NEWPORT BEACH, Calif., May 4 /PRNewswire-FirstCall/ -- Nationwide Health Properties, Inc. today announced first quarter 2005 operating results and new investments totaling $146.1 million -- $25.3 million for the first quarter (in addition to the previously announced $39.9 million transaction) and the $120.8 million buyout of JER’s interest in our joint venture that closed on May 3, 2005.
2005 FIRST QUARTER RESULTS
The following table presents selected financial results for the first quarter of 2005 as compared to 2004:
SELECTED FINANCIAL RESULTS ($ in thousands, except per share amounts) Three Months Ended March 31 Item 2005 2004 Change Revenues $51,441 $40,981 $10,460 25.5% Net Income $13,361 $14,556 $(1,195) (8.2)% Net Income Per Share $0.14 $0.20 $(0.06) (30.0)% FFO $22,374 $23,248 $(874) (3.8)% Diluted FFO Before Impairments $31,605 $23,248 $8,357 35.9% FFO Per Share $0.33 $0.36 $(0.03) (8.3)% Diluted FFO Per Share Before Impairments $0.44 $0.36 $0.08 22.2% Funds From Operation (FFO)
FFO is a non-GAAP measure that NHP believes is important to an understanding of its operations.A reconciliation between net income, the most directly comparable GAAP financial measure, and FFO is included in the accompanying financial data. We believe FFO is an important supplemental measure of operating performance because it excludes the effects of depreciation and gains (losses) from sales of facilities (both of which are based on historical costs and which may be of limited relevance in evaluating current performance).
Diluted FFO per share for the quarter was $0.33. Prior to impairments of $7,169,000 (and including the add-back of dividends on our convertible preferred stock that are dilutive at this level of FFO), FFO before such charges was $31,605,000, or $0.44 per share. The impairments totaling $7,169,000 consisted of an impairment of $7,019,000 related to a facility that will no longer be operated as a skilled nursing facility and a related receivable from the operator of such facility and $150,000 related to a land parcel that is held for sale. The results for the first quarter of 2005 include a separation charge of $585,000 related to payments under the separation agreement we entered into with our former CFO. The results for the first quarter of 2004 included the impact of a charge of $1,402,000 related to the retirement of our former CEO.
“We recently revisited our methodology for calculating FFO and decided to make a change to conform to the definition used by the National Association of Real Estate Investment Trusts (NAREIT),” said Acting Chief Financial Officer Abdo H. Khoury. “From this point forward we will only be adding back real estate related depreciation and amortization to arrive at FFO, as opposed to adding back all depreciation and amortization which was our prior practice. This will reduce our FFO per share by $0.01 in 2005. While this change causes a reduction in our FFO for the current period, our guidance for the year and all prior periods, the change is relatively consistent over time and does not change the historical trends in our FFO.”
NEW INVESTMENTS
First Quarter 2005. $25.3 million in addition to the previously announced $39.9 million transaction, for a first quarter total of $65.2 million.
Previously Announced Investment: * On February 1, 2005, NHP acquired ten skilled nursing facilities in Missouri for a total investment of $39.9 million. The facilities have 814 beds ($49,000/bed) with an average age of 12 years. The initial yield on this acquisition/master leaseback transaction is 9.25% with CPI-based annual increases estimated at 2% and EBITDARM rent coverage of 2.8x. Additional Investments: * In March 2005, NHP added two assisted living facilities to its master lease portfolio with Emeritus Corporation. The total investment was $14.3 million with the master lease initial yield of 9% and CPI-based annual increases estimated at 3%. * Also in March 2005, NHP added two skilled nursing facilities (a 38-year old, 157-bed facility in Pennsylvania and an 18-year old, 150-bed facility in Texas) to two separate master leases with two different tenants for a total investment of $10.3 million. These acquisitions had a weighted average yield of 10.15%, both with CPI-based annual increases estimated at 2% and EBITDARM rent coverage of over 2x. * We also paid $0.7 million as part of an earnout on one independent living facility acquired in May 2004 that yields 9.1% with CPI-based annual increases estimated at 2%.
Second Quarter 2005. On May 3, 2005, we acquired the entire interest of JER Senior Housing, LLC in our joint venture for $120.8 million. As a result, we now own all of the venture’s 46 assisted living & Alzheimer facilities that are master leased to and operated by Alterra Healthcare Corporation. The facilities have 1,552 units in 12 states and on average are eight years old. The cross-defaulted master leases have remaining initial terms expiring at the end of 2020, with current aggregate annual rent of $14.7 million and annual increases averaging 1.8% over the remaining term. Occupancy is over 85% (up from 79% in 2003) with rent coverage at over 1.2x backed by a $7.3 million security deposit and solid balance sheet. This brings NHP’s year-to-date completed investments to $186.0 million.
2005 OVERVIEW
“We are very excited to have acquired JER’s interest in our joint venture at what works out to be about a 9.1% cap rate on 2005 rent,” commented Douglas M. Pasquale, NHP’s President and Chief Executive Officer. “The joint venture has proven to be a very good investment for both our partner, JER, and NHP, with each of us enjoying a good return and accomplishing our objectives. After this transaction, our all-in investment in these properties is about $150 million ($96,500 per unit), with a blended yield of 9.84%. The properties, which the NHP/JER venture acquired just prior to Alterra’s largely pre-negotiated bankruptcy filing, as well as our entire Alterra portfolio have shown steady improvement in operations ever since the current management team led Alterra out of bankruptcy in 2003.”
“Our results for the First Quarter before impairment and separation charges closely paralleled our expectations. Although we are never pleased to have an asset impaired, we remain committed to conservatively record a diminution in value at the earliest appropriate time,” said Mr. Pasquale. “We are generally pleased with our portfolio and tenants’ performances, and remain cautiously optimistic that we will generally see continued improvement over the balance of this year.”
2005 GUIDANCE
We have modified our 2005 FFO guidance range excluding impairments to reflect the change in our methodology for calculating FFO and the separation charge in the first quarter. The change in the calculation of FFO to add back only real estate related depreciation and amortization instead of all depreciation and amortization consistent with the NAREIT definition causes a $0.01 reduction in our expected FFO per share and the separation charge results in an additional reduction of $0.01 per share. Our 2005 guidance range excluding impairments is between $1.70 per share and $1.76 per share based on a 2005 FFO guidance range of between $1.60 per share and $1.66 per share. Although management has reiterated its commitment to continue accretive acquisitions in 2005, this guidance incorporates no results from acquisitions besides the $65.2 million of acquisitions completed during the first quarter, nor does it incorporate the impact from any future capital transactions or any future impairments that might arise. While we would normally modify our guidance for completed investments, we will not do so now for our acquisition of JER’s interest in the joint venture pending the refinancing of our credit facility which has a post-acquisition balance of $335 million. This guidance also assumes asset sales with net proceeds during the year in a range of $50 million to $90 million. A reconciliation between net income, FFO and FFO before impairments for guidance purposes is included in the accompanying financial data.
CONFERENCE CALL INFORMATION
The Company has scheduled a conference call and webcast later today at 1:30 p.m. Pacific time in order to present the Company’s performance and operating results for the quarter ended March 31, 2005. The conference call is accessible by dialing (877) 356-5705 or by logging on to our website at http://www.nhp-reit.com/. The earnings release and any additional financial information that may be discussed on the conference call will also be available at the same location on our website. A digitized replay of the conference call will be available from 4:30 p.m. PDT that day until midnight Wednesday, May 18, 2005. Callers can access the replay be dialing (800) 642-1687 or (706) 645-9291 and entering conference ID number 385326. Webcast replays will also be available on our website for at least 12 months following the conference call.
Nationwide Health Properties, Inc. is a real estate investment trust that invests in senior housing and long-term care facilities. The Company has investments in 423 facilities in 39 states. For more information on Nationwide Health Properties, Inc., visit our website at http://www.nhp-reit.com/.
Certain information contained in this news release includes forward-looking statements. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are not statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. All forward-looking statements included in this news release are based on information available to us on the date hereof. These statements speak only as of the date hereof, and we assume no obligation to update such forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. 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: deterioration in the operating results or financial condition, including bankruptcies, of our tenants; occupancy levels at certain facilities; changes in the ratings of our debt securities; access to the capital markets and the cost of capital; government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs; the general distress of the healthcare industry; the effect of economic and market conditions and changes in interest rates; the amount and yield of any additional investments; our ability to meet acquisition goals; the ability of our operators to repay deferred rent or loans in future periods; the ability of our operators to obtain and maintain adequate liability and other insurance; our ability to attract new operators for certain facilities; our ability to sell certain facilities for their book value; changes in or inadvertent violations of tax laws and regulations and other factors that can affect real estate investment trusts and our status as a real estate investment trust; and the risk factors described in our annual report on Form 10-K filed with the SEC on February 24, 2005.
CONTACT: Abdo H. Khoury Senior Vice President & Acting CFO (949) 718-4400 NATIONWIDE HEALTH PROPERTIES, INC. STATEMENTS OF OPERATIONS MARCH 31, 2005 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Three Months Ended March 31, 2005 2004 Revenues: Rental income $48,946 $37,804 Interest and other income 2,495 3,177 51,441 40,981 Expenses: Interest & amortization of deferred financing costs 14,586 12,622 Depreciation and amortization 13,339 10,423 General and administrative 3,901 3,867 Impairment of assets 7,019 -- 38,845 26,912 Income before unconsolidated entity 12,596 14,069 Income from unconsolidated joint venture 847 412 Income from continuing operations 13,443 14,481 Discontinued operations Gain/(loss) on sale of facilities 33 -- Income/(loss) from discontinued operations (115) 75 (82) 75 Net income 13,361 14,556 Preferred stock dividends (3,982) (1,919) Income available to common stockholders $9,379 $12,637 Basic/diluted per share amounts available to common stockholders: Income from continuing operations $0.14 $0.19 Discontinued operations -- 0.01 Net income $0.14 $0.20 Weighted average shares outstanding 67,053 64,796 NATIONWIDE HEALTH PROPERTIES, INC. BALANCE SHEETS MARCH 31, 2005 (IN THOUSANDS) March 31, December 31, ASSETS 2005 2004 Investments in real estate: Real estate properties Land $193,790 $187,666 Buildings and improvements 1,719,039 1,665,290 1,912,829 1,852,956 Less accumulated depreciation (316,225) (303,766) 1,596,604 1,549,190 Mortgage loans receivable, net 75,032 75,453 Investment in unconsolidated joint venture 12,076 12,747 1,683,712 1,637,390 Cash and cash equivalents 9,184 8,473 Receivables 6,475 7,470 Assets held for sale 2,161 3,050 Other assets 49,459 53,728 $1,750,991 $1,710,111 LIABILITIES AND STOCKHOLDERS’ EQUITY Bank borrowings $246,000 $186,000 Senior notes due 2006 - 2038 452,000 470,000 Notes and bonds payable 194,988 187,409 Accounts payable and accrued liabilities 53,353 50,876 Total liabilities 946,341 894,285 Stockholders’ equity: Series A Preferred Stock 100,000 100,000 Series B Preferred Stock 106,450 106,450 Common stock 6,710 6,681 Capital in excess of par value 872,542 868,091 Cumulative net income 822,136 808,775 Cumulative dividends (1,103,188) (1,074,171) Total stockholders’ equity 804,650 815,826 $1,750,991 $1,710,111 NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Three Months Ended March 31, 2005 2004 Net income $13,361 $14,556 Preferred stock dividends (3,982) (1,919) Real estate related depreciation and amortization 13,172 10,346 Depreciation in income from joint venture 186 188 (Gain)/loss on sale of facilities (33) -- (Gain)/loss on sale of facility from joint venture (330) 77 Funds From Operations (“FFO”) available to common stockholders (1) 22,374 23,248 Impairments 7,169 -- FFO before impairments 29,543 23,248 Series B Preferred dividend add-back 2,062 -- Diluted FFO before impairments $31,605 $23,248 Weighted average shares outstanding 67,053 64,796 Series B Preferred Stock add-back 4,681 -- Diluted weighted average shares outstanding 71,734 64,796 Basic/diluted per share amounts: FFO $0.33 $0.36 FFO before impairments $0.44 $0.36 (1) We believe that funds from operations is an important supplemental measure of operating performance because it excludes the effect of depreciation and gains (losses) from sales of facilities (both of which are based on historical costs which may be of limited relevance in evaluating current performance). Additionally, funds from operations is widely used by industry analysts as a measure of operating performance for equity REITs. We therefore disclose funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We calculate funds from operations in accordance with the National Association of Real Estate Investment Trusts’ definition. Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity). NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 PORTFOLIO COMPOSITION EQUITY OWNERSHIP 96% MORTGAGE LOANS RECEIVABLE 4% 100% ASSISTED AND INDEPENDENT LIVING FACILITIES 55% SKILLED NURSING FACILITIES 37% CONTINUING CARE RETIREMENT COMMUNITIES 5% OTHER 3% 100% OWNED FACILITIES FACILITIES INVESTMENT ASSISTED & IND LIVING FACILITIES 167 $1,081,382,000 $79,760 PER UNIT SKILLED NURSING FACILITIES 181 687,696,000 $33,367 PER BED CONTINUING CARE RETIREMENT COM 6 76,613,000 $65,092 PER BED/UNIT SPECIALTY HOSPITALS 7 67,138,000 $221,578 PER BED 361 $1,912,829,000 MORTGAGE LOANS RECEIVABLE FACILITIES LOAN VALUE SKILLED NURSING FACILITIES 13 $47,437,000 $25,422 PER BED ASSISTED & IND LIVING FACILITIES 1 8,500,000 $67,460 PER UNIT CONTINUING CARE RETIREMENT COM 1 19,095,000 $44,614 PER BED/UNIT 15 $75,032,000 2005 2004 2003 TOTAL RENT COVERAGE - MATURE FACILITIES ASSISTED AND INDEPENDENT LIVING FACILITIES 1.3x 1.3x 1.3x SKILLED NURSING FACILITIES 2.0x 1.9x 1.7x CONTINUING CARE RETIREMENT COMMUNITIES 1.5x 1.6x 1.6x OCCUPANCY - MATURE FACILITIES ASSISTED AND INDEPENDENT LIVING FACILITIES 88% 89% 88% SKILLED NURSING FACILITIES 79% 80% 82% CONTINUING CARE RETIREMENT COMMUNITIES 92% 89% 89% PERCENT PRIVATE PAY AND MEDICARE ASSISTED AND INDEPENDENT LIVING FACILITIES 100% 100% 100% SKILLED NURSING FACILITIES 41% 34% 31% NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 INVESTMENT BY OPERATOR (excluding assets held for sale) NUMBER OF INVESTMENT PERCENT OF PERCENT OF FACILITIES AMOUNT INVESTMENT REVENUES ALTERRA HEALTHCARE CORPORATION 54 $194,518,000 10% 10% AMERICAN RETIREMENT CORPORATION* 16 186,656,000 9% 10% EMERITUS CORPORATION* 23 179,467,000 9% 7% ATRIA SENIOR LIVING GROUP 17 124,583,000 6% 9% LAUREATE GROUP 8 105,921,000 5% 4% BEVERLY ENTERPRISES, INC.* 28 99,985,000 5% 7% EPOCH SENIOR LIVING, INC. 10 94,346,000 5% 4% COMPLETE CARE SERVICES 35 73,336,000 4% 4% LIFE CARE CENTERS OF AMERICA, INC. 10 61,389,000 3% 3% SENIOR SERVICES OF AMERICA 9 60,533,000 3% 2% AMERICAN SENIOR LIVING 10 58,888,000 3% 3% NEXION HEALTH MANAGEMENT, INC. 17 48,757,000 3% 3% HEALTHSOUTH CORPORATION* 2 45,645,000 2% 2% THE NEWTON GROUP, LLC 4 42,422,000 2% 2% LIBERTY HEALTHCARE 11 41,246,000 2% 2% OTHER - PUBLIC COMPANIES 10 45,718,000 2% 3% OTHER 112 524,451,000 27% 25% 376 $1,987,861,000 100% 100% * PUBLIC COMPANY SECURITY DEPOSITS BANK LETTERS OF CREDIT $40,914,000 CASH DEPOSITS 16,786,000 $57,700,000 CURRENT CAPITALIZATION REVOLVING BANK LINE OF CREDIT (MATURES 4/07) $246,000,000 12% SENIOR DEBT 646,988,000 32% EQUITY (UNDEPRECIATED BOOK BASIS) 1,120,875,000 56% $2,013,863,000 DEBT COMPOSITION WEIGHTED AMOUNT RATE FIXED RATE $624,228,000 7.4% FLOATING RATE $22,760,000 2.3% FLOATING RATE REVOLVING BANK LINE OF CREDIT $246,000,000 5.75% Prime/3.95% LIBOR CURRENT QUARTER ACQUISITIONS/EXPENDITURES FACILITIES INVESTMENT SKILLED NURSING FACILITIES 12 $50,229,000 $44,807 PER BED ASSISTED & IND LIVING FACILITIES 2 14,270,000 $109,769 PER UNIT EARNOUT -- 700,000 CAPITAL EXPENDITURES -- 1,668,000 14 $66,867,000 NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 MEDIUM TERM NOTE MATURITIES WEIGHTED YEAR AMOUNT RATE Q4 2006 63,500,000 7.4% Q1 2007 25,000,000 7.4% Q2 2007 60,000,000 7.4% Q4 2007 55,000,000 (1) 6.9% Q1 2008 25,000,000 8.5% Q3 2008 40,000,000 (2) 6.6% Q4 2008 33,500,000 (3) 7.6% 2009 50,000,000 7.8% 2010 -- -- 2011 -- -- 2012 100,000,000 8.3% THEREAFTER -- -- $452,000,000 7.6% (1) Includes $55,000,000 of 6.9% MTNs putable October of 2007, ’09, ’12, ’17, ’27 with a final maturity in 2037. (2) Includes $40,000,000 of 6.59% MTNs putable July of 2008, ’13, ’18, ’23, ’28 with a final maturity in 2038. (3) Includes $33,500,000 of 7.6% MTNs putable November of 2008, ’13, ’18, ’23 with a final maturity in 2028. NOTES AND BONDS PAYABLE MATURITIES WEIGHTED YEAR AMOUNT RATE Q3 2005 $1,431,000 7.6% Q4 2005 13,124,000 7.6% 2010 10,328,000 8.6% 2011 5,932,000 7.7% 2012 34,857,000 7.6% 2013 43,401,000 6.0% 2014 -- -- THEREAFTER 85,915,000 5.3% $194,988,000 6.3% LEASE EXPIRATIONS MINIMUM NUMBER OF YEAR RENT FACILITIES 2005 3,250,000 6 2006 7,152,000 21 2007 6,316,000 14 2008 2,451,000 5 2009 3,148,000 8 2010 12,239,000 25 2011 4,828,000 15 2012 18,139,000 21 2013 15,240,000 31 2014 25,495,000 33 THEREAFTER 88,664,000 182 $186,922,000 361 NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 MORTGAGE LOAN RECEIVABLE PRINCIPAL PAYMENTS PRINCIPAL NUMBER YEAR PAYMENTS OF FACILITIES 2005 626,000 -- 2006 5,433,000 2 2007 9,191,000 1 2008 5,557,000 1 2009 859,000 -- 2010 1,005,000 -- 2011 4,993,000 2 2012 1,222,000 -- 2013 9,850,000 -- 2014 1,489,000 -- THEREAFTER 34,956,000 9 $75,181,000 15 JOINT VENTURE INFORMATION FOR THE PERIOD ENDED MARCH 31, 2005 (dollars in thousands) NHP has a 25% interest in a joint venture that owns 46 assisted living facilities operated by Alterra. In addition to its share of the income, NHP receives a management fee of 2.5% of the joint venture revenues. This fee is included in general and administrative expense below. INCOME STATEMENT Three Months Ended March 31, 2005 Rental income $3,681 Expenses: Interest and amortization of deferred financing costs 1,096 Depreciation and amortization 740 General and administrative 169 2,005 Income from continuing operations 1,676 Discontinued operations Gain on sale 1,320 Income from discontinued operations 20 1,340 Net income $3,016 BALANCE SHEET ASSETS LIABILITIES AND EQUITY Real estate: Notes and bonds payable $60,315 Accounts payable and Land $12,335 accr. liab. 3,557 Buildings and improvements 103,413 115,748 Less accumulated Equity: depreciation (8,236) Capital Contributions 65,501 107,512 Distributions (36,625) Cash and cash equivalents 3,875 Cumulative net income 19,431 Other assets 792 Total equity 48,307 $112,179 $112,179 NATIONWIDE HEALTH PROPERTIES, INC. SUPPLEMENTAL ANALYST INFORMATION MARCH 31, 2005 RECONCILIATION OF 2005 NET INCOME GUIDANCE TO 2005 FFO GUIDANCE Low High Net income $1.41 $1.28 Less: preferred dividends (0.11) (0.11) Real estate related depreciation and amortization 0.70 0.71 Depreciation in joint venture 0.01 0.01 Less: gains on sale (0.30) (0.12) Impairment of assets (0.10) (0.10) Separation charge related to former CFO (0.01) (0.01) Funds from operations 1.60 1.66 Impairment of assets 0.10 0.10 FFO before impairment and separation charges $1.70 $1.76 RECONCILIATION OF FFO ACCORDING TO THE NAREIT DEFINITION TO PREVIOUSLY REPORTED FFO Year Ended December 31, 2004 2003 Net income $74,822 $53,442 Preferred stock dividends (11,802) (7,677) Real estate related depreciation and amortization 47,541 42,966 Depreciation in income from joint venture 745 751 (Gain)/loss on sale of facilities (3,750) 2,725 (Gain)/loss on sale of facility from joint venture 116 -- FFO $107,672 $92,207 FFO previously reported $108,298 $92,728 Variance ($626) ($521) Basic/Diluted FFO per share $1.63 $1.66 Basic/Diluted FFO per share previously reported $1.64 $1.67 Variance ($0.01) ($0.01) Weighted average shares outstanding 66,211 55,654
Nationwide Health Properties, Inc.
CONTACT: Abdo H. Khoury, Senior Vice President & Acting CFO ofNationwide Health Properties, Inc., +1-949-718-4400
Web site: http://www.nhp-reit.com/