0000950152-01-505296.txt : 20011101
0000950152-01-505296.hdr.sgml : 20011101
ACCESSION NUMBER: 0000950152-01-505296
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011030
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEALTH CARE REIT INC /DE/
CENTRAL INDEX KEY: 0000766704
STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798]
IRS NUMBER: 341096634
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08923
FILM NUMBER: 1770644
BUSINESS ADDRESS:
STREET 1: ONE SEAGATE STE 1500
STREET 2: P O BOX 1475
CITY: TOLEDO
STATE: OH
ZIP: 43604
BUSINESS PHONE: 4192472800
10-Q
1
l90942ae10-q.txt
HEALTH CARE REIT, INC. 10-Q
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2001
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________________
Commission File number 1-8923
HEALTH CARE REIT, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1096634
------------------------------------- ----------------------
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One SeaGate, Suite 1500, Toledo, Ohio 43604
------------------------------------- ----------------------
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (419) 247-2800
----------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No ______.
-------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____. No _____.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 25, 2001.
Class: Shares of Common Stock, $1.00 par value
Outstanding 32,595,721 shares
HEALTH CARE REIT, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 2001
and December 31, 2000 3
Consolidated Statements of Income - Three
and nine months ended September 30, 2001 and 2000 4
Consolidated Statements of Shareholders'
Equity - Nine months ended September 30, 2001
and 2000 5
Consolidated Statements of Cash Flows -
Nine months ended September 30, 2001 and 2000 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk 11
PART II. OTHER INFORMATION
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
SEPTEMBER 30 DECEMBER 31
2001 2000
(UNAUDITED) (NOTE)
-------------- --------------
ASSETS (IN THOUSANDS)
Real estate investments:
Real property owned:
Land $ 79,861 $ 74,319
Buildings & improvements 836,867 770,660
Construction in progress 8,995 11,976
-------------- --------------
925,723 856,955
Less accumulated depreciation (71,564) (52,968)
-------------- --------------
Total real property owned 854,159 803,987
Loans receivable
Real property loans 234,886 301,321
Subdebt investments 23,426 21,972
-------------- --------------
1,112,471 1,127,280
Less allowance for loan losses (6,611) (5,861)
-------------- --------------
Net real estate investments 1,105,860 1,121,419
Other Assets:
Equity investments 6,585 5,450
Deferred loan expenses 7,266 2,939
Cash and cash equivalents 43,564 2,844
Receivables and other assets 32,012 24,252
-------------- --------------
89,427 35,485
-------------- --------------
TOTAL ASSETS $ 1,195,287 $ 1,156,904
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Borrowings under line of credit obligations $ 0 $ 119,900
Senior unsecured notes 412,250 255,000
Secured debt 3,801 64,852
Accrued expenses and other liabilities 16,250 18,545
-------------- --------------
TOTAL LIABILITIES 432,301 458,297
Shareholders' equity:
Preferred stock 150,000 150,000
Common stock 32,490 28,806
Capital in excess of par value 603,705 528,138
Overdistributed net income (18,922) (3,388)
Accumulated other
comprehensive loss (873) (744)
Unamortized restricted stock (3,414) (4,205)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 762,986 698,607
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,195,287 $ 1,156,904
============== ==============
NOTE: The consolidated balance sheet at December 31, 2000 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.
See notes to unaudited consolidated financial statements
-3-
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2001 2000 2001 2000
--------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUES:
Rental income $ 25,756 $ 22,266 $ 72,227 $ 65,984
Interest income 7,187 9,695 23,974 31,408
Commitment fees and other income 934 1,390 2,861 4,657
Prepayment fees 856 0 990 57
--------- --------- --------- ---------
Total revenue 34,733 33,351 100,052 102,106
EXPENSES:
Interest expense 7,643 8,411 23,731 26,093
Loan expense 447 276 1,212 879
Provision for depreciation 7,244 5,985 21,023 16,558
Provision for losses 250 250 750 750
General and administrative expenses 2,070 1,823 5,956 5,654
--------- --------- --------- ---------
Total expenses 17,654 16,745 52,672 49,934
--------- --------- --------- ---------
Net income before gain on sale of
properties and loss on extraordinary item 17,079 16,606 47,380 52,172
Gain on sale of properties 101 555 124 1,072
--------- --------- --------- ---------
Net income before extraordinary item 17,180 17,161 47,504 53,244
Loss on extinguishment of debt (213) 0 (213) 0
--------- --------- --------- ---------
Net income 16,967 17,161 47,291 53,244
Preferred stock dividends 3,376 3,376 10,128 10,114
--------- --------- --------- ---------
Net income available to common
shareholders $ 13,591 $ 13,785 $ 37,163 $ 43,130
========= ========= ========= =========
Average number of common shares outstanding:
Basic 32,205 28,507 29,946 28,460
Diluted 32,762 28,650 30,358 28,603
Net income available to common shareholders
per share:
Basic $ 0.42 $ 0.48 $ 1.24 $ 1.52
Diluted 0.41 0.48 1.22 1.51
Dividends declared and paid per
common share $ 0.585 $ 0.585 $ 1.755 $ 1.750
See notes to unaudited consolidated financial statements
-4-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
Nine months ended September 30, 2001
--------------------------------------------------------------------------------------------
Capital
In Accum.
In thousands Excess Other
of Unamortized Comprehensive
Preferred Common Par Restricted Overdistributed Income/
Stock Stock Value Stock Net Income (Loss) Total
--------------------------------------------------------------------------------------------
Balance at beginning of period $ 150,000 28,806 $ 528,138 $ (4,205) $ (3,388) $ (744) $ 698,607
Comprehensive income:
Net income 47,291 47,291
Unrealized losses on securities (89) (89)
Foreign currency translation adjustment (40) (40)
---------
Comprehensive income 47,162
Proceeds from issuance from
dividend reinvestment and
stock incentive plans,
net of forfeitures 234 4,827 (83) 4,978
Proceeds from issuance of common
shares 3,450 70,740 74,190
Restricted stock amortization 874 874
Cash dividends paid (62,825) (62,825)
--------- --------- --------- --------- --------- --------- ---------
Balance at end of period $ 150,000 $ 32,490 $ 603,705 $ (3,414) $ (18,922) $ (873) $ 762,986
========= ========= ========= ========= ========= ========= =========
Nine months ended September 30, 2000
--------------------------------------------------------------------------------------------
Capital
In Accum.
Excess Other
of Unamortized Comprehensive
Preferred Common Par Restricted Overdistributed Income/
Stock Stock Value Stock Net Income (Loss) Total
--------------------------------------------------------------------------------------------
Balance at beginning of period $ 150,000 $ 28,532 $ 524,204 $ (5,216) $ 8,883 $ 593 $ 706,996
Comprehensive income:
Net income 53,244 53,244
Unrealized losses on securities (591) (591)
Foreign currency translation adjustment (717) (717)
---------
Comprehensive income 51,936
Proceeds from issuance of common
stock from dividend reinvestment and
stock incentive plans, net of
forfeitures 159 2,103 1,085 3,347
Restricted stock amortization 859 859
Cash dividends paid (60,126) (60,126)
--------- --------- --------- --------- --------- --------- ---------
Balance at end of period $ 150,000 $ 28,691 $ 526,307 $ (3,272) $ 2,001 $ (715) $ 703,012
========= ========= ========= ========= ========= ========= =========
See notes to unaudited consolidated financial statements
-5-
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
HEALTH CARE REIT, INC. AND SUBSIDIARIES
NINE MONTHS ENDED
SEPTEMBER 30
2001 2000
--------- ---------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $ 47,291 $ 53,244
Adjustments to reconcile net income to net cash
Provision for depreciation 21,201 16,751
Provision for losses 750 750
Amortization 2,124 1,737
Loan and commitment fees earned in excess of cash received (1,329) (1,154)
Rental income in excess of cash received (6,187) (4,396)
Interest and other income in excess of cash received (249) (235)
Decrease in accrued expenses and other liabilities (967) (3,623)
Increase in receivables and other assets (1,548) (4,554)
--------- ---------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 61,086 58,520
INVESTING ACTIVITIES
Investment in real properties (79,529) (37,833)
Investment in loans receivable (19,424) (14,478)
Other investments, net (685) (10,955)
Principal collected on loans 70,391 57,147
Proceeds from sale of properties 22,018 107,182
Other (203) (659)
--------- ---------
NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES (7,432) 100,404
FINANCING ACTIVITIES
Net payments under line of credit arrangements (119,900) (58,650)
Principal payments on long-term obligations (78,801) (41,475)
Issuance of long-term obligations 175,000 0
Net proceeds from the issuance of Common Stock 79,168 3,347
Increase in deferred loan expense (5,576) (633)
Cash distributions to shareholders (62,825) (60,126)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (12,934) (157,537)
--------- ---------
Increase in cash and cash equivalents 40,720 1,387
Cash and cash equivalents at beginning of period 2,844 2,129
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43,564 $ 3,516
========= =========
Supplemental Cash Flow Information -- Interest Paid $ 25,096 $ 31,186
========= =========
See notes to unaudited consolidated financial statements
-6-
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
HEALTH CARE REIT, INC. AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered for a fair
presentation have been included. Operating results for the nine months ended
September 30, 2001, are not necessarily an indication of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 2000.
NOTE B - REAL ESTATE INVESTMENTS
During the nine months ended September 30, 2001, the Company invested
$69,605,000 in real property, made construction advances of $14,016,000 and
funded $2,665,000 of equity related investments. During the nine months ended
September 30, 2001, the Company sold properties valued at $22,018,000 and
received principal payments on real estate mortgages of $70,391,000.
With respect to the above-mentioned construction advances, funding for
construction in progress in connection with four properties owned directly by
the Company totaled $9,084,000, and funding associated with two construction
loans represented $4,932,000. During the nine months ended September 30, 2001,
two of the construction properties in progress with investment balances totaling
$12,065,000 completed the construction phase of the Company's investment process
and were converted to permanent operating leases and one of the construction
loans with an investment balance of $2,010,000 was converted to a permanent
mortgage loan.
NOTE C - EQUITY INVESTMENTS
Management determines the appropriate classification of an equity investment at
the time of acquisition and reevaluates such designation as of each balance
sheet date. At September 30, 2001, equity investments include the common stock
of a corporation, valued at historical cost, and ownership representing a 31%
interest in Atlantic Healthcare Finance L.P., a property investment group that
specializes in the financing, through sale and leaseback transactions, of
nursing homes located in the United Kingdom and continental Europe. The
ownership interest is accounted for under the equity method.
-7-
NOTE D - CONTINGENT LIABILITIES
As disclosed in the financial statements for the year ended December 31, 2000,
the Company was contingently liable for certain obligations amounting to
$11,425,000.
NOTE E - DISTRIBUTIONS PAID TO COMMON SHAREHOLDERS
On February 20, 2001, the Company paid a dividend of $0.585 per share to
shareholders of record on January 31, 2001. This dividend related to the period
from October 1, 2000 through December 31, 2000.
On May 21, 2001, the Company paid a dividend of $0.585 per share to shareholders
of record on May 1, 2001. This dividend related to the period January 1, 2001 to
March 31, 2001.
On August 20, 2001, the Company paid a dividend of $0.585 per share to
shareholders of record on August 1, 2001. This dividend related to the period
April 1, 2001 to June 30, 2001.
NOTE F - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Numerator for basic and diluted earnings per
share-income available to common shareholders $ 13,591 $ 13,785 $ 37,163 $ 43,129
========= ========= ========= =========
Denominator for basic earnings per share -
weighted average shares 32,205 28,507 29,946 28,460
Effect of dilutive securities:
Employee stock options 327 -- 182 --
Nonvested restricted shares 230 143 230 143
--------- --------- --------- ---------
Dilutive potential common shares 557 143 412 143
--------- --------- --------- ---------
Denominator for diluted earnings per share -
adjusted weighted average shares 32,762 28,650 30,358 28,603
========= ========= ========= =========
Basic earnings per share $ 0.42 $ 0.48 $ 1.24 $ 1.52
Diluted earnings per share $ 0.41 $ 0.48 $ 1.22 $ 1.51
The diluted earnings per share calculation excludes the dilutive effect of
150,000 and 1,479,000 shares for the three month periods and 763,000 and
1,479,000 for the nine month periods ended September 30, 2001 and September 30,
2000, respectively; because the exercise price was greater than the average
market price. The Series C Cumulative Convertible Preferred Stock was not
included in this calculation as the effect of the conversion was anti-dilutive.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company's net real estate investments totaled
$1,105,860,000 which included 147 assisted living facilities, 48 nursing
facilities and seven specialty care facilities. Depending upon the availability
and cost of external capital, the Company anticipates making additional
investments in health care related facilities. New investments are funded from
temporary borrowings under the Company's line of credit arrangements, internally
generated cash and the proceeds derived from asset sales. Permanent financing
for future investments, which replaces funds drawn under the line of credit
arrangements, is expected to be provided through a combination of private and
public offerings of debt and equity securities and the assumption of secured
debt. The Company believes its liquidity and various sources of available
capital are sufficient to fund operations, meet debt service and dividend
requirements and finance future investments.
In March, 2001, the Company completed its approximately $200 million asset
divestiture program that it announced in October, 1999 in response to a lack of
capital for health care REITs and long-term care companies. This program
strengthened the Company's portfolio and generated liquidity, enhancing the
Company's balance sheet. The completion of this program positioned the Company
for new investment opportunities.
During the first half of 2001, improved operating results in the public nursing
home sector, reduced development of new assisted living facilities and a shift
in equity funds flow back into income-oriented investments resulted in new
access to appropriately priced capital for health care REITs.
In June, 2001, the Company issued 3,450,000 shares of Common Stock, $1 par
value, at a price of $22.75 per share, which generated net proceeds of
$74,190,000.
In August, 2001, the Company sold $175 million of senior unsecured notes due in
2007 at an effective yield of 7.775%. Pending their use to invest in additional
health care properties, the proceeds were used primarily to pay down borrowings
under the Company's unsecured and secured line of credit arrangements.
As of September 30, 2001, the Company had a total outstanding debt balance of
$416,051,000 and shareholders' equity of $762,986,000 which represents a debt to
equity ratio of .55 to 1.0, and a debt to total capitalization ratio of .35 to
1.0.
As of September 30, 2001, the Company had an unsecured revolving line of credit
expiring March 31, 2003 in the amount of $150,000,000 bearing interest at the
lender's prime rate or LIBOR plus 1.5%. In addition, the Company had an
unsecured revolving line of credit in the amount of $25,000,000 bearing interest
at the lender's prime rate expiring June 30, 2002. Also, at September 30, 2001,
the Company had secured line of credit arrangements totaling $64,000,000. At
September 30, 2001, the Company had no borrowings under the unsecured line of
credit arrangements and $3,000,000 outstanding on the secured line of credit
arrangements.
As of September 30, 2001, the Company had effective shelf registrations on file
with the Securities and Exchange Commission under which the Company may issue up
to $77,000,000 of securities including debt, convertible debt, common and
preferred stock. Depending upon market conditions, the Company anticipates
issuing securities under such shelf registrations to invest in additional health
care facilities and to repay borrowings under the Company's line of credit
arrangements.
-9-
RESULTS OF OPERATIONS
Revenues were comprised of the following:
Three months ended Change Year to date through Change
------------------------------ -------------------- ------------------------------ --------------------
Sept. 30, 2001 Sept. 30, 2000 $ % Sept. 30, 2001 Sept. 30, 2000 $ %
-------------- -------------- -------------------- ------------------------------ --------------------
(000's)
Rental income $ 25,756 $ 22,266 $ 3,490 15.67% $ 72,227 $ 65,984 $ 6,243 9.46%
Interest income 7,187 9,695 (2.508) -25.87% 23,974 31,408 (7,434) -23.67%
Commitment fees and
other income 934 1,390 (456) -32.81% 2,861 4,657 (1,796) -38.57%
Prepayment fees 856 - 856 100.00% 990 57 933 1637.84%
------------ ------------ -------- --------- ------------ ------------- -------- ---------
Total $ 34,733 $ 33,351 $ 1,382 4.14% $ 100,052 102,106 $ (2,054) -2.01%
============ ============ ======== ========= ============ ============= ======== =========
For the three and nine months ended September 30, 2001, the Company generated
increased rental income as a result of the completion of real property
construction projects for which the Company began receiving rent and the
purchase of properties previously financed by the Company. This offset a
reduction in interest income due to the repayment of mortgage loans and the
purchase of properties previously financed by the Company with mortgage loans.
Commitment fees and other income decreased as a result of the completion of
construction projects and curtailment of investing activity.
Expenses were comprised of the following:
Three months ended Change Year to date through Change
----------------------------- --------------------- ------------------------------ --------------------
Sept. 30, 2001 Sept. 30, 2000 $ % Sept. 30, 2001 Sept. 30, 2000 $ %
-------------- -------------- --------------------- ------------------------------ --------------------
(000's)
Interest expense $ 7,643 $ 8,411 $ (768) -9.13% $ 23,731 $ 26,093 $(2,362) -9.05%
Loan expense 447 276 171 6.20% 1,212 879 333 37.88%
Provision for
depreciation 7,244 5,985 1,259 2.10% 21,023 16,558 4,465 26.97%
Provision for losses 250 250 - -% 750 750 - -%
General and
admin. expenses 2,070 1,823 247 13.55% 5,956 5,654 302 5.34%
------------ ------------ --------- --------- ------------ ------------ -------- --------
Total $ 17,654 $ 16,745 $ 909 5.43% $ 52,672 $ 49,934 $ 2,738 5.48%
============ ============ ========= ========= ============ ============ ======== ========
The decrease in interest expense for both the three-month and year-to-date
periods was primarily due to lower average borrowings on the Company's lines of
credit and senior notes partially offset by a reduction in the amount of
capitalized interest offsetting interest expense. The Company capitalizes
certain interest costs associated with funds used to finance the construction of
properties owned directly by the Company. The amount capitalized is based upon
the borrowings outstanding during the construction period using the rate of
interest which approximates the Company's cost of financing. Capitalized
interest for the three-month and year-to-date periods totaled $200,000 and
$739,000, respectively as compared with $603,000 and $2,777,000 for the same
periods in 2000.
The provision for depreciation increased over the comparable periods in 2000
primarily as a result of additional investments in properties owned directly by
the Company.
General and administrative expenses as a percentage of revenue for the
three-month and year-to-date periods were 5.96% and 5.95% as compared with 5.47%
and 5.54% for the same periods in 2000.
-10-
Other items:
Three months ended Change Year to date through Change
------------------------------ --------------------- ------------------------------ --------------------
Sept. 30, 2001 Sept. 30, 2000 $ % Sept. 30, 2001 Sept. 30, 2000 $ %
-------------- -------------- --------------------- ------------------------------ --------------------
(000's)
Other items:
Loss on extinguishment
of debt 213 - 213 100.00% 213 - 213 100.00%
Gain on sales of
properties $ 101 $ 555 $ (454) -81.80% $ 124 $ 1,072 $ (948) -88.43%
Preferred dividends 3,376 3,376 - -% 10,128 10,114 14 -
As a result of the various factors mentioned above, net income available to
common shareholders for the three-month and year-to-date periods was
$13,591,000, or $0.41 per diluted share, and $37,163,000 or $1.22 per diluted
share, respectively, as compared with $13,785,000, or $0.48 per diluted share,
and $43,130,000, or $1.51 per diluted share for the comparable periods in 2000.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This report on Form 10-Q of the Company includes forward looking statements that
reflect the Company's current view with respect to future events and financial
performance. The words "believe", "expect", "anticipate" and similar expressions
identify forward-looking statements. These statements involve risks and
uncertainties that could cause actual results to differ materially from those
described in the statements. These risks and uncertainties include (without
limitation) the following: the effect of economic and market conditions and
changes in interest rates, government regulations, including changes in Medicare
and Medicaid payment levels, changes in the healthcare industry, deterioration
of the operating results or financial condition, including bankruptcies, of the
Company's tenants and borrowers, the ability of the Company to attract new
operators for certain facilities, the amount of any additional investments,
access to capital markets and changes in the ratings of the Company's debt
securities. Forward-looking statements are not a guarantee of future performance
and actual results or developments may differ materially from expectations. The
Company undertakes no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future events, or
otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including the potential loss
arising from adverse changes in interest rates. The Company seeks to mitigate
the effects of fluctuations in interest rates by matching the term of new
investments with new long-term fixed rate borrowings to the extent possible. The
following section is presented to provide a discussion of the risks associated
with potential fluctuations in interest rates.
The Company historically borrows on its revolving lines of credit to make
acquisitions or to finance the construction of health care facilities. Then, as
market conditions dictate, the Company will issue equity or long-term fixed rate
debt to repay the borrowings under the revolving lines of credit.
A change in interest rates will not affect future earnings or cash flow on our
fixed rate debt. Interest rate changes, however, will affect the fair value of
such debt. A 1% increase in interest rates would result in a decrease in fair
value of the Company's Senior Unsecured Notes by approximately $17 million at
September 30, 2001. Changes in the interest rate environment upon maturity of
this fixed rate debt could have an affect on the future cash flows and earnings
of the Company, depending on whether the debt is replaced with other fixed rate
debt, with variable rate debt, with equity or by the sale of assets.
A change in interest rates will not affect the fair value of the Company's
variable rate debt, including its unsecured and secured revolving credit
arrangements. At September 30, 2001, the Company had limited variable rate debt,
so a 1% increase in interest rates would have an immaterial effect on annual
interest expense.
-11-
The Company is subject to risks associated with debt financing, including the
risk that existing indebtedness may not be refinanced or that the terms of such
refinancing may not be as favorable as the terms of current indebtedness. The
majority of the Company's borrowings were completed pursuant to indentures or
contractual agreements which limit the amount of indebtedness the Company may
incur. Accordingly, in the event that the Company is unable to raise additional
equity or borrow money because of these limitations, the Company's ability to
acquire additional properties may be limited.
From time to time, the Company's variable interest rate debt may exceed its
variable interest rate assets, presenting an exposure to rising interest rates.
The Company may or may not elect to use financial derivative instruments to
hedge variable interest rate exposure. Such decisions are principally based on
the Company's policy to match its variable rate investments with comparable
borrowings, but is also based on the general trend in interest rates at the
applicable dates and the Company's perception of future volatility of interest
rates.
Potential Risks from Bankruptcies
The Company is exposed to the risk that its operators may not be able to meet
the rent and interest payments due the Company, which may result in an operator
bankruptcy or insolvency. Although the Company's operating lease agreements and
loans provide the Company the right to terminate an investment, evict an
operator, demand immediate repayment, and other remedies, the bankruptcy laws
afford certain rights to a party that has filed for bankruptcy or
reorganization. An operator in bankruptcy may be able to restrict the Company's
ability to collect unpaid rent or interest, and collect interest during the
bankruptcy proceeding.
The receipt of liquidation proceeds or the replacement of an operator that has
defaulted on its lease or loan could be delayed by the approval process of any
federal, state or local agency necessary for the transfer of the property or the
replacement of the operator licensed to manage the facility. In addition, the
Company may be required to fund certain expenses (e.g., real estate taxes and
maintenance) to retain control of a property. In some instances the Company may
take possession of a property, which may expose the Company to successor
liabilities. Should such events occur, the Company's revenue and operating cash
flow may be adversely affected.
-12-
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On August 8, 2001, the Company issued a press release announcing the issuance of
$175 million in senior notes. On October 3, 2001, the Company issued a press
release announcing release of earnings and third quarter conference call. On
October 16, 2001, the Company issued a press release announcing third quarter
results and dividends.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Press release dated August 8, 2001
99.2 Press release dated October 3, 2001
99.3 Press release dated October 16, 2001
(b) Reports on Form 8-K
Form 8-K filed August 9, 2001
-13-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH CARE REIT, INC.
Date: October 30, 2001 By: /S/ GEORGE L. CHAPMAN
-------------------------- --------------------------------------
George L. Chapman,
Chairman, Chief Executive Officer and
President
Date: October 30, 2001 By: /S/ RAYMOND W. BRAUN
------------------------- --------------------------------------
Raymond W. Braun,
Chief Financial Officer
Date: October 30, 2001 By: /S/ MICHAEL A. CRABTREE
------------------------- --------------------------------------
Michael A. Crabtree,
Chief Accounting Officer
-14-
EXHIBIT INDEX
The following documents are included in this Form 10-Q as Exhibits:
DESIGNATION
NUMBER UNDER
ITEM 601 OF
REGULATION S-K EXHIBIT DESCRIPTION
-------------- -------------------
99.1 Press release dated August 8, 2001
99.2 Press release dated October 3, 2001
99.3 Press release dated October 16, 2001
-15-
EX-99.1
3
l90942aex99-1.txt
EXHIBIT 99.1
Exhibit 99.1
F O R I M M E D I A T E R E L E A S E
AUGUST 8, 2001
FOR MORE INFORMATION CONTACT:
RAY BRAUN - (419) 247-2800
MIKE CRABTREE - (419) 247-2800
HEALTH CARE REIT, INC. ISSUES
$175 MILLION IN SENIOR NOTES
Toledo, Ohio, August 8, 2001........HEALTH CARE REIT, INC. (NYSE/HCN) today
announced that it has priced a public offering of $175 million of senior
unsecured notes due 2007 at an effective yield of 7.775 percent. Proceeds from
the sale of the securities will be used to repay borrowings under the company's
revolving lines of credit and to invest in additional health care properties.
"We are pleased that investors viewed our debt offering so favorably, as
evidenced by the increase in the size of this deal from $150 million to $175
million," commented George L. Chapman, chairman and chief executive officer of
HCN. "The market's reaction to our successful 3.45 million share equity offering
in June was equally gratifying. We believe that the success of these financings
reflects investors' growing confidence in the health care REIT market and, more
specifically, in our ability to make accretive investments, based on our
unrivaled 30-year track record."
Deutsche Banc Alex. Brown and UBS Warburg acted as joint-lead managers. Legg
Mason Wood Walker Incorporated and Raymond James & Associates, Inc. acted as
co-managers.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate
investment trust that invests in health care facilities, primarily nursing homes
and assisted living facilities. At June 30, 2001, the company had investments in
203 health care facilities in 33 states and had total assets of approximately
$1.2 billion. For more information on Health Care REIT, Inc., via facsimile at
no cost, dial 1-800-PRO-INFO and enter the company code - HCN. More information
is available on the Internet at http://www.hcreit.com.
This document may contain "forward-looking" statements as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties, which may cause the company's actual
results in the future to differ materially from expected results. These risks
and uncertainties include, among others, general economic conditions, the
availability of capital, competition within the financial services and real
estate markets, the performance of operators within Health Care REIT's
portfolio, and regulatory and other changes in the health care sector, as
described in the company's filings with the Securities and Exchange Commission.
#####
-16-
EX-99.2
4
l90942aex99-2.txt
EXHIBIT 99.2
Exhibit 99.2
F O R I M M E D I A T E R E L E A S E
October 3, 2001
For more information contact:
Ray Braun (419) 247-2800
Mike Crabtree (419) 247-2800
HEALTH CARE REIT, INC. TO RELEASE EARNINGS AND HOLD
THIRD-QUARTER CONFERENCE CALL SET FOR OCTOBER 17, 2001
Toledo, Ohio, October 3, 2001...HEALTH CARE REIT, INC. (NYSE/HCN) announced
today that it will release its 2001 third-quarter earnings on Tuesday, October
16, after New York Stock Exchange trading ends. At 11:00 a.m. Eastern Time on
Wednesday, October 17, the company will hold a conference call to discuss the
company's results and performance for the third quarter.
The conference call will be accessible by telephone and through the Internet.
Telephone access is available by dialing 888-792-1093 or 703-871-3597. Callers
to this number will be able to listen to the company's business update. For
those unable to listen to the call live, a taped rebroadcast will be available
beginning two hours after completion of the live call on October 17 through
October 24. To access the rebroadcast, dial 888-266-2086 or 703-925-2435. The
conference ID number is 5549070.
To participate on the webcast, log on to www.hcreit.com or www.streetfusion.com
15 minutes before the call to download the necessary software. Replays will be
available for 90 days through the same websites.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate
investment trust that invests in health care facilities, primarily nursing homes
and assisted living facilities. At June 30, 2001, the company had investments in
203 health care facilities in 33 states and had total assets of approximately
$1.2 billion. For more information on Health Care REIT, Inc., via facsimile at
no cost, dial 1-800-PRO-INFO and enter the company code - HCN. More information
is available on the Internet at http://www.hcreit.com.
#####
-17-
EX-99.3
5
l90942aex99-3.txt
EXHIBIT 99.3
Exhibit 99.3
F O R I M M E D I A T E R E L E A S E
OCTOBER 16, 2001
FOR MORE INFORMATION CONTACT:
RAY BRAUN - (419) 247-2800
MIKE CRABTREE - (419) 247-2800
HEALTH CARE REIT, INC. REPORTS
THIRD QUARTER RESULTS; DECLARES REGULAR DIVIDEND
Toledo, Ohio, October 16, 2001........HEALTH CARE REIT, INC. (NYSE/HCN) today
announced operating results for its third quarter of 2001. The company continues
to meet financial and operational expectations.
"Management was pleased with the third quarter results and our ongoing progress
on portfolio seasoning," commented George L. Chapman, chairman and chief
executive officer. "The capital markets continued its strong support for our
company, as evidenced by the successful completion of a $175 million debt
offering in August. The proceeds from the offering, together with the proceeds
from the $75 million equity offering in June, will enable us to capitalize on
accretive investment opportunities. We continue to see attractive investment
opportunities in the long-term care market and are confident that the company
will meet its goal of $100-125 million of new investments in the second half of
2001."
The Board of Directors voted to declare a dividend for the quarter ended
September 30, 2001, of $0.585 per share. The dividend represents the 122nd
consecutive dividend payment. The dividend will be payable November 20, 2001, to
shareholders of record on October 31, 2001.
SUMMARY OF THIRD QUARTER RESULTS
--------------------------------
(In thousands, except per share numbers)
--------------------------------------------------------- ---------------------------- ---------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
--------------------------------------------------------- ---------------------------- ---------------------------------
Revenues $34,834 $33,906
--------------------------------------------------------- ---------------------------- ---------------------------------
Net Income Available to Common Shareholders $13,591 $13,785
--------------------------------------------------------- ---------------------------- ---------------------------------
Funds From Operations (FFO) $20,091 $19,215
--------------------------------------------------------- ---------------------------- ---------------------------------
Net Income Per Diluted Share $0.41 $0.48
--------------------------------------------------------- ---------------------------- ---------------------------------
FFO Per Diluted Share $0.61 $0.67
--------------------------------------------------------- ---------------------------- ---------------------------------
Dividend Per Share $0.585 $0.585
--------------------------------------------------------- ---------------------------- ---------------------------------
FFO Payout Ratio 95% 87%
--------------------------------------------------------- ---------------------------- ---------------------------------
Funds from operations (FFO), the generally accepted measure of operating
performance for the real estate investment trust industry, totaled $20.1
million, or $0.61 per diluted share, for the third quarter of 2001, compared
with $19.2 million, or $0.67 per diluted share, for the same period in 2000. The
decrease in FFO per share was primarily attributable to the short-term dilutive
effects of the recent 3.45 million share common stock offering and the $175
million senior note issuance.
-18-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
SUMMARY OF YEAR TO DATE RESULTS
-------------------------------
(In thousands, except per share numbers)
--------------------------------------------------------- ---------------------------- ---------------------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
--------------------------------------------------------- ---------------------------- ---------------------------------
Revenues $100,176 $103,178
--------------------------------------------------------- ---------------------------- ---------------------------------
Net Income Available to Common Shareholders $37,163 $43,130
--------------------------------------------------------- ---------------------------- ---------------------------------
Funds From Operations (FFO) $57,285 $58,559
--------------------------------------------------------- ---------------------------- ---------------------------------
Net Income Per Diluted Share $1.22 $1.51
--------------------------------------------------------- ---------------------------- ---------------------------------
FFO Per Diluted Share $1.89 $2.05
--------------------------------------------------------- ---------------------------- ---------------------------------
Dividend Per Share $1.755 $1.75
--------------------------------------------------------- ---------------------------- ---------------------------------
FFO Payout Ratio 93% 85%
--------------------------------------------------------- ---------------------------- ---------------------------------
FFO totaled $57.3 million, or $1.89 per diluted share for the nine months ended
September 30, 2001, compared with $58.6 million, or $2.05 per diluted share, for
the same period in 2000.
The company had a total outstanding debt balance of $416 million at September
30, 2001, down from $439 million in third quarter 2000, and shareholders' equity
of $763 million, which represents a debt to total capitalization ratio of 35
percent. The company's coverage ratio of EBITDA to interest was 3.66 to 1.0 for
the twelve months ended September 30, 2001.
NEW FACILITY INVESTMENTS. The company's investment activity for the quarter
totaled $39.3 million, including the acquisition of seven assisted living
facilities, with a total of 390 beds, located in three states and leased to two
operators.
PORTFOLIO UPDATE. The portfolio results met the company's expectations. The
seasoning of the assisted living portfolio is on target. The company ended the
second quarter with 24 assisted living facilities remaining in fill-up
representing less than 19 percent of revenues. Only three assisted living
facilities have occupancy less than 50 percent.
OUTLOOK FOR 2001 AND 2002. The company previously announced FFO guidance of
$0.64 to $0.65 per diluted share per quarter for 2001. With the recent debt
offering and the previous equity offering, the company believes FFO will be
$0.62 to $0.63 in fourth quarter 2001 and $0.64 to $0.65 in first quarter 2002.
CONFERENCE CALL INFORMATION. Health Care REIT has scheduled a conference call on
October 17, 2001, at 11:00 A.M. EST to discuss its third quarter 2001
performance, industry trends, portfolio performance, and its outlook for the
remainder of 2001 and for 2002. To participate on the webcast, log on to
www.hcreit.com or www.streetfusion.com 15 minutes before the call to download
the necessary software. Replays will be available for 90 days through the same
websites.
-19-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate
investment trust that invests in health care facilities, primarily nursing homes
and assisted living facilities. At September 30, 2001, the company had
investments in 202 health care facilities in 32 states and had total assets of
approximately $1.2 billion. For more information on Health Care REIT, Inc., via
facsimile at no cost, dial 1-800-PRO-INFO and enter the company code - HCN. More
information is available on the Internet at http://www.hcreit.com.
This document and supporting schedules may contain "forward-looking" statements
as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the company's actual results in the future to differ materially
from expected results. These risks and uncertainties include, among others,
general economic conditions, the availability of capital, competition within the
financial services and real estate markets, the performance of operators within
Health Care REIT's portfolio, and regulatory and other changes in the health
care sector, as described in the company's filings with the Securities and
Exchange Commission.
FINANCIAL SCHEDULES FOLLOW
#####
-20-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
HEALTH CARE REIT, INC.
FINANCIAL SUPPLEMENT
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
SEPTEMBER 30
-----------------------------------------
2001 2000
-----------------------------------------
ASSETS
Real estate investments:
Real property owned
Land $ 79,861 $ 71,289
Buildings & improvements 836,867 739,437
Construction in progress 8,995 23,744
----------- -----------
925,723 834,470
Less accumulated depreciation (71,564) (46,820)
----------- -----------
Total real property owned 854,159 787,650
Loans receivable
Real property loans 234,886 314,570
Subdebt investments 23,426 27,551
----------- -----------
258,312 342,121
Less allowance for losses on loans receivable (6,611) (6,337)
----------- -----------
251,701 335,784
----------- -----------
Net real estate investments 1,105,860 1,123,434
Other assets:
Equity investments 6,585 5,556
Deferred loan expenses 7,266 3,065
Cash and cash equivalents 43,564 3,516
Receivables and other assets 32,012 26,712
----------- -----------
89,427 38,849
----------- -----------
TOTAL ASSETS $ 1,195,287 $ 1,162,283
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Borrowings under line of credit obligations $ 0 $ 118,850
Senior unsecured notes 412,250 255,000
Secured debt 3,801 64,867
Accrued expenses and other liabilities 16,250 20,554
----------- -----------
Total liabilities $ 432,301 $ 459,271
Shareholders' equity:
Preferred Stock 150,000 150,000
Common Stock 32,490 28,691
Capital in excess of par value 603,705 526,307
Undistributed (overdistributed) net income (18,922) 2,001
Accumulated other
comprehensive income (873) (715)
Unamortized restricted stock (3,414) (3,272)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 762,986 $ 703,012
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,195,287 $ 1,162,283
=========== ===========
-21-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
HEALTH CARE REIT, INC.
FINANCIAL SUPPLEMENT
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Operating lease rents $ 25,756 $ 22,266 $ 72,227 $ 65,984
Interest income 7,187 9,695 23,974 31,408
Commitment fees and other income 934 1,390 2,861 4,657
Prepayment fees 856 0 990 57
Gain on sale of properties 101 555 124 1,072
---------- ---------- ---------- ----------
Gross Revenues 34,834 33,906 100,176 103,178
Expenses:
Interest expense $ 7,643 $ 8,411 $ 23,731 $ 26,093
Provision for depreciation 7,244 5,985 21,023 16,558
General and administrative 2,070 1,823 5,956 5,654
Loan expense 447 276 1,212 879
Provision for losses 250 250 750 750
---------- ---------- ---------- ----------
Total Expenses 17,654 16,745 52,672 49,934
---------- ---------- ---------- ----------
Net Income before extraordinary item 17,180 17,161 47,504 53,244
Loss on extinguishment of debt 213 0 213 0
---------- ---------- ---------- ----------
Net Income 16,967 17,161 47,291 53,244
Preferred stock dividends 3,376 3,376 10,128 10,114
---------- ---------- ---------- ----------
Net Income available to
Common Shareholders $ 13,591 $ 13,785 $ 37,163 $ 43,130
========== ========== ========== ==========
Average number of common shares outstanding:
Basic 32,205 28,507 29,946 28,460
Diluted 32,762 28,650 30,358 28,603
Net income per share:
Basic $ 0.42 $ 0.48 $ 1.24 $ 1.52
Diluted 0.41 0.48 1.22 1.51
Funds from operations: $ 20,091 $ 19,215 $ 57,285 $ 58,559
Funds from operations per share:
Basic $ 0.62 $ 0.67 $ 1.91 $ 2.06
Diluted 0.61 0.67 1.89 2.05
Dividends per share $ 0.585 $ 0.585 $ 1.755 $ 1.750
-22-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
HEALTH CARE REIT, INC.
FINANCIAL SUPPLEMENT - SEPTEMBER 30, 2001
PORTFOLIO COMPOSITION ($000'S) EXHIBIT 1
------------------------------
BALANCE SHEET DATA # Properties # Beds/Units Balance % Balance
-------------------- ------------------- -------------------- -----------------
Real Property 164 12,965 $ 854,159 77%
Loans Receivable 38 4,528 234,886 21%
Subdebt Investments -na- -na- 23,426 2%
-------------------- ------------------- -------------------- -----------------
Total Investments 202 17,493 $ 1,112,471 100%
INVESTMENT DATA # Properties # Beds/Units Investment (1) % Investment
-------------------- ------------------- -------------------- -----------------
Assisted Living Facilities 147 9,711 $ 764,881 68%
Nursing Homes 48 6,477 273,472 24%
Specialty Care Facilities 7 1,305 85,543 8%
-------------------- ------------------- -------------------- -----------------
Real Estate Investments 202 17,493 $ 1,123,896 100%
INVESTMENT BY OWNER TYPE # Properties # Beds/Units Investment (1) % Investment
-------------------- ------------------- -------------------- -----------------
Publicly Traded 69 3,872 $ 253,303 22%
Key Private 77 7,686 537,946 48%
Privately Held 56 5,935 332,647 30%
-------------------- ------------------- -------------------- -----------------
Real Estate Investments 202 17,493 $ 1,123,896 100%
NOTES: (1) REAL ESTATE INVESTMENTS INCLUDE GROSS REAL ESTATE INVESTMENTS AND
CREDIT ENHANCEMENTS WHICH AMOUNTED TO $1,112,471,000 AND
$11,425,000, RESPECTIVELY.
REVENUE COMPOSITION ($000'S) EXHIBIT 2
----------------------------
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
---------------------------------- ------------------------------
REVENUE BY INVESTMENT TYPE
Real Property $ 26,301 75% $ 73,822 74%
Loans Receivable & Other 8,082 23% 24,943 25%
Subdebt Investments 451 2% 1,411 1%
------------------ --------------- ----------------- -------------
Total $ 34,834 100% $ 100,176 100%
REVENUE BY FACILITY TYPE
Assisted Living Facilities $ 22,942 66% $ 66,098 66%
Nursing Homes 8,694 25% 23,946 24%
Specialty Care Facilities 3,198 9% 10,132 10%
------------------ --------------- ----------------- -------------
Total $ 34,834 100% $ 100,176 100%
REVENUE BY OWNER TYPE
Publicly Traded $ 9,097 26% $ 25,052 25%
Key Private 17,248 50% 52,226 52%
Privately Held 8,489 24% 22,898 23%
------------------ --------------- ----------------- -------------
Total $ 34,834 100% $ 100,176 100%
-23-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
REVENUE COMPOSITION (CONTINUED) ($000'S) EXHIBIT 3
----------------------------------------
OPERATING LEASE EXPIRATIONS & LOAN MATURITIES
Current Lease Current Interest Interest and
Year Revenue (1) Revenue (1) Lease Revenue % of Total
------------------- ------------------------ ------------------------ ----------------------- -------------------
2001 $ 1,993 $ 0 $ 1,993 2%
2002 1,738 7,530 9,268 7%
2003 2,770 0 2,770 2%
2004 410 1,433 1,843 1%
2005 0 2,507 2,507 2%
Thereafter 93,443 16,878 110,321 86%
------------------------ ------------------------ ----------------------- -------------------
Total $ 100,354 $ 28,348 $ 128,702 100%
NOTES: (1) REVENUE IMPACT BY YEAR, ANNUALIZED
COMMITTED INVESTMENT BALANCES EXHIBIT 4
------------------------------
($000'S EXCEPT INVESTMENT PER BED/UNIT)
Committed Balance Investment per
# Properties # Beds/Units (1) Bed/Unit
-------------------- ------------------- -------------------- ------------------
Assisted Living Facilities 147 9,711 $ 768,979 $ 79,186
Nursing Homes 48 6,477 273,472 42,222
Specialty Care Facilities 7 1,305 85,543 65,551
-------------------- ------------------- -------------------- ------------------
Total 202 17,493 $ 1,127,994 -na-
NOTES: (1) COMMITTED BALANCE INCLUDES GROSS REAL ESTATE INVESTMENTS, CREDIT
ENHANCEMENTS AND UNFUNDED COMMITMENTS FOR WHICH INITIAL FUNDING
HAD COMMENCED.
OPERATOR CONCENTRATION ($000'S) EXHIBIT 5
-------------------------------
CONCENTRATION BY INVESTMENT # Properties Investment % Investment
----------------------- ---------------------- -----------------------
Merrill Gardens 19 $ 128,023 11%
Alterra Healthcare 42 92,016 8%
Life Care Centers of America, Inc. 13 84,969 8%
Atria Senior Quarters 9 78,875 7%
Commonwealth Communities 6 69,980 6%
Remaining Operators 113 670,033 60%
----------------------- ---------------------- -----------------------
Total 202 $ 1,123,896 100%
CONCENTRATION BY REVENUE # Properties Revenue (1) % Revenue
----------------------- ---------------------- -----------------------
Merrill Gardens 19 $ 10,451 10%
Alterra Healthcare 42 8,606 9%
Life Care Centers of America, Inc. 13 7,202 7%
Atria Senior Quarters 9 7,087 7%
Commonwealth Communities 6 5,509 6%
Remaining Operators 113 61,321 61%
----------------------- ---------------------- -----------------------
Total 202 $ 100,176 100%
NOTES: (1) NINE MONTHS ENDED SEPTEMBER 30, 2001
-24-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
SELECTED FACILITY DATA EXHIBIT 6
----------------------
Coverage Data
% Payor Mix ----------------------------------
------------------------------------- Before After
Census Private Medicare Mgt. Fees Mgt. Fees
------------------------------------------------------- ------------------ ---------------
Nursing Homes 83% 12% 21% 1.71x 1.24x
Assisted Living Facilities 88% 100% 0% 1.30x 1.12x
Specialty Care Facilities 50% 31% 15% 1.76x 1.37x
------------------ ---------------
Weighted Averages 1.48x 1.19x
NOTES: DATA AS OF JUNE 30, 2001
SECURITY DEPOSITS & OTHER CREDIT SUPPORT ($000'S) EXHIBIT 7
-------------------------------------------------
Balance % Investment
--------------------------------
Cross Defaulted $ 1,019,770 91% of gross real estate investments
Cross Collateralized 198,095 84% of mortgage loans
Bank Letters of Credit & Cash 21,590 2% of investment balance
CURRENT CAPITALIZATION ($000'S)
------------------------------- Balance % Balance LEVERAGE & PERFORMANCE RATIOS
--------------- ----------------- ----------------------------------------
Borrowings Under Bank Lines $ 0 0% Debt/Total Book Cap 35%
Long-Term Debt Obligations 416 35% Debt/Total Mkt. Cap 30%
Shareholders' Equity 763 65% Interest Coverage 3.77x 3rd Qtr.
--------------- -----------------
Total Book Capitalization $ 1,179 100% 3.66x L12M
FFO Payout Ratio 95% 3rd Qtr.
92% L12M
DEBT MATURITIES AND PRINCIPAL PAYMENTS ($000'S) EXHIBIT 8
-----------------------------------------------
Year Lines of Credit (1) Senior Notes Secured Debt (1) Total
------------------- ------------------------ ------------------------ ----------------------- -------------------
2001 $ 0 $ 0 $ 16 $ 16
2002 25,000 12,250 75 37,325
2003 150,000 35,000 84 185,084
2004 0 40,000 64,133 104,133
2005 0 0 493 493
2006 0 50,000 0 50,000
2007 0 175,000 0 175,000
Thereafter 0 100,000 0 100,000
------------------------ ------------------------ ----------------------- -------------------
Total $ 175,000 $ 412,250 $ 64,801 $ 652,051
NOTES: (1) LINES OF CREDIT REFLECT 100% CAPACITY
-25-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
INVESTMENT ACTIVITY ($000'S) EXHIBIT 9
----------------------------
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
--------------------------------- ---------------------------------
FUNDING BY INVESTMENT TYPE
Real Property $ 34,806 88% $ 69,605 81%
Mortgage & Other Loans 0 0% 0 0%
Construction Advances 3,558 9% 13,884 16%
Subdebt Investments 992 3% 2,665 3%
----------------- --------------- ---------------- ----------------
Total $ 39,356 100% $ 86,154 100%
REAL ESTATE INVESTMENTS
Assisted Living Facilities $ 38,736 94% $ 49,218 57%
Nursing Homes 620 6% 36,936 43%
Specialty Care Facilities 0 0% 0 0%
----------------- --------------- ---------------- ----------------
Total $ 39,356 100% $ 86,154 100%
GEOGRAPHIC CONCENTRATION ($000'S) EXHIBIT 10
---------------------------------
CONCENTRATION BY REGION # Properties Investment % Investment
----------------------- ---------------------- -----------------------
South 115 $ 524,483 47%
Northeast 31 262,571 23%
West 29 199,654 18%
Midwest 27 137,188 12%
----------------------- ---------------------- -----------------------
Total 202 $ 1,123,896 100%
CONCENTRATION BY STATE # Properties Investment % Investment
----------------------- ---------------------- -----------------------
Florida 29 $ 148,930 13%
Massachusetts 14 123,526 11%
Texas 29 101,657 9%
California 8 61,400 5%
New York 6 58,665 5%
Remaining States 116 629,718 57%
----------------------- ---------------------- -----------------------
Total 202 $ 1,123,896 100%
REVENUE BY STATE (1) # Properties Revenue (1) % Revenue
----------------------- ---------------------- -----------------------
Florida 29 $ 11,638 12%
Texas 29 11,560 11%
Massachusetts 14 9,880 10%
California 8 6,198 6%
New York 6 5,106 5%
Remaining States 116 55,794 56%
----------------------- ---------------------- -----------------------
Total 202 $ 100,176 100%
NOTES: (1) NINE MONTHS ENDED SEPTEMBER 30, 2001
-26-
3Q01 EARNINGS RELEASE OCTOBER 16, 2001
--------------------------------------------------------------------------------
FUNDS FROM OPERATIONS COMPUTATION ($000'S) EXHIBIT 11
------------------------------------------
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
------------------------------- --------------------------
Net Income Available to Common Shareholders $ 13,591 $ 37,163
Add: Depreciation Expense 7,244 21,023
Loss on Extinguishment 213 213
Deduct: Gain on Sale of Assets (101) (124)
Prepayment Fees (856) (990)
---------------------------- -- --------------------------
Funds From Operations (FFO) $ 20,091 $ 57,285
Average Common Shares Outstanding:
Basic 32,205 29,946
Diluted 32,762 30,358
FFO Per Common Share:
Basic $ 0.62 $ 1.91
Diluted $ 0.61 $ 1.89
DISPOSITION ACTIVITY EXHIBIT 12
--------------------
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
--------------------------------- ---------------------------------
DISPOSITIONS BY INVESTMENT TYPE
Real Property $ 10,429 27% $ 22,018 25%
Mortgage & Other Loans 28,535 73% 65,040 75%
----------- -------- ----------- ------
Total $ 38,964 100% $ 87,058 100%
=========== ======== =========== ======
REAL ESTATE INVESTMENTS
Assisted Living Facilities $ 10,429 27% $ 26,420 30%
Nursing Homes 0 0% 0 0%
Specialty Care Facilities 28,535 73% 60,638 70%
----------- -------- ----------- ------
Total $ 38,964 100% $ 87,058 100%
=========== ======== =========== ------
LEASE UP STATISTICS ON ASSISTED LIVING FACILITIES EXHIBIT 13
-------------------------------------------------
OCCUPANCY FACILITIES MONTHS IN OPERATION REVENUE (1) % OF REVENUE
------------------- ----------------------- ----------------- -----------------
00% - 50% 3 10 $5,741 6%
50% - 70% 15 20 $8,634 8%
70% + 6 17 $3,914 4%
NOTES: (1) INTEREST AND RENTAL INCOME FOR NINE MONTHS ENDED SEPTEMBER 30, 2001.
-27-