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Health Care REIT Inc. Reports Operating Results (10-K)

February 17, 2012 | About:
10qk

10qk

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Health Care REIT Inc. (HCN) filed Annual Report for the period ended 2011-12-31.

Health Care Reit Inc. has a market cap of $10.71 billion; its shares were traded at around $55.46 with a P/E ratio of 18.6 and P/S ratio of 15.7. The dividend yield of Health Care Reit Inc. stocks is 5.2%.
This is the annual revenues and earnings per share of HCN over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of HCN.


Highlight of Business Operations:

The increase in rental income is primarily attributable to the acquisitions of new properties and the conversion of newly constructed seniors housing triple-net properties from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the three months ended December 31, 2011, we had no lease renewals but we had 12 leases with rental rate increasers ranging from 0.25% to 0.41% in our seniors housing triple-net portfolio.

The increase in rental income is primarily attributable to the acquisitions of new properties and the construction conversions of medical facilities from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the three months ended December 31, 2011, our consolidated medical office building portfolio signed 55,562 square feet of new leases and 103,954 square feet of renewals. The weighted average term of these leases was five years, with a rate of $23.06 per square foot and tenant improvement and lease commission costs of $10.53 per square foot. Substantially all of these leases during the referenced quarter contain an annual fixed or contingent escalation rent structure ranging from the change in

operating income and published capitalization rates. During the three months ended September 30, 2010, we recorded an impairment charge of $947,000 related to two of the held for sale medical facilities to adjust the carrying values to estimated fair values less costs to sell based on current sales price expectations. During the year ended December 31, 2010, we sold seven of the held for sale medical facilities for net losses of $159,000. At December 31, 2010, we had one medical facility held for sale. During the year ended December 31, 2011, we sold three medical facilities for net gains of $2,052,000. At December 31, 2011, we had five medical facilities held for sale and we recorded an impairment charge of $6,791,000 to reduce the carrying values of certain properties to their estimated fair values less costs to sell. The following illustrates the reclassification impact as a result of classifying medical facilities sold prior to or held for sale at December 31, 2011 as discontinued operations for the periods presented. Please refer to Note 5 to our consolidated financial statements for further discussion.

General and administrative expenses as a percentage of consolidated revenues (including revenues from discontinued operations) for the years ended December 31, 2011, 2010 and 2009 were 5.37%, 7.78% and 8.33%, respectively. The increase in general and administrative expenses is primarily related to costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. The decline in percent of revenue is primarily related to the increasing revenue base as a result of our seniors housing operating partnerships.

For the year ended December 31, 2011, we recognized $41,070,000 of interest income, $456,085,000 of resident fees and services, and $928,846,000 of rental income, including discontinued operations. For the year ended December 31, 2011, cash receipts on leases with deferred revenue provisions equaled $9,490,000 as compared to gross straight-line rental income recognized of $41,068,000. At December 31, 2011, our straight-line receivable balance was $119,555,000, net of reserves totaling $265,000. Also at December 31, 2011, we had real estate loans with outstanding balances of $6,244,000 on non-accrual status.

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