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Health Care Property Investors Inc. Reports Operating Results (10-Q)

November 02, 2010 | About:

Health Care Property Investors Inc. (NYSE:HCP) filed Quarterly Report for the period ended 2010-09-30.

Health Care Property Investors Inc. has a market cap of $11.04 billion; its shares were traded at around $36.33 with a P/E ratio of 20.7 and P/S ratio of 9.6. The dividend yield of Health Care Property Investors Inc. stocks is 5.2%.HCP is in the portfolios of Manning & Napier Advisors, Inc, Pioneer Investments, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

During the nine months ended September 30, 2010, we made investments of $413.2 million consisting of: (i) $173.4 million of real estate; (ii) $142.5 million of participations in Genesis HealthCares (Genesis) senior loan and mezzanine note purchased at a discount for $123.3 million; and (iii) $97.3 million of construction and other capital projects (primarily in our life science segment). Additional details regarding these investments are as follows:

· In September 2010 we purchased participations in a Genesis senior loan and mezzanine note with face amounts of $92.5 million and $50 million, respectively, each at a discount for $83.3 million and $40 million, respectively. Subsequently, on October 8, 2010, we purchased an additional participation in Genesis senior loan with a face amount of $185 million, at a discount for $167 million. These investments represent a portion of the $1.67 billion of debt incurred in connection with the $2.0 billion acquisition of Genesis in July 2007.

During the nine months ended September 30, 2010, we sold investments of $98 million as follows: (i) $72.5 million of debt investments (including $65.4 million of HCA bonds) and recognized gains of $5.6 million; and (ii) three skilled nursing facilities and a hospital for $25.5 million and recognized gain on sales of real estate of $4 million. Subsequently, in October 2010, we sold our remaining bond investments from HCA and one other issuer for $102 million and recognized additional gains of $8 million.

In June 2010, we initiated a public offering, which resulted in the sale of 15.5 million shares of common stock at a price of $33.00 per share for gross proceeds of $512 million. This offering included: (i) the June 2010 public offering of 13.5 million shares for $445.5 million; and (ii) the July 2010 sale of 2.025 million shares, for $66.8 million, as a result of the underwriters exercising the over-allotment option from the June 2010 public offering. We received total net proceeds of $492 million from these sales, which were used to repay the outstanding indebtedness under our revolving line of credit, fund acquisitions and capital expenditures, repay mortgage debt and for other general corporate purposes.

For the three months ended September 30, 2010, interest income increased $2.6 million to $36.6 million. This increase was primarily related to additional interest income of $5.1 million earned from the $720 million participation in the first mortgage debt of HCR ManorCare purchased in August 2009, which was partially offset by a $2.6 million decrease of interest earned from marketable debt securities that were sold in 2009 and 2010. For a more detailed description of our participation in the first mortgage debt of HCR ManorCare, see Note 6 to the Condensed Consolidated Financial Statements. Our exposure to income fluctuations related to our variable rate loans is partially mitigated by our variable rate indebtedness. For a more detailed discussion of our interest rate risk, see Quantitative and Qualitative Disclosures About Market Risk in Item 3.

Interest expense decreased $2.4 million to $71.6 million for the three months ended September 30, 2010. The decrease was primarily due to: (i) a $2.1 million decrease from the net impact of the repayment of mortgage debt related to contractual maturities, offset in part by secured debt financing obtained in connection with our purchase of a $720 million participation in the first mortgage debt of HCR ManorCare and (ii) a $1.4 million decrease as a result of the early repayment of our term loan in March 2010. These decreases in interest expense were partially offset by a decrease of $1.3 million of capitalized interest related to assets under development in our life science segment that were placed in service during 2010.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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