Health Care REIT Inc. (HCN), a real estate investment trust (REIT) that operates senior housing and health care real estate, has recently updated its recurring FFO (funds from operations) and FAD (funds available for distribution) guidance for fiscal 2012 to better reflect the effect of the just-concluded secondary offering and acquisitions closed till date in the first quarter.
Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. Funds available for distribution represents FFO adjusted for non-real estate depreciation and the effect of straight-line rent, less capital investments in property.
The company has revised its recurring FFO guidance for fiscal 2012 from the earlier range of $3.68 – $3.78 per share to $3.53 – $3.63. Health Care REIT also updated its recurring FAD guidance from $3.26 – $3.36 per share to $3.11 – $3.21.
The changes in FFO and FAD guidance were effected after taking into consideration the following factors: $508 million worth of acquisitions were closed till date during the current quarter; $269 million worth of assumed and newly arranged debt; $1.1 billion worth of equity offering (20.7 million shares); $287.5 million worth of cumulative redeemable preferred stock offering already closed; and another $275 million worth of redemptions of cumulative redeemable preferred stock expected to close in second quarter 2012.
Headquartered in Toledo, Ohio, Health Care REIT invests across the full spectrum of senior housing and health care real estate properties. Founded in 1970, the company was the first REIT to invest exclusively in healthcare facilities.
Health Care REIT usually has long-term ‘triple-net’ leases in senior housing and healthcare real estate properties that insulates it from market volatility and provides a steady source of revenue despite a challenging macroeconomic environment. Under ‘triple-net’ leases, the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent.
The healthcare sector is one of the more recession-proof real estate sectors and has continually fared comparatively better than other sectors during the commercial real estate downturn. In addition, an aging Baby Boomer generation’s demand for assisted and independent living facilities should increase in the coming years.
With a significant presence in these property types, Health Care REIT is poised to maintain its growth curves and simultaneously benefit the shareholders with steadily rising dividends.
We presently have a Neutral recommendation on Health Care REIT Inc., which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for HCP Inc. (HCP), one of the competitors of Health Care REIT Inc.
HEALTH CR REIT (HCN): Free Stock Analysis Report
HCP INC (HCP): Free Stock Analysis Report
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