$

(1.21

)

$

2.55

 

FFO

 

$

1,119,153

 

$

2.39

 

$

(10,841

)

$

(0.02

)

$

2.41

 

Other impairments, net(1)

 

—

 

—

 

1,446,800

 

3.11

 

(3.11

)

Transaction-related items(2)

 

96,586

 

0.20

 

32,932

 

0.07

 

0.13

 

Loss on debt extinguishments(3)

 

46,020

 

0.10

 

—

 

—

 

0.10

 

Severance-related charges(4)

 

16,965

 

0.04

 

6,713

 

0.01

 

0.03

 

Other(5)

 

3,666

 

0.01

 

(5,437

)

(0.01

)

0.02

 

FFO as adjusted

 

$

1,282,390

 

$

2.74

 

$

1,470,167

 

$

3.16

 

$

(0.42

)

FFO as adjusted from QCP

 

(328,341

)

(0.70

)

(575,471

)

(1.22

)

0.52

 

Comparable FFO as adjusted(6)

 

$

954,049

 

$

2.04

 

$

894,696

 

$

1.94

 

$

0.10

 

FAD

 

$

1,215,696

 

 

 

$

1,261,849

 

 

 

 

 

________________________________________

(1)

Other impairments, net in the prior period include: (i) $1.3 billion related to our previous HCRMC DFL investments, (ii) $112 million related to our Four Seasons Health Care senior notes (“Four Seasons Notes”) and (iii) $46 million related to our previous equity investment in HCRMC, partially offset by an impairment recovery of $6 million related to a loan payoff.

(2)

Transaction-related items for the year ended December 31, 2016 primarily consist of costs incurred for the QCP spin-off.

(3)

Represents penalties of $46 million from the prepayment of $1.1 billion of senior unsecured notes and $108 million of mortgage debt using proceeds from the QCP spin-off.

(4)

Severance-related charges for the year ended December 31, 2016 primarily relate to the departure of our former President and Chief Executive Officer. Severance-related charges for the year ended December 31, 2015 relate to the departure of our former Executive Vice President and Chief Investment Officer.

(5)

For the year ended December 31, 2016, Other includes: (i) $3 million of litigation expense related to shareholder lawsuits and (ii) $0.6 million of foreign currency remeasurement losses. For the year ended December 31, 2015, Other includes $5 million of foreign currency remeasurement gains.

(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 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.

 

Page 2 of 15


 

In addition to the items discussed above, 2016 net income includes: (i) net gain on sales of real estate of $0.39 per share (of which $0.04 per share is reflected in equity income from unconsolidated joint ventures) and (ii) $0.04 per share of interest income from monetizing three senior housing development loans. In 2015, operating results included non-cash HCRMC income of $0.30 per share. Additionally, 2015 net income included: (i) $0.04 per share of interest income from monetizing three senior housing development loans and (ii) $0.04 per share of net gain on sales of real estate (of which $0.03 per share is reflected in equity income from unconsolidated joint ventures).

 

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 the “Funds From Operations”, “Funds Available for Distribution” and “Net Operating Income and Same Property Performance” sections of this release for additional information regarding these non-GAAP financial measures.

 

BROOKDALE TRANSACTIONS AND OTHER DISPOSITIONS & TRANSITIONS

 

BROOKDALE ASSET SALES & TRANSITIONS

 

During the fourth quarter, we transitioned seven of the eight previously announced expiring Brookdale triple-net leases to RIDEA structures; four remain with Brookdale and three were transferred to Sonata Senior Living.

 

In January 2017, we completed the previously announced sale of a 40% interest in our RIDEA II senior housing joint venture and the related financing of the venture, generating $480 million of proceeds which were used to pay down our revolving credit facility.

 

Our previously disclosed transaction to sell 64 communities triple-net leased to Brookdale for $1.125 billion is scheduled to close in the first quarter of 2017. In addition, we continue to market an additional 25 communities triple-net leased to Brookdale and expect to sell or transition these assets during 2017.

 

Combined, these transactions reduce Brookdale concentration while improving lease coverage and strengthening our balance sheet and credit profile.

 

OTHER DISPOSITIONS & TRANSITIONS

 

Dispositions

 

During the fourth quarter, we completed $472 million of dispositions, bringing our year-to-date total dispositions to $770 million. Significant transactions in the quarter included:

 

·

As previously disclosed, in November, we sold four life science facilities in South San Francisco, CA encompassing 457,000 sq. ft. for $311 million to the current tenant.

 

 

·

As previously disclosed, in October, we sold seven of ten properties subject to a master lease to the current operator for an aggregate purchase price of $88 million. Concurrently, we modified the in-place master lease to transition the operations of the remaining three properties to a new regional operator.

 

In January 2017, we sold four life science facilities in Salt Lake City, UT encompassing 324,000 sq. ft. for $76 million to the current tenant.

 

Transitions

 

·

In October, we transitioned four triple-net leased assets to RIDEA structures, three managed by Elmcroft Senior Living and one managed by Frontier Management.

 

Page 3 of 15


 

INVESTMENT TRANSACTIONS

 

During the fourth quarter, we completed $345 million of acquisitions and loan fundings, bringing our year-to-date total acquisitions and loan fundings to $723 million. Significant transactions in the quarter included:

 

·

In November, we entered into agreements with Maria Mallaband Care Group (“Maria Mallaband”) to acquire a portfolio of predominantly private pay prime care homes located in London/South-East England for $131 million (£105 million). In mid-2017, through the exercise of a call option, we intend to convert our bridge loan provided to Maria Mallaband in November into fee ownership and enter into a Master Lease with Maria Mallaband.

 

 

·

In December, we acquired a 10-asset portfolio of MOBs, including nine on-campus, leased to affiliates of Community Health Systems for an aggregate purchase price of $163 million. The nine on-campus MOBs are affiliated with seven hospitals, each of which is a leader in its respective market.

 

BALANCE SHEET AND FINANCING ACTIVITIES

 

Repaid $1.7 billion of debt during the fourth quarter and an additional $440 million through February 13, 2017, using proceeds generated from QCP financing, RIDEA II transaction and other dispositions. We remain on track with our previously disclosed deleveraging plan and continue to target net debt to EBITDA in the low to mid six-times range and a target financial leverage in the 43% to 44% range by the end of 2017.

 

·

In November, we repaid $500 million of 6.0% senior notes scheduled to mature in January 2017 and $600 million of 6.7% senior notes scheduled to mature in January 2018. In addition, during the fourth quarter we paid down $454 million on our revolving credit facility and $135 million of mortgage debt with maturity dates ranging from the fourth quarter of 2016 to 2018.

 

 

·

In January, we paid down $440 million on our revolving credit facility primarily using proceeds from our RIDEA II joint venture disposition.

 

As of February 13, 2017, we had $1.6 billion of liquidity from a combination of cash and availability under our credit facility.

 

In October, S&P reaffirmed our BBB credit rating, while Fitch reaffirmed our BBB credit rating and improved our outlook to stable.

 

LIFE SCIENCE AND MEDICAL OFFICE LEASING

 

During the fourth quarter, we completed 1.1 million sq. ft. of leasing in our life science and medical office portfolios, consisting of 450,000 sq. ft. of new leases and 668,000 sq. ft. of renewals.

 

Significant leasing transactions were primarily in our life science portfolio, including a 10-year lease with Five Prime Therapeutics, Inc., a biotechnology company, for 115,000 sq. ft. at Phase II of The Cove, projected to commence in January 2018. This brings Phases I and II to 86% leased.

 

We commenced the $211 million development of Phase III, which adds two Class A buildings representing up to 336,000 sq. ft., and expect it to be delivered by the fourth quarter of 2018. Visit our website for additional information, including a link to view our development progress at The Cove, at www.hcpi.com/portfolio-diversification/life-science.

 

QCP SPIN TRANSACTION

 

On October 31, 2016, we completed the spin-off of QCP into an independent publicly-traded REIT. A copy of the press release is available in the Investor Relations section of our website at http://ir.hcpi.com.

 

EXECUTIVE LEADERSHIP

 

Our Board of Directors elected Tom Herzog as CEO and to serve as a member of the Board and also elected Justin Hutchens as President. Both elections were effective January 1, 2017.

 

Peter Scott joined the company as Executive Vice President and Chief Financial Officer, effective February 13, 2017.

 

Copies of both press releases are available in the Investor Relations section of our website at http://ir.hcpi.com.

 

Page 4 of 15


 

DIVIDEND

 

On February 2, 2017, our Board declared a quarterly cash dividend of $0.37 per common share. The dividend will be paid on March 2, 2017 to stockholders of record as of the close of business on February 15, 2017. A copy of the press release is available in the Investor Relations section of our website at http://ir.hcpi.com.

 

SUSTAINABILITY

 

In November, HCP was named the 2016 Healthcare Leader in the Light Award winner by the National Association of Real Estate Investment Trusts (“NAREIT”). HCP has received a Leader in the Light award eight of the past ten years for producing significant, measurable results through our sustainability programs.

 

Additionally, we achieved constituency in the North America Dow Jones Sustainability Index (DJSI) for the fourth consecutive year, as well as the World DJSI for the second time. Accordingly, HCP was included in The Sustainability Yearbook, a listing of the world’s most sustainable companies which includes only those companies in the top 15% of their industry, as scored by the DJSI assessment. More information about HCP’s sustainability efforts can be found on our website at www.hcpi.com/sustainability.

 

FULL YEAR 2017 GUIDANCE

 

For full year 2017, we expect: EPS to range between $1.32 and $1.38; FFO per share to range between $1.88 and $1.94; and FFO as adjusted per share to range between $1.89 and $1.95. In addition, we expect 2017 SPP Cash NOI to increase between 2.5% and 3.5%. 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 “Projected Future Operations” and “Projected SPP Cash NOI” sections of this release, 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 Cash NOI

 

Projected Full Year 2017
SPP NOI

 

 

 

Low

 

High

 

Low

 

High

 

Senior housing triple-net

 

 

3.9%

 

 

4.9%

 

 

1.1%

 

 

2.1%

 

Senior housing operating portfolio (SHOP)(1)

 

 

2.0%

 

 

3.0%

 

 

2.0%

 

 

3.0%

 

Life science

 

 

2.5%

 

 

3.5%

 

 

0.4%

 

 

1.4%

 

Medical office

 

 

2.0%

 

 

3.0%

 

 

1.3%

 

 

2.3%

 

Other(2)

 

 

0.75%

 

 

1.75%

 

 

1.8%

 

 

2.8%

 

  SPP growth

 

 

2.5%

 

 

3.5%

 

 

1.2%

 

 

2.2%

 

________________________________________

 

(1)   The 2016 SHOP SPP Cash NOI growth rate was favorably impacted by 240 basis points due to year-end true-ups of group purchase rebates. The higher 2016 jumping-off point from these rebates contributed to a 200 basis point lower 2017 SHOP SPP Cash NOI growth rate versus what was provided in our November 1st preliminary Outlook. However, of note, the 2017 contribution from SHOP SPP Cash NOI is in line with our November 1st preliminary Outlook.

(2)          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 Monday, February 13, 2017 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) to present its performance and operating results for the quarter and year ended December 31, 2016. The conference call is accessible by dialing (888) 317-6003 (U.S.) or (412) 317-6061 (International). The conference ID number is 6632291. 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 February 28, 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 10099205. 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.

 

###

 

Page 5 of 15


 

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 “Full Year 2017 Guidance,” including without limitation with respect to expected EPS, FFO per share, FFO as adjusted per share, Comparable FFO per share, SPP Cash NOI and SPP NOI projections, and other financial projections and assumptions, including those in the “Projected Future Operations” and “Projected SPP NOI and SPP Cash NOI” sections of this release, as well as comparable statements included in other sections of this release; (ii) statements regarding the payment of the quarterly cash dividend; and (iii) statements regarding timing, outcomes and other details relating to the 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 “Strategic Brookdale Transactions and Other Dispositions.” 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 HCP’s and its 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 in Brookdale increasing 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 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 HCP’s Securities and Exchange Commission filings. The Company cautions investors not to place undue reliance on any forward-looking statements. HCP assumes no, and hereby disclaims 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

 

Page 6 of 15


 

HCP, Inc.

 

Consolidated Balance Sheets

 

In thousands, except share and per share data

 

 

 

December 31,

 

December 31,

 

 

 

2016

 

2015

 

Assets

 

 

 

 

 

Real estate:

 

 

 

 

 

Buildings and improvements

 

$

11,692,654

 

$

12,007,071

 

Development costs and construction in progress

 

400,619

 

388,576

 

Land

 

1,881,487

 

1,934,610

 

Accumulated depreciation and amortization

 

(2,648,930

)

(2,476,015

)

Net real estate

 

11,325,830

 

11,854,242

 

 

 

 

 

 

 

Net investment in direct financing leases

 

752,589

 

750,693

 

Loans receivable, net

 

807,954

 

768,743

 

Investments in and advances to unconsolidated joint ventures

 

571,491

 

605,244

 

Accounts receivable, net of allowance of $4,459 and $3,261, respectively

 

45,116

 

48,929

 

Cash and cash equivalents

 

94,730

 

340,442

 

Restricted cash

 

42,260

 

46,090

 

Intangible assets, net

 

479,805

 

586,657

 

Assets held for sale and discontinued operations, net

 

927,866

 

5,654,326

 

Other assets, net

 

711,624

 

794,483

 

 

 

 

 

 

 

Total assets

 

$

15,759,265

 

$

21,449,849

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Bank line of credit

 

$

899,718

 

$

397,432

 

Term loans

 

440,062

 

524,807

 

Senior unsecured notes

 

7,133,538

 

9,120,107

 

Mortgage debt

 

623,792

 

932,212

 

Other debt

 

92,385

 

94,445

 

Intangible liabilities, net

 

58,145

 

56,147

 

Liabilities of assets held for sale and discontinued operations, net

 

3,776

 

25,266

 

Accounts payable and accrued liabilities

 

417,360

 

430,786

 

Deferred revenue

 

149,181

 

122,330

 

Total liabilities

 

9,817,957

 

11,703,532

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $1.00 par value: 750,000,000 shares authorized; 468,081,489 and 465,488,492 shares issued and outstanding, respectively

 

468,081

 

465,488

 

Additional paid-in capital

 

8,198,890

 

11,647,039

 

Cumulative dividends in excess of earnings

 

(3,089,734

)

(2,738,414

)

Accumulated other comprehensive loss

 

(29,642

)

(30,470

)

Total stockholders’ equity

 

5,547,595

 

9,343,643

 

 

 

 

 

 

 

Joint venture partners

 

214,377

 

217,066

 

Non-managing member unitholders

 

179,336

 

185,608

 

Total noncontrolling interests

 

393,713

 

402,674

 

 

 

 

 

 

 

Total equity

 

5,941,308

 

9,746,317

 

 

 

 

 

 

 

Total liabilities and equity

 

$

15,759,265

 

$

21,449,849

 

 

Page 7 of 15


 

HCP, Inc.

 

Consolidated Statements of Operations

 

In thousands, except per share data

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental and related revenues

 

$

286,968

 

$

292,083

 

$

1,159,791

 

$

1,116,830

 

Tenant recoveries

 

34,565

 

31,785

 

134,280

 

125,022

 

Resident fees and services

 

186,118

 

158,312

 

686,835

 

525,453

 

Income from direct financing leases

 

14,789

 

15,010

 

59,580

 

61,000

 

Interest income

 

17,510

 

23,135

 

88,808

 

112,184

 

Total revenues

 

539,950

 

520,325

 

2,129,294

 

1,940,489

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Interest expense

 

103,148

 

122,027

 

464,403

 

479,596

 

Depreciation and amortization

 

146,927

 

139,686

 

568,108

 

504,905

 

Operating

 

195,648

 

171,665

 

738,399

 

610,679

 

General and administrative

 

20,600

 

21,835

 

103,611

 

95,965

 

Acquisition and pursuit costs

 

3,760

 

3,959

 

9,821

 

27,309

 

(Recoveries) impairments, net

 

—

 

(6,108

)

—

 

108,349

 

Total costs and expenses

 

470,083

 

453,064

 

1,884,342

 

1,826,803

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Gain on sales of real estate, net

 

45,093

 

—

 

164,698

 

6,377

 

Loss on debt extinguishments

 

(46,020

)

—

 

(46,020

)

—

 

Other (loss) income, net

 

(1,410

)

3,147

 

3,654

 

16,208

 

Total other (loss) income, net

 

(2,337

)

3,147

 

122,332

 

22,585

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and equity income from unconsolidated joint ventures

 

67,530

 

70,408

 

367,284

 

136,271

 

Income tax (expense) benefit

 

(3,372

)

2,596

 

(4,473

)

9,807

 

Equity income from unconsolidated joint ventures

 

15,388

 

12,144

 

11,360

 

6,590

 

Income from continuing operations

 

79,546

 

85,148

 

374,171

 

152,668

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Income before impairments, transaction costs and income taxes

 

40,470

 

156,141

 

400,701

 

643,109

 

Impairments, net

 

—

 

(835,701

)

—

 

(1,341,399

)

Transaction costs

 

(58,256

)

—

 

(86,765

)

—

 

Income tax expense

 

(460

)

(205

)

(48,181

)

(796

)

Total discontinued operations

 

(18,246

)

(679,765

)

265,755

 

(699,086

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

61,300

 

(594,617

)

639,926

 

(546,418

)

Noncontrolling interests’ share in earnings

 

(2,639

)

(4,251

)

(12,179

)

(12,817

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to HCP, Inc.

 

58,661

 

(598,868

)

627,747

 

(559,235

)

Participating securities’ share in earnings

 

(221

)

(296

)

(1,198

)

(1,317

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) applicable to common shares

 

$

58,440

 

$

(599,164

)

$

626,549

 

$

(560,552

)

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

$

(1.29

)

$

1.34

 

$

(1.21

)

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.12

 

$

(1.29

)

$

1.34

 

$

(1.21

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to calculate earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

467,979

 

465,036

 

467,195

 

462,795

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

468,210

 

465,036

 

467,403

 

462,795

 

 

Page 8 of 15


 

HCP, Inc.

 

Consolidated Statements of Cash Flows

 

In thousands

 

 

 

Year Ended December 31,

 

 

 

2016

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

 $

639,926

 

 $

(546,418

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization of real estate, in-place lease and other intangibles:

 

 

 

 

 

Continuing operations

 

568,108

 

504,905

 

Discontinued operations

 

4,890

 

5,880

 

Amortization of market lease intangibles, net

 

(1,197

)

(1,295

)

Amortization of deferred compensation

 

22,884

 

26,127

 

Amortization of deferred financing costs

 

20,014

 

20,222

 

Straight-line rents

 

(18,003

)

(28,859

)

Loan and direct financing lease non-cash interest:

 

 

 

 

 

Continuing operations

 

599

 

(5,648

)

Discontinued operations

 

—

 

(90,065

)

Deferred rental revenues

 

(1,959

)

(2,813

)

Equity income from unconsolidated joint ventures

 

(11,360

)

(57,313

)

Distributions of earnings from unconsolidated joint ventures

 

26,492

 

15,111

 

Lease termination income, net

 

—

 

(1,103

)

Gain on sales of real estate, net

 

(164,698

)

(6,377

)

Deferred income tax expense

 

47,195

 

—

 

Loss on debt extinguishments

 

46,020

 

—

 

Foreign exchange and other losses (gains), net

 

188

 

(7,178

)

Impairments, net

 

—

 

1,449,748

 

Changes in:

 

 

 

 

 

Accounts receivable, net

 

3,813

 

(9,569

)

Other assets, net

 

(10,805

)

(19,453

)

Accounts payable and accrued liabilities

 

42,024

 

(23,757

)

Net cash provided by operating activities

 

1,214,131

 

1,222,145

 

Cash flows from investing activities:

 

 

 

 

 

Acquisitions of RIDEA III, net

 

—

 

(770,325

)

Acquisitions of other real estate

 

(467,162

)

(613,252

)

Development of real estate

 

(421,322

)

(281,017

)

Leasing costs and tenant and capital improvements

 

(91,442

)

(84,282

)

Proceeds from sales of real estate, net

 

647,754

 

58,623

 

Contributions to unconsolidated joint ventures

 

(10,186

)

(69,936

)

Distributions in excess of earnings from unconsolidated joint ventures

 

28,366

 

30,989

 

Proceeds from the sales of marketable securities

 

—

 

2,348

 

Principal repayments on loans receivable, DFLs and other

 

231,990

 

625,701

 

Investments in loans receivable and other

 

(273,693

)

(575,652

)

Purchase of securities for debt defeasance

 

(73,278

)

—

 

Decrease in restricted cash

 

18,356

 

4,798

 

Net cash used in investing activities

 

(410,617

)

(1,672,005

)

Cash flows from financing activities:

 

 

 

 

 

Net borrowings under bank line of credit

 

1,108,417

 

98,743

 

Repayments under bank line of credit

 

(540,000

)

(511,521

)

Proceeds related to QCP spin-off, net

 

1,691,268

 

—

 

Cash impact of QCP spin-off

 

(6,096

)

—

 

Borrowings under term loan

 

—

 

333,014

 

Issuance of senior unsecured notes

 

—

 

1,936,017

 

Repayments of senior unsecured notes

 

(2,000,000

)

(400,000

)

Debt extinguishment costs

 

(45,406

)

—

 

Repayments of mortgage and other debt

 

(316,774

)

(57,845

)

Deferred financing costs

 

(9,450

)

(19,995

)

Issuance of common stock and exercise of options

 

67,650

 

206,471

 

Repurchase of common stock

 

(8,685

)

(8,738

)

Dividends paid on common stock

 

(979,542

)

(1,046,638

)

Issuance of noncontrolling interests

 

11,834

 

110,775

 

Purchase of noncontrolling interests

 

(1,300

)

(7,049

)

Distributions to noncontrolling interests

 

(26,181

)

(19,147

)

Net cash (used in) provided by financing activities

 

(1,054,265

)

614,087

 

Effect of foreign exchange on cash and cash equivalents

 

(1,019

)

(1,537

)

Net (decrease) increase in cash and cash equivalents

 

(251,770

)

162,690

 

Cash and cash equivalents, beginning of year

 

346,500

 

183,810

 

Cash and cash equivalents, end of year

 

 $

94,730

 

 $

346,500

 

Less: cash and cash equivalents of discontinued operations

 

—

 

(6,058

)

Cash and cash equivalents of continuing operations, end of year

 

 $

94,730

 

 $

340,442

 

 

Page 9 of 15


 

HCP, Inc.

 

Funds From Operations(1)

 

In thousands, except per share data

 

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss) applicable to common shares

 

$

58,440

 

$

(599,164

)

$

626,549

 

$

(560,552

)

Depreciation and amortization

 

147,416

 

141,156

 

572,998

 

510,785

 

Other depreciation and amortization(2) 

 

2,998

 

5,207

 

11,919

 

22,223

 

Gain on sales of real estate, net

 

(45,093

)

—

 

(164,698

)

(6,377

)

Taxes associated with real estate disposition(3)

 

7,017

 

—

 

60,451

 

—

 

Impairment of real estate

 

—

 

—

 

—

 

2,948

 

Equity income from unconsolidated joint ventures

 

(15,388

)

(23,397

)

(11,360

)

(57,313

)

FFO from unconsolidated joint ventures

 

11,967

 

21,176

 

44,071

 

90,498

 

Noncontrolling interests’ and participating securities’ share in earnings

 

2,860

 

4,547

 

13,377

 

14,134

 

Noncontrolling interests’ and participating securities’ share in FFO

 

(7,952

)

(8,203

)

(34,154

)

(27,187

)

FFO applicable to common shares

 

$

162,265

 

$

(458,678

)

$

1,119,153

 

$

(10,841

)

Distributions on dilutive convertible units

 

—

 

—

 

8,732

 

—

 

Diluted FFO applicable to common shares

 

$

162,265

 

$

(458,678

)

$

1,127,885

 

$

(10,841

)

Diluted FFO per common share

 

$

0.35

 

$

(0.99

)

$

2.39

 

$

(0.02

)

Weighted average shares used to calculate diluted FFO per share

 

468,210

 

465,036

 

471,566

 

462,795

 

Impact of adjustments to FFO:

 

 

 

 

 

 

 

 

 

Other impairments, net(4)

 

$

—

 

$

829,593

 

$

—

 

$

1,446,800

 

Transaction-related items

 

62,016

 

3,959

 

96,586

 

32,932

 

Loss on debt extinguishments(5)

 

46,020

 

—

 

46,020

 

—

 

Severance-related charges(6)

 

2,501

 

—

 

16,965

 

6,713

 

Litigation provision

 

3,081

 

—

 

3,081

 

—

 

Foreign currency remeasurement losses (gains)

 

317

 

60

 

585

 

(5,437

)

 

 

$

113,935

 

$

833,612

 

$

163,237

 

$

1,481,008

 

FFO as adjusted applicable to common shares

 

$

276,200

 

$

374,934

 

$

1,282,390

 

$

1,470,167

 

Distributions on dilutive convertible units and other

 

2,315

 

3,397

 

12,849

 

13,597

 

Diluted FFO as adjusted applicable to common shares

 

$

278,515

 

$

378,331

 

$

1,295,239

 

$

1,483,764

 

Per common share impact of adjustments on diluted FFO

 

$

0.24

 

$

1.79

 

$

0.35

 

$

3.18

 

Diluted FFO as adjusted per common share

 

$

0.59

 

$

0.80

 

$

2.74

 

$

3.16

 

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

 

474,318

 

471,273

 

473,340

 

469,064

 

FFO as adjusted from QCP

 

$

26,948

 

$

138,875

 

$

328,341

 

$

575,471

 

Diluted Comparable FFO as adjusted applicable to common shares(7)

 

$

251,567

 

$

239,456

 

$

966,898

 

$

908,293

 

FFO as adjusted from QCP per common share

 

$

0.06

 

$

0.29

 

$

0.70

 

$

1.22

 

Diluted Comparable FFO as adjusted per common share(7)

 

$

0.53

 

$

0.51

 

$

2.04

 

$

1.94

 

 

(1)

See “Results of Operations-Non-GAAP Financial Measures” and “Non-GAAP Financial Measure Reconciliations” included in our Annual Report on Form 10-K for the year ended December 31, 2016 for definitions of FFO and FFO as adjusted and an important discussion of their uses and inherent limitations.

 

 

(2)

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. Beginning January 2016, we changed our accounting treatment for our previous HCRMC DFL investments to recognize rental income on a cash basis and no longer recognize non-cash depreciation.

 

 

(3)

Represents income tax expense associated with state built-in gain tax payable upon the disposition of specific real estate assets, of which $47 million relates to our previous HCRMC real estate portfolio. See Note 5 to the Consolidated Financial Statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K.

 

 

(4)

For the three months ended December 31, 2015, other impairments, net include: (i) $817 million related to our previous HCRMC DFL investments and (ii) $19 million related to our previous equity investment in HCRMC, partially offset by an impairment recovery of $6 million related to a loan payoff. For the year ended December 31, 2015, other impairments, net include: (i) $1.3 billion related to our previous HCRMC DFL investments, (ii) $112 million related to our Four Seasons Notes and (iii) $46 million related to our previous equity investment in HCRMC, partially offset by an impairment recovery of $6 million related to a loan payoff.

 

 

(5)

Represents penalties of $46 million from the prepayment of $1.1 billion of senior unsecured notes and $108 million of mortgage debt using proceeds from the QCP spin-off.

 

 

(6)

Severance-related charges for the year ended December 31, 2016 primarily relate to the departure of our former President and Chief Executive Officer. Severance-related charges for the year ended December 31, 2015 relate to the departure of our former Executive Vice President and Chief Investment Officer.

 

 

(7)

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 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.

 

Page 10 of 15


 

HCP, Inc.

 

Funds Available for Distribution(1)

 

In thousands

 

(Unaudited)

 

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

FFO as adjusted applicable to common shares

 

$

276,200

 

$

374,934

 

$

1,282,390

 

$

1,470,167

 

Amortization of market lease intangibles, net

 

196

 

(315

)

(1,197

)

(1,295

)

Amortization of deferred compensation(2)

 

2,687

 

5,059

 

15,581

 

23,233

 

Amortization of deferred financing costs

 

4,416

 

5,272

 

20,014

 

20,222

 

Straight-line rents

 

(3,591

)

(4,042

)

(18,003

)

(28,859

)

DFL non-cash interest(3)

 

633

 

(23,685

)

2,600

 

(87,861

)

Other depreciation and amortization

 

(2,998

)

(5,207

)

(11,919

)

(22,223

)

Deferred revenues – tenant improvement related

 

(432

)

(457

)

(1,883

)

(2,594

)

Deferred revenues – additional rents

 

(500

)

(860

)

(76

)

(219

)

Leasing costs and tenant and capital improvements

 

(26,179

)

(31,193

)

(88,953

)

(82,072

)

Lease restructure payments

 

2,124

 

6,289

 

16,604

 

22,657

 

Joint venture adjustments – CCRC entrance fees(4)

 

7,574

 

8,870

 

29,998

 

30,918

 

Joint venture and other FAD adjustments(3)

 

(8,879

)

(21,077

)

(29,460

)

(80,225

)

FAD applicable to common shares

 

$

251,251

 

$

313,588

 

$

1,215,696

 

$

1,261,849

 

Distributions on dilutive convertible units

 

2,466

 

3,547

 

13,088

 

14,230

 

 

 

 

 

 

 

 

 

 

 

Diluted FAD applicable to common shares

 

$

253,717

 

$

317,135

 

$

1,228,784

 

$

1,276,079

 

 

(1)          See “Results of Operations-Non-GAAP Financial Measures” and “Non-GAAP Financial Measure Reconciliations” included in our Annual Report on Form 10-K for the year ended December 31, 2016 for the definition of FAD and an important discussion of its uses and inherent limitations.

 

(2)          Excludes $7 million primarily related to the acceleration of deferred compensation for restricted stock units that vested upon the departure of HCP’s former President and Chief Executive Officer, which is included in the severance-related charges for the year ended December 31, 2016. Excludes $3 million related to the acceleration of deferred compensation for restricted stock units and stock options that vested upon the departure of HCP’s former Executive Vice President and Chief Investment Officer, which is included in the severance-related charges for the year ended December 31, 2015.

 

(3)          For the three months and year ended December 31, 2015, DFL non-cash interest reflects an elimination of $14 million and $58 million, respectively. Our previous equity investment in HCRMC was accounted for using the equity method, which required an elimination of DFL income that was proportional to our ownership in HCRMC. Further, our share of earnings from HCRMC (equity income) increased for the corresponding elimination of related lease expense recognized at the HCRMC entity level, which we presented as a non-cash joint venture FAD adjustment. Beginning January 2016, as a result of placing our previous equity investment in HCRMC on a cash basis, we no longer eliminated our proportional ownership share of income from DFLs to equity income (loss) from unconsolidated joint ventures.

 

(4)          Represents our 49% share of non-refundable entrance fees included in FAD as the fees are collected by our CCRC JV.

 

Page 11 of 15


 

HCP, Inc.

 

Net Operating Income and Same Property Performance(1)

 

Dollars in thousands

 

(Unaudited)

 

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss)

 

$

61,300

 

$

(594,617

)

$

639,926

 

$

(546,418

)

Interest income

 

(17,510

)

(23,135

)

(88,808

)

(112,184

)

Interest expense

 

103,148

 

122,027

 

464,403

 

479,596

 

Depreciation and amortization

 

146,927

 

139,686

 

568,108

 

504,905

 

General and administrative

 

20,600

 

21,835

 

103,611

 

95,965

 

Acquisition and pursuit costs

 

3,760

 

3,959

 

9,821

 

27,309

 

(Recoveries) impairments, net

 

—

 

(6,108

)

—

 

108,349

 

Gain on sales of real estate, net

 

(45,093

)

—

 

(164,698

)

(6,377

)

Loss on debt extinguishments

 

46,020

 

—

 

46,020

 

—

 

Other loss (income), net

 

1,410

 

(3,147

)

(3,654

)

(16,208

)

Income tax expense (benefit)

 

3,372

 

(2,596

)

4,473

 

(9,807

)

Equity income from unconsolidated joint ventures

 

(15,388

)

(12,144

)

(11,360

)

(6,590

)

Discontinued operations

 

18,246

 

679,765

 

(265,755

)

699,086

 

HCP’s share of unconsolidated joint ventures revenues

 

55,024

 

50,095

 

215,804

 

191,986

 

HCP’s share of unconsolidated joint ventures operating expenses

 

(42,137

)

(40,169

)

(169,035

)

(154,259

)

NOI

 

$

339,679

 

$

335,451

 

$

1,348,856

 

$

1,255,353

 

Non-SPP NOI

 

(46,498

)

(49,088

)

(308,951

)

(241,775

)

SPP NOI

 

$

293,181

 

$

286,363

 

$

1,039,905

 

$

1,013,578

 

Non-cash adjustment to SPP NOI

 

(1,603

)

(2,111

)

(6,152

)

(16,789

)

SPP cash (adjusted) NOI

 

$

291,578

 

$

284,252

 

$

1,033,753

 

$

996,789

 

 

 

 

 

 

 

 

 

 

 

SPP NOI % change

 

2.4%

 

 

 

2.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

SPP Cash (adjusted) NOI % change

 

2.6%

 

 

 

3.7%

 

 

 

 

(1)          See “Results of Operations-Non-GAAP Financial Measures,” “Results of Operations-Segment Analysis” and “Note 14 to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2016 for definitions of NOI, Cash (adjusted) NOI and SPP and an important discussion of their uses and inherent limitations.

 

Page 12 of 15


 

HCP, Inc.

 

Projected Future Operations(1)

(Unaudited)

 

 

 

 

Full Year 2017

 

 

 

Low

 

High

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.32

 

$

1.38

 

Depreciation and amortization

 

1.13

 

1.13

 

Other depreciation and amortization

 

0.02

 

0.02

 

Gain on sales of real estate, net

 

(0.70)

 

(0.70)

 

Joint venture FFO adjustments

 

0.11

 

0.11

 

Diluted FFO per common share

 

$

1.88

 

$

1.94

 

Transaction-related items and other

 

0.01

 

0.01

 

Diluted FFO as adjusted per common share

 

$

1.89

 

$

1.95

 

 

(1)          The foregoing projections reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, development items and the earnings impact of the events referenced in this release. These projections do not reflect unannounced future transactions, except as described herein, other impairments or recoveries, the future bankruptcy or insolvency of our operators, lessees, borrowers or other obligors, the effect of any future restructuring of our contractual relationships with such entities, gains or losses on marketable securities, ineffectiveness related to our cash flow hedges, or larger than expected litigation settlements and related expenses related to existing or future litigation matters. Our actual results may differ materially from the projections set forth above. The aforementioned ranges represent management’s best estimates based upon the underlying assumptions as of the date of this press release. Except as otherwise required by law, management assumes no, and hereby disclaims any, obligation to update any of the foregoing projections as a result of new information or new or future developments.

 

Page 13 of 15


 

HCP, Inc.

 

Projected SPP NOI and Cash NOI(1)

 

Dollars in thousands

(Unaudited)

 

For the projected full year 2017 (low):

 

 

 

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical
Office

 

Other

 

Total

 

NOI(2)

 

$

319,000

 

$

238,800

 

$

273,900

 

$

293,000

 

$

117,700

 

$

1,242,400

 

Non-SPP NOI

 

(35,200

)

(48,250

)

(34,700

)

(41,300

)

(7,800

)

(167,250

)

SPP NOI

 

283,800

 

190,550

 

239,200

 

251,700

 

109,900

 

1,075,150

 

Non-cash adjustments to SPP NOI(3)

 

5,500

 

—

 

5,100

 

1,000

 

(4,150

)

7,450

 

SPP cash (adjusted) NOI

 

$

289,300

 

$

190,550

 

$

244,300

 

$

252,700

 

$

105,750

 

1,082,600

 

Addback adjustments(4)

 

 

 

 

 

 

 

 

 

 

 

159,800

 

Other income and expenses(5)

 

 

 

 

 

 

 

 

 

 

 

337,100

 

Costs and expenses(6)

 

 

 

 

 

 

 

 

 

 

 

(944,900

)

Net income

 

 

 

 

 

 

 

 

 

 

 

$

634,600

 

 

For the projected full year 2017 (high):

 

 

 

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical
Office

 

Other

 

Total

 

NOI(2)

 

$

323,200

 

$

241,300

 

$

276,800

 

$

295,700

 

$

118,900

 

$

1,255,900

 

Non-SPP NOI

 

(36,600

)

(48,900

)

(35,200

)

(41,500

)

(7,950

)

(170,150

)

SPP NOI

 

286,600

 

192,400

 

241,600

 

254,200

 

110,950

 

1,085,750

 

Non-cash adjustments to SPP NOI(3)

 

5,500

 

—

 

5,100

 

1,000

 

(4,150

)

7,450

 

SPP cash (adjusted) NOI

 

$

292,100

 

$

192,400

 

$

246,700

 

$

255,200

 

$

106,800

 

1,093,200

 

Addback adjustments(4)

 

 

 

 

 

 

 

 

 

 

 

162,700

 

Other income and expenses(5)

 

 

 

 

 

 

 

 

 

 

 

344,100

 

Costs and expenses(6)

 

 

 

 

 

 

 

 

 

 

 

(937,900

)

Net income

 

 

 

 

 

 

 

 

 

 

 

$

662,100

 

 

For the year ended December 31, 2016:

 

 

 

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical
Office

 

Other

 

Total

 

NOI(2)

 

$

416,408

 

$

243,752

 

$

292,057

 

$

273,994

 

$

122,645

 

$

1,348,856

 

Non-SPP NOI

 

(135,723

)

(56,945

)

(53,822

)

(25,522

)

(14,695

)

(286,707

)

SPP NOI

 

280,685

 

186,807

 

238,235

 

248,472

 

107,950

 

1,062,149

 

Non-cash adjustments to SPP NOI(3)

 

(2,252

)

—

 

114

 

(733

)

(2,985

)

(5,856

)

SPP cash (adjusted) NOI

 

$

278,433

 

$

186,807

 

$

238,349

 

$

247,739

 

$

104,965

 

1,056,293

 

Addback adjustments(4)

 

 

 

 

 

 

 

 

 

 

 

292,563

 

Other income and expenses(5)

 

 

 

 

 

 

 

 

 

 

 

217,278

 

Costs and expenses(6)

 

 

 

 

 

 

 

 

 

 

 

(1,191,963

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

265,755

 

Net income

 

 

 

 

 

 

 

 

 

 

 

$

639,926

 

 

Projected SPP NOI change for the full year 2017:

 

 

 

Senior Housing
Triple-net

 

SHOP

 

Life Science

 

Medical
Office

 

Other

 

Total

 

Low

 

1.1%

 

2.0%

 

0.4%

 

1.3%

 

1.8%

 

1.2%

 

High

 

2.1%

 

3.0%

 

1.4%

 

2.3%

 

2.8%

 

2.2%

 

 

Projected SPP cash (adjusted) NOI change for the full year 2017:

 

 

 

Senior Housing
Triple-net

 

SHOP(7)

 

Life Science

 

Medical
Office

 

Other

 

Total

 

Low

 

3.9%

 

2.0%

 

2.5%

 

2.0%

 

0.75%

 

2.5%

 

High

 

4.9%

 

3.0%

 

3.5%

 

3.0%

 

1.75%

 

3.5%

 

 

Page 14 of 15


 

(1)          The foregoing projections reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, development items and the earnings impact of the events referenced in this release. These projections do not reflect the impact of unannounced future transactions, except as described herein, other impairments or recoveries, the future bankruptcy or insolvency of our operators, lessees, borrowers or other obligors, the effect of any future restructuring of our contractual relationships with such entities, gains or losses on marketable securities, ineffectiveness related to our cash flow hedges, or larger than expected litigation settlements and related expenses related to existing or future litigation matters. Our actual results may differ materially from the projections set forth above. The aforementioned ranges represent management’s best estimates based upon the underlying assumptions as of the date of this press release. Except as otherwise required by law, management assumes no, and hereby disclaims any, obligation to update any of the foregoing projections as a result of new information or new or future developments.

 

(2)          Represents rental and related revenues, tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses, including our share of unconsolidated joint ventures.

 

(3)          Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net and lease termination fees.

 

(4)          Represents non-SPP NOI and non-cash adjustments to SPP NOI.

 

(5)          Represents interest income, gain on sales of real estate, other income, net, income taxes and equity income (loss) from unconsolidated joint ventures, excluding NOI.

 

(6)          Represents interest expense, depreciation and amortization, general and administrative expenses, acquisition and pursuit costs, and loss on debt extinguishments.

(7)          The 2016 SHOP SPP Cash NOI growth rate was favorably impacted by 240 basis points due to year-end true-ups of group purchase rebates. The higher 2016 jumping-off point from these rebates contributed to a 200 basis point lower 2017 SHOP SPP Cash NOI growth rate versus what was provided in our November 1st preliminary Outlook. However, of note, the 2017 contribution from SHOP SPP Cash NOI is in line with our November 1st preliminary Outlook.

 

Page 15 of 15