HCP, Inc. Q1 2010 Earnings Call Transcript

HCP, Inc. Q1 2010 Earnings Call Transcript
By Seeking Alpha ,

HCP, Inc. (HCP)

Q1 2010 Earnings Call Transcript

April 27, 2010 12:00 pm ET

Executives

Ed Henning – EVP and General Counsel

Jay Flaherty – Chairman and CEO

Tom Herzog – EVP and CFO

Paul Gallagher – EVP and Chief Investment Officer

Analysts

Adam Feinstein – Barclays Capital

Michael Bilerman – Citi

Jay Habermann – Goldman Sachs

Jerry Doctrow – Stifel Nicholas

Ross Nussbaum – UBS

Andrew Lo – Bank of America

Rich Anderson – BMO Capital

Rob Mains – Morgan Keegan

Todd Stender – Wells Fargo

Karin Ford – KeyBanc

Presentation

Operator

Compare to:
Previous Statements by HCP
» HCP, Inc. Q4 2009 Earnings Call Transcript
» HCP Inc. Q3 2009 Earnings Call Transcript
» HCP Inc. Q2 2009 Earnings Call Transcript

Good day, ladies and gentlemen and welcome to the First Quarter 2010 HCP Earnings Conference Call. My name is Cheynelle and I'll be your coordinator today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) Now, I would like to turn the presentation over to your host for today's conference call, Mr. Ed Henning, HCP's Executive Vice President and General Counsel. You may go ahead, sir.

Ed Henning

Thank you, Cheynelle. Good afternoon and good morning. Some of the statements made during this conference call contain forward-looking statements. These statements are made as of today's date, reflect the company's good faith belief and best judgment based upon currently available information and are subject to risks, uncertainties and assumptions that are described from time to time in the company's press releases and SEC filings. Forward-looking statements are not guarantees of future performance. Some of these statements may include projections of financial measures that may not be updated until the next earnings announcement or at all. Events prior to the company's next announcement could render the forward-looking statements untrue and the company expressly disclaims any obligation to update earlier statements as a result of new information.

Additionally, certain non-GAAP financial measures will be discussed during the course of this call. We have provided reconciliations of these measures to the most comparable GAAP measures as well as certain related disclosures in our supplemental information package and earnings release, each of which has been furnished to the SEC today and is available on our website at www.hcpi.com. I'll now turn the call over to our Chairman and CEO, Jay Flaherty.

Jay Flaherty

Thanks, Ed and welcome to HCP's first quarter 2010 earnings call. Joining me today are Executive Vice President, Chief Financial Officer, Tom Herzog and Executive Vice President, Chief Investment Officer, Paul Gallagher. Let's begin by having Tom update you on our most recent results.

Tom Herzog

Thanks, Jay. There are three topics I will cover today. First, our first quarter results and investment activities; second, our balance sheet and financing activities and third, our full year 2010 guidance, which remains unchanged. Let me start with our first quarter results and investment activities. We reported FFO of $0.50 per share for the first quarter before $12 million or $0.04 per share of an impairment recovery. We have several highlights for the quarter, which include the following; first, our same property performance generated a strong 3.7% cash NOI growth during the quarter versus the first quarter of 2009.

Paul will review our performance by segment in a few minutes. Second, we placed into service three Life Science assets located in South San Francisco, representing 329,000 square feet and an investment to date of $245 million. Third, largely as a result of an acceleration with our Sunrise litigation activity, which Jay will elaborate on in his remarks, we incurred higher than anticipated litigation expense during the quarter and expect higher full year 2010 litigation costs. Accordingly, we are increasing our full year G&A forecast by $7 million.

Fourth, we recognized a $12 million partial recovery of impairment charges recorded in 2009 in connection with the bankruptcy of Erickson Retirement Communities. During the first quarter, we reached a settlement with the debtor and the other creditors, resulting in this recovery. Lastly, we made investments of $36 million through the acquisition of a senior housing facility for $9 million in February and funding of $27 million for construction and other capital projects primarily in our Life Science segment.

Turning now to our balance sheet and financing activities. In March, we prepaid a $200 million term loan that was scheduled to mature in August 2011. We funded the pre-payment primarily with our revolver. We continue to have strong credit metrics with our financial leverage at 43.5% and fixed charge coverage at 2.6 times. We are comfortably within all covenants of our credit agreements.

Our 2010 debt maturities of $300 million remain modest with $200 million of senior unsecured notes due in September and $100 million of mortgage debt maturing primarily in the second half of 2010. We ended the quarter with around $220 million of marketable securities and unrestricted cash and $1.2 billion available on our revolver.

Finally, full year 2010 guidance. Our guidance remains unchanged and we continue to expect FFO to range from $2.11 to $2.17 per share before the impairment recovery. We are increasing our G&A guidance from $70 million to $77 million, due to higher litigation costs. This increase of approximately $0.02 per share is expected to be offset by $0.01 from higher NOI and $0.01 from lower net financing costs, resulting from the prepayment of our term loan.

We are increasing our full year projected cash same property performance growth to a range of 3% to 4% versus previous guidance of 2.5% to 3.5%, due to a $4 million deferred rent payment received in April from a Life Science tenant. This will have no impact on FFO because we recognize rent from this tenant on a straight line basis. I will now turn the call over to Paul. Paul?

Paul

Gallagher

Thank you, Tom. Let me break down the 2010 first quarter performance of our portfolio. Senior housing. Occupancy for the current quarter in our same store senior housing platform is 85%, representing a 50 basis point sequential decline over the prior quarter and a 270 basis point decline over the prior year.

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