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HCP Inc. (HCP) Q3 FFO Beats, to Sell Assets to Blackstone
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HCP Inc. (HCP - Free Report) – a healthcare real estate investment trust (“REIT”) – reported third-quarter 2016 adjusted funds from operations (“FFO”) per share of 72 cents, beating the Zacks Consensus Estimate of 71 cents.
Results were driven by better-than-expected growth in revenues. However, adjusted FFO per share was down 7 cents from a year ago.
The company posted revenues of $654.3 million, which beat the Zacks Consensus Estimate of $624 million. However, it compared unfavorably with the year-ago number of $657.5 million.
Importantly, HCP completed the spin-off of Quality Care Properties, Inc. (QCP) on Oct 31, 2016. The company also entered into definitive deals for selling 64 communities triple-net leased to Brookdale Senior Living, Inc. for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII L.P.
Behind the Headlines
HCP attained year-over-year three-month cash same property portfolio net operating income (NOI) growth of 3.1%, excluding QCP. Results were backed by solid life science and senior housing operating portfolio performance.
The company executed 991,000 square feet of leasing in its life science and medical office portfolios, comprising 429,000 square feet of new leases and 562,000 square feet of renewals. Leasing efforts helped bring Phase I of The Cove to 73% leased and Phase II to 50% pre-leased.
HCP completed $254 million of acquisitions during the reported quarter and through Oct 31, 2016. Year to date, the company’s investments totaled $711 million. On the other hand, during the third quarter and through Oct 31, 2016, the company announced $204 million of additional dispositions. Notably, for full-year 2016, the company projects to generate around $1.3 billion of proceeds from dispositions.
HCP exited third-quarter 2016 with cash and cash equivalents of $132.9 million, down from $346.5 million at the end of 2015. It ended the quarter with $1.4 billion drawn on its revolving line of credit facility and $0.6 billion of remaining capacity.
Brookdale Asset Deals
HCP signed definitive agreements for selling 64 communities triple-net leased to Brookdale for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII L.P. The deal is anticipated to close in first-quarter 2017 and the company plans to repay debt with the proceeds.
Further, the company has settled with Brookdale to sell or transition 25 triple-net leased assets in the next 12 months as well as shift eight expiring Brookdale leases to RIDEA structures. These moves are aimed at reduction of the company’s tenant concentration and improved lease coverage.
Outlook
HCP projects 2016 adjusted FFO per share in the range of $2.69–$2.75. This reflects the QCP spin-off accomplished recently. The company anticipates 2016 same property portfolio cash net operating income growth, excluding QCP, in the range of 2.75–3.75%. The Zacks Consensus Estimate for 2016 is currently pegged at $2.83.
For 2017, the company estimates adjusted FFO per share of $1.89–$1.95. Presently, the Zacks Consensus Estimate for 2017 is currently pegged at $2.63.
Conclusion
We believe that HCP stands to benefit from its diversified portfolio, rise in healthcare spending and an aging population over the long run. Strategic investments, tie ups and opportunistic acquisitions are likely to drive decent cash flow. Yet, cutthroat competition and any rise in interest rate continue to pose challenges before the company.
Investors interested in the REIT industry may consider stocks like Duke Realty Corp. , Mack-Cali Realty Corp. and Ventas, Inc. (VTR - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy).
Note: FFO, 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. All EPS numbers presented in this write up represent FFO per share.
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HCP Inc. (HCP) Q3 FFO Beats, to Sell Assets to Blackstone
HCP Inc. (HCP - Free Report) – a healthcare real estate investment trust (“REIT”) – reported third-quarter 2016 adjusted funds from operations (“FFO”) per share of 72 cents, beating the Zacks Consensus Estimate of 71 cents.
Results were driven by better-than-expected growth in revenues. However, adjusted FFO per share was down 7 cents from a year ago.
The company posted revenues of $654.3 million, which beat the Zacks Consensus Estimate of $624 million. However, it compared unfavorably with the year-ago number of $657.5 million.
Importantly, HCP completed the spin-off of Quality Care Properties, Inc. (QCP) on Oct 31, 2016. The company also entered into definitive deals for selling 64 communities triple-net leased to Brookdale Senior Living, Inc. for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII L.P.
Behind the Headlines
HCP attained year-over-year three-month cash same property portfolio net operating income (NOI) growth of 3.1%, excluding QCP. Results were backed by solid life science and senior housing operating portfolio performance.
The company executed 991,000 square feet of leasing in its life science and medical office portfolios, comprising 429,000 square feet of new leases and 562,000 square feet of renewals. Leasing efforts helped bring Phase I of The Cove to 73% leased and Phase II to 50% pre-leased.
HCP completed $254 million of acquisitions during the reported quarter and through Oct 31, 2016. Year to date, the company’s investments totaled $711 million. On the other hand, during the third quarter and through Oct 31, 2016, the company announced $204 million of additional dispositions. Notably, for full-year 2016, the company projects to generate around $1.3 billion of proceeds from dispositions.
HCP exited third-quarter 2016 with cash and cash equivalents of $132.9 million, down from $346.5 million at the end of 2015. It ended the quarter with $1.4 billion drawn on its revolving line of credit facility and $0.6 billion of remaining capacity.
Brookdale Asset Deals
HCP signed definitive agreements for selling 64 communities triple-net leased to Brookdale for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII L.P. The deal is anticipated to close in first-quarter 2017 and the company plans to repay debt with the proceeds.
Further, the company has settled with Brookdale to sell or transition 25 triple-net leased assets in the next 12 months as well as shift eight expiring Brookdale leases to RIDEA structures. These moves are aimed at reduction of the company’s tenant concentration and improved lease coverage.
Outlook
HCP projects 2016 adjusted FFO per share in the range of $2.69–$2.75. This reflects the QCP spin-off accomplished recently. The company anticipates 2016 same property portfolio cash net operating income growth, excluding QCP, in the range of 2.75–3.75%. The Zacks Consensus Estimate for 2016 is currently pegged at $2.83.
For 2017, the company estimates adjusted FFO per share of $1.89–$1.95. Presently, the Zacks Consensus Estimate for 2017 is currently pegged at $2.63.
Conclusion
We believe that HCP stands to benefit from its diversified portfolio, rise in healthcare spending and an aging population over the long run. Strategic investments, tie ups and opportunistic acquisitions are likely to drive decent cash flow. Yet, cutthroat competition and any rise in interest rate continue to pose challenges before the company.
HCP currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HCP INC Price, Consensus and EPS Surprise
HCP INC Price, Consensus and EPS Surprise | HCP INC Quote
Investors interested in the REIT industry may consider stocks like Duke Realty Corp. , Mack-Cali Realty Corp. and Ventas, Inc. (VTR - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy).
Note: FFO, 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. All EPS numbers presented in this write up represent FFO per share.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>