HCP CEO Discusses Q3 2010 Results – Earnings Call Transcript
HCP, Inc. (
)
Q3 2010 Earnings Conference Call
November 2, 2010 12:00 PM
Executives
Beejal Northrup [ph] – Director, IR
Jay Flaherty – Chairman & CEO
Tom Herzog – EVP & CFO
Paul Gallagher – EVP & Chief Investment Officer
Analysts
Jay Habermann – Goldman Sachs
Michael Bilerman – Citi
Michael Mueller – JPMorgan
Brian Sakino [ph] – Barclays Capital
Rich Anderson – BMO Capital Markets
Jerry Doctrow – Stifel Nicolaus
Tayo Okusanya – Jefferies & Company
Robert Mains – Morgan Keegan
Ross Nussbaum – UBS
Presentation
Operator
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HCP, Inc. Q2 2010 Earnings Call Transcript
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HCP, Inc. Q1 2010 Earnings Call Transcript
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HCP, Inc. Q4 2009 Earnings Call Transcript
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HCP Inc. Q3 2009 Earnings Call Transcript
Good day ladies and gentlemen and welcome to the third quarter 2010 HCP earnings conference call. I will be your coordinator today. At this time, all participants are in listen only mode. Later we will conduct a question and answer session. Now, I would like to turn the presentation over to your host for today’s conference call, Miss Beejal Northrup [ph], HCP’s Director of Investor Relations. You may go ahead madam.
Be
e
jal Northrup
Good afternoon and good morning. Some of the statements made during today’s conference call will contain forward-looking statements. These statements are made as of today’s date and reflect the company’s good faith belief and best judgment based upon currently available information. The statements are subject to the 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 earnings 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 have been furnished to the SEC today and is available on our website at www.hcpi.com.
I will now turn the call over to our Chairman and CEO, Jay Flaherty.
Jay Flaherty
Welcome to HCP’s third quarter 2010 earnings conference call. Joining me this morning are Executive Vice President and Chief Financial Tom Herzog and Executive Vice President and Chief Investment Officer, Paul Gallagher.
Let’s start with a report on HCP’s most recent results and for that, I will turn the call over to Tom.
Tom Herzog
Thank you Jay. There are several topics I will cover today; first, our third quarter results, second our investment and disposition transactions, third our financing activities and finally, our full year 2010 guidance.
Let me start with our third quarter results. For the third quarter, we reported FFO of $0.54 per share before giving effect to an impairment charge of $0.23 per share compared to $0.52 per share before impairments and litigation provision for the third quarter of 2009.
There are several items I would like to point out. First, our same property portfolio continued to perform well, producing a strong 4.8% year over year, quarterly cash analogue growth. Paul will review our performance by segment in a few minutes.
Our third quarter results included the impact of two offsetting items that were not contemplated in our guidance. $0.02 per share related to gain on sales of HCA bonds and charge of $0.02 per share related to acquisition pursuit costs.
During the third quarter we recorded a non-cash impairment charge of $72 million related to our 35% interest in HCP Ventures II an unconsolidated joint venture that owns 25 senior housing properties leased by Horizon Bay.
Turning now to our investment and disposition transactions, first, on August 31, we entered into agreements with Sunrise that allowed us to terminate management contracts on 27 of 75 senior housing communities. We transitioned these 27 communities to Emeritus effective yesterday.
In exchange, we paid Sunrise $50 million, which after certain closing and working capital adjustments resulted in $41 million that was capitalized and will be amortized as deferred leasing costs in accordance with GAAP. As part of this arrangement, HCP and Sunrise agreed to dismiss all litigation proceedings between them. Paul will describe the terms of the new Emeritus leases shortly.
Second, during September and October, we purchased a $278 million participation in Genesis Health Care’s senior loan at a discount for $250 million, and a $50 million participation in a Mezzanine note at a discount for $40 million.
Third, during the quarter, we made real estate acquisitions of $63 million and capital investments of $36 million for construction and other capital projects. Year to date, this brings us to $640 million in real estate and debt investments.
Turning to dispositions, in September, we sold $73 million of debt investments including $65 million of HCA bonds and recognized gains of $6 million. We also sold three skilled nursing facilities for $10 million and recognized a gain of $4 million.
Subsequent to quarter end, we sold our remaining bond investments in HCA and one other issuer for $102 million, resulting in fourth quarter gains of $8 million. We also sold nine senior housing facilities for $27 million and recognized a gain of $15 million.
Next, our financing activities, in September, we prepaid without penalties $68 million of 6% mortgage debt, which was scheduled to mature in February 2011. Also, we repaid $200 million of senior unsecured notes at 4 7/8 that matured in September.
We ended the quarter with $320 million drawn on our revolver and had $1.2 billion of immediate liquidity from our revolver, cash and marketable securities.
Finally, full year 2010 guidance; based on stronger than forecasted performance to date, primarily in our senior housing and life science segments, we are raising our full year cash same property performance guidance to a range of 4% to 5%, up from 3% to 4% previously.
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