Equity real estate investment trust Health Care REIT, Inc. (HCN) reported Wednesday a year-over-year drop in normalized fund from operations or FFO for the third quarter, hurt by a loss on extinguishment of debt, despite revenue growth. Normalized FFO per share for the quarter declined 10% and came in line with analysts' expectations. Normalized funds available for distribution or FAD declined 12% from last year. The company also narrowed its forecast range for normalized FFO per share and normalized FAD per share, while lowering its earnings per share guidance.
Third Quarter Results
The Toledo, Ohio-based company, which invests in healthcare properties, reported normalized FFO of $60.93 million or $0.77 per share for the third quarter, down from $82.57 million or $0.86 per share in the prior-year quarter. On average, eleven analysts polled by Thomson Reuters estimated FFO of $0.77 per share for the third quarter. Analysts' estimates typically exclude special items.
Normalized FAD for the quarter was $83.32 million or $0.72 per share, compared to $78.96 million or $0.82 per share in the year-ago quarter. Net income attributable to common shareholders for the quarter plunged to $19.13 million or $0.17 per share from $53.59 million or $0.55 per share in the similar period last year.
Gross revenues for the quarter increased to $145.10 million from $139.35 million in the same quarter last year. Four Wall Street analysts had a consensus revenue estimate of $143.07 million for the quarter.
Segment-wise, rental income for the third quarter increased to $133.48 million from $126.38 million in the year-ago quarter. Interest income totaled $10.53 million, marginally down from $10.91 million in the prior-year quarter. Other income almost halved to $1.09 million from $2.06 million last year.
Peer Performance
Among Health Care's peers, Long Beach, California-based real estate investment trust HCP, Inc. (HCP), reported Tuesday a decline in funds from operation for the third quarter, hurt by the negative impact of impairments, litigation liabilities and income from the sales of marketable debt securities. The company slipped to a loss in the third quarter on lower revenues and the special items that affected quarterly FFO.
Another peer, Newport Beach, California-based Nationwide Health Properties, Inc. (NHP) is scheduled to report financial results for the third quarter on November 9, 2009. Analysts expect the company to report earnings of $0.56 per share for the quarter, on revenues of $94.41 million.
Other Metrics
Income from continuing operations for the quarter dropped to $26.33 million from $44.04 million in the corresponding period last year. Loss from discontinued operations was $1.64 million, compared to income of $15.28 million in the year-ago quarter.
Total expenses for the third quarter increased to $118.83 million from $95.46 million in the prior-year quarter. Expenses include loss on extinguishment of debt of $26.37 million, compared to a gain of $0.77 million in the year-ago quarter, and interest expense of $28.57 million, lower than $33.73 million in the same quarter last year.
On Thursday, the Board of Directors declared a quarterly cash dividend of $0.68 per share, payable on November 20, to stockholders of record on November 9, 2009.
In a statement, chairman, chief executive officer and president, George Chapman said, "In the face of the significant challenges of 2009, we successfully disposed of non-core assets and will have completed over $700 million of development projects. We believe that these larger, consumer-driven senior housing properties and state-of-the-art medical facilities are excellent additions to our portfolio. In addition, the continued strength of our property level rent coverage is a testament to the resiliency of our senior housing and health care real estate.
In September, the company closed its public offering of 8 million shares, raising net proceeds of about $310.3 million, excluding offering expenses. The company has also granted the underwriters of the offering a thirty-day option to purchase up to 1.2 million additional shares to cover over-allotments, if any.
Nine-Month Highlights
For the nine-month period, the company reported normalized FFO of $266.08 million or $2.38 per share, compared to $228.81 million or $2.51 per share in the prior-year period. Normalized FAD for the quarter was $250.17 million or $2.24 per share, compared to $217.41 million or $2.39 per share in the year-ago period.
Net income attributable to common shareholders for the period dropped to $139.49 million or $1.25 per share from $238.25 million or $2.61 per share in the similar period last year.
Gross revenues for the year-to-date period increased to $428.35 million from $392.42 million in the same period last year.
Outlook
Looking ahead to fiscal 2009, the company narrowed its normalized FFO forecast to a range of $3.10 to $3.12 per share from the prior guidance of $3.07 to $3.14 per share, and also narrowed its normalized FAD outlook to a range of $2.92 to $2.94 per share from the prior projection of $2.91 to $2.98 per share. However, the company lowered its earnings forecast to a range of $1.61 to $1.63 per share from $1.75 to $1.82 per share. Analysts currently estimate normalized FFO of $3.13 per share for the full year 2009.
In early September, the company had lowered its fiscal 2009 2009 FFO and net income guidance after completing a stock offering of 8 million shares.
Stock Quote
HCN closed Wednesday's regular trading session at $43.73, down $1.23 or 2.74% on a volume of 2.50 million shares, higher than the three-month average volume of 2.18 million shares. In the past 52-week period, the stock has been trading in a range of $25.86 to $45.74.
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