XNYS:HCN Health Care REIT, Inc. Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XNYS:HCN Fair Value Estimate
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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 June 30, 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 July 31, 2012, the registrant had 214,766,609 shares of common stock outstanding.

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

      Consolidated Balance Sheets — June 30, 2012 and December 31, 2011

3

 

 

      Consolidated Statements of Comprehensive Income — Three and six months ended June 30, 2012 and 2011

4

 

 

      Consolidated Statements of Equity — Six months ended June 30, 2012 and 2011

5

 

 

      Consolidated Statements of Cash Flows — Six months ended June 30, 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

26

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

57

 

 

Item 4. Controls and Procedures

58

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1A. Risk Factors

58

 

 

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

58

 

 

Item 6. Exhibits

59

 

 

Signatures

60

 

 

2

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

2012 

 

2011 

 

 

 

 

  

(Unaudited)

 

(Note)

 

 

 

 

 

 

 

 

 

 

Assets  

(In thousands)

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

 1,189,280 

 

$

 1,116,756 

 

 

Buildings and improvements  

 

 14,057,887 

 

 

 13,073,747 

 

 

Acquired lease intangibles  

 

 524,145 

 

 

 428,199 

 

 

Real property held for sale, net of accumulated depreciation  

 

 193,307 

 

 

 36,115 

 

 

Construction in progress  

 

 170,785 

 

 

 189,502 

 

 

 

Gross real property owned  

 

 16,135,404 

 

 

 14,844,319 

 

 

Less accumulated depreciation and amortization  

 

 (1,369,449) 

 

 

 (1,194,476) 

 

 

 

Net real property owned  

 

 14,765,955 

 

 

 13,649,843 

 

Real estate loans receivable:  

 

 

 

 

 

 

 

Real estate loans receivable  

 

 300,000 

 

 

 292,507 

 

 

Less allowance for losses on loans receivable  

 

 

 

 

 

 

Net real estate loans receivable  

 

 300,000 

 

 

 292,507 

 

Net real estate investments  

 

 15,065,955 

 

 

 13,942,350 

Other assets:  

 

 

 

 

 

 

 

Equity investments  

 

 460,962 

 

 

 241,722 

 

 

Goodwill  

 

 68,321 

 

 

 68,321 

 

 

Deferred loan expenses  

 

 60,597 

 

 

 58,584 

 

 

Cash and cash equivalents  

 

 204,895 

 

 

 163,482 

 

 

Restricted cash  

 

 79,619 

 

 

 69,620 

 

 

Receivables and other assets  

 

 407,077 

 

 

 380,527 

 

 

 

Total other assets  

 

 1,281,471 

 

 

 982,256 

Total assets  

$

 16,347,426 

 

$

 14,924,606 

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under unsecured line of credit arrangement  

$

 393,000 

 

$

 610,000 

 

 

Senior unsecured notes  

 

 4,910,871 

 

 

 4,434,107 

 

 

Secured debt  

 

 2,299,674 

 

 

 2,112,649 

 

 

Capital lease obligations  

 

 81,955 

 

 

 83,996 

 

 

Accrued expenses and other liabilities  

 

 400,065 

 

 

 371,557 

Total liabilities  

 

 8,085,565 

 

 

 7,612,309 

Redeemable noncontrolling interests  

 

 34,068 

  

  

 33,650 

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

 1,022,917 

 

 

 1,010,417 

 

 

Common stock  

 

 214,592 

 

 

 192,299 

 

 

Capital in excess of par value  

 

 8,129,913 

 

 

 7,019,714 

 

 

Treasury stock  

 

 (17,272) 

 

 

 (13,535) 

 

 

Cumulative net income  

 

 2,023,769 

 

 

 1,893,806 

 

 

Cumulative dividends  

 

 (3,309,558) 

 

 

 (2,972,129) 

 

 

Accumulated other comprehensive income (loss)  

 

 (13,590) 

 

 

 (11,928) 

 

 

Other equity  

 

 7,302 

 

 

 6,120 

 

 

 

Total Health Care REIT, Inc. stockholders’ equity  

 

 8,058,073 

 

 

 7,124,764 

 

 

Noncontrolling interests  

 

 169,720 

 

 

 153,883 

Total equity  

 

 8,227,793 

 

 

 7,278,647 

Total liabilities and equity  

$

 16,347,426 

 

$

 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

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012 

 

2011 

 

2012 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands, except per share data)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental income  

$

 278,067 

 

$

 228,246 

 

$

 541,208 

 

$

 384,009 

 

Resident fees and services

 

 165,654 

 

 

 123,149 

 

 

 323,828 

 

 

 194,435 

 

Interest income

 

 7,879 

 

 

 12,866 

 

 

 16,020 

 

 

 24,575 

 

Other income

 

 1,482 

 

 

 5,341 

 

 

 3,166 

 

 

 8,165 

 

 

Total revenues

 

 453,082 

 

 

 369,602 

 

 

 884,222 

 

 

 611,184 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 94,968 

 

 

 81,484 

 

 

 186,941 

 

 

 137,613 

 

Property operating expenses

 

 136,303 

 

 

 99,808 

 

 

 265,572 

 

 

 163,371 

 

Depreciation and amortization

 

 131,917 

 

 

 107,255 

 

 

 256,821 

 

 

 176,939 

 

General and administrative

 

 25,870 

 

 

 19,562 

 

 

 53,621 

 

 

 37,276 

 

Transaction costs

 

 28,691 

 

 

 13,738 

 

 

 34,270 

 

 

 49,803 

 

Loss (gain) on derivatives

 

 (2,676) 

 

 

 

 

 (2,121) 

 

 

 

Loss (gain) on extinguishment of debt

 

 576 

 

 

 

 

 576 

 

 

 

Provision for loan losses

 

 

 

 168 

 

 

 

 

 416 

 

 

Total expenses

 

 415,649 

 

 

 322,015 

 

 

 795,680 

 

 

 565,418 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and income from unconsolidated entities

 

 37,433 

 

 

 47,587 

 

 

 88,542 

 

 

 45,766 

Income tax (expense) benefit

 

 (1,447) 

 

 

 (211) 

 

 

 (2,918) 

 

 

 (340) 

Income from unconsolidated entities

 

 1,456 

 

 

 971 

 

 

 2,989 

 

 

 2,514 

Income (loss) from continuing operations

 

 37,442 

 

 

 48,347 

 

 

 88,613 

 

 

 47,940 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sales of properties

 

 32,450 

 

 

 30,224 

 

 

 33,219 

 

 

 56,380 

 

Impairment of assets

 

 

 

 

 

 

 

 (202) 

 

Income (loss) from discontinued operations, net

 

 6,983 

 

 

 7,637 

 

 

 12,497 

 

 

 13,900 

 

 

Discontinued operations, net

 

 39,433 

 

 

 37,861 

 

 

 45,716 

 

 

 70,078 

Net income

 

 76,875 

 

 

 86,208 

 

 

 134,329 

 

 

 118,018 

Less:

Preferred stock dividends

 

 16,719 

 

 

 17,353 

 

 

 35,926 

 

 

 26,033 

Less:

Preferred stock redemption charge

 

 6,242 

 

 

 

 

 6,242 

 

 

Less:

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

 

 (821) 

 

 

 (992) 

 

 

 (1,876) 

 

 

 (1,234) 

Net income (loss) attributable to common stockholders

$

 54,735 

 

$

 69,847 

 

$

 94,037 

 

$

 93,219 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 213,498 

 

 

 176,445 

 

 

 206,612 

 

 

 165,755 

 

Diluted

 

 215,138 

 

 

 177,488 

 

 

 208,237 

 

 

 166,458 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to common stockholders

$

 0.07 

 

$

 0.18 

 

$

 0.23 

 

$

 0.14 

 

Discontinued operations, net

 

 0.18 

 

 

 0.21 

 

 

 0.22 

 

 

 0.42 

 

Net income (loss) attributable to common stockholders*

$

 0.26 

 

$

 0.40 

 

$

 0.46 

 

$

 0.56 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to common stockholders

$

 0.07 

 

$

 0.18 

 

$

 0.23 

 

$

 0.14 

 

Discontinued operations, net

 

 0.18 

 

 

 0.21 

 

 

 0.22 

 

 

 0.42 

 

Net income (loss) attributable to common stockholders*

$

 0.25 

 

$

 0.39 

 

$

 0.45 

 

$

 0.56 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

 0.74 

 

$

 0.715 

 

$

 1.48 

 

$

 1.405 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss) attributable to stockholders

$

 74,927 

 

$

 86,358 

 

$

 132,667 

 

$

 118,972 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* 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)

 

Six Months Ended June 30, 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)

 

 

 

 

 

 

 

 

 

 136,205 

 

 

 

 

 

 

 

 (1,172) 

 

 135,033 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 (38) 

 

 

 

 

 

 (38) 

 

 

Unrecognized gains (losses) on foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2,348) 

 

 

 

 

 

 (2,348) 

 

 

Unrecognized gains (losses) on cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 724 

 

 

 

 

 

 724 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 133,371 

Contributions by noncontrolling interests

 

 

 

 

 

 80 

 

 

 

 

 

 

 

 

 

 

 

 24,840 

 

 24,920 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (7,831) 

 

 (7,831) 

Amounts related to issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from dividend reinvestment and stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

incentive plans, net of forfeitures

 

 

 

 1,188 

 

 69,819 

 

 (3,737) 

 

 

 

 

 

 

 

 (602) 

 

 

 

 66,668 

Proceeds from issuance of common stock

 

 

 

 20,700 

 

 1,041,556 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,062,256 

Proceeds from issuance of preferred stock

 

 287,500 

 

 

 

 (9,812) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 277,688 

Equity component of convertible debt

 

 

 

 405 

 

 2,354 

 

 

 

 

 

 

 

 

 

 

 

 

 

 2,759 

 Redemption of preferred stock

 

 (275,000) 

 

 

 

 6,202 

 

 

 

 (6,242) 

 

 

 

 

 

 

 

 

 

 (275,040) 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,784 

 

 

 

 1,784 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (301,503) 

 

 

 

 

 

 

 

 (301,503) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (35,926) 

 

 

 

 

 

 

 

 (35,926) 

Balances at end of period

$

 1,022,917 

$

 214,592 

$

 8,129,913 

$

 (17,272) 

$

 2,023,769 

$

 (3,309,558) 

$

 (13,590) 

$

 7,302 

$

 169,720 

$

 8,227,793 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 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)

 

 

 

 

 

 

 

 

 

 119,252 

 

 

 

 

 

 

 

 (1,396) 

 

 117,856 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 86 

 

 

 

 

 

 86 

 

 

Unrecognized losses on cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 868 

 

 

 

 

 

 868 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 118,810 

Contributions by noncontrolling interests

 

 

 

 

 

 6,017 

 

 

 

 

 

 

 

 

 

 

 

 22,226 

 

 28,243 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (16,227) 

 

 (16,227) 

Amounts related to issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from dividend reinvestment and stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

incentive plans, net of forfeitures

 

 

 

 1,385 

 

 69,524 

 

 (2,141) 

 

 

 

 

 

 

 

 (888) 

 

 

 

 67,880 

Proceeds from issuance of common stock

 

 

 

 28,750 

 

 1,328,996 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,357,746 

Proceeds from issuance of preferred stock

 

 718,750 

 

 

 

 (22,313) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 696,437 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,651 

 

 

 

 1,651 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (228,565) 

 

 

 

 

 

 

 

 (228,565) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (26,033) 

 

 

 

 

 

 

 

 (26,033) 

Balances at end of period

$

 1,010,417 

$

 177,290 

$

 6,314,692 

$

 (13,493) 

$

 1,795,448 

$

 (2,682,479) 

$

 (10,145) 

$

 6,460 

$

 134,852 

$

 6,733,042 

 

See notes to unaudited consolidated financial statements

5

 


 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

 

 

 

 

Six Months Ended

 

 

 

  

June 30,

 

 

 

  

2012 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

  

(In thousands)

Operating activities  

 

 

 

 

 

Net income  

$

 134,329 

 

$

 118,018 

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

 260,385 

 

 

 185,821 

 

 

Other amortization expenses  

 

 8,519 

 

 

 7,900 

 

 

Provision for loan losses  

 

 

 

 416 

 

 

Impairment of assets  

 

 

 

 202 

 

 

Stock-based compensation expense  

 

 13,634 

 

 

 7,274 

 

 

Loss (gain) on derivatives  

 

 (2,121) 

 

 

 

 

Loss (gain) on extinguishment of debt  

 

 576 

 

 

 

 

Income from unconsolidated entities

 

 (2,989) 

 

 

 (2,514) 

 

 

Rental income in excess of cash received  

 

 (20,793) 

 

 

 (9,304) 

 

 

Amortization related to above (below) market leases, net  

 

 (205) 

 

 

 (1,056) 

 

 

Loss (gain) on sales of properties  

 

 (33,219) 

 

 

 (56,380) 

 

 

Distributions by unconsolidated entities

 

 4,123 

 

 

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

 16,355 

 

 

 38,416 

 

 

Decrease (increase) in receivables and other assets  

 

 (27,556) 

 

 

 (47,195) 

Net cash provided from (used in) operating activities  

 

 351,038 

 

 

 241,598 

 

 

 

  

 

 

 

 

 

Investing activities  

 

 

 

 

 

 

Investment in real property, net of cash acquired  

 

 (1,158,266) 

 

 

 (3,370,597) 

 

Capitalized interest  

 

 (4,558) 

 

 

 (6,979) 

 

Investment in real estate loans receivable  

 

 (20,354) 

 

 

 (28,467) 

 

Other investments, net of payments  

 

 20,147 

 

 

 1,743 

 

Principal collected on real estate loans receivable  

 

 12,861 

 

 

 138,396 

 

Contributions to unconsolidated entities  

 

 (227,554) 

 

 

 (779) 

 

Distributions by unconsolidated entities  

 

 

 

 1,069 

 

Proceeds from (payments on) derivatives  

 

 2,217 

 

 

 

Decrease (increase) in restricted cash  

 

 (9,024) 

 

 

 42,023 

 

Proceeds from sales of real property  

 

 156,689 

 

 

 208,692 

Net cash provided from (used in) investing activities  

 

 (1,227,842) 

 

 

 (3,014,899) 

 

 

 

  

 

 

 

 

 

Financing activities  

 

 

 

 

 

 

Net increase (decrease) under unsecured lines of credit arrangements  

 

 (217,000) 

 

 

 (300,000) 

 

Proceeds from issuance of senior unsecured notes  

 

 593,319 

 

 

 1,381,086 

 

Payments to extinguish senior unsecured notes  

 

 (125,585) 

 

 

 

Net proceeds from the issuance of secured debt  

 

 139,395 

 

 

 58,470 

 

Payments on secured debt  

 

 (254,175) 

 

 

 (13,081) 

 

Net proceeds from the issuance of common stock  

 

 1,120,265 

 

 

 1,421,495 

 

Net proceeds from the issuance of preferred stock  

 

 277,688 

 

 

 696,437 

 

Redemption of preferred stock  

 

 (275,000) 

 

 

 

Decrease (increase) in deferred loan expenses  

 

 (4,698) 

 

 

 (11,603) 

 

Contributions by noncontrolling interests(1)

 

 11,110 

 

 

 9,087 

 

Distributions to noncontrolling interests(1)

 

 (9,673) 

 

 

 (16,804) 

 

Cash distributions to stockholders  

 

 (337,429) 

 

 

 (254,598) 

Net cash provided from (used in) financing activities  

 

 918,217 

 

 

 2,970,489 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents  

 

 41,413 

 

 

 197,188 

Cash and cash equivalents at beginning of period  

 

 163,482 

 

 

 131,570 

Cash and cash equivalents at end of period  

$

 204,895 

 

$

 328,758 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

 180,460 

 

$

 112,711 

 

Income taxes paid

 

 2,729 

 

 

 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 June 30, 2012, our broadly diversified portfolio consisted of  1,010 properties in 46 states and Canada. 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 six months ended June 30, 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, as updated by our Current Report on Form 8-K filed on May 10, 2012.

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.

7

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

3. Real Property Acquisition and Development

     Seniors Housing Triple-net Activity

     During the six months ended June 30, 2012, we completed the acquisition of 24 seniors housing triple-net properties.  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 HealthCare Corporation real estate assets. There were no material changes in the Genesis 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, as updated by our Current Report on Form 8-K filed on May 10, 2012.  The following is our purchase price allocations and other seniors housing triple-net real property investment activity for the periods presented (in thousands):

 

 

 

Six Months Ended

 

 

 

June 30, 2012(1)

June 30, 2011

 

 

 

 

Amount

 

Amount

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 29,320 

 

$

 179,321 

 

Buildings and improvements

 

 

 394,508 

 

 

 2,670,282 

 

 

Total assets acquired

 

 

 423,828 

 

 

 2,849,603 

 

Assumed debt

 

 

 (56,337) 

 

 

 (93,425) 

 

Accrued expenses and other liabilities  

 

 

 (1,568) 

 

 

 (75,144) 

 

 

Total liabilities assumed

 

 

 (57,905) 

 

 

 (168,569) 

 

Capital in excess of par

 

 

 1,024 

 

 

 - 

 

Noncontrolling interest

 

 

 (15,820) 

 

 

 - 

 

Non-cash acquisition related activity

 

 

 (310) 

 

 

 - 

 

 

Cash disbursed for acquisitions

 

 

 350,817 

 

 

 2,681,034 

 

Construction in progress additions

 

 

 81,419 

 

 

 75,999 

 

Less:  Capitalized interest

 

 

 (2,629) 

 

 

 (2,331) 

 

Cash disbursed for construction in progress

 

 

 78,790 

 

  

 73,668 

 

Capital improvements to existing properties

 

 

 36,421 

 

 

 11,556 

 

Total cash invested in real property, net of cash acquired

 

$

 466,028 

 

$

 2,766,258 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $129,545,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

 

 

 

 

 

 

 

 

 

8

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

     Seniors Housing Operating Activity

     During the six months ended June 30, 2012, we completed the acquisition of 48 seniors housing operating properties. Also, during the three months ended June 30, 2012, we entered into a new partnership with Chartwell Seniors Housing REIT to own and operate a portfolio of 42 seniors housing properties. We own a 50% partnership interest and Chartwell owns the remaining 50% interest in 39 properties. We wholly own the remaining three properties and Chartwell will manage all 42 properties. See Note 7 for additional information.  Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. We translate the results of operations of our foreign subsidiaries into U.S. dollars using average rates of exchange in effect during the period, and we translate balance sheet accounts using exchange rates in effect at the end of the period. We record resulting currency translation adjustments in accumulated other comprehensive income, a component of stockholders’ equity, on our balance sheet.  The total purchase price for the properties 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 seniors housing operating real property investment activity for the periods presented (in thousands):

 

 

 

Six Months Ended

 

 

 

June 30, 2012(2)

June 30, 2011

 

 

 

 

Amount

 

Amount

 

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 27,647 

 

$

 71,610 

 

Building and improvements

 

 

 241,287 

 

 

 966,235 

 

Acquired lease intangibles

 

 

 24,052 

 

 

 88,285 

 

Restricted cash

 

 

 - 

 

 

 5,451 

 

Receivables and other assets

 

 

 1,182 

 

 

 14,960 

 

  

Total assets acquired(1)

 

 

 294,168 

 

 

 1,146,541 

 

Assumed debt

 

 

 (8,684) 

 

 

 (585,656) 

 

Accrued expenses and other liabilities  

 

 

 (1,665) 

 

 

 (30,681) 

 

 

Total liabilities assumed

 

 

 (10,349) 

 

 

 (616,337) 

 

Capital in excess of par

 

 

 - 

 

 

 (6,017) 

 

Noncontrolling interests

 

 

 (2,054) 

 

 

 (27,411) 

 

Non-cash acquisition related activity

 

 

 - 

 

 

 (28,090) 

 

Cash disbursed for acquisitions

 

 

 281,765 

 

 

 468,686 

 

Capital improvements to existing properties

 

 

 8,553 

 

 

 7,661 

 

Total cash invested in real property, net of cash acquired

 

$

 290,318 

 

$

 476,347 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes $1,619,000 and $34,342,000 of cash acquired during the six months ended June 30, 2012 and 2011, respectively.

(2) Includes acquisitions with an aggregate purchase price of $82,774,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

9

 


 

HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

     Medical Facilities Activity

     During the six months ended June 30, 2012, we acquired 19 medical office buildings, one hospital, and one parcel of land.  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):

 

 

 

Six Months Ended

 

 

 

June 30, 2012(2)

 

June 30, 2011

 

 

 

 

Amount

 

Amount

 

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

 30,160 

 

$

 7,711 

 

Buildings and improvements

 

 

 489,659 

 

 

 63,532 

 

Acquired lease intangibles

 

 

 58,998 

 

 

 1,126 

 

Restricted cash

 

 

 975 

 

 

 - 

 

Receivables and other assets

 

 

 4,250 

 

 

 - 

 

  

Total assets acquired

 

 

 584,042 

 

  

 72,369 

 

Assumed debt

 

 

 (238,589) 

 

 

 (42,551) 

 

Accrued expenses and other liabilities

 

 

 (12,775) 

 

 

 (568) 

 

 

Total liabilities assumed  

 

 

 (251,364)  

 

 

 (43,119) 

 

Non-cash acquisition activity

 

 

 (880) 

 

 

 - 

 

Cash disbursed for acquisitions

 

 

 331,798 

 

 

 29,250 

 

Construction in progress additions:

 

 

 64,937 

 

 

 124,150 

 

Less:  Capitalized interest

 

 

 (1,929) 

 

 

 (4,648) 

 

 

Accruals(1)

 

 

 (10,911) 

 

 

 (30,736) 

 

Cash disbursed for construction in progress

 

 

 52,097 

 

  

 88,766 

 

Capital improvements to existing properties

 

 

 18,025 

 

 

 9,976 

 

Total cash invested in real property

 

$

 401,920 

 

$

 127,992 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 $545,824,000 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:

 

 

 

 

 

Six Months Ended

 

 

 

 

June 30, 2012

 

June 30, 2011

 

Development projects:

 

 

 

 

 

 

 

 

 

 

Seniors housing triple-net

  

 

$

 59,167 

 

 

$

 

 

Medical facilities

 

 

 

 105,666 

 

 

 

 325,563 

 

 

Total development projects

 

 

 

 164,833 

 

 

 

 325,563 

 

Expansion projects

 

 

 

 240 

 

 

 

 19,218 

Total construction in progress conversions

  

 

$

 165,073 

 

 

$

 344,781 

 

     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.

10

 


 

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):

 

 

 

 

June 30, 2012

 

December 31, 2011

Assets:

  

 

 

 

 

 

 

In place lease intangibles

  

$

 405,499 

 

$

 332,645 

 

Above market tenant leases

  

 

 45,739 

 

 

 35,973 

 

Below market ground leases

  

 

 58,604 

 

 

 51,316 

 

Lease commissions

  

 

 14,303 

 

 

 8,265 

 

Gross historical cost

  

 

 524,145 

 

 

 428,199 

 

Accumulated amortization

  

 

 (206,832) 

 

 

 (148,380) 

 

Net book value

  

$

 317,313 

 

$

 279,819 

 

 

  

 

 

 

 

 

 

Weighted-average amortization period in years

  

 

17.0 

 

 

17.0 

 

 

  

 

 

 

 

 

Liabilities:

  

 

 

 

 

 

 

Below market tenant leases

  

$

 72,384 

 

$

 67,284 

 

Above market ground leases

  

 

 5,894 

 

 

 5,020 

 

Gross historical cost

  

 

 78,278 

 

 

 72,304 

 

Accumulated amortization

  

 

 (24,620) 

 

 

 (21,387) 

 

Net book value

  

$

 53,658 

 

$

 50,917 

 

 

  

 

 

 

 

 

 

Weighted-average amortization period in years

  

 

12.2 

 

 

12.3 

 

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

 

 

 

Three Months Ended June 30,

 

 Six Months Ended June 30,

  

 

2012 

 

2011 

 

2012 

 

2011 

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

 

$

 282 

 

$

 874 

 

$

 887 

 

$

 1,592 

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

 

 

 (364) 

 

 

 (268) 

 

 

 (682) 

 

 

 (536) 

Depreciation and amortization related to in place lease intangibles and lease commissions

 

 

 (28,551) 

 

 

 (27,048) 

 

 

 (55,843) 

 

 

 (41,540) 

 

     The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):

 

 

 

 

Assets

 

 

Liabilities

2012 

 

$