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Health Care REIT, Inc. Reports Third Quarter Results

Stocks in this article: HCN

During the quarter the company completed $56 million in medical office building investments at a blended yield of 7.1%. The investments include the acquisition of three medical office buildings for $50 million and one development completion. The three buildings acquired total 220,000 rentable square feet, with a yield of 7.0%. Each building is affiliated with a health system and average occupancy is 98%. The development completion represents a 13,400 rentable square foot building that is affiliated with a health system and 100% leased with a yield of 8.5%.

Sunrise Acquisition Update  The 125 property acquisition of Sunrise Senior Living, Inc. (NYSE:SRZ) remains on track to close in early 2013. The company successfully reached agreement to sell the Sunrise management company as announced on September 14, 2012 and continues to work with Sunrise to accelerate the buyout of its partners in certain of the 105 joint venture properties. The company acquired five of the 105 joint venture properties located in the United Kingdom in the third quarter for approximately $243.5 million. During the fourth quarter 2012, the company funded its previously announced $467 million loan to Sunrise. The final amount drawn was $462.5 million. The proceeds of the loan were used by Sunrise to acquire its partners’ interests in 33 of the 105 joint venture properties. As a result of the accelerated joint venture buyouts, the company expects the Sunrise acquisition to include 58 wholly owned properties and 67 joint venture properties at closing. The accelerated joint venture partner buyouts increases the expected real estate value of the 125 properties from approximately $1.9 billion to approximately $3.2 billion. Of the 67 joint venture properties, 50 properties remain subject to purchase options that the company may exercise to acquire the partners’ interests.

$925 Million Acquisition Pipeline Update  On August 6, 2012, Health Care REIT announced anticipated third quarter 2012 acquisitions of $925 million. During the third quarter, $634 million of those acquisitions have closed and $291 million are now expected to close in the fourth quarter of 2012. The aggregate acquisition amount includes approximately $134 million of debt that the company expects to assume at an average interest rate of 5.6%. Approximately $27 million of the aggregate debt is associated with the third quarter acquisitions and $107 million is associated with the fourth quarter acquisitions.

Previously Announced Investments Reconciliation
($ millions)
        3Q12A     4Q12E     1Q13E     Total Announced    

Remaining as of 9/30/12

Sunrise Acquisition $243.5 $462.5 $2,464.2 $3,170.2 $2,926.7
Debt Assumed $1,556.1 $1,556.1 $1,556.1
Cash Required $462.5 $908.1 $1,370.6
$925 Million Announced August 6, 2012 $634.2 $291.2 $925.4 $291.2
Debt Assumed $26.7 $107.5 $134.2 $107.5
Cash Required $183.7 $183.7
Total Acquisitions $877.7 $753.7 $2,464.2 $4,095.6 $3,217.9
Debt Assumed $26.7 $107.5 $1,556.1 $1,690.3 $1,663.6
Cash Required $646.2 $908.1 $1,554.3

All amounts included in this announcement relating to acquisitions or investments that have not yet closed are preliminary estimates, are subject to downward or upward adjustment, and are subject to change. Furthermore, certain of the estimated investment amounts with respect to the incremental Sunrise investments, including the acquisition of five properties in the United Kingdom, are based on exchange rates in effect as of the time of the estimate. Our anticipated acquisitions and investments are in various stages of closing and some or all of the transactions may not be completed on currently anticipated terms, or within currently anticipated timeframes, or at all. The completion of the anticipated acquisitions and investments is subject to the satisfaction of various conditions.

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