XNYS:HCN Health Care REIT, Inc. Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

þ

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

 

 

 

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                      

Commission File number 1-8923

HEALTH CARE REIT, INC.

 

(Exact name of registrant as specified in its charter

 

 

 

Delaware

 

34-1096634

 

 

 

(State or other jurisdiction of

 incorporation or organization)

 

(I.R.S. Employer

 Identification No.)

 

 

 

4500 Dorr Street, Toledo, Ohio

 

43615

 

 

 

(Address of principal executive office)

 

(Zip Code)

(419) 247-2800

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes  þ   No  o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No  o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer þ  

 

Accelerated filer o  

 

Non-accelerated filer   o

 (Do not check if a smaller reporting company)

 

Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  þ 

As of April 30, 2012, the registrant had 213,818,411 shares of common stock outstanding.

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

      Consolidated Balance Sheets — March 31, 2012 and December 31, 2011

3

 

 

      Consolidated Statements of Comprehensive Income — Three months ended March 31, 2012 and 2011

4

 

 

      Consolidated Statements of Equity — Three months ended March 31, 2012 and 2011

5

 

 

      Consolidated Statements of Cash Flows — Three months ended March 31, 2012 and 2011

6

 

 

      Notes to Unaudited Consolidated Financial Statements

7

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

51

 

 

Item 4. Controls and Procedures

52

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1A. Risk Factors

52

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

52

 

 

Item 6. Exhibits

53

 

 

Signatures

54

 

 

2

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

2012 

 

2011 

 

 

 

 

  

(Unaudited)

 

(Note)

 

 

 

 

 

 

 

 

 

 

Assets  

(In thousands)

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

 1,146,099 

 

$

 1,116,756 

 

 

Buildings and improvements  

 

 13,575,137 

 

 

 13,073,747 

 

 

Acquired lease intangibles  

 

 497,389 

 

 

 428,199 

 

 

Real property held for sale, net of accumulated depreciation  

 

 165,736 

 

 

 36,115 

 

 

Construction in progress  

 

 150,750 

 

 

 189,502 

 

 

 

Gross real property owned  

 

 15,535,111 

 

 

 14,844,319 

 

 

Less accumulated depreciation and amortization  

 

 (1,272,922) 

 

 

 (1,194,476) 

 

 

 

Net real property owned  

 

 14,262,189 

 

 

 13,649,843 

 

Real estate loans receivable:  

 

 

 

 

 

 

 

Real estate loans receivable  

 

 298,868 

 

 

 292,507 

 

 

Less allowance for losses on loans receivable  

 

 

 

 

 

 

Net real estate loans receivable  

 

 298,868 

 

 

 292,507 

 

Net real estate investments  

 

 14,561,057 

 

 

 13,942,350 

Other assets:  

 

 

 

 

 

 

 

Equity investments  

 

 239,254 

 

 

 241,722 

 

 

Goodwill  

 

 68,321 

 

 

 68,321 

 

 

Deferred loan expenses  

 

 57,252 

 

 

 58,584 

 

 

Cash and cash equivalents  

 

 469,217 

 

 

 163,482 

 

 

Restricted cash  

 

 83,499 

 

 

 69,620 

 

 

Receivables and other assets  

 

 381,134 

 

 

 380,527 

 

 

 

Total other assets  

 

 1,298,677 

 

 

 982,256 

Total assets  

$

 15,859,734 

 

$

 14,924,606 

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under unsecured line of credit arrangement  

$

 5,000 

 

$

 610,000 

 

 

Senior unsecured notes  

 

 4,436,103 

 

 

 4,434,107 

 

 

Secured debt  

 

 2,353,856 

 

 

 2,112,649 

 

 

Capital lease obligations  

 

 83,020 

 

 

 83,996 

 

 

Accrued expenses and other liabilities  

 

 393,202 

 

 

 371,557 

Total liabilities  

 

 7,271,181 

 

 

 7,612,309 

Redeemable noncontrolling interests  

 

 34,535 

  

  

 33,650 

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

 1,297,917 

 

 

 1,010,417 

 

 

Common stock  

 

 213,529 

 

 

 192,299 

 

 

Capital in excess of par value  

 

 8,088,573 

 

 

 7,019,714 

 

 

Treasury stock  

 

 (17,265) 

 

 

 (13,535) 

 

 

Cumulative net income  

 

 1,952,320 

 

 

 1,893,806 

 

 

Cumulative dividends  

 

 (3,134,255) 

 

 

 (2,972,129) 

 

 

Accumulated other comprehensive income (loss)  

 

 (11,642) 

 

 

 (11,928) 

 

 

Other equity  

 

 7,208 

 

 

 6,120 

 

 

 

Total Health Care REIT, Inc. stockholders’ equity  

 

 8,396,385 

 

 

 7,124,764 

 

 

Noncontrolling interests  

 

 157,633 

 

 

 153,883 

Total equity  

 

 8,554,018 

 

 

 7,278,647 

Total liabilities and equity  

$

 15,859,734 

 

$

 14,924,606 

 

NOTE: The consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

See notes to unaudited consolidated financial statements

3

 


 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

(In thousands, except per share data)

Revenues:

 

 

 

 

 

 

Rental income  

$

 267,358 

 

$

 159,937 

 

Resident fees and services

 

 158,174 

 

 

 71,286 

 

Interest income

 

 8,141 

 

 

 11,709 

 

Other income

 

 1,686 

 

 

 2,824 

 

 

Total revenues

 

 435,359 

 

 

 245,756 

Expenses:

 

 

 

 

 

 

Interest expense

 

 92,712 

 

 

 56,902 

 

Property operating expenses

 

 129,268 

 

 

 63,563 

 

Depreciation and amortization

 

 125,955 

 

 

 70,743 

 

Transaction costs

 

 5,579 

 

 

 36,065 

 

General and administrative

 

 27,751 

 

 

 17,714 

 

Unrealized loss on derivatives

 

 555 

 

 

 

Provision for loan losses

 

 

 

 248 

 

 

Total expenses

 

 381,820 

 

 

 245,235 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

and income from unconsolidated entities

 

 53,539 

 

 

 521 

Income tax (expense) benefit

 

 (1,470) 

 

 

 (129) 

Income from unconsolidated entities

 

 1,532 

 

 

 1,543 

Income (loss) from continuing operations

 

 53,601 

 

 

 1,935 

Discontinued operations:

 

 

 

 

 

 

Gain (loss) on sales of properties

 

 769 

 

 

 26,156 

 

Impairment of assets

 

 

 

 (202) 

 

Income (loss) from discontinued operations, net

 

 3,088 

 

 

 3,921 

 

 

Discontinued operations, net

 

 3,857 

 

 

 29,875 

Net income

 

 57,458 

 

 

 31,810 

Less:

Preferred stock dividends

 

 19,207 

 

 

 8,680 

Less:

Net income (loss) attributable to noncontrolling interests(1)

 

 (1,056) 

 

 

 (242) 

Net income (loss) attributable to common stockholders

$

 39,307 

 

$

 23,372 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 199,661 

 

 

 154,945 

 

Diluted

 

 201,658 

 

 

 155,485 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

 

 

 

 

 

attributable to common stockholders

$

 0.18 

 

$

 (0.04) 

 

Discontinued operations, net

 

 0.02 

 

 

 0.19 

 

Net income (loss) attributable to common stockholders*

$

 0.20 

 

$

 0.15 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

 

 

 

 

 

attributable to common stockholders

$

 0.18 

 

$

 (0.04) 

 

Discontinued operations, net

 

 0.02 

 

 

 0.19 

 

Net income (loss) attributable to common stockholders*

$

 0.19 

 

$

 0.15 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

 0.74 

 

$

 0.69 

 

 

 

 

 

 

Total comprehensive income (loss) attributable to common stockholders

$

 57,744 

 

$

 32,614 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Amounts may not sum due to rounding

(1) Includes amounts attributable to redeemable noncontrolling interests.

See notes to unaudited consolidated financial statements

4

 


 

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(in thousands)

 

Three Months Ended March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

 1,010,417 

$

 192,299 

$

 7,019,714 

$

 (13,535) 

$

 1,893,806 

$

 (2,972,129) 

$

 (11,928) 

$

 6,120 

$

 153,883 

$

 7,278,647 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 58,514 

 

 

 

 

 

 

 

 (678) 

 

 57,836 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 8 

 

 

 

 

 

 8 

 

 

Cash flow hedge activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 278 

 

 

 

 

 

 278 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 58,122 

Contributions by noncontrolling interests

 

 

 

 

 

 874 

 

 

 

 

 

 

 

 

 

 

 

 7,227 

 

 8,101 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2,799) 

 

 (2,799) 

Amounts related to issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from dividend reinvestment and stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

incentive plans, net of forfeitures

 

 

 

 530 

 

 35,546 

 

 (3,730) 

 

 

 

 

 

 

 

 (294) 

 

 

 

 32,052 

Proceeds from issuance of common stock

 

 

 

 20,700 

 

 1,042,038 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,062,738 

Proceeds from issuance of preferred stock

 

 287,500 

 

 

 

 (9,599) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 277,901 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,382 

 

 

 

 1,382 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (142,919) 

 

 

 

 

 

 

 

 (142,919) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (19,207) 

 

 

 

 

 

 

 

 (19,207) 

Balances at end of period

$

 1,297,917 

$

 213,529 

$

 8,088,573 

$

 (17,265) 

$

 1,952,320 

$

 (3,134,255) 

$

 (11,642) 

$

 7,208 

$

 157,633 

$

 8,554,018 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at beginning of period

$

 291,667 

$

 147,155 

$

 4,932,468 

$

 (11,352) 

$

 1,676,196 

$

 (2,427,881) 

$

 (11,099) 

$

 5,697 

$

 130,249 

$

 4,733,100 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 32,052 

 

 

 

 

 

 

 

 (250) 

 

 31,802 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 322 

 

 

 

 

 

 322 

 

 

Cash flow hedge activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 482 

 

 

 

 

 

 482 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 32,606 

Contributions by noncontrolling interests

 

 

 

 

 

 6,017 

 

 

 

 

 

 

 

 

 

 

 

 27,486 

 

 33,503 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (7,023) 

 

 (7,023) 

Amounts related to issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from dividend reinvestment and stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

incentive plans, net of forfeitures

 

 

 

 658 

 

 34,486 

 

 (2,128) 

 

 

 

 

 

 

 

 (353) 

 

 

 

 32,663 

Proceeds from issuance of common stock

 

 

 

 28,750 

 

 1,329,944 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,358,694 

Proceeds from issuance of preferred stock

 

 718,750 

 

 

 

 (22,009) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 696,741 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,039 

 

 

 

 1,039 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (102,040) 

 

 

 

 

 

 

 

 (102,040) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (8,680) 

 

 

 

 

 

 

 

 (8,680) 

Balances at end of period

$

 1,010,417 

$

 176,563 

$

 6,280,906 

$

 (13,480) 

$

 1,708,248 

$

 (2,538,601) 

$

 (10,295) 

$

 6,383 

$

 150,462 

$

 6,770,603 

 

See notes to unaudited consolidated financial statements

5

 


 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

 

 

 

 

Three Months Ended

 

 

 

  

March 31,

 

 

 

  

2012 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

  

(In thousands)

Operating activities  

 

 

 

 

 

Net income  

$

 57,458 

 

$

 31,810 

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

 127,422 

 

 

 74,768 

 

 

Other amortization expenses  

 

 4,984 

 

 

 4,338 

 

 

Provision for loan losses  

 

 

 

 248 

 

 

Impairment of assets  

 

 

 

 202 

 

 

Stock-based compensation expense  

 

 11,323 

 

 

 5,593 

 

 

Unrealized loss on derivative  

 

 555 

 

 

 

 

Income from unconsolidated entities

 

 (1,532) 

 

 

 (1,543) 

 

 

Rental income in excess of cash received  

 

 (10,125) 

 

 

 (1,418) 

 

 

Amortization related to above (below) market leases, net  

 

 (252) 

 

 

 (658) 

 

 

Loss (gain) on sales of properties  

 

 (769) 

 

 

 (26,156) 

 

 

Distributions by unconsolidated entities

 

 4,009 

 

 

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

 (6,156) 

 

 

 56,247 

 

 

Decrease (increase) in receivables and other assets  

 

 (12,873) 

 

 

 (29,644) 

Net cash provided from (used in) operating activities  

 

 174,044 

 

 

 113,787 

 

 

 

  

 

 

 

 

 

Investing activities  

 

 

 

 

 

 

Investment in real property, net of cash acquired  

 

 (570,200) 

 

 

 (683,352) 

 

Capitalized interest  

 

 (2,420) 

 

 

 (4,665) 

 

Investment in real estate loans receivable  

 

 (10,661) 

 

 

 (23,112) 

 

Other investments, net of payments  

 

 22,438 

 

 

 (2,815) 

 

Principal collected on real estate loans receivable  

 

 4,301 

 

 

 12,341 

 

Contributions to unconsolidated entities  

 

 

 

 (602) 

 

Distributions by unconsolidated entities  

 

 

 

 980 

 

Decrease (increase) in restricted cash  

 

 (13,879) 

 

 

 45,797 

 

Proceeds from sales of real property  

 

 32,584 

 

 

 44,048 

Net cash provided from (used in) investing activities  

 

 (537,837) 

 

 

 (611,380) 

 

 

 

  

 

 

 

 

 

Financing activities  

 

 

 

 

 

 

Net increase (decrease) under unsecured lines of credit arrangements  

 

 (605,000) 

 

 

 (300,000) 

 

Proceeds from issuance of senior unsecured notes  

 

 

 

 1,381,086 

 

Payments to extinguish senior unsecured notes  

 

 (22) 

 

 

 

Net proceeds from the issuance of secured debt  

 

 111,000 

 

 

 

Payments on secured debt  

 

 (42,568) 

 

 

 (5,906) 

 

Net proceeds from the issuance of common stock  

 

 1,087,777 

 

 

 1,388,118 

 

Net proceeds from the issuance of preferred stock  

 

 277,901 

 

 

 696,741 

 

Decrease (increase) in deferred loan expenses  

 

 (2,324) 

 

 

 (8,339) 

 

Contributions by noncontrolling interests(1)

 

 8,367 

 

 

 95 

 

Distributions to noncontrolling interests(1)

 

 (3,477) 

 

 

 (7,057) 

 

Cash distributions to stockholders  

 

 (162,126) 

 

 

 (110,720) 

Net cash provided from (used in) financing activities  

 

 669,528 

 

 

 3,034,018 

Increase (decrease) in cash and cash equivalents  

 

 305,735 

 

 

 2,536,425 

Cash and cash equivalents at beginning of period  

 

 163,482 

 

 

 131,570 

Cash and cash equivalents at end of period  

$

 469,217 

 

$

 2,667,995 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

 96,426 

 

$

 35,081 

 

Income taxes paid

 

 2,596 

 

 

 31 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)     Includes amounts attributable to redeemable noncontrolling interests.

 

See notes to unaudited consolidated financial statements

6

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Business

 

     Health Care REIT, Inc., an S&P 500 company with headquarters in Toledo, Ohio, is an equity real estate investment trust (“REIT”) that invests in seniors housing and health care real estate. Our full service platform also offers property management and development services to our customers. As of March 31, 2012, our broadly diversified portfolio consisted of 956 properties in 46 states. Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities.

 

2. Accounting Policies and Related Matters

Basis of Presentation

      The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2012 are not necessarily an indication of the results that may be expected for the year ending December 31, 2012. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011.

New Accounting Standards

     In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (“ASU 2011-04”), which requires incremental fair value disclosures in the notes to the financial statements.  We have adopted ASU 2011-04 effective January 1, 2012.  The adoption of this guidance did not have a material impact on our consolidated financial position or results of operations.  

     In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), which requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income.  We have adopted ASU 2011-05 effective January 1, 2012 and presented total comprehensive income on the consolidated statements of comprehensive income.  Further disclosures including reconciliation from net income to total comprehensive income will be required on an annual basis.  The provisions of ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” delayed the requirement to present certain reclassifications on the face of the financial statements.

 

3. Real Property Acquisition and Development

     Seniors Housing Triple-net Activity

     During the three months ended March 31, 2012, we completed the acquisition of three seniors housing properties operated by Senior Lifestyle Management LLC.  The total purchase price for the communities acquired has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values in accordance with our accounting policies.  Also during the three months ended March 31, 2012, we finalized our purchase price allocation of the previously acquired Genesis real estate assets. There were no material changes in the Genesis HealthCare Corporation purchase accounting allocation from those previously disclosed in Note 3 to our Annual Report on Form 10-K for the year ended December 31, 2011.  The following is our purchase price allocations and other seniors housing triple-net real property investment activity for the periods presented (in thousands):

7

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

Three Months Ended

 

 

March 31, 2012

 

March 31, 2011

 

 

 

Amount

 

 

Amount

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 5,950 

 

 

$

 8,990 

Buildings and improvements

 

 

 89,333 

 

 

 

 105,340 

Receivables and other assets

 

 

 - 

 

 

 

 329 

 

Total assets acquired

 

 

 95,283 

 

 

 

 114,659 

Assumed debt

 

 

 - 

 

 

 

 (7,054) 

Accrued expenses and other liabilities  

 

 

 (232) 

 

 

 

 (1,655) 

 

Total liabilities assumed

 

 

 (232) 

 

 

 

 (8,709) 

 

Cash disbursed for acquisitions

 

 

 95,051 

 

 

 

 105,950 

Construction in progress additions

 

 

 38,467 

 

 

 

 31,892 

Less:  Capitalized interest

 

 

 (1,242) 

 

 

 

 (976) 

Cash disbursed for construction in progress

 

 

 37,225 

 

 

  

 30,916 

Capital improvements to existing properties

 

 

 9,948 

 

 

 

 3,235 

Total cash invested in real property, net of cash acquired

 

$

 142,224 

 

 

$

 140,101 

 

     Seniors Housing Operating Activity

     During the three months ended March 31, 2012, we acquired six seniors housing properties which were added to our partnership with Belmont Village, LP to own and operate a portfolio of seniors housing communities. We own a 95% partnership interest and Belmont owns the remaining 5% interest and continues to manage the communities. The total purchase price for the communities acquired has been allocated to the tangible and identifiable intangible assets and liabilities as well as the noncontrolling interests based upon their respective fair values in accordance with our accounting policies.  The following is a summary of our seniors housing operating real property investment activity for the periods presented (in thousands):

 

 

 

Three Months Ended

 

 

March 31, 2012

 

March 31, 2011

 

 

 

Amount

 

 

Amount

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 18,980 

 

 

$

 71,610 

Building and improvements

 

 

 174,467 

 

 

 

 968,727 

Acquired lease intangibles

 

 

 16,656 

 

 

 

 88,285 

Restricted cash

 

 

 - 

 

 

 

 8,185 

Investment in unconsolidated entities

 

 

 - 

 

 

 

 11,516 

Receivables and other assets

 

 

 1,182 

 

 

 

 3,455 

  

Total assets acquired(1)

 

 

 211,285 

 

 

 

 1,151,778 

Secured debt

 

 

 - 

 

 

 

 (585,657) 

Accrued expenses and other liabilities  

 

 

 (1,649) 

 

 

 

 (39,043) 

 

Total liabilities assumed

 

 

 (1,649) 

 

 

 

 (624,700) 

Capital in excess of par

 

 

 - 

 

 

 

 (6,017) 

Noncontrolling interests

 

 

 (2,054) 

 

 

 

 (27,559) 

Non-cash acquisition related activity

 

 

 - 

 

 

 

 (24,646) 

Cash disbursed for acquisitions

 

 

 207,582 

 

 

 

 468,856 

Capital improvements to existing properties

 

 

 3,040 

 

 

 

 2,267 

Total cash invested in real property, net of cash acquired

 

$

 210,622 

 

 

$

 471,123 

 

 

 

 

 

 

 

 

 

(1) Excludes $1,619,000 and $34,973,000 of cash acquired during the three months ended March 31, 2012 and 2011, respectively.

8

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

     Medical Facilities Activity

     During the three months ended March 31, 2012, we acquired 12 medical office buildings and one hospital.  The total purchase price for the communities acquired has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values in accordance with our accounting policies.  The following is a summary of our medical facilities real property investment activity for the periods presented (in thousands):

 

 

 

Three Months Ended

 

 

March 31, 2012(2)

 

March 31, 2011

 

 

 

Amount

 

 

Amount

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 9,509 

 

 

$

 6,981 

Buildings and improvements

 

 

 320,481 

 

 

 

 - 

Acquired lease intangibles

 

 

 39,619 

 

 

 

 - 

Receivables and other assets

 

 

 4,158 

 

 

 

 - 

  

Total assets acquired

 

 

 373,767 

 

 

  

 6,981 

Secured debt

 

 

 (172,856) 

 

 

 

 - 

Accrued expenses and other liabilities

 

 

 (9,255) 

 

 

 

 - 

 

Total liabilities assumed  

 

 

 (182,111)  

 

 

 

 - 

Cash disbursed for acquisitions

 

 

 191,656 

 

 

 

 6,981 

Construction in progress additions:

 

 

 40,557 

 

 

 

 82,590 

Less:  Capitalized interest

 

 

 (1,178) 

 

 

 

 (3,689) 

 

Accruals(1)

 

 

 (20,752) 

 

 

 

 (19,130) 

Cash disbursed for construction in progress

 

 

 18,627 

 

 

  

 59,771 

Capital improvements to existing properties

 

 

 7,071 

 

 

 

 5,376 

Total cash invested in real property

 

$

 217,354 

 

 

$

 72,128 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Represents non-cash accruals for amounts to be paid in future periods relating to properties that converted in the periods noted above.

(2) Includes acquisitions with an aggregate purchase price of $363,136,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

     Development Conversions

 

     The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented:

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31, 2012

 

March 31, 2011

 

Development projects:

 

 

 

 

 

 

 

 

 

 

Seniors housing triple-net

  

 

$

 23,859 

 

 

$

 

 

Medical facilities

 

 

 

 93,676 

 

 

 

 105,940 

 

 

Total development projects

 

 

 

 117,535 

 

 

 

 105,940 

 

Expansion projects

 

 

 

 240 

 

 

 

 11,524 

Total construction in progress conversions

  

 

$

 117,775 

 

 

$

 117,464 

 

     Transaction Costs

 

     Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs.

9

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

4. Real Estate Intangibles

 

     The following is a summary of our real estate intangibles, excluding those classified as held for sale, as of the dates indicated (dollars in thousands):

 

 

 

 

March 31, 2012

 

December 31, 2011

Assets:

  

 

 

 

 

 

 

In place lease intangibles

  

$

 385,367 

 

$

 332,645 

 

Above market tenant leases

  

 

 42,597 

 

 

 35,973 

 

Below market ground leases

  

 

 58,604 

 

 

 51,316 

 

Lease commissions

  

 

 10,821 

 

 

 8,265 

 

Gross historical cost

  

 

 497,389 

 

 

 428,199 

 

Accumulated amortization

  

 

 (176,365) 

 

 

 (148,380) 

 

Net book value

  

$

 321,024 

 

$

 279,819 

 

 

  

 

 

 

 

 

 

Weighted-average amortization period in years

  

 

16.6 

 

 

17.0 

 

 

  

 

 

 

 

 

Liabilities:

  

 

 

 

 

 

 

Below market tenant leases

  

$

 70,304 

 

$

 67,284 

 

Above market ground leases

  

 

 5,894 

 

 

 5,020 

 

Gross historical cost

  

 

 76,198 

 

 

 72,304 

 

Accumulated amortization

  

 

 (22,971) 

 

 

 (21,387) 

 

Net book value

  

$

 53,227 

 

$

 50,917 

 

 

  

 

 

 

 

 

 

Weighted-average amortization period in years

  

 

12.6 

 

 

12.3 

 

     The following is a summary of real estate intangible amortization for the periods presented (in thousands):

 

 

 

Three Months Ended March 31,

 

 

2012 

 

2011 

Rental income related to above/below market tenant leases, net

 

$

 552 

 

$

 926 

Property operating expenses related to above/below market ground leases, net