WELLTOWER INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2009
Commission File
No. 1-8923
HEALTH CARE REIT,
INC.
(Exact name of registrant as
specified in its charter)
|
Delaware
(State or other jurisdiction of incorporation or organization) |
34-1096634
(I.R.S. Employer Identification Number) |
|
|
One SeaGate, Suite 1500, Toledo, Ohio
(Address of principal executive office) |
43604
(Zip Code) |
(419) 247-2800
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
|
Common Stock, $1.00 par value
|
New York Stock Exchange | |
|
7.875% Series D Cumulative
Redeemable Preferred Stock, $1.00 par value |
New York Stock Exchange | |
|
7.625% Series F Cumulative
Redeemable Preferred Stock, $1.00 par value |
New York Stock Exchange | |
|
7.5% Series G Cumulative
Convertible Preferred Stock, $1.00 par value |
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes
o
No
þ
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; and (2) has been subject to such filing
requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment of this
Form 10-K.
þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the
Act). Yes
o
No
þ
The aggregate market value of the shares of voting common stock
held by non-affiliates of the registrant, computed by reference
to the closing sales price of such shares on the New York Stock
Exchange as of the last business day of the registrant’s
most recently completed second fiscal quarter was $3,811,648,657.
As of February 12, 2010, there were 123,687,306 shares
of common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for
the annual stockholders’ meeting to be held May 6,
2010, are incorporated by reference into Part III.
HEALTH
CARE REIT, INC.
2009 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
2009 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Table of Contents
| Item 1. | Business |
General
Health Care REIT, Inc., an S&P 500 company with
headquarters in Toledo, Ohio, is a real estate investment trust
(“REIT”) that invests in senior housing and health
care real estate. We also provide an extensive array of property
management and development services. As of December 31,
2009, our broadly diversified portfolio consisted of 590
properties in 39 states. Founded in 1970, we were the first
real estate investment trust to invest exclusively in health
care facilities. More information is available on the Internet
at www.hcreit.com.
Our primary objectives are to protect stockholder capital and
enhance stockholder value. We seek to pay consistent cash
dividends to stockholders and create opportunities to increase
dividend payments to stockholders as a result of annual
increases in rental and interest income and portfolio growth. To
meet these objectives, we invest in the full spectrum of senior
housing and health care real estate and diversify our investment
portfolio by property type, operator/tenant and geographic
location.
Depending upon the availability and cost of external capital, we
believe our liquidity is sufficient to fund operations, meet
debt service obligations (both principal and interest), make
dividend distributions and complete construction projects in
process. We also continue to evaluate opportunities to finance
future investments. New investments are generally funded from
temporary borrowings under our unsecured line of credit
arrangement, internally generated cash and the proceeds from
sales of real property. Our investments generate internal cash
from rent and interest receipts and principal payments on loans
receivable. Permanent financing for future investments, which
replaces funds drawn under the unsecured line of credit
arrangement, has historically been provided through a
combination of public and private offerings of debt and equity
securities and the incurrence or assumption of secured debt.
References herein to “we,” “us,”
“our” or the “Company” refer to Health Care
REIT, Inc. and its subsidiaries unless specifically noted
otherwise.
Portfolio
of Properties
The following table summarizes our portfolio as of
December 31, 2009:
|
Investments
|
Percentage of
|
Number of
|
# Beds/Units
|
Investment per
|
||||||||||||||||||||
|
Type of Property
|
(In thousands) | Investments | Properties | or Sq. Ft. | metric (1) | States | ||||||||||||||||||
|
Independent living/CCRCs
|
$ | 1,210,005 | 19.8 | % | 50 | 7,046 units | $ | 174,552 per unit | 19 | |||||||||||||||
|
Assisted living facilities
|
1,312,167 | 21.6 | % | 179 | 11,116 units | 119,273 per unit | 30 | |||||||||||||||||
|
Skilled nursing facilities
|
1,496,360 | 24.6 | % | 214 | 28,692 beds | 52,153 per bed | 26 | |||||||||||||||||
|
Hospitals
|
639,930 | 10.5 | % | 29 | 1,716 beds | 461,084 per bed | 13 | |||||||||||||||||
|
Medical office buildings
|
1,427,341 | 23.5 | % | 118 | 5,634,181 sq. ft. | 259 per sq. ft. | 23 | |||||||||||||||||
|
Totals
|
$ | 6,085,803 | 100.0 | % | 590 | 39 | ||||||||||||||||||
| (1) | Investment per metric was computed by using the total investment amount of $6,299,748,000 which includes real estate investments and unfunded construction commitments for which initial funding has commenced which amounted to $6,085,803,000 and $213,945,000, respectively. |
Property
Types
Our property types include investment properties and medical
office buildings. Under the investment property segment, we
invest in senior housing and health care real estate through
acquisition and financing of primarily single tenant properties.
Properties acquired are typically leased under
triple-net
leases. We are not involved in the management of our investment
properties. Our primary investment property types include
independent living/
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Table of Contents
continuing care retirement communities, assisted living
facilities, skilled nursing facilities and hospitals. The
medical office building segment is primarily self-managed and
consists of health care related properties acquired or developed
for the medical profession. The medical office building leases
have lease terms that typically include fixed increasers and
operating expense reimbursement. Our properties include
stand-alone facilities that provide one level of service,
combination facilities that provide multiple levels of service,
and communities or campuses that provide a wide range of
services. The following is a summary of our various property
types.
Independent
Living/Continuing Care Retirement Communities
These communities may include one or more of the following
property types.
Independent Living Facilities.
Independent
living facilities are age-restricted, multifamily properties
with central dining facilities that provide residents access to
meals and other services such as housekeeping, linen service,
transportation and social and recreational activities.
Continuing Care Retirement
Communities.
Continuing care retirement
communities include a combination of detached homes, an
independent living facility, an assisted living facility
and/or
a
skilled nursing facility on one campus. These communities are
appealing to residents because there is no need for relocating
when health and medical needs change. Resident payment plans
vary, but can include entrance fees, condominium fees and rental
fees. Many of these communities also charge monthly maintenance
fees in exchange for a living unit, meals and some health
services.
Early Stage Senior Housing.
Early stage senior
housing communities contain primarily for-sale single-family
homes, townhomes, cluster homes, mobile homes
and/or
condominiums with no specialized services. These communities are
typically restricted or targeted to adults at least
55 years of age or older. Residents generally lead an
independent lifestyle. Communities may include amenities such as
a clubhouse, golf course and recreational spaces.
Assisted
Living Facilities
Assisted living facilities are state regulated rental properties
that provide the same services as independent living facilities,
but also provide supportive care from trained employees to
residents who require assistance with activities of daily
living, including management of medications, bathing, dressing,
toileting, ambulating and eating.
Alzheimer’s/Dementia Care
Facilities.
Certain assisted living facilities
may include state licensed settings that specialize in caring
for those afflicted with Alzheimer’s disease
and/or
similar forms of dementia.
Skilled
Nursing Facilities
Skilled nursing facilities are licensed daily rate or rental
properties where the majority of individuals require
24-hour
nursing
and/or
medical care. Generally, these properties are licensed for
Medicaid
and/or
Medicare reimbursement.
Hospitals
Our hospitals generally include acute care hospitals, inpatient
rehabilitation hospitals, and long-term acute care hospitals.
Acute care hospitals provide a wide range of inpatient and
outpatient services, including, but not limited to, surgery,
rehabilitation, therapy and clinical laboratories. Inpatient
rehabilitation hospitals provide inpatient services for patients
with intensive rehabilitation needs. Long-term acute care
hospitals provide inpatient services for patients with complex
medical conditions that require more intensive care, monitoring
or emergency support than is available in most skilled nursing
facilities.
Medical
Office Buildings
The medical office building portfolio consists of health care
related buildings that include physician offices, ambulatory
surgery centers, diagnostic facilities or labs. Our portfolio
has a strong affiliation with health systems:
4
Table of Contents
approximately 75% of the buildings are either located on campus
or affiliated with hospitals through a satellite location.
Investments
We invest in senior housing and health care real estate. We
diversify our investment portfolio by property type,
operator/tenant and geographic location. In determining whether
to invest in a property, we focus on the following: (1) the
experience of the obligor’s management team; (2) the
historical and projected financial and operational performance
of the property; (3) the credit of the obligor;
(4) the security for the lease or loan; and (5) the
capital committed to the property by the obligor. We conduct
market research and analysis for all potential investments. In
addition, we review the value of all properties, the interest
rates and covenant requirements of any debt to be assumed and
the anticipated sources of repayment of any existing debt that
is not to be assumed.
We monitor our investments through a variety of methods
determined by the type of property. Our asset management process
for investment properties generally includes review of monthly
financial statements and other operating data for each property,
periodic review of obligor creditworthiness, periodic property
inspections and review of covenant compliance relating to
licensure, real estate taxes, letters of credit and other
collateral. Our internal property management division actively
manages and monitors the medical office building portfolio with
a comprehensive process including tenant relations, tenant lease
expirations, the mix of health service providers,
hospital/health system relationships, property performance,
capital improvement needs and market conditions among other
things. In monitoring our portfolio, our personnel use a
proprietary database to collect and analyze property-specific
data. Additionally, we conduct extensive research to ascertain
industry trends and risks.
Through asset management and research, we evaluate the operating
environment in each property’s market to determine whether
payment risk is likely to increase. When we identify
unacceptable levels of payment risk, we seek to mitigate,
eliminate or transfer the risk. We categorize the risk as
obligor, property or market risk. For obligor risk, we typically
find a substitute operator/tenant to run the property. For
property risk, we usually work with the operator/tenant to
institute property-level management changes to address the risk.
Finally, for market risk, we often encourage an obligor to
change its capital structure, including refinancing the property
or raising additional equity. Through these asset management and
research efforts, we are generally able to intervene at an early
stage to address payment risk, and in so doing, support both the
collectability of revenue and the value of our investment.
Depending upon market conditions, we believe that new
investments will be available in the future with spreads over
our cost of capital that will generate appropriate returns to
our stockholders.
Segment
Reporting
Our business consists of two business segments —
investment properties and medical office buildings. For
additional information regarding business segments, see
Note 18 to our audited consolidated financial statements.
Investment
Properties
Real Property.
Our investment properties are
those in which we do not participate in the management of the
property and are primarily land, building, improvements and
related rights that are leased to operators under long-term
operating leases. The net value of our investment properties
(excluding construction in progress) aggregated approximately
$3,795,765,000 at December 31, 2009. The leases generally
have a fixed contractual term of 12 to 15 years and contain
one or more five to
15-year
renewal options. Most of our rents are received under
triple-net
leases requiring the operator to pay rent and all additional
charges incurred in the operation of the leased property. The
tenants are required to repair, rebuild and maintain the leased
properties. Substantially all of these operating leases are
designed with either fixed or contingent escalating rent
structures. Leases with fixed annual rental escalators are
generally recognized on a straight-line basis over the initial
lease period, subject to a collectability assessment. Rental
income related to leases with contingent rental escalators is
generally recorded based on the contractual cash rental payments
due for the period.
At December 31, 2009, 84% of our investment properties was
subject to master leases. A master lease is a lease of multiple
properties to one tenant entity under a single lease agreement.
From time to time, we may acquire
5
Table of Contents
additional properties that are then leased to the tenant under
the master lease. The tenant is required to make one monthly
payment that represents rent on all the properties that are
subject to the master lease. Typically, the master lease tenant
can exercise its right to purchase the properties or to renew
the master lease only with respect to all leased properties at
the same time. This bundling feature benefits us because the
tenant cannot limit the purchase or renewal to the better
performing properties and terminate the leasing arrangement with
respect to the poorer performing properties. This spreads our
risk among the entire group of properties within the master
lease. The bundling feature may provide a similar advantage if
the master lease tenant is in bankruptcy. Subject to certain
restrictions, a debtor in bankruptcy has the right to assume or
reject each of its leases. It is our intent that a tenant in
bankruptcy would be required to assume or reject the master
lease as a whole, rather than deciding on a property by property
basis.
Construction.
We currently provide for the
construction of properties for tenants as part of long-term
operating leases. We capitalize certain interest costs
associated with funds used to pay for the construction of
properties owned by us. The amount capitalized is based upon the
amount advanced during the construction period using the rate of
interest that approximates our cost of financing. Our interest
expense is reduced by the amount capitalized. We also typically
charge a transaction fee at the commencement of construction
which we defer and amortize to income over the term of the
resulting lease. The construction period commences upon funding
and terminates upon the earlier of the completion of the
applicable property or the end of a specified period. During the
construction period, we advance funds to the tenants in
accordance with agreed upon terms and conditions which require,
among other things, periodic site visits by a Company
representative. During the construction period, we generally
require an additional credit enhancement in the form of payment
and performance bonds
and/or
completion guaranties. At December 31, 2009, we had
outstanding construction investments of $435,334,000 and were
committed to providing additional funds of approximately
$184,848,000 to complete construction for investment properties.
Real Estate Loans.
Our real estate loans are
typically structured to provide us with interest income,
principal amortization and transaction fees and are generally
secured by a first, second or third mortgage lien, leasehold
mortgage, corporate guaranties
and/or
personal guaranties. At December 31, 2009, we had
outstanding real estate loans of $427,363,000. The interest
yield averaged approximately 7.96% per annum on our outstanding
real estate loan balances. Our yield on real estate loans
depends upon a number of factors, including the stated interest
rate, average principal amount outstanding during the term of
the loan and any interest rate adjustments. The real estate
loans outstanding at December 31, 2009 are generally
subject to three to
20-year
terms with principal amortization schedules
and/or
balloon payments of the outstanding principal balances at the
end of the term. Typically, real estate loans are
cross-defaulted and cross-collateralized with other real estate
loans, operating leases or agreements between us and the obligor
and its affiliates.
Medical
Office Buildings
Our medical office building portfolio is primarily self-managed
and consists principally of multi-tenant properties leased to
health care providers. Our leases have favorable lease terms
that typically include fixed increasers and some form of
operating expense reimbursement by the tenant. As of
December 31, 2009 87% of our portfolio included leases with
full pass thru, 10% with a partial expense reimbursement
(modified gross) and 3% with no expense reimbursement (gross).
Our medical office building leases are non-cancellable operating
leases that have a weighted average remaining term of six years
at December 31, 2009 and are normally credit enhanced by
guaranties
and/or
letters of credit. The net value of our medical office buildings
(excluding construction in progress) aggregated approximately
$1,405,843,000 at December 31, 2009. We also had
outstanding construction investments of $21,498,000 and expected
to provide additional funds of approximately $29,097,000 to
complete construction for medical office buildings.
Development
Services Group
Through our subsidiary, HCN Development Services Group, Inc.
(“DSG”), we provide services such as property
development, facility and medical equipment planning and
implementation services to health care systems, physician groups
and third party medical property owners. Formerly known as
Hospital Affiliates Development Corporation or “HADC,”
DSG develops and constructs new
“build-to-suit”
and multi-tenant facilities
6
Table of Contents
for us, and in some instances, for third parties who are
expected to develop long-term relationships with the Company.
Equity
Investments
Equity investments at December 31, 2009 and 2008 include an
investment in a public company that has a readily determinable
fair market value. We classify this equity investment as
available-for-sale
and, accordingly, record this investment at its fair market
value with unrealized gains and losses included in accumulated
other comprehensive income, a separate component of
stockholders’ equity. Equity investments at
December 31, 2009 and 2008 also include an investment in a
private company. We do not have the ability to exercise
influence over the company, so the investment is accounted for
under the cost method. Under the cost method of accounting,
investments in private companies are carried at cost and are
adjusted only for
other-than-temporary
declines in fair value, return of capital and additional
investments. These equity investments represented a minimal
ownership interest in these companies. Additionally, equity
investments at December 31, 2009 include an investment in
an unconsolidated joint venture.
Investments in Unconsolidated Joint
Ventures.
Investments in entities which we do not
consolidate but for which we have the ability to exercise
significant influence over operating and financial policies are
reported under the equity method of accounting. Under the equity
method of accounting, our share of the investee’s earnings
or losses is included in our consolidated results of operations.
The initial carrying value of investments in unconsolidated
joint ventures is based on the amount paid to purchase the joint
venture interest or the estimated fair value of the assets prior
to the sale of interests in the joint venture. We evaluate our
equity method investments for impairment based upon a comparison
of the estimated fair value of the equity method investment to
its carrying value. When we determine a decline in the estimated
fair value of such an investment below its carrying value is
other-than-temporary,
an impairment is recorded.
Borrowing
Policies
We utilize a combination of debt and equity to fund the purchase
of new properties and to provide loan financing. Our debt and
equity levels are determined by management to maintain a
conservative credit profile. Generally, we intend to issue
unsecured, fixed rate public debt with long-term maturities to
approximate the maturities on our leases and loans. For
short-term purposes, we may borrow on our unsecured line of
credit arrangement. We replace these borrowings with long-term
capital such as senior unsecured notes, common stock or
preferred stock. When terms are deemed favorable, we may invest
in properties subject to existing mortgage indebtedness. In
addition, we may obtain secured financing for unleveraged
properties in which we have invested or may refinance properties
acquired on a leveraged basis. It is our intent to limit secured
indebtedness. In our agreements with our lenders, we are subject
to restrictions with respect to secured and unsecured
indebtedness.
Competition
We compete with other real estate investment trusts, real estate
partnerships, private equity and hedge fund investors, banks,
insurance companies, finance/investment companies,
government-sponsored agencies, taxable and tax-exempt bond
funds, health care operators, developers and other investors in
the acquisition, development, leasing and financing of health
care and senior housing properties. Some of our competitors are
larger with greater resources and lower costs of capital than
us. Increased competition inhibits our ability to identify and
successfully complete investments. We compete for investments
based on a number of factors including rates, financings
offered, underwriting criteria and reputation. Our ability to
successfully compete is also impacted by economic and population
trends, availability of acceptable investment opportunities, our
ability to negotiate beneficial investment terms, availability
and cost of capital, construction and renovation costs and new
and existing laws and regulations.
The operators/tenants of our properties compete on a local and
regional basis with operators/tenants of properties that provide
comparable services. Operators/tenants compete for patients and
residents based on a number of factors including quality of
care, reputation, physical appearance of properties, services
offered, family preferences, physicians, staff and price. We
also face competition from other health care facilities for
tenants, such as physicians and other health care providers that
provide comparable facilities and services.
7
Table of Contents
For additional information on the risks associated with our
business, please see “Item 1A — Risk
Factors” of this Annual Report on
Form 10-K.
Employees
As of December 31, 2009, we had 217 employees.
Customer
Concentrations
The following table summarizes certain information about our
customer concentrations as of December 31, 2009 (dollars in
thousands):
|
Number of
|
Total
|
Percent of
|
||||||||||
| Properties | Investment | Investment(1) | ||||||||||
|
Concentration by investment:
|
||||||||||||
|
Senior Living Communities, LLC
|
10 | $ | 419,406 | 7 | % | |||||||
|
Brookdale Senior Living, Inc
|
86 | 310,126 | 5 | % | ||||||||
|
Signature Healthcare LLC
|
32 | 270,775 | 5 | % | ||||||||
|
Emeritus Corporation
|
21 | 241,288 | 4 | % | ||||||||
|
Life Care Centers of America, Inc.
|
18 | 204,558 | 3 | % | ||||||||
|
Remaining portfolio
|
423 | 4,639,650 | 76 | % | ||||||||
|
Totals
|
590 | $ | 6,085,803 | 100 | % | |||||||
| (1) | Investments with our top five customers comprised 25% of total investments at December 31, 2008. |
Certain
Government Regulations
Health
Law Matters — Generally
Typically, operators of assisted living and independent living
facilities do not receive significant funding from governmental
programs and are regulated by the applicable state, not the
federal government. Operators of skilled nursing facilities and
hospitals do receive significant funding from governmental
programs and are subject to federal and state laws that regulate
the type and quality of the medical
and/or
nursing care provided, ancillary services (e.g., respiratory,
occupational, physical and infusion therapies), qualifications
of the administrative personnel and nursing staff, the adequacy
of the physical plant and equipment, reimbursement and rate
setting and operating policies. In addition, as described below,
operators are subject to extensive laws and regulations
pertaining to health care fraud and abuse, including kickbacks,
physician self-referrals and false claims. Hospitals, physician
group practice clinics, and other health care providers that
operate in our portfolio are subject to extensive federal, state
and local licensure, certification, and inspection laws and
regulations. Our tenants’ failure to comply with any of
these laws could result in loss of accreditation, denial of
reimbursement, imposition of fines, suspension or
decertification or exclusion from federal and state health care
programs, loss of license or closure of the facility.
Licensing
and Certification
The primary regulations that affect assisted living facilities
are state licensing laws. In granting and renewing these
licenses, the regulatory authorities consider numerous factors
relating to a property’s physical plant and operations
including, but not limited to, admission and discharge standards
and staffing and training. A decision to grant or renew a
license is also affected by a property’s record with
respect to patient and consumer rights and medication guidelines
and rules. Certain of the senior housing facilities mortgaged to
or owned by us may require the resident to pay an entrance or
upfront fee, a portion of which may be refundable. These
entrance fee communities are subject to significant state
regulatory oversight, including, for example, oversight of each
facility’s financial condition, establishment and
monitoring of reserve requirements and other financial
restrictions, the right of residents to cancel their contracts
within a specified period of time, lien rights in favor of
residents, restrictions on change of ownership and similar
matters. Such oversight and the rights of residents within these
8
Table of Contents
entrance fee communities may have an effect on the revenue or
operations of the operators of such facilities and therefore may
adversely affect us.
Skilled nursing facilities are subject to a variety of licensure
and certificate of need (“CON”) laws and regulations.
CON laws in those states that have them generally require a
facility to demonstrate the need for constructing a new
facility, adding beds or expanding an existing facility,
investing in major capital equipment or adding new services,
changing the ownership or control of an existing licensed
facility, or terminating services that have been previously
approved through the CON process. The CON laws and regulations
may restrict the ability of operators to add new properties or
expand an existing facility’s size or services. In
addition, CON laws may constrain the ability of an operator to
transfer responsibility for operating a particular facility to a
new operator. If we have to replace a barred property operator
(as discussed below), our ability to replace the operator may be
affected by CON rules and policies governing changes in control.
With respect to licensure, generally our skilled nursing
facilities and hospitals are required to be licensed and
certified for participation in the Medicare, Medicaid, and other
federal health care programs. This generally requires license
renewals and compliance surveys on an annual or bi-annual basis.
The failure of our operators to maintain or renew any required
license or regulatory approval or the failure to correct serious
survey deficiencies identified in compliance surveys could
prevent them from continuing operations at a property. In
addition, if a property is found out of compliance with the
conditions of participation in Medicare, Medicaid or other
health care programs, the property may be barred from
participation in government reimbursement programs. Any of these
occurrences may impair the ability of our operators to meet
their obligations to us. If we have to replace a barred property
operator, our ability to replace the operator may be affected by
federal and state rules and policies governing changes in
control. This may result in payment delays, an inability to find
a replacement operator, a significant working capital commitment
from us to a new operator or other difficulties.
Reimbursement
Assisted Living Facilities.
Approximately 21%
of our rental revenues for the year ended December 31, 2009
were attributable to assisted living facilities. The majority of
the revenues received by the operators of our assisted living
facilities are from private pay sources. The remaining revenue
source is primarily Medicaid under certain waiver programs. As a
part of the Omnibus Budget Reconciliation Act (“OBRA”)
of 1981, Congress established a waiver program enabling some
states to offer Medicaid reimbursement to assisted living
facilities as an alternative to institutional long-term care
services. The provisions of OBRA and the subsequent OBRA Acts of
1987 and 1990 permit states to seek a waiver from typical
Medicaid requirements to develop cost-effective alternatives to
long-term care, including Medicaid payments for assisted living
and home health. At December 31, 2009, four of our 22
assisted living operators received Medicaid reimbursement
pursuant to Medicaid waiver programs. For the twelve months
ended September 30, 2009, approximately 9% of the revenues
at our assisted living facilities were from Medicaid
reimbursement. There can be no guarantee that a state Medicaid
program operating pursuant to a waiver will be able to maintain
its waiver status.
Rates paid by self-pay residents are set by the facilities and
are largely determined by local market conditions and operating
costs. Generally, facilities receive a higher payment per day
for a private pay resident than for a Medicaid beneficiary who
requires a comparable level of care. The level of Medicaid
reimbursement varies from state to state. Thus, the revenues
generated by operators of our assisted living facilities may be
adversely affected by payor mix, acuity level and changes in
Medicaid eligibility and reimbursement levels. In addition, a
state could lose its Medicaid waiver and no longer be permitted
to utilize Medicaid dollars to reimburse for assisted living
services. Changes in revenues could in turn have a material
adverse effect on an operator’s ability to meet its
obligations to us.
Skilled Nursing Facilities and
Hospitals.
Skilled nursing facilities and
hospitals typically receive most of their revenues from Medicare
and Medicaid, with the balance representing private pay,
including private insurance. Consequently, changes in federal or
state reimbursement policies may also adversely affect an
operator’s ability to cover its expenses, including our
rent or debt service. Skilled nursing facilities and hospitals
are subject to periodic pre- and post-payment reviews and other
audits by federal and state authorities. A review or audit of
claims of a property operator could result in recoupments,
denials or delays of payments in the future, which could have a
material adverse effect on the operator’s ability to meet
its obligations to us. Due to the significant judgments and
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estimates inherent in payor settlement accounting, no assurance
can be given as to the adequacy of any reserves maintained by
our property operators for potential adjustments to
reimbursements for payor settlements. Due to budgetary
constraints, governmental payors may limit or reduce payments to
skilled nursing facilities and hospitals. As a result of
government reimbursement programs being subject to such
budgetary pressures and legislative and administrative actions,
an operator’s ability to meet its obligations to us may be
significantly impaired.
Medicare Reimbursement and Skilled Nursing
Facilities.
For the twelve months ended
September 30, 2009, approximately 30% of the revenues at
our skilled nursing facilities (which comprised 31% of our
rental revenues for the year ended December 31,
2009) were from Medicare reimbursement. Skilled nursing
facilities are reimbursed under the skilled nursing facility
prospective payment system. This type of reimbursement program
puts facilities at risk to the extent that their costs exceed
the fixed payments under the prospective payment system. In
addition, there is a risk that payments under the prospective
payment system may be set too low, which could result in
immediate financial difficulties for skilled nursing facilities
and cause operators to seek bankruptcy protection. Skilled
nursing facilities have had these types of difficulties since
the implementation of the prospective payment system.
Skilled nursing facilities received a full Medicare market
basket update of 3.4% for federal fiscal year 2009. The Centers
for Medicare & Medicaid Services (“CMS”), an
agency of the U.S. Department of Health and Human Services,
has announced that skilled nursing facilities will receive an
additional 1.1% net decrease in Medicare payments for fiscal
year 2010. This 1.1% net decrease is the result of a 3.3%
decrease in payments due to recalibration of the case-mix
indexes combined with a 2.2% increase in payments through
“market basket” changes for fiscal year 2010.
Section 5008 of the Deficit Reduction Act of 2005 directs
the Secretary (as defined in that statute) to conduct a
demonstration program beginning January 1, 2008 assessing
the costs and outcomes of patients discharged from hospitals in
a variety of post-acute care settings, including skilled nursing
facilities. The outcome of that demonstration program could lead
to changes in Medicare coverage and reimbursement for post-acute
care. It is not known how either the demonstration program, or
any other changes in Medicare reimbursement or regulatory
obligations that might be proposed, might impact tenants of the
Company’s properties.
The Balanced Budget Act of 1997 mandated caps on Medicare
reimbursement for certain therapy services. However, Congress
imposed various moratoriums on the implementation of those caps.
For 2010, the annual payment cap of $1,860 per patient applies
to occupational therapy and a separate $1,860 cap applies to
speech and physical therapy. Congress has permitted patients
exceeding the cap to obtain additional Medicare coverage through
a waiver program if the therapy is deemed medically necessary.
The waiver program was historically extended, most recently by
the Medicare Improvements for Patients and Providers Act of 2008
through December 31, 2009. Health care reform bills
considered by Congress in 2009 would have extended this waiver
program through at least 2010, but due to Congressional
inactivity these provisions were not passed before the waiver
expired on December 31, 2009. Patients will therefore need
to use private funds to pay for the cost of therapy above the
caps. If patients are unable to satisfy their
out-of-pocket
cost responsibility to reimburse an operator for services
rendered, the operator’s ability to meet its obligations to
us could be adversely impacted.
Medicare Reimbursement and Hospitals.
For the
twelve months ended September 30, 2009, approximately 53%
of the revenues at our hospitals (which comprised 8% of our
rental revenues for the year ended December 31,
2009) were from Medicare. Hospitals generally are
reimbursed by Medicare under the diagnosis related group
prospective payment system reimbursement methodology for
inpatient hospitals, the long-term acute care hospital
prospective payment system for long-term acute care hospitals or
the inpatient rehabilitation facility prospective payment
system. Acute care hospitals provide a wide range of inpatient
and outpatient services including, but not limited to, surgery,
rehabilitation, therapy and clinical laboratories. Long-term
acute care hospitals provide inpatient services for patients
with complex medical conditions that require more intensive
care, monitoring or emergency support than that available in
most skilled nursing facilities. Inpatient rehabilitation
facilities provide intensive rehabilitation services in an
inpatient setting for patients requiring at least three hours of
rehabilitation services a day.
With respect to Medicare’s diagnosis related
group/outpatient prospective payment system methodology for
regular hospitals, reimbursement for inpatient services is made
on the basis of a fixed, prospective rate based on the principal
diagnosis of the patient. Hospitals are at risk to the extent
that their costs in treating a specific case exceed the fixed
payment. The diagnosis related group reimbursement system was
changed in 2008, with the expansion of
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diagnosis groups from 538 to 745 diagnosis related groups to
greater reflect severity. One additional diagnosis related group
was added in 2009, for a new total of 746. It is possible that
this change in the DRG system will adversely impact
reimbursement for some of our hospitals. In some cases, a
hospital might be able to qualify for an outlier payment if the
hospital’s losses exceed a threshold.
Medicaid Reimbursement.
Medicaid is a major
payor source for residents in our skilled nursing facilities and
hospitals. For the twelve months ended September 30, 2009,
approximately 50% of the revenues of our skilled nursing
facilities and 3% of the revenues of our hospitals were
attributable to Medicaid payments. The federal government and
the states share responsibility for financing Medicaid. The
federal matching rate, known as the Federal Medical Assistance
Percentage, varies by state based on relative per capita income,
but is at least 50% in all states. On average, Medicaid is the
largest component of total state spending, representing
approximately 21% of total state spending. The percentage of
Medicaid dollars used for long-term care varies from state to
state due in part to different ratios of elderly population and
eligibility requirements. Within certain federal guidelines,
states have a wide range of discretion to determine eligibility
and reimbursement methodology. Many states reimburse long-term
care facilities using fixed daily rates, which are applied
prospectively based on patient acuity and the historical costs
incurred in providing patient care. Reasonable costs typically
include allowances for staffing, administrative and general, and
property and equipment (e.g., real estate taxes, depreciation
and fair rental).
In most states, Medicaid does not fully reimburse the cost of
providing skilled nursing services. Certain states are
attempting to slow the rate of growth in Medicaid expenditures
by freezing rates or restricting eligibility and benefits. At
the beginning of state fiscal year 2010, states in which we have
skilled nursing property investments held rates flat on average
for fiscal year 2010. Our skilled nursing portfolio’s
average Medicaid rate will likely vary throughout the year as
states continue to make interim changes to their budgets and
Medicaid funding. In addition, Medicaid rates may decline if
revenues in a particular state are not sufficient to fund
budgeted expenditures.
The Medicare Part D drug benefit became effective
January 1, 2006. Nursing home residents dually eligible for
Medicare (and enrolled in one of the new Part D plans) and
Medicaid may now enroll and receive reimbursement for drugs
through Medicare Part D rather than through Medicaid.
Part D will result in increased administrative
responsibilities for nursing home operators because enrollment
in Part D is voluntary and residents have the choice of
multiple prescription drug plans. Operators may also experience
increased expenses to the extent that patients’ specific
prescribed drugs may not be on the Part D drug plan
formulary for the plan in which specific patients are enrolled.
The reimbursement methodologies applied to health care
facilities continue to evolve. Federal and state authorities
have considered and may seek to implement new or modified
reimbursement methodologies that may negatively impact health
care property operations. The impact of any such change, if
implemented, may result in a material adverse effect on our
skilled nursing and hospital property operations. No assurance
can be given that current revenue sources or levels will be
maintained. Accordingly, there can be no assurance that payments
under a government reimbursement program are currently, or will
be in the future, sufficient to fully reimburse the property
operators for their operating and capital expenses. As a result,
an operator’s ability to meet its obligations to us could
be adversely impacted.
Finally, federal legislative efforts to reform the health care
industry may have a significant impact on Medicare, Medicaid,
and private insurance coverage and reimbursement for services
provided by skilled nursing facilities and other health care
providers. Any such health care reform could have a substantial
and material adverse effect on all parties directly or
indirectly involved in the health care system.
Other
Related Laws
Skilled nursing facilities and hospitals (and assisted living or
CCRC facilities that receive Medicaid payments) are subject to
federal, state and local laws and regulations that govern the
operations and financial and other arrangements that may be
entered into by health care providers. Certain of these laws
prohibit direct or indirect payments of any kind for the purpose
of inducing or encouraging the referral of patients for medical
products or services reimbursable by governmental programs.
Other laws require providers to furnish only medically necessary
services and submit to the government valid and accurate
statements for each service. Still other laws require providers
to comply with a variety of safety, health and other
requirements relating to the condition of the licensed
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property and the quality of care provided. Sanctions for
violations of these laws and regulations may include, but are
not limited to, criminal
and/or
civil
penalties and fines and a loss of licensure, immediate
termination of governmental payments, and exclusion from
eligibility for any governmental reimbursement. In certain
circumstances, violation of these rules (such as those
prohibiting abusive and fraudulent behavior) with respect to one
property may subject other facilities under common control or
ownership to sanctions, including exclusion from participation
in the Medicare and Medicaid programs. In the ordinary course of
its business, a property operator is regularly subjected to
inquiries, investigations and audits by federal and state
agencies that oversee these laws and regulations.
Each skilled nursing and hospital property (and any assisted
living or CCRC property that receives Medicaid payments) is
subject to the federal anti-kickback statute that generally
prohibits persons from offering, providing, soliciting or
receiving remuneration to induce either the referral of an
individual or the furnishing of a good or service for which
payment may be made under a federal health care program such as
the Medicare and Medicaid programs. Skilled nursing facilities
and hospitals are also subject to the federal Ethics in Patient
Referral Act of 1989, commonly referred to as the Stark Law. The
Stark Law generally prohibits the submission of claims to
Medicare for payment if the claim results from a physician
referral for certain designated services and the physician has a
financial relationship with the health service provider that
does not qualify under one of the exceptions for a financial
relationship under the Stark Law. Similar prohibitions on
physician self-referrals and submission of claims apply to state
Medicaid programs. Further, skilled nursing facilities and
hospitals (and assisted living or CCRC facilities that receive
Medicaid payments) are subject to substantial financial
penalties under the Civil Monetary Penalties Act and the False
Claims Act and, in particular, actions under the False Claims
Act’s “whistleblower” provisions. Private
enforcement of health care fraud has increased due in large part
to amendments to the False Claims Act that encourage private
individuals to sue on behalf of the government. These
whistleblower suits by private individuals, known as qui tam
actions, may be filed by almost anyone, including present and
former patients, nurses and other employees. Some cases have
been brought under the federal False Claims Act asserting claims
for treble damages and up to $11,000 per claim on the basis of
the alleged failure of a nursing facility to meet applicable
regulations relating to the operation of the nursing facility.
Prosecutions, investigations or whistleblower actions could have
a material adverse effect on a property operator’s
liquidity, financial condition and results of operations which
could adversely affect the ability of the operator to meet its
obligations to us. Finally, various state false claim and
anti-kickback laws also may apply to each property operator.
Violation of any of the foregoing statutes can result in
criminal
and/or
civil
penalties that could have a material adverse effect on the
ability of an operator to meet its obligations to us.
Other legislative developments over the past several years,
including the Health Insurance Portability and Accountability
Act of 1996 (“HIPAA”), have greatly expanded the
definition of health care fraud and related offenses and
broadened its scope to include private health care plans in
addition to government payors. Congress also has greatly
increased funding for the Department of Justice, Federal Bureau
of Investigation and the Office of the Inspector General of the
Department of Health and Human Services to audit, investigate
and prosecute suspected health care fraud. Moreover, a
significant portion of the billions in health care fraud
recoveries over the past several years has also been returned to
government agencies to further fund their fraud investigation
and prosecution efforts.
Additionally, other HIPAA provisions and regulations provide for
communication of health information through standard electronic
transaction formats and for the privacy and security of health
information. In order to comply with the regulations, health
care providers must undergo significant operational and
technical changes. Operators also face significant financial
exposure if they fail to maintain the privacy and security of
medical records and personal, identifiable health information
about individuals. The Health Information Technology for
Economic and Clinical Health (“HITECH”) Act, passed in
February 2009, modified the Secretary of Health and Human
Services’ authority to impose civil money penalties for
HIPAA violations occurring after February 18, 2009. HITECH
directs the HHS Secretary to provide for periodic audits to
ensure covered entities and their business associates (as that
term is defined under HIPAA) comply with applicable HITECH
requirements, increasing the likelihood that a HIPAA violation
will result in an enforcement action. CMS issued an interim
Final Rule effective November 2009 which conforms HIPAA
enforcement regulations to the HITECH Act, increasing the
maximum penalty to $1.5 million for certain types of
violations.
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In November 2002, CMS began a national Nursing Home Quality
Initiative (NHQI). Under this initiative, historical survey
information, the NHQI Pilot Evaluation Report and the NHQI
Overview is made available to the public on-line. The NHQI
website provides consumer and provider information regarding the
quality of care in nursing homes. The data allows consumers,
providers, states and researchers to compare quality information
that shows how well nursing homes are caring for their
residents’ physical and clinical needs. The posted nursing
home quality measures come from resident assessment data that
nursing homes routinely collect on the residents at specified
intervals during their stay. If the operators of nursing
facilities are unable to achieve quality of care ratings that
are comparable or superior to those of their competitors, they
may lose market share to other facilities, reducing their
revenues and adversely impacting their ability to make rental
payments.
Finally, government investigation and enforcement of health care
laws has increased dramatically over the past several years and
is expected to continue. Some of these enforcement actions
represent novel legal theories and expansions in the application
of false claims laws. The costs for an operator of a health care
property associated with both defending such enforcement actions
and the undertakings in settlement agreements can be substantial
and could have a material adverse effect on the ability of an
operator to meet its obligations to us.
Environmental
Laws
A wide variety of federal, state and local environmental and
occupational health and safety laws and regulations affect
health care facility operations or special medical properties.
Under various federal, state and local environmental laws,
ordinances and regulations, an owner of real property or a
secured lender (such as the Company) may be liable for the costs
of removal or remediation of hazardous or toxic substances at,
under or disposed of in connection with such property, as well
as other potential costs relating to hazardous or toxic
substances (including government fines and damages for injuries
to persons and adjacent property). The cost of any required
remediation, removal, fines or personal or property damages and
the owner’s or secured lender’s liability for such
costs could exceed the value of the property,
and/or
the
assets of the owner or secured lender. In addition, the presence
of such substances, or the failure to properly dispose of or
remediate such substances, may adversely affect the owner’s
ability to sell or rent such property or to borrow using such
property as collateral which, in turn, would reduce revenues.
Taxation
Federal
Income Tax Considerations
The following summary of the taxation of the Company and the
material federal tax consequences to the holders of our debt and
equity securities is for general information only and is not tax
advice. This summary does not address all aspects of taxation
that may be relevant to certain types of holders of stock or
securities (including, but not limited to, insurance companies,
tax-exempt entities, financial institutions or broker-dealers,
persons holding shares of common stock as part of a hedging,
integrated conversion, or constructive sale transaction or a
straddle, traders in securities that use a
mark-to-market
method of accounting for their securities, investors in
pass-through entities and foreign corporations and persons who
are not citizens or residents of the United States).
This summary does not discuss all of the aspects of
U.S. federal income taxation that may be relevant to you in
light of your particular investment or other circumstances. In
addition, this summary does not discuss any state or local
income taxation or foreign income taxation or other tax
consequences. This summary is based on current U.S. federal
income tax law. Subsequent developments in U.S. federal
income tax law, including changes in law or differing
interpretations, which may be applied retroactively, could have
a material effect on the U.S. federal income tax
consequences of purchasing, owning and disposing of our
securities as set forth in this summary. Before you purchase our
securities, you should consult your own tax advisor regarding
the particular U.S. federal, state, local, foreign and
other tax consequences of acquiring, owning and selling our
securities.
General
We elected to be taxed as a real estate investment trust (a
“REIT”) commencing with our first taxable year. We
intend to continue to operate in such a manner as to qualify as
a REIT, but there is no guarantee that we will qualify or remain
qualified as a REIT for subsequent years. Qualification and
taxation as a REIT depends upon our ability to
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meet a variety of qualification tests imposed under federal
income tax law with respect to income, assets, distribution
level and diversity of share ownership as discussed below under
“— Qualification as a REIT.” There can be no
assurance that we will be owned and organized and will operate
in a manner so as to qualify or remain qualified.
In any year in which we qualify as a REIT, in general, we will
not be subject to federal income tax on that portion of our REIT
taxable income or capital gain that is distributed to
stockholders. We may, however, be subject to tax at normal
corporate rates on any taxable income or capital gain not
distributed. If we elect to retain and pay income tax on our net
long-term capital gain, stockholders are required to include
their proportionate share of our undistributed long-term capital
gain in income, but they will receive a refundable credit for
their share of any taxes paid by us on such gain.
Despite the REIT election, we may be subject to federal income
and excise tax as follows:
| • | To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates; | |
| • | We may be subject to the “alternative minimum tax” (the “AMT”) on certain tax preference items to the extent that the AMT exceeds our regular tax; | |
| • | If we have net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, such income will be taxed at the highest corporate rate; | |
| • | Any net income from prohibited transactions (which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than dispositions of foreclosure property and dispositions of property due to an involuntary conversion) will be subject to a 100% tax; | |
| • | If we fail to satisfy either the 75% or 95% gross income tests (as discussed below), but nonetheless maintain our qualification as a REIT because certain other requirements are met, we will be subject to a 100% tax on an amount equal to (1) the gross income attributable to the greater of (i) 75% of our gross income over the amount of qualifying gross income for purposes of the 75% gross income test (discussed below) or (ii) 95% of our gross income (90% of our gross income for taxable years beginning on or before October 22, 2004) over the amount of qualifying gross income for purposes of the 95% gross income test (discussed below) multiplied by (2) a fraction intended to reflect our profitability; | |
| • | If we fail to distribute during each year at least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain net income for such year (other than capital gain that we elect to retain and pay tax on) and (3) any undistributed taxable income from preceding periods, we will be subject to a 4% excise tax on the excess of such required distribution over amounts actually distributed; and | |
| • | We will be subject to a 100% tax on the amount of any rents from real property, deductions or excess interest paid to us by any of our “taxable REIT subsidiaries” that would be reduced through reallocation under certain federal income tax principles in order to more clearly reflect income of the taxable REIT subsidiary. See “— Qualification as a REIT — Investments in Taxable REIT Subsidiaries.” |
If we acquire any assets from a corporation, which is or has
been a “C” corporation, in a carryover basis
transaction, we could be liable for specified liabilities that
are inherited from the “C” corporation. A
“C” corporation is generally defined as a corporation
that is required to pay full corporate level federal income tax.
If we recognize gain on the disposition of the assets during the
ten-year period beginning on the date on which the assets were
acquired by us, then, to the extent of the assets’
“built-in gain” (i.e., the excess of the fair market
value of the asset over the adjusted tax basis in the asset, in
each case determined as of the beginning of the ten-year
period), we will be subject to tax on the gain at the highest
regular corporate rate applicable. The results described in this
paragraph with respect to the recognition of built-in gain
assume that the built-in gain assets, at the time the built-in
gain assets were subject to a conversion transaction (either
where a “C” corporation elected REIT status or a REIT
acquired the assets from a “C” corporation), were not
treated as sold to an unrelated party and gain recognized.
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Qualification
as a REIT
A REIT is defined as a corporation, trust or association:
| (1) | which is managed by one or more trustees or directors; | |
| (2) | the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest; | |
| (3) | which would be taxable as a domestic corporation but for the federal income tax law relating to REITs; | |
| (4) | which is neither a financial institution nor an insurance company; | |
| (5) | the beneficial ownership of which is held by 100 or more persons in each taxable year of the REIT except for its first taxable year; | |
| (6) | not more than 50% in value of the outstanding stock of which is owned during the last half of each taxable year, excluding its first taxable year, directly or indirectly, by or for five or fewer individuals (which includes certain entities) (the “Five or Fewer Requirement”); and | |
| (7) | which meets certain income and asset tests described below. |
Conditions (1) to (4), inclusive, must be met during the
entire taxable year and condition (5) must be met during at
least 335 days of a taxable year of 12 months or
during a proportionate part of a taxable year of less than
12 months. For purposes of conditions (5) and (6),
pension funds and certain other tax-exempt entities are treated
as individuals, subject to a “look-through” exception
in the case of condition (6).
Based on publicly available information, we believe we have
satisfied the share ownership requirements set forth in
(5) and (6) above. In addition, Article VI of our
Amended and Restated By-Laws provides for restrictions regarding
ownership and transfer of shares. These restrictions are
intended to assist us in continuing to satisfy the share
ownership requirements described in (5) and (6) above.
These restrictions, however, may not ensure that we will, in all
cases, be able to satisfy the share ownership requirements
described in (5) and (6) above.
We have complied with, and will continue to comply with,
regulatory rules to send annual letters to certain of our
stockholders requesting information regarding the actual
ownership of our stock. If, despite sending the annual letters,
we do not know, or after exercising reasonable diligence would
not have known, whether we failed to meet the Five or Fewer
Requirement, we will be treated as having met the Five or Fewer
Requirement. If we fail to comply with these regulatory rules,
we will be subject to a monetary penalty. If our failure to
comply was due to intentional disregard of the requirement, the
penalty would be increased. However, if our failure to comply
were due to reasonable cause and not willful neglect, no penalty
would be imposed.
We may own a number of properties through wholly owned
subsidiaries. A corporation will qualify as a “qualified
REIT subsidiary” if 100% of its stock is owned by a REIT,
and the REIT does not elect to treat the subsidiary as a taxable
REIT subsidiary. A “qualified REIT subsidiary” will
not be treated as a separate corporation, and all assets,
liabilities and items of income, deductions and credits of a
“qualified REIT subsidiary” will be treated as assets,
liabilities and items (as the case may be) of the REIT. A
“qualified REIT subsidiary” is not subject to federal
income tax, and our ownership of the voting stock of a qualified
REIT subsidiary will not violate the restrictions against
ownership of securities of any one issuer which constitute more
than 10% of the value or total voting power of such issuer or
more than 5% of the value of our total assets, as described
below under “— Asset Tests.”
If we invest in a partnership, a limited liability company or a
trust taxed as a partnership or as a disregarded entity, we will
be deemed to own a proportionate share of the
partnership’s, limited liability company’s or
trust’s assets. Likewise, we will be treated as receiving
our share of the income and loss of the partnership, limited
liability company or trust, and the gross income will retain the
same character in our hands as it has in the hands of the
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partnership, limited liability company or trust. These
“look-through” rules apply for purposes of the income
tests and assets tests described below.
Income Tests.
There are two separate
percentage tests relating to our sources of gross income that we
must satisfy for each taxable year.
| • | At least 75% of our gross income (excluding gross income from certain sales of property held primarily for sale) must be directly or indirectly derived each taxable year from “rents from real property,” other income from investments relating to real property or mortgages on real property or certain income from qualified temporary investments. | |
| • | At least 95% of our gross income (excluding gross income from certain sales of property held primarily for sale) must be directly or indirectly derived each taxable year from any of the sources qualifying for the 75% gross income test and from dividends (including dividends from taxable REIT subsidiaries) and interest. |
For taxable years beginning on or before October 22, 2004,
(1) payments to us under an interest rate swap or cap
agreement, option, futures contract, forward rate agreement or
any similar financial instrument entered into by us to reduce
interest rate risk on indebtedness incurred or to be incurred
and (2) gain from the sale or other disposition of any such
investment are treated as income qualifying under the 95% gross
income test. As to transactions entered into in taxable years
beginning after October 22, 2004, any of our income from a
“clearly identified” hedging transaction that is
entered into by us in the normal course of business, directly or
indirectly, to manage the risk of interest rate movements, price
changes or currency fluctuations with respect to borrowings or
obligations incurred or to be incurred by us, or such other
risks that are prescribed by the Internal Revenue Service, is
excluded from the 95% gross income test.
For transactions entered into after July 30, 2008, any of
our income from a “clearly identified” hedging
transaction that is entered into by us in the normal course of
business, directly or indirectly, to manage the risk of interest
rate movements, price changes or currency fluctuations with
respect to borrowings or obligations incurred or to be incurred
by us is excluded from the 95% and 75% gross income tests.
For transactions entered into after July 30, 2008, any of
our income from a “clearly identified” hedging
transaction entered into by us primarily to manage risk of
currency fluctuations with respect to any item of income or gain
that is included in gross income in the 95% and 75% gross income
tests is excluded from the 95% and 75% gross income tests.
In general, a hedging transaction is “clearly
identified” if (1) the transaction is identified as a
hedging transaction before the end of the day on which it is
entered into and (2) the items or risks being hedged are
identified “substantially contemporaneously” with the
hedging transaction. An identification is not substantially
contemporaneous if it is made more than 35 days after
entering into the hedging transaction.
As to gains and items of income recognized after July 30,
2008, “passive foreign exchange gain” for any taxable
year will not constitute gross income for purposes of the 95%
gross income test and “real estate foreign exchange
gain” for any taxable year will not constitute gross income
for purposes of the 75% gross income test. Real estate foreign
exchange gain is foreign currency gain (as defined in Internal
Revenue Code section 988(b)(1)) which is attributable to:
(i) any qualifying item of income or gain for purposes of
the 75% gross income test; (ii) the acquisition or
ownership of obligations secured by mortgages on real property
or interests in real property; or (iii) becoming or being
the obligor under obligations secured by mortgages on real
property or on interests in real property. Real estate foreign
exchange gain also includes Internal Revenue Code
section 987 gain attributable to a qualified business unit
(a “QBU”) of a REIT if the QBU itself meets the 75%
income test for the taxable year and the 75% asset test at the
close of each quarter that the REIT has directly or indirectly
held the QBU. Real estate foreign exchange gain also includes
any other foreign currency gain as determined by the Secretary
of the Treasury. Passive foreign exchange gain includes all real
estate foreign exchange gain and foreign currency gain which is
attributable to: (i) any qualifying item of income or gain
for purposes of the 95% gross income test; (ii) the
acquisition or ownership of obligations; (iii) becoming or
being the obligor under obligations; and (iv) any other
foreign currency gain as determined by the Secretary of the
Treasury.
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Generally, other than income from “clearly identified”
hedging transactions entered into by us in the normal course of
business, any foreign currency gain derived by us from dealing,
or engaging in substantial and regular trading, in securities
will constitute gross income which does not qualify under the
95% or 75% gross income tests.
Rents received by us will qualify as “rents from real
property” for purposes of satisfying the gross income tests
for a REIT only if several conditions are met:
| • | The amount of rent must not be based in whole or in part on the income or profits of any person, although rents generally will not be excluded merely because they are based on a fixed percentage or percentages of receipts or sales. | |
| • | Rents received from a tenant will not qualify as rents from real property if the REIT, or an owner of 10% or more of the REIT, also directly or constructively owns 10% or more of the tenant, unless the tenant is our taxable REIT subsidiary and certain other requirements are met with respect to the real property being rented. | |
| • | If rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as “rents from real property.” | |
| • | For rents to qualify as rents from real property, we generally must not furnish or render services to tenants, other than through a taxable REIT subsidiary or an “independent contractor” from whom we derive no income, except that we may directly provide services that are “usually or customarily rendered” in the geographic area in which the property is located in connection with the rental of real property for occupancy only, or are not otherwise considered “rendered to the occupant for his convenience.” | |
| • | For taxable years beginning after July 30, 2008, the REIT may lease qualified health care property (as defined in Internal Revenue Code section 856(e)(6)(D)) on an arm’s-length basis to a taxable REIT subsidiary if the property is operated on behalf of such subsidiary by a person who is an eligible independent contractor (as defined in Internal Revenue Code section 856(d)(9)(A)). Generally, the rent that the REIT receives from the taxable REIT subsidiary will be treated as “rents from real property.” |
For taxable years beginning after August 5, 1997, a REIT
has been permitted to render a de minimis amount of
impermissible services to tenants and still treat amounts
received with respect to that property as rent from real
property. The amount received or accrued by the REIT during the
taxable year for the impermissible services with respect to a
property may not exceed 1% of all amounts received or accrued by
the REIT directly or indirectly from the property. The amount
received for any service or management operation for this
purpose shall be deemed to be not less than 150% of the direct
cost of the REIT in furnishing or rendering the service or
providing the management or operation. Furthermore,
impermissible services may be furnished to tenants by a taxable
REIT subsidiary subject to certain conditions, and we may still
treat rents received with respect to the property as rent from
real property.
The term “interest” generally does not include any
amount if the determination of the amount depends in whole or in
part on the income or profits of any person, although an amount
generally will not be excluded from the term
“interest” solely by reason of being based on a fixed
percentage of receipts or sales.
If we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may nevertheless qualify as a
REIT for such year if we are eligible for relief. For taxable
years beginning on or before October 22, 2004, these relief
provisions generally will be available if: (1) our failure
to meet such tests was due to reasonable cause and not due to
willful neglect; (2) we attach a schedule of the sources of
our income to our return; and (3) any incorrect information
on the schedule was not due to fraud with intent to evade tax.
For taxable years beginning after October 22, 2004, these
relief provisions generally will be available if
(1) following our identification of the failure, we file a
schedule for such taxable year describing each item of our gross
income, and (2) the failure to meet such tests was due to
reasonable cause and not due to willful neglect.
It is not now possible to determine the circumstances under
which we may be entitled to the benefit of these relief
provisions. If these relief provisions apply, a 100% tax is
imposed on an amount equal to (a) the gross income
attributable to (1) 75% of our gross income over the amount
of qualifying gross income for purposes of the 75% income test
and (2) 95% of our gross income (90% of our gross income
for taxable years beginning on or before
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October 22, 2004) over the amount of qualifying gross
income for purposes of the 95% income test, multiplied by
(b) a fraction intended to reflect our profitability.
The Secretary of the Treasury is given broad authority to
determine whether particular items of income or gain qualify or
not under the 75% and 95% gross income tests, or are to be
excluded from the measure of gross income for such purposes.
Asset Tests.
Within 30 days after the
close of each quarter of our taxable year, we must also satisfy
several tests relating to the nature and diversification of our
assets determined in accordance with generally accepted
accounting principles. At least 75% of the value of our total
assets must be represented by real estate assets, cash, cash
items (including receivables arising in the ordinary course of
our operation), government securities and qualified temporary
investments. Although the remaining 25% of our assets generally
may be invested without restriction, we are prohibited from
owning securities representing more than 10% of either the vote
(the “10% vote test”) or value (the “10% value
test”) of the outstanding securities of any issuer other
than a qualified REIT subsidiary, another REIT or a taxable REIT
subsidiary. Further, no more than 25% of the total assets may be
represented by securities of one or more taxable REIT
subsidiaries (the “25% asset test”) and no more than
5% of the value of our total assets may be represented by
securities of any non-governmental issuer other than a qualified
REIT subsidiary (the “5% asset test”), another REIT or
a taxable REIT subsidiary. Each of the 10% vote test, the 10%
value test and the 25% and 5% asset tests must be satisfied at
the end of each quarter. There are special rules which provide
relief if the value related tests are not satisfied due to
changes in the value of the assets of a REIT.
For taxable years beginning after December 31, 2000,
certain items are excluded from the 10% value test, including:
(1) straight debt securities of an issuer (including
straight debt that provides certain contingent payments);
(2) any loan to an individual or an estate; (3) any
rental agreement described in Section 467 of the Internal
Revenue Code, other than with a “related person”;
(4) any obligation to pay rents from real property;
(5) certain securities issued by a state or any subdivision
thereof, the District of Columbia, a foreign government, or any
political subdivision thereof, or the Commonwealth of Puerto
Rico; (6) any security issued by a REIT; and (7) any
other arrangement that, as determined by the Secretary of the
Treasury, is excepted from the definition of security
(“excluded securities”). Special rules apply to
straight debt securities issued by corporations and entities
taxable as partnerships for federal income tax purposes. If a
REIT, or its taxable REIT subsidiary, holds (1) straight
debt securities of a corporate or partnership issuer and
(2) securities of such issuer that are not excluded
securities and have an aggregate value greater than 1% of such
issuer’s outstanding securities, the straight debt
securities will be included in the 10% value test.
For taxable years beginning after December 31, 2000, a
REIT’s interest as a partner in a partnership is not
treated as a security for purposes of applying the 10% value
test to securities issued by the partnership. Further, any debt
instrument issued by a partnership will not be a security for
purposes of applying the 10% value test (1) to the extent
of the REIT’s interest as a partner in the partnership and
(2) if at least 75% of the partnership’s gross income
(excluding gross income from prohibited transactions) would
qualify for the 75% gross income test. For taxable years
beginning after October 22, 2004, for purposes of the 10%
value test, a REIT’s interest in a partnership’s
assets is determined by the REIT’s proportionate interest
in any securities issued by the partnership (other than the
excluded securities described in the preceding paragraph).
For taxable years beginning after July 30, 2008, if the
REIT or its QBU uses a foreign currency as its functional
currency, the term “cash” includes such foreign
currency, but only to the extent such foreign currency is
(i) held for use in the normal course of the activities of
the REIT or QBU which give rise to items of income or gain that
are included in the 95% and 75% gross income tests or are
directly related to acquiring or holding assets qualifying under
the 75% asset test, and (ii) not held in connection with
dealing or engaging in substantial and regular trading in
securities.
With respect to corrections of failures for which the
requirements for corrections are satisfied after
October 22, 2004, regardless of whether such failures
occurred in taxable years beginning on, before or after such
date, as to violations of the 10% vote test, the 10% value test
or the 5% asset test, a REIT may avoid disqualification as a
REIT by disposing of sufficient assets to cure a violation that
does not exceed the lesser of 1% of the REIT’s assets at
the end of the relevant quarter or $10,000,000, provided that
the disposition occurs within six months following the last day
of the quarter in which the REIT first identified the assets.
For violations of any of the REIT asset tests due to
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reasonable cause and not willful neglect that exceed the
thresholds described in the preceding sentence, a REIT can avoid
disqualification as a REIT after the close of a taxable quarter
by taking certain steps, including disposition of sufficient
assets within the six month period described above to meet the
applicable asset test, paying a tax equal to the greater of
$50,000 or the highest corporate tax rate multiplied by the net
income generated by the non-qualifying assets during the period
of time that the assets were held as non-qualifying assets and
filing a schedule with the Internal Revenue Service that
describes the non-qualifying assets.
Investments in Taxable REIT Subsidiaries.
For
taxable years beginning after December 31, 2000, REITs may
own more than 10% of the voting power and value of securities in
taxable REIT subsidiaries. We and any taxable corporate entity
in which we own an interest are allowed to jointly elect to
treat such entity as a “taxable REIT subsidiary.”
Certain of our subsidiaries have elected to be treated as a
taxable REIT subsidiary. Taxable REIT subsidiaries are subject
to full corporate level federal taxation on their earnings but
are permitted to engage in certain types of activities that
cannot be performed directly by REITs without jeopardizing their
REIT status. Our taxable REIT subsidiaries will attempt to
minimize the amount of these taxes, but there can be no
assurance whether or the extent to which measures taken to
minimize taxes will be successful. To the extent our taxable
REIT subsidiaries are required to pay federal, state or local
taxes, the cash available for distribution as dividends to us
from our taxable REIT subsidiaries will be reduced.
The amount of interest on related-party debt that a taxable REIT
subsidiary may deduct is limited. Further, a 100% tax applies to
any interest payments by a taxable REIT subsidiary to its
affiliated REIT to the extent the interest rate is not
commercially reasonable. A taxable REIT subsidiary is permitted
to deduct interest payments to unrelated parties without any of
these restrictions.
The Internal Revenue Service may reallocate costs between a REIT
and its taxable REIT subsidiary where there is a lack of
arm’s-length dealing between the parties. Any deductible
expenses allocated away from a taxable REIT subsidiary would
increase its tax liability. Further, any amount by which a REIT
understates its deductions and overstates those of its taxable
REIT subsidiary will, subject to certain exceptions, be subject
to a 100% tax. Additional taxable REIT subsidiary elections may
be made in the future for additional entities in which we own an
interest.
Annual Distribution Requirements.
In order to
avoid being taxed as a regular corporation, we are required to
make distributions (other than capital gain distributions) to
our stockholders which qualify for the dividends paid deduction
in an amount at least equal to (1) the sum of (i) 90%
of our “REIT taxable income” (computed without regard
to the dividends paid deduction and our net capital gain) and
(ii) 90% of the after-tax net income, if any, from
foreclosure property, minus (2) a portion of certain items
of non-cash income. These distributions must be paid in the
taxable year to which they relate, or in the following taxable
year if declared before we timely file our tax return for that
year and if paid on or before the first regular distribution
payment after such declaration. The amount distributed must not
be preferential. This means that every stockholder of the class
of stock to which a distribution is made must be treated the
same as every other stockholder of that class, and no class of
stock may be treated otherwise than in accordance with its
dividend rights as a class. To the extent that we do not
distribute all of our net capital gain or distribute at least
90%, but less than 100%, of our “REIT taxable income,”
as adjusted, we will be subject to tax on the undistributed
amount at regular corporate tax rates. Finally, as discussed
above, we may be subject to an excise tax if we fail to meet
certain other distribution requirements. We intend to make
timely distributions sufficient to satisfy these annual
distribution requirements.
It is possible that, from time to time, we may not have
sufficient cash or other liquid assets to meet the 90%
distribution requirement, or to distribute such greater amount
as may be necessary to avoid income and excise taxation, due to,
among other things, (1) timing differences between
(i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of income and
deduction of expenses in arriving at our taxable income, or
(2) the payment of severance benefits that may not be
deductible to us. In the event that timing differences occur, we
may find it necessary to arrange for borrowings or, if possible,
pay dividends in the form of taxable stock dividends in order to
meet the distribution requirement.
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Under certain circumstances, in the event of a deficiency
determined by the Internal Revenue Service, we may be able to
rectify a resulting failure to meet the distribution requirement
for a year by paying “deficiency dividends” to
stockholders in a later year, which may be included in our
deduction for distributions paid for the earlier year. Thus, we
may be able to avoid being taxed on amounts distributed as
deficiency dividends; however, we will be required to pay
applicable penalties and interest based upon the amount of any
deduction taken for deficiency dividend distributions.
The Internal Revenue Service issued Revenue Procedure
2008-68,
which provided temporary relief to publicly traded REITs seeking
to preserve liquidity by electing cash/stock dividends. Under
Revenue Procedure
2008-68,
a
REIT may treat the entire dividend, including the stock portion,
as a taxable dividend distribution, thereby qualifying for the
dividends-paid deduction, provided certain requirements are
satisfied. The cash portion of the dividend may be as low as
10%. The Revenue Procedure, as amplified by Revenue Procedure
2010-12,
applies to dividends declared on or before December 31,
2012, and with respect to a taxable year ending on or before
December 31, 2011.
Failure
to Qualify as a REIT
If we fail to qualify for taxation as a REIT in any taxable
year, we will be subject to federal income tax, including any
applicable alternative minimum tax, on our taxable income at
regular corporate rates. Distributions to stockholders in any
year in which we fail to qualify as a REIT will not be
deductible nor will any particular amount of distributions be
required to be made in any year. All distributions to
stockholders will be taxable as ordinary income to the extent of
current and accumulated earnings and profits allocable to these
distributions and, subject to certain limitations, will be
eligible for the dividends received deduction for corporate
stockholders. Unless entitled to relief under specific statutory
provisions, we also will be disqualified from taxation as a REIT
for the four taxable years following the year during which
qualification was lost. It is not possible to state whether in
all circumstances we would be entitled to statutory relief.
Failure to qualify for even one year could result in our need to
incur indebtedness or liquidate investments in order to pay
potentially significant resulting tax liabilities.
In addition to the relief described above under
“— Income Tests” and “— Asset
Tests,” relief is available in the event that we violate a
provision of the Internal Revenue Code that would result in our
failure to qualify as a REIT if: (1) the violation is due
to reasonable cause and not due to willful neglect; (2) we
pay a penalty of $50,000 for each failure to satisfy the
provision; and (3) the violation does not include a
violation described under “— Income Tests”
or “— Asset Tests” above. It is not now
possible to determine the circumstances under which we may be
entitled to the benefit of these relief provisions.
Federal
Income Taxation of Holders of Our Stock
Treatment of Taxable
U.S. Stockholders.
The following summary
applies to you only if you are a
“U.S. stockholder.” A
“U.S. stockholder” is a holder of shares of stock
who, for United States federal income tax purposes, is:
| • | a citizen or resident of the United States; | |
| • | a corporation, partnership or other entity classified as a corporation or partnership for these purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States, including any state; | |
| • | an estate, the income of which is subject to United States federal income taxation regardless of its source; or | |
| • | a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trust’s substantial decisions. |
So long as we qualify for taxation as a REIT, distributions on
shares of our stock made out of the current or accumulated
earnings and profits allocable to these distributions (and not
designated as capital gain dividends) will be includable as
ordinary income for federal income tax purposes. None of these
distributions will be eligible for the dividends received
deduction for U.S. corporate stockholders.
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Generally, for taxable years ending after May 6, 2003
through December 31, 2010, the maximum marginal rate of tax
payable by individuals on dividends received from corporations
that are subject to a corporate level of tax is 15%. Except in
limited circumstances, this tax rate will not apply to dividends
paid to you by us on our shares, because generally we are not
subject to federal income tax on the portion of our REIT taxable
income or capital gains distributed to our stockholders. The
reduced maximum federal income tax rate will apply to that
portion, if any, of dividends received by you with respect to
our shares that are attributable to: (1) dividends received
by us from non-REIT corporations or other taxable REIT
subsidiaries; (2) income from the prior year with respect
to which we were required to pay federal corporate income tax
during the prior year (if, for example, we did not distribute
100% of our REIT taxable income for the prior year); or
(3) the amount of any earnings and profits that were
distributed by us and accumulated in a non-REIT year.
Distributions that are designated as capital gain dividends will
be taxed as long-term capital gains (to the extent they do not
exceed our actual net capital gain for the taxable year),
without regard to the period for which you held our stock.
However, if you are a corporation, you may be required to treat
a portion of some capital gain dividends as ordinary income.
If we elect to retain and pay income tax on any net long-term
capital gain, you would include in income, as long-term capital
gain, your proportionate share of this net long-term capital
gain. You would also receive a refundable tax credit for your
proportionate share of the tax paid by us on such retained
capital gains, and you would have an increase in the basis of
your shares of our stock in an amount equal to your includable
capital gains less your share of the tax deemed paid.
You may not include in your federal income tax return any of our
net operating losses or capital losses. Federal income tax rules
may also require that certain minimum tax adjustments and
preferences be apportioned to you. In addition, any distribution
declared by us in October, November or December of any year on a
specified date in any such month shall be treated as both paid
by us and received by you on December 31 of that year, provided
that the distribution is actually paid by us no later than
January 31 of the following year.
We will be treated as having sufficient earnings and profits to
treat as a dividend any distribution up to the amount required
to be distributed in order to avoid imposition of the 4% excise
tax discussed under “— General” and
“— Qualification as a REIT — Annual
Distribution Requirements” above. As a result, you may be
required to treat as taxable dividends certain distributions
that would otherwise result in a tax-free return of capital.
Moreover, any “deficiency dividend” will be treated as
a dividend (an ordinary dividend or a capital gain dividend, as
the case may be), regardless of our earnings and profits. Any
other distributions in excess of current or accumulated earnings
and profits will not be taxable to you to the extent these
distributions do not exceed the adjusted tax basis of your
shares of our stock. You will be required to reduce the tax
basis of your shares of our stock by the amount of these
distributions until the basis has been reduced to zero, after
which these distributions will be taxable as capital gain, if
the shares of our stock are held as capital assets. The tax
basis as so reduced will be used in computing the capital gain
or loss, if any, realized upon sale of the shares of our stock.
Any loss upon a sale or exchange of shares of our stock which
were held for six months or less (after application of certain
holding period rules) will generally be treated as a long-term
capital loss to the extent you previously received capital gain
distributions with respect to these shares of our stock.
Upon the sale or exchange of any shares of our stock to or with
a person other than us or a sale or exchange of all shares of
our stock (whether actually or constructively owned) with us,
you will generally recognize capital gain or loss equal to the
difference between the amount realized on the sale or exchange
and your adjusted tax basis in these shares of our stock. This
gain will be capital gain if you held these shares of our stock
as a capital asset.
If we redeem any of your shares in us, the treatment can only be
determined on the basis of particular facts at the time of
redemption. In general, you will recognize gain or loss (as
opposed to dividend income) equal to the difference between the
amount received by you in the redemption and your adjusted tax
basis in your shares redeemed if such redemption:
(1) results in a “complete termination” of your
interest in all classes of our equity securities; (2) is a
“substantially disproportionate redemption”; or
(3) is “not essentially equivalent to a dividend”
with respect to you. In applying these tests, you must take into
account your ownership of all classes of our equity securities
(e.g., common stock, preferred stock, depositary shares and
warrants). You also must take into account any equity securities
that are considered to be constructively owned by you.
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If, as a result of a redemption by us of your shares, you no
longer own (either actually or constructively) any of our equity
securities or only own (actually and constructively) an
insubstantial percentage of our equity securities, then it is
probable that the redemption of your shares would be considered
“not essentially equivalent to a dividend” and, thus,
would result in gain or loss to you. However, whether a
distribution is “not essentially equivalent to a
dividend” depends on all of the facts and circumstances,
and if you rely on any of these tests at the time of redemption,
you should consult your tax advisor to determine their
application to the particular situation.
Generally, if the redemption does not meet the tests described
above, then the proceeds received by you from the redemption of
your shares will be treated as a distribution taxable as a
dividend to the extent of the allocable portion of current or
accumulated earnings and profits. If the redemption is taxed as
a dividend, your adjusted tax basis in the redeemed shares will
be transferred to any other shareholdings in us that you own. If
you own no other shareholdings in us, under certain
circumstances, such basis may be transferred to a related
person, or it may be lost entirely.
Gain from the sale or exchange of our shares held for more than
one year is taxed at a maximum long-term capital gain rate,
which is currently 15%. Pursuant to Internal Revenue Service
guidance, we may classify portions of our capital gain dividends
as gains eligible for the long-term capital gains rate or as
gain taxable to individual stockholders at a maximum rate of 25%.
Treatment of Tax-Exempt
U.S. Stockholders.
Tax-exempt entities,
including qualified employee pension and profit sharing trusts
and individual retirement accounts (“Exempt
Organizations”), generally are exempt from federal income
taxation. However, they are subject to taxation on their
unrelated business taxable income (“UBTI”). The
Internal Revenue Service has issued a published revenue ruling
that dividend distributions from a REIT to an exempt employee
pension trust do not constitute UBTI, provided that the shares
of the REIT are not otherwise used in an unrelated trade or
business of the exempt employee pension trust. Based on this
ruling, amounts distributed by us to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt
Organization finances its acquisition of the shares of our stock
with debt, a portion of its income from us will constitute UBTI
pursuant to the “debt financed property” rules.
Likewise, a portion of the Exempt Organization’s income
from us would constitute UBTI if we held a residual interest in
a real estate mortgage investment conduit.
In addition, in certain circumstances, a pension trust that owns
more than 10% of our stock is required to treat a percentage of
our dividends as UBTI. This rule applies to a pension trust
holding more than 10% of our stock only if: (1) the
percentage of our income that is UBTI (determined as if we were
a pension trust) is at least 5%; (2) we qualify as a REIT
by reason of the modification of the Five or Fewer Requirement
that allows beneficiaries of the pension trust to be treated as
holding shares in proportion to their actuarial interests in the
pension trust; and (3) either (i) one pension trust
owns more than 25% of the value of our stock, or (ii) a
group of pension trusts individually holding more than 10% of
the value of our stock collectively own more than 50% of the
value of our stock.
Backup Withholding and Information
Reporting.
Under certain circumstances, you may
be subject to backup withholding at applicable rates on payments
made with respect to, or cash proceeds of a sale or exchange of,
shares of our stock. Backup withholding will apply only if you:
(1) fail to provide a correct taxpayer identification
number, which if you are an individual, is ordinarily your
social security number; (2) furnish an incorrect taxpayer
identification number; (3) are notified by the Internal
Revenue Service that you have failed to properly report payments
of interest or dividends; or (4) fail to certify, under
penalties of perjury, that you have furnished a correct taxpayer
identification number and that the Internal Revenue Service has
not notified you that you are subject to backup withholding.
Backup withholding will not apply with respect to payments made
to certain exempt recipients, such as corporations and
tax-exempt organizations. You should consult with a tax advisor
regarding qualification for exemption from backup withholding,
and the procedure for obtaining an exemption. Backup withholding
is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a stockholder will be
allowed as a credit against such stockholder’s United
States federal income tax liability and may entitle such
stockholder to a refund, provided that the required information
is provided to the Internal Revenue Service. In addition,
withholding a portion of capital gain distributions made to
stockholders may be required for stockholders who fail to
certify their non-foreign status.
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Taxation of Foreign Stockholders.
The
following summary applies to you only if you are a foreign
person. The federal taxation of foreign persons is a highly
complex matter that may be affected by many considerations.
Except as discussed below, distributions to you of cash
generated by our real estate operations in the form of ordinary
dividends, but not by the sale or exchange of our capital
assets, generally will be subject to U.S. withholding tax
at a rate of 30%, unless an applicable tax treaty reduces that
tax and you file with us the required form evidencing the lower
rate.
In general, you will be subject to United States federal income
tax on a graduated rate basis rather than withholding with
respect to your investment in our stock if such investment is
“effectively connected” with your conduct of a trade
or business in the United States. A corporate foreign
stockholder that receives income that is, or is treated as,
effectively connected with a United States trade or business may
also be subject to the branch profits tax, which is payable in
addition to regular United States corporate income tax. The
following discussion will apply to foreign stockholders whose
investment in us is not so effectively connected. We expect to
withhold United States income tax, as described below, on the
gross amount of any distributions paid to you unless
(1) you file an Internal Revenue Service
Form W-8ECI
with us claiming that the distribution is “effectively
connected” or (2) certain other exceptions apply.
Distributions by us that are attributable to gain from the sale
or exchange of a United States real property interest will be
taxed to you under the Foreign Investment in Real Property Tax
Act of 1980 (“FIRPTA”) as if these distributions were
gains “effectively connected” with a United States
trade or business. Accordingly, you will be taxed at the normal
capital gain rates applicable to a U.S. stockholder on
these amounts, subject to any applicable alternative minimum tax
and a special alternative minimum tax in the case of nonresident
alien individuals. Distributions subject to FIRPTA may also be
subject to a branch profits tax in the hands of a corporate
foreign stockholder that is not entitled to treaty exemption.
We will be required to withhold from distributions subject to
FIRPTA, and remit to the Internal Revenue Service, 35% of
designated capital gain dividends, or, if greater, 35% of the
amount of any distributions that could be designated as capital
gain dividends. In addition, if we designate prior distributions
as capital gain dividends, subsequent distributions, up to the
amount of the prior distributions not withheld against, will be
treated as capital gain dividends for purposes of withholding.
For taxable years beginning after October 22, 2004, any
capital gain dividend with respect to any class of stock that is
“regularly traded” on an established securities market
will be treated as an ordinary dividend if the foreign
stockholder did not own more than 5% of such class of stock at
any time during the taxable year. Once this provision takes
effect, foreign stockholders generally will not be required to
report distributions received from us on U.S. federal
income tax returns and all distributions treated as dividends
for U.S. federal income tax purposes including any capital
gain dividend will be subject to a 30% U.S. withholding tax
(unless reduced under an applicable income tax treaty) as
discussed above. In addition, the branch profits tax will no
longer apply to such distributions.
Unless our shares constitute a “United States real property
interest” within the meaning of FIRPTA or are effectively
connected with a U.S. trade or business, a sale of our
shares by you generally will not be subject to United States
taxation. Our shares will not constitute a United States real
property interest if we qualify as a “domestically
controlled REIT.” We believe that we, and expect to
continue to, qualify as a domestically controlled REIT. A
domestically controlled REIT is a REIT in which at all times
during a specified testing period less than 50% in value of its
shares is held directly or indirectly by foreign stockholders.
However, if you are a nonresident alien individual who is
present in the United States for 183 days or more during
the taxable year and certain other conditions apply, you will be
subject to a 30% tax on such capital gains. In any event, a
purchaser of our shares from you will not be required under
FIRPTA to withhold on the purchase price if the purchased shares
are “regularly traded” on an established securities
market or if we are a domestically controlled REIT. Otherwise,
under FIRPTA, the purchaser may be required to withhold 10% of
the purchase price and remit such amount to the Internal Revenue
Service.
Backup withholding tax and information reporting will generally
not apply to distributions paid to you outside the United States
that are treated as: (1) dividends to which the 30% or
lower treaty rate withholding tax discussed
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above applies; (2) capital gains dividends; or
(3) distributions attributable to gain from the sale or
exchange by us of U.S. real property interests. Payment of
the proceeds of a sale of stock within the United States or
conducted through certain U.S. related financial
intermediaries is subject to both backup withholding and
information reporting unless the beneficial owner certifies
under penalties of perjury that he or she is not a
U.S. person (and the payor does not have actual knowledge
that the beneficial owner is a U.S. person) or otherwise
established an exemption. You may obtain a refund of any amounts
withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service.
U.S.
Federal Income Taxation of Holders of Depositary
Shares
Owners of our depositary shares will be treated as if you were
owners of the series of preferred stock represented by the
depositary shares. Thus, you will be required to take into
account the income and deductions to which you would be entitled
if you were a holder of the underlying series of preferred stock.
Conversion or Exchange of Shares for Preferred
Stock.
No gain or loss will be recognized upon
the withdrawal of preferred stock in exchange for depositary
shares and the tax basis of each share of preferred stock will,
upon exchange, be the same as the aggregate tax basis of the
depositary shares exchanged. If you held your depositary shares
as a capital asset at the time of the exchange for shares of
preferred stock, the holding period for your shares of preferred
stock will include the period during which you owned the
depositary shares.
U.S.
Federal Income and Estate Taxation of Holders of Our Debt
Securities
The following is a general summary of the United States federal
income tax consequences and, in the case that you are a holder
that is a
non-U.S. holder,
as defined below, the United States federal estate tax
consequences, of purchasing, owning and disposing of debt
securities periodically offered under one or more indentures
(the “notes”). This summary assumes that you hold the
notes as capital assets. This summary applies to you only if you
are the initial holder of the notes and you acquire the notes
for a price equal to the issue price of the notes. The issue
price of the notes is the first price at which a substantial
amount of the notes is sold other than to bond houses, brokers
or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers. In addition, this
summary does not consider any foreign, state, local or other tax
laws that may be applicable to us or a purchaser of the notes.
U.S.
Holders
The following summary applies to you only if you are a
U.S. holder, as defined below.
Definition of a U.S. Holder.
A
“U.S. holder” is a beneficial owner of a note or
notes that is for United States federal income tax purposes:
| • | a citizen or resident of the United States; | |
| • | a corporation, partnership or other entity classified as a corporation or partnership for these purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States, including any state; | |
| • | an estate, the income of which is subject to United States federal income taxation regardless of its source; or | |
| • | a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trust’s substantial decisions. |
Payments of Interest.
Stated interest on the
notes generally will be taxed as ordinary interest income from
domestic sources at the time it is paid or accrues in accordance
with your method of accounting for tax purposes.
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Sale, Exchange or Other Disposition of
Notes.
The adjusted tax basis in your note
acquired at a premium will generally be your cost. You generally
will recognize taxable gain or loss when you sell or otherwise
dispose of your notes equal to the difference, if any, between:
| • | the amount realized on the sale or other disposition, less any amount attributable to any accrued interest, which will be taxable in the manner described under “— Payments of Interest” above; and | |
| • | your adjusted tax basis in the notes. |
Your gain or loss generally will be capital gain or loss. This
capital gain or loss will be long-term capital gain or loss if
at the time of the sale or other disposition you have held the
notes for more than one year. Subject to limited exceptions,
your capital losses cannot be used to offset your ordinary
income.
Backup Withholding and Information
Reporting.
In general, “backup
withholding” may apply to any payments made to you of
principal and interest on your note, and to payment of the
proceeds of a sale or other disposition of your note before
maturity, if you are a non-corporate U.S. holder and:
(1) fail to provide a correct taxpayer identification
number, which if you are an individual, is ordinarily your
social security number; (2) furnish an incorrect taxpayer
identification number; (3) are notified by the Internal
Revenue Service that you have failed to properly report payments
of interest or dividends; or (4) fail to certify, under
penalties of perjury, that you have furnished a correct taxpayer
identification number and that the Internal Revenue Service has
not notified you that you are subject to backup withholding.
The amount of any reportable payments, including interest, made
to you (unless you are an exempt recipient) and the amount of
tax withheld, if any, with respect to such payments will be
reported to you and to the Internal Revenue Service for each
calendar year. You should consult your tax advisor regarding
your qualification for an exemption from backup withholding and
the procedures for obtaining such an exemption, if applicable.
The backup withholding tax is not an additional tax and will be
credited against your U.S. federal income tax liability,
provided that correct information is provided to the Internal
Revenue Service.
Non-U.S.
Holders
The following summary applies to you if you are a beneficial
owner of a note and are not a U.S. holder, as defined above
(a
“non-U.S. holder”).
Special rules may apply to certain
non-U.S. holders
such as “controlled foreign corporations,”
“passive foreign investment companies” and
“foreign personal holding companies.” Such entities
are encouraged to consult their tax advisors to determine the
United States federal, state, local and other tax consequences
that may be relevant to them.
U.S. Federal Withholding Tax.
Subject to
the discussion below, U.S. federal withholding tax will not
apply to payments by us or our paying agent, in its capacity as
such, of principal and interest on your notes under the
“portfolio interest” exception of the Internal Revenue
Code, provided that:
| • | you do not, directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all classes of our stock entitled to vote; | |
| • | you are not (1) a controlled foreign corporation for U.S. federal income tax purposes that is related, directly or indirectly, to us through sufficient stock ownership, as provided in the Internal Revenue Code, or (2) a bank receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code; | |
| • | such interest is not effectively connected with your conduct of a U.S. trade or business; and | |
| • | you provide a signed written statement, under penalties of perjury, which can reliably be related to you, certifying that you are not a U.S. person within the meaning of the Internal Revenue Code and providing your name and address to: |
| • | us or our paying agent; or | |
| • | a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business and holds your notes on your behalf and that certifies to us or our paying agent under penalties of perjury that it, or the bank or financial institution between it and you, has |
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| received from you your signed, written statement and provides us or our paying agent with a copy of such statement. |
Treasury regulations provide that:
| • | if you are a foreign partnership, the certification requirement will generally apply to your partners, and you will be required to provide certain information; | |
| • | if you are a foreign trust, the certification requirement will generally be applied to you or your beneficial owners depending on whether you are a “foreign complex trust,” “foreign simple trust,” or “foreign grantor trust” as defined in the Treasury regulations; and | |
| • | look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts. |
If you are a foreign partnership or a foreign trust, you should
consult your own tax advisor regarding your status under these
Treasury regulations and the certification requirements
applicable to you.
If you cannot satisfy the portfolio interest requirements
described above, payments of interest will be subject to the 30%
United States withholding tax, unless you provide us with a
properly executed (1) Internal Revenue Service
Form W-8BEN
claiming an exemption from or reduction in withholding under the
benefit of an applicable treaty or (2) Internal Revenue
Service
Form W-8ECI
stating that interest paid on the note is not subject to
withholding tax because it is effectively connected with your
conduct of a trade or business in the United States. Alternative
documentation may be applicable in certain circumstances.
If you are engaged in a trade or business in the United States
and interest on a note is effectively connected with the conduct
of that trade or business, you will be required to pay United
States federal income tax on that interest on a net income basis
(although you will be exempt from the 30% withholding tax
provided the certification requirement described above is met)
in the same manner as if you were a U.S. person, except as
otherwise provided by an applicable tax treaty. If you are a
foreign corporation, you may be required to pay a branch profits
tax on the earnings and profits that are effectively connected
to the conduct of your trade or business in the United States.
Sale, Exchange or other Disposition of
Notes.
You generally will not have to pay
U.S. federal income tax on any gain or income realized from
the sale, redemption, retirement at maturity or other
disposition of your notes, unless:
| • | in the case of gain, you are an individual who is present in the United States for 183 days or more during the taxable year of the sale or other disposition of your notes, and specific other conditions are met; | |
| • | you are subject to tax provisions applicable to certain United States expatriates; or | |
| • | the gain is effectively connected with your conduct of a U.S. trade or business. |
If you are engaged in a trade or business in the United States,
and gain with respect to your notes is effectively connected
with the conduct of that trade or business, you generally will
be subject to U.S. income tax on a net basis on the gain.
In addition, if you are a foreign corporation, you may be
subject to a branch profits tax on your effectively connected
earnings and profits for the taxable year, as adjusted for
certain items.
U.S. Federal Estate Tax.
If you are an
individual and are not a U.S. citizen or a resident of the
United States, as specially defined for U.S. federal estate
tax purposes, at the time of your death, your notes will
generally not be subject to the U.S. federal estate tax,
unless, at the time of your death (1) you owned actually or
constructively 10% or more of the total combined voting power of
all our classes of stock entitled to vote, or (2) interest
on the notes is effectively connected with your conduct of a
U.S. trade or business.
Backup Withholding and Information
Reporting.
Backup withholding will not apply to
payments of principal or interest made by us or our paying
agent, in its capacity as such, to you if you have provided the
required certification that you are a
non-U.S. holder
as described in “— U.S. Federal Withholding
Tax” above, and provided that neither we nor our paying
agent have actual knowledge that you are a U.S. holder, as
described in “— U.S. Holders” above. We
or our paying agent may, however, report payments of interest on
the notes.
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The gross proceeds from the disposition of your notes may be
subject to information reporting and backup withholding tax. If
you sell your notes outside the United States through a
non-U.S. office
of a
non-U.S. broker
and the sales proceeds are paid to you outside the United
States, then the U.S. backup withholding and information
reporting requirements generally will not apply to that payment.
However, U.S. information reporting, but not backup
withholding, will apply to a payment of sales proceeds, even if
that payment is made outside the United States, if you sell your
notes through a
non-U.S. office
of a broker that:
| • | is a U.S. person, as defined in the Internal Revenue Code; | |
| • | derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States; | |
| • | is a “controlled foreign corporation” for U.S. federal income tax purposes; or | |
| • | is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons who in the aggregate hold more than 50% of the income or capital interests in the partnership, or the foreign partnership is engaged in a U.S. trade or business, unless the broker has documentary evidence in its files that you are a non-U.S. person and certain other conditions are met or you otherwise establish an exemption. If you receive payments of the proceeds of a sale of your notes to or through a U.S. office of a broker, the payment is subject to both U.S. backup withholding and information reporting unless you provide a Form W-8BEN certifying that you are a non-U.S. person or you otherwise establish an exemption. |
You should consult your own tax advisor regarding application of
backup withholding in your particular circumstance and the
availability of and procedure for obtaining an exemption from
backup withholding. Any amounts withheld under the backup
withholding rules from a payment to you will be allowed as a
refund or credit against your U.S. federal income tax
liability, provided the required information is furnished to the
Internal Revenue Service.
U.S.
Federal Income and Estate Taxation of Holders of Our
Warrants
Exercise of Warrants.
You will not generally
recognize gain or loss upon the exercise of a warrant. Your
basis in the debt securities, preferred stock, depositary shares
or common stock, as the case may be, received upon the exercise
of the warrant will be equal to the sum of your adjusted tax
basis in the warrant and the exercise price paid. Your holding
period in the debt securities, preferred stock, depositary
shares or common stock, as the case may be, received upon the
exercise of the warrant will not include the period during which
the warrant was held by you.
Expiration of Warrants.
Upon the expiration of
a warrant, you will recognize a capital loss in an amount equal
to your adjusted tax basis in the warrant.
Sale or Exchange of Warrants.
Upon the sale or
exchange of a warrant to a person other than us, you will
recognize gain or loss in an amount equal to the difference
between the amount realized on the sale or exchange and your
adjusted tax basis in the warrant. Such gain or loss will be
capital gain or loss and will be long-term capital gain or loss
if the warrant was held for more than one year. Upon the sale of
the warrant to us, the Internal Revenue Service may argue that
you should recognize ordinary income on the sale. You are
advised to consult your own tax advisors as to the consequences
of a sale of a warrant to us.
Potential
Legislation or Other Actions Affecting Tax
Consequences
Current and prospective securities holders should recognize that
the present federal income tax treatment of an investment in us
may be modified by legislative, judicial or administrative
action at any time and that any such action may affect
investments and commitments previously made. The rules dealing
with federal income taxation are constantly under review by
persons involved in the legislative process and by the Internal
Revenue Service and the Treasury Department, resulting in
revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in
federal tax laws and interpretations of these laws could
adversely affect the tax consequences of an investment in us.
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Internet
Access to Our SEC Filings
Our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports, as well as our proxy statements
and other materials that are filed with, or furnished to, the
Securities and Exchange Commission are made available, free of
charge, on the Internet at www.hcreit.com, as soon as reasonably
practicable after they are filed with, or furnished to, the
Securities and Exchange Commission.
| Item 1A. | Risk Factors |
Forward-Looking
Statements and Risk Factors
This section discusses the most significant factors that affect
our business, operations and financial condition. It does not
describe all risks and uncertainties applicable to us, our
industry or ownership of our securities. If any of the following
risks, as well as other risks and uncertainties that are not yet
identified or that we currently think are not material, actually
occur, we could be materially adversely affected. In that event,
the value of our securities could decline.
This Annual Report on
Form 10-K
and the documents incorporated by reference contain statements
that constitute “forward-looking statements” as that
term is defined in the federal securities laws. These
forward-looking statements include, but are not limited to,
those regarding:
| • | the possible expansion of our portfolio; | |
| • | the sale of properties; | |
| • | the performance of our operators/tenants and properties; | |
| • | our ability to enter into agreements with new viable tenants for vacant space or for properties that we take back from financially troubled tenants, if any; | |
| • | our occupancy rates; | |
| • | our ability to acquire, develop and/or manage properties; | |
| • | our ability to make distributions to stockholders; | |
| • | our policies and plans regarding investments, financings and other matters; | |
| • | our tax status as a real estate investment trust; | |
| • | our critical accounting policies; | |
| • | our ability to appropriately balance the use of debt and equity; | |
| • | our ability to access capital markets or other sources of funds; and | |
| • | our ability to meet our earnings guidance. |
When we use words such as “may,” “will,”
“intend,” “should,” “believe,”
“expect,” “anticipate,” “project,”
“estimate” or similar expressions, we are making
forward-looking statements. Forward-looking statements are not
guarantees of future performance and involve risks and
uncertainties. Our expected results may not be achieved, and
actual results may differ materially from our expectations. This
may be a result of various factors, including, but not limited
to:
| • | the status of the economy; | |
| • | the status of capital markets, including availability and cost of capital; | |
| • | issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; | |
| • | changes in financing terms; |
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| • | competition within the health care and senior housing industries; | |
| • | negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; | |
| • | our ability to transition or sell facilities with profitable results; | |
| • | the failure to make new investments as and when anticipated; | |
| • | acts of God affecting our properties; | |
| • | our ability to re-lease space at similar rates as vacancies occur; | |
| • | our ability to timely reinvest sale proceeds at similar rates to assets sold; | |
| • | operator/tenant bankruptcies or insolvencies; | |
| • | government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; | |
| • | liability or contract claims by or against operators/tenants; | |
| • | unanticipated difficulties and/or expenditures relating to future acquisitions; | |
| • | environmental laws affecting our properties; | |
| • | changes in rules or practices governing our financial reporting; | |
| • | other legal and operational matters, including REIT qualification and key management personnel recruitment and retention; and | |
| • | the risks described below: |
Risk
factors related to our operators’ revenues and
expenses
Our investment property operators’ revenues are primarily
driven by occupancy, Medicare and Medicaid reimbursement, if
applicable, and private pay rates. Expenses for these facilities
are primarily driven by the costs of labor, food, utilities,
taxes, insurance and rent or debt service. Revenues from
government reimbursement have, and may continue to, come under
pressure due to reimbursement cuts and state budget shortfalls.
Liability insurance and staffing costs continue to increase for
our operators. To the extent that any decrease in revenues
and/or
any
increase in operating expenses result in a property not
generating enough cash to make payments to us, the credit of our
operator and the value of other collateral would have to be
relied upon.
The ongoing credit and liquidity crisis, and the weakening
economy, may have an adverse effect on our operators and
tenants, including their ability to access credit or maintain
occupancy rates. If the operations, cash flows or financial
condition of our operators are materially adversely impacted by
the current economic conditions, our revenue and operations may
be adversely affected.
Increased
competition may affect our operators’ ability to meet their
obligations to us
The operators of our properties compete on a local and regional
basis with operators of properties and other health care
providers that provide comparable services. We cannot be certain
that the operators of all of our facilities will be able to
achieve and maintain occupancy and rate levels that will enable
them to meet all of their obligations to us. Our operators are
expected to encounter increased competition in the future that
could limit their ability to attract residents or expand their
businesses.
Risk
factors related to obligor bankruptcies
We are exposed to the risk that our obligors may not be able to
meet the rent, principal and interest or other payments due us,
which may result in an obligor bankruptcy or insolvency, or that
an obligor might become subject to bankruptcy or insolvency
proceedings for other reasons. Although our operating lease
agreements provide us with the right to evict a tenant, demand
immediate payment of rent and exercise other remedies, and our
loans
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provide us with the right to terminate any funding obligation,
demand immediate repayment of principal and unpaid interest,
foreclose on the collateral and exercise other remedies, the
bankruptcy and insolvency laws afford certain rights to a party
that has filed for bankruptcy or reorganization. An obligor in
bankruptcy or subject to insolvency proceedings may be able to
limit or delay our ability to collect unpaid rent in the case of
a lease or to receive unpaid principal and interest in the case
of a loan, and to exercise other rights and remedies.
We may be required to fund certain expenses (e.g., real estate
taxes and maintenance) to preserve the value of an investment
property, avoid the imposition of liens on a property
and/or
transition a property to a new tenant. In some instances, we
have terminated our lease with a tenant and relet the property
to another tenant. In some of those situations, we have provided
working capital loans to and limited indemnification of the new
obligor. If we cannot transition a leased property to a new
tenant, we may take possession of that property, which may
expose us to certain successor liabilities. Should such events
occur, our revenue and operating cash flow may be adversely
affected.
Transfers
of health care facilities may require regulatory approvals and
these facilities may not have efficient alternative
uses
Transfers of health care facilities to successor operators
frequently are subject to regulatory approvals, including change
of ownership approvals under certificate of need
(“CON”) laws, state licensure laws and Medicare and
Medicaid provider arrangements, that are not required for
transfers of other types of real estate. The replacement of an
operator could be delayed by the approval process of any
federal, state or local agency necessary for the transfer of the
facility or the replacement of the operator licensed to manage
the facility. Alternatively, given the specialized nature of our
facilities, we may be required to spend substantial time and
funds to adapt these properties to other uses. If we are unable
to timely transfer properties to successor operators or find
efficient alternative uses, our revenue and operations may be
adversely affected.
Risk
factors related to government regulations
Our obligors’ businesses are affected by government
reimbursement and private payor rates. To the extent that an
operator/tenant receives a significant portion of its revenues
from governmental payors, primarily Medicare and Medicaid, such
revenues may be subject to statutory and regulatory changes,
retroactive rate adjustments, recovery of program overpayments
or set-offs, administrative rulings, policy interpretations,
payment or other delays by fiscal intermediaries or carriers,
government funding restrictions (at a program level or with
respect to specific facilities) and interruption or delays in
payments due to any ongoing governmental investigations and
audits at such property. In recent years, governmental payors
have frozen or reduced payments to health care providers due to
budgetary pressures. Health care reimbursement will likely
continue to be of paramount importance to federal and state
authorities. We cannot make any assessment as to the ultimate
timing or effect any future legislative reforms may have on the
financial condition of our obligors and properties. There can be
no assurance that adequate reimbursement levels will be
available for services provided by any property operator,
whether the property receives reimbursement from Medicare,
Medicaid or private payors. Significant limits on the scope of
services reimbursed and on reimbursement rates and fees could
have a material adverse effect on an obligor’s liquidity,
financial condition and results of operations, which could
adversely affect the ability of an obligor to meet its
obligations to us. See “Item 1 —
Business — Certain Government Regulations —
Reimbursement” above.
Our operators and tenants generally are subject to extensive
federal, state and local licensure, certification and inspection
laws and regulations. Our operators’ or tenants’
failure to comply with any of these laws could result in loss of
accreditation, denial of reimbursement, imposition of fines,
suspension or decertification from federal and state health care
programs, loss of license or closure of the facility. Such
actions may have an effect on our operators’ or
tenants’ ability to make lease payments to us and,
therefore, adversely impact us. See
“Item 1 — Business — Certain
Government Regulations — Other Related Laws”
above.
Many of our properties may require a license
and/or
CON
to operate. Failure to obtain a license or CON, or loss of a
required license or CON would prevent a facility from operating
in the manner intended by the operators or tenants. These events
could materially adversely affect our operators’ or
tenants’ ability to make rent payments to us. State and
local laws also may regulate expansion, including the addition
of new beds or services or acquisition of
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medical equipment, and the construction of health care
facilities, by requiring a CON or other similar approval. See
“Item 1 — Business — Certain
Government Regulations — Licensing and
Certification” above.
The American Reinvestment and Recovery Act of 2009, which was
signed into law on February 17, 2009, provides
$87 billion in additional federal Medicaid funding for
states’ Medicaid expenditures between October 1, 2008
and December 31, 2010. Under this Act, states meeting
certain eligibility requirements will temporarily receive
additional money in the form of an increase in the federal
medical assistance percentage (FMAP). Thus, for a limited period
of time, the share of Medicaid costs that are paid for by the
federal government will go up, and each state’s share will
go down. We cannot predict whether states are, or will remain,
eligible to receive the additional federal Medicaid funding, or
whether the states will have sufficient funds for their Medicaid
programs. We also cannot predict the impact that this
broad-based, far-reaching legislation will have on the
U.S. economy or our business.
Risk
factors related to liability claims and insurance
costs
In recent years, skilled nursing and seniors housing operators
have experienced substantial increases in both the number and
size of patient care liability claims. As a result, general and
professional liability costs have increased in some markets.
However, a recent report and state survey found that the
liability insurance market is beginning to stabilize in most
markets. In 2008, national average liability loss costs were
stable for the first time in nearly a decade. State-led tort
reform efforts have greatly contributed to decreasing costs. In
some markets general and professional liability insurance
coverage continues to be restricted or very costly, which may
adversely affect the property operators’ future operations,
cash flows and financial condition, and may have a material
adverse effect on the property operators’ ability to meet
their obligations to us.
Risk
factors related to acquisitions
We are exposed to the risk that some of our acquisitions may not
prove to be successful. We could encounter unanticipated
difficulties and expenditures relating to any acquired
properties, including contingent liabilities, and acquired
properties might require significant management attention that
would otherwise be devoted to our ongoing business. If we agree
to provide construction funding to an operator/tenant and the
project is not completed, we may need to take steps to ensure
completion of the project. Moreover, if we issue equity
securities or incur additional debt, or both, to finance future
acquisitions, it may reduce our per share financial results.
These costs may negatively affect our results of operations.
Risk
factors related to joint ventures
We have entered into, and may continue in the future to enter
into, partnerships or joint ventures with other persons or
entities. Joint venture investments involve risks, including the
possibility that our partner might become insolvent or otherwise
refuse to make capital contributions when due; that our partner
might at any time have investment goals which are inconsistent
with ours; that we could become engaged in a dispute with our
partner, which could require us to expend additional resources
to resolve such disputes; and that our partner may be in a
position to take action or withhold consent contrary to our
instructions or requests. In addition, our ability to transfer
our interest in a joint venture to a third party may be
restricted. In some instances, we and our partner may each have
the right to trigger a buy-sell arrangement, which could cause
us to sell our interest, or acquire our partner’s interest,
at a time when we otherwise would not have initiated such a
transaction. Joint ventures require us to share decision-making
authority with our partners, which limits our ability to control
the properties in the joint ventures. Even when we have a
controlling interest, certain major decisions may require
partner approval.
Risk
factors related to life sciences facilities
Our tenants in the life sciences industry face high levels of
regulation, expense and uncertainty that may adversely affect
their ability to make payments to us. Research, development and
clinical testing of products and technologies can be very
expensive and sources of funds may not be available to our life
sciences tenants in the future. The products and technologies
that are developed and manufactured by our life sciences tenants
may require regulatory approval prior to being made, marketed,
sold and used. The regulatory process can be costly, long and
31
Table of Contents
unpredictable. Even after a tenant gains regulatory approval and
market acceptance, the product still presents regulatory and
liability risks, such as safety concerns, competition from new
products and eventually the expiration of patent protection.
These factors may affect the ability of our life sciences
tenants to make timely payments to us, which may adversely
affect our revenue and operations.
Permanent financing for our investments is typically provided
through a combination of public and private offerings of debt
and equity securities and the incurrence or assumption of
secured debt. The incurrence or assumption of indebtedness may
cause us to become more leveraged, which could (1) require
us to dedicate a greater portion of our cash flow to the payment
of debt service, (2) make us more vulnerable to a downturn
in the economy, (3) limit our ability to obtain additional
financing, or (4) negatively affect our credit ratings or
outlook by one or more of the noted rating agencies.
Our debt agreements contain various covenants, restrictions and
events of default. Among other things, these provisions require
us to maintain certain financial ratios and minimum net worth
and impose certain limits on our ability to incur indebtedness,
create liens and make investments or acquisitions. Breaches of
these covenants could result in defaults under the instruments
governing the applicable indebtedness, in addition to any other
indebtedness cross-defaulted against such instruments. These
defaults could have a material adverse impact on our business,
results of operations and financial condition.
Risk
factors related to our credit ratings
As of February 12, 2010, our senior unsecured notes were
rated Baa2 (stable), BBB- (positive) and BBB (stable) by
Moody’s Investors Service, Standard & Poor’s
Ratings Services and Fitch Ratings, respectively. We plan to
manage the Company to maintain investment grade status with a
capital structure consistent with our current profile, but there
can be no assurance that we will be able to maintain our current
credit ratings. Any downgrades in terms of ratings or outlook by
any or all of the noted rating agencies could have a material
adverse impact on our cost and availability of capital, which
could in turn have a material adverse impact on our consolidated
results of operations, liquidity
and/or
financial condition.
Risk
factors related to interest rate swaps
We enter into interest rate swap agreements from time to time to
manage some of our exposure to interest rate volatility. These
swap agreements involve risks, such as the risk that
counterparties may fail to honor their obligations under these
arrangements. In addition, these arrangements may not be
effective in reducing our exposure to changes in interest rates.
When we use forward-starting interest rate swaps, there is a
risk that we will not complete the long-term borrowing against
which the swap is intended to hedge. If such events occur, our
results of operations may be adversely affected.
Risk
factors related to environmental laws
Under various federal and state laws, owners or operators of
real estate may be required to respond to the presence or
release of hazardous substances on the property and may be held
liable for property damage, personal injuries or penalties that
result from environmental contamination or exposure to hazardous
substances. We may become liable to reimburse the government for
damages and costs it incurs in connection with the
contamination. Generally, such liability attaches to a person
based on the person’s relationship to the property. Our
tenants or borrowers are primarily responsible for the condition
of the property. Moreover, we review environmental site
assessments of the properties that we own or encumber prior to
taking an interest in them. Those assessments are designed to
meet the “all appropriate inquiry” standard, which we
believe qualifies us for the innocent purchaser defense if
environmental liabilities arise. Based upon such assessments, we
do not believe that any of our properties are subject to
material environmental contamination. However, environmental
liabilities may be present in our properties and we may incur
costs to remediate contamination, which could have a material
adverse effect on our business or financial condition or the
business or financial condition of our obligors.
32
Table of Contents
Risk
factors related to facilities that require entrance
fees
Certain of our senior housing facilities require the payment of
an upfront entrance fee by the resident, a portion of which may
be refundable by the operator. Some of these facilities are
subject to substantial oversight by state regulators relating to
these funds. As a result of this oversight, residents of these
facilities may have a variety of rights, including, for example,
the right to cancel their contracts within a specified period of
time and certain lien rights. The oversight and rights of
residents within these facilities may have an effect on the
revenue or operations of the operators of such facilities and
therefore may negatively impact us.
Risk
factors related to facilities under construction or
development
At any given time, we may be in the process of constructing one
or more new facilities that ultimately will require a CON and
license before they can be utilized by the operator for their
intended use. The operator also may need to obtain Medicare and
Medicaid certification and enter into Medicare and Medicaid
provider agreements
and/or
third
party payor contracts. In the event that the operator is unable
to obtain the necessary CON, licensure, certification, provider
agreements or contracts after the completion of construction,
there is a risk that we will not be able to earn any revenues on
the facility until either the initial operator obtains a license
or certification to operate the new facility and the necessary
provider agreements or contracts or we can find and contract
with a new operator that is able to obtain a license to operate
the facility for its intended use and the necessary provider
agreements or contracts.
In connection with our renovation, redevelopment, development
and related construction activities, we may be unable to obtain,
or suffer delays in obtaining, necessary zoning, land-use,
building, occupancy and other required governmental permits and
authorizations. These factors could result in increased costs or
our abandonment of these projects. In addition, we may not be
able to obtain financing on favorable terms, which may render us
unable to proceed with our development activities, and we may
not be able to complete construction and
lease-up
of
a property on schedule, which could result in increased debt
service expense or construction costs.
Additionally, the time frame required for development,
construction and
lease-up
of
these properties means that we may have to wait years for
significant cash returns. Because we are required to make cash
distributions to our stockholders, if the cash flow from
operations or refinancing is not sufficient, we may be forced to
borrow additional money to fund such distributions. Newly
developed and acquired properties may not produce the cash flow
that we expect, which could adversely affect our overall
financial performance.
In deciding whether to acquire or develop a particular property,
we make assumptions regarding the expected future performance of
that property. In particular, we estimate the return on our
investment based on expected occupancy and rental rates. If our
financial projections with respect to a new property are
inaccurate, and the property is unable to achieve the expected
occupancy and rental rates, it may fail to perform as we
expected in analyzing our investment. Our estimate of the costs
of repositioning or redeveloping an acquired property may prove
to be inaccurate, which may result in our failure to meet our
profitability goals. Additionally, we may acquire new properties
that are not fully leased, and the cash flow from existing
operations may be insufficient to pay the operating expenses and
debt service associated with that property.
We do
not know if our tenants will renew their existing leases, and if
they do not, we may be unable to lease the properties on as
favorable terms, or at all
We cannot predict whether our tenants will renew existing leases
at the end of their lease terms, which expire at various times
through 2079. If these leases are not renewed, we would be
required to find other tenants to occupy those properties or
sell them. There can be no assurance that we would be able to
identify suitable replacement tenants or enter into leases with
new tenants on terms as favorable to us as the current leases or
that we would be able to lease those properties at all.
Our
ownership of properties through ground leases exposes us to the
loss of such properties upon breach or termination of the ground
leases
We have acquired an interest in certain of our properties by
acquiring a leasehold interest in the property on which the
building is located, and we may acquire additional properties in
the future through the purchase of interests in ground leases.
As the lessee under a ground lease, we are exposed to the
possibility of losing the property upon termination of the
ground lease or an earlier breach of the ground lease by us.
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Table of Contents
Illiquidity
of real estate investments could significantly impede our
ability to respond to adverse changes in the performance of our
properties
Real estate investments are relatively illiquid. Our ability to
quickly sell or exchange any of our properties in response to
changes in economic and other conditions will be limited. No
assurances can be given that we will recognize full value for
any property that we are required to sell for liquidity reasons.
Our inability to respond rapidly to changes in the performance
of our investments could adversely affect our financial
condition and results of operations. In addition, we are exposed
to the risks inherent in concentrating investments in real
estate, and in particular, the seniors housing and health care
industries. A downturn in the real estate industry could
adversely affect the value of our properties and our ability to
sell properties for a price or on terms acceptable to us.
Risk
factors related to reinvestment of sale proceeds
From time to time, we will have cash available from (1) the
proceeds of sales of our securities, (2) principal payments
on our loans receivable and (3) the sale of properties,
including non-elective dispositions, under the terms of master
leases or similar financial support arrangements. In order to
maintain current revenues and continue generating attractive
returns, we expect to re-invest these proceeds in a timely
manner. We compete for real estate investments with a broad
variety of potential investors. This competition for attractive
investments may negatively affect our ability to make timely
investments on terms acceptable to us.
Failure
to properly manage our rapid growth could distract our
management or increase our expenses
We have experienced rapid growth and development in a relatively
short period of time and expect to continue this rapid growth in
the future. This growth has resulted in increased levels of
responsibility for our management. Future property acquisitions
could place significant additional demands on, and require us to
expand, our management, resources and personnel. Our failure to
manage any such rapid growth effectively could harm our business
and, in particular, our financial condition, results of
operations and cash flows, which could negatively affect our
ability to make distributions to stockholders. Our growth could
also increase our capital requirements, which may require us to
issue potentially dilutive equity securities and incur
additional debt.
We
might fail to qualify or remain qualified as a
REIT
We intend to operate as a REIT under the Internal Revenue Code
and believe we have and will continue to operate in such a
manner. If we lose our status as a REIT, we will face serious
tax consequences that will substantially reduce the funds
available for satisfying our obligations and for distribution to
our stockholders for each of the years involved because:
| • | we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax at regular corporate rates; | |
| • | we could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and | |
| • | unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified. |
Since REIT qualification requires us to meet a number of complex
requirements, it is possible that we may fail to fulfill them,
and if we do, our earnings will be reduced by the amount of
federal taxes owed. A reduction in our earnings would affect the
amount we could distribute to our stockholders. If we do not
qualify as a REIT, we would not be required to make
distributions to stockholders since a non-REIT is not required,
in order to maintain REIT status or avoid an excise tax, to pay
dividends to stockholders. See “Item 1 —
Business — Federal Income Tax Considerations” for
a discussion of the provisions of the Internal Revenue Code that
apply to us and the effects of non-qualification.
In addition, if we fail to qualify as a REIT, all distributions
to stockholders would continue to be treated as dividends to the
extent of our current and accumulated earnings and profits,
although corporate stockholders may be eligible for the
dividends received deduction, and individual stockholders may be
eligible for taxation at the rates generally applicable to
long-term capital gains (currently at a maximum rate of 15%)
with respect to distributions.
As a result of all these factors, our failure to qualify as a
REIT also could impair our ability to implement our business
strategy and would adversely affect the value of our common
stock.
34
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Qualification as a REIT involves the application of highly
technical and complex Internal Revenue Code provisions for which
there are only limited judicial and administrative
interpretations. The determination of various factual matters
and circumstances not entirely within our control may affect our
ability to remain qualified as a REIT. Although we believe that
we qualify as a REIT, we cannot assure you that we will continue
to qualify or remain qualified as a REIT for tax purposes. See
“Item 1 — Business —
Taxation — Federal Income Tax Considerations”
included in this Annual Report on
Form 10-K.
The
90% annual distribution requirement will decrease our liquidity
and may limit our ability to engage in otherwise beneficial
transactions
To comply with the 90% distribution requirement applicable to
REITs and to avoid the nondeductible excise tax, we must make
distributions to our stockholders. See
“Item 1 — Business
— Taxation — Federal Income Tax
Considerations — Qualification as a REIT —
Annual Distribution Requirements” included in this Annual
Report on
Form 10-K.
Although we anticipate that we generally will have sufficient
cash or liquid assets to enable us to satisfy the REIT
distribution requirement, it is possible that, from time to
time, we may not have sufficient cash or other liquid assets to
meet the 90% distribution requirement, or we may decide to
retain cash or distribute such greater amount as may be
necessary to avoid income and excise taxation. This may be due
to timing differences between the actual receipt of income and
actual payment of deductible expenses, on the one hand, and the
inclusion of that income and deduction of those expenses in
arriving at our taxable income, on the other hand. In addition,
non-deductible expenses such as principal amortization or
repayments or capital expenditures in excess of non-cash
deductions may cause us to fail to have sufficient cash or
liquid assets to enable us to satisfy the 90% distribution
requirement. In the event that timing differences occur, or we
deem it appropriate to retain cash, we may borrow funds, issue
additional equity securities (although we cannot assure you that
we will be able to do so), pay taxable stock dividends, if
possible, distribute other property or securities or engage in a
transaction intended to enable us to meet the REIT distribution
requirements. This may require us to raise additional capital to
meet our obligations.
The amount of additional indebtedness we may incur is limited by
the terms of our line of credit arrangement and the indentures
governing our senior unsecured notes. In addition, adverse
economic conditions may impact the availability of additional
funds or could cause the terms on which we are able to borrow
additional funds to become unfavorable. In those circumstances,
we may be required to raise additional equity in the capital
markets. Our access to capital depends upon a number of factors
over which we have little or no control, including rising
interest rates, inflation and other general market conditions
and the market’s perception of our growth potential and our
current and potential future earnings and cash distributions and
the market price of the shares of our capital stock. We cannot
assure you that we will be able to raise the capital necessary
to make future investments or to meet our obligations and
commitments as they mature.
Other
risk factors
We are also subject to other risks. First, our Second Restated
Certificate of Incorporation and Second Amended and Restated
By-Laws contain anti-takeover provisions (staggered board
provisions, restrictions on share ownership and transfer and
super majority stockholder approval requirements for business
combinations) that could make it more difficult for or even
prevent a third party from acquiring us without the approval of
our incumbent Board of Directors. Provisions and agreements that
inhibit or discourage takeover attempts could reduce the market
value of our common stock.
Additionally, we are dependent on key personnel. Although we
have entered into employment agreements with our executive
officers, losing any one of them could, at least temporarily,
have an adverse impact on our operations. We believe that losing
more than one could have a material adverse impact on our
business.
| Item 1B. | Unresolved Staff Comments |
None.
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Table of Contents
| Item 2. | Properties |
We lease our corporate headquarters located at One SeaGate,
Suite 1500, Toledo, Ohio 43604. We also own corporate
offices in Ohio and Tennessee, lease corporate offices in
Florida and have ground leases relating to certain of our
investment properties and medical office buildings. The
following table sets forth certain information regarding the
properties that comprise our investments as of December 31,
2009 (dollars in thousands):
|
Number of
|
Number of
|
Total
|
Annualized
|
|||||||||||||
|
Property Location
|
Properties | Units | Investment | Income(1) | ||||||||||||
|
Independent Living Facilities/CCRCs:
|
||||||||||||||||
|
Arizona
|
2 | 105 | $ | 11,825 | $ | 935 | ||||||||||
|
California
|
8 | 1,310 | 162,858 | 18,462 | ||||||||||||
|
Colorado
|
2 | 582 | 78,420 | 8,297 | ||||||||||||
|
Florida
|
5 | 842 | 218,924 | 11,347 | ||||||||||||
|
Georgia
|
4 | 417 | 74,977 | 6,310 | ||||||||||||
|
Idaho
|
1 | 254 | 12,360 | 1,760 | ||||||||||||
|
Indiana
|
2 | 597 | 98,556 | 7,610 | ||||||||||||
|
Kansas
|
1 | 120 | 11,555 | 1,375 | ||||||||||||
|
Maryland
|
1 | 0 | 800 | 0 | ||||||||||||
|
Massachusetts
|
5 | 219 | 76,600 | 5,580 | ||||||||||||
|
Missouri
|
1 | 65 | 5,570 | 570 | ||||||||||||
|
Nevada
|
1 | 93 | 6,240 | 1,176 | ||||||||||||
|
North Carolina
|
3 | 345 | 46,191 | 2,262 | ||||||||||||
|
Ohio
|
1 | 288 | 99,749 | 0 | ||||||||||||
|
Pennsylvania
|
4 | 0 | 28,778 | 0 | ||||||||||||
|
South Carolina
|
6 | 1,198 | 235,883 | 16,149 | ||||||||||||
|
Texas
|
1 | 403 | 10,134 | 1,427 | ||||||||||||
|
Washington
|
1 | 70 | 4,881 | 543 | ||||||||||||
|
Wisconsin
|
1 | 138 | 25,704 | 2,264 | ||||||||||||
|
Total Independent Living Facilities/CCRCs
|
50 | 7,046 | 1,210,005 | 86,067 | ||||||||||||
|
Assisted Living Facilities:
|
||||||||||||||||
|
Arizona
|
3 | 132 | $ | 13,255 | $ | 1,636 | ||||||||||
|
California
|
8 | 609 | 64,008 | 7,937 | ||||||||||||
|
Colorado
|
1 | 46 | 3,845 | 583 | ||||||||||||
|
Connecticut
|
5 | 530 | 38,682 | 5,508 | ||||||||||||
|
Delaware
|
1 | 97 | 18,880 | 2,439 | ||||||||||||
|
Florida
|
11 | 682 | 59,916 | 5,097 | ||||||||||||
|
Georgia
|
1 | 45 | 1,521 | 210 | ||||||||||||
|
Illinois
|
7 | 688 | 130,017 | 6,648 | ||||||||||||
|
Indiana
|
2 | 78 | 4,429 | 718 | ||||||||||||
|
Iowa
|
1 | 236 | 37,215 | 1,075 | ||||||||||||
|
Kansas
|
1 | 119 | 9,717 | 1,253 | ||||||||||||
|
Louisiana
|
1 | 123 | 6,183 | 1,302 | ||||||||||||
|
Massachusetts
|
5 | 397 | 117,027 | 13,122 | ||||||||||||
|
Mississippi
|
1 | 78 | 6,899 | 992 | ||||||||||||
|
Montana
|
3 | 205 | 13,344 | 1,917 | ||||||||||||
|
Nevada
|
4 | 494 | 73,852 | 7,791 | ||||||||||||
|
New Jersey
|
2 | 90 | 6,576 | 1,025 | ||||||||||||
|
New York
|
4 | 284 | 52,814 | 4,511 | ||||||||||||
|
North Carolina
|
40 | 1,866 | 157,337 | 22,392 | ||||||||||||
|
Ohio
|
7 | 481 | 40,631 | 4,636 | ||||||||||||
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Table of Contents
|
Number of
|
Number of
|
Total
|
Annualized
|
|||||||||||||
|
Property Location
|
Properties | Units | Investment | Income(1) | ||||||||||||
|
Oklahoma
|
17 | 644 | 32,279 | 4,657 | ||||||||||||
|
Oregon
|
1 | 46 | 4,041 | 703 | ||||||||||||
|
Pennsylvania
|
4 | 302 | 45,641 | 4,456 | ||||||||||||
|
South Carolina
|
2 | 124 | 6,424 | 928 | ||||||||||||
|
Tennessee
|
3 | 194 | 37,130 | 3,246 | ||||||||||||
|
Texas
|
24 | 1,254 | 106,407 | 10,812 | ||||||||||||
|
Utah
|
1 | 81 | 6,099 | 791 | ||||||||||||
|
Virginia
|
4 | 225 | 30,334 | 3,903 | ||||||||||||
|
Washington
|
5 | 342 | 97,345 | 8,928 | ||||||||||||
|
Wisconsin
|
10 | 624 | 90,319 | 9,044 | ||||||||||||
|
Total Assisted Living Facilities
|
179 | 11,116 | 1,312,167 | 138,260 | ||||||||||||
|
Number of
|
Number of
|
Total
|
Annualized
|
|||||||||||||
| Properties | Beds | Investment | Income(1) | |||||||||||||
|
Skilled Nursing Facilities:
|
||||||||||||||||
|
Alabama
|
7 | 1,013 | $ | 33,580 | $ | 4,797 | ||||||||||
|
Arizona
|
1 | 162 | 12,790 | 1,348 | ||||||||||||
|
Colorado
|
3 | 474 | 20,763 | 2,598 | ||||||||||||
|
Connecticut
|
6 | 728 | 19,145 | 1,881 | ||||||||||||
|
Florida
|
37 | 4,724 | 223,493 | 27,868 | ||||||||||||
|
Georgia
|
3 | 500 | 14,764 | 2,041 | ||||||||||||
|
Idaho
|
3 | 393 | 28,586 | 3,769 | ||||||||||||
|
Illinois
|
4 | 406 | 26,122 | 3,115 | ||||||||||||
|
Indiana
|
6 | 643 | 29,746 | 3,943 | ||||||||||||
|
Kansas
|
2 | 343 | 39,279 | 3,406 | ||||||||||||
|
Kentucky
|
10 | 1,265 | 57,855 | 7,721 | ||||||||||||
|
Louisiana
|
7 | 854 | 30,852 | 3,300 | ||||||||||||
|
Maryland
|
2 | 240 | 14,072 | 1,474 | ||||||||||||
|
Massachusetts
|
22 | 3,086 | 218,453 | 26,445 | ||||||||||||
|
Michigan
|
1 | 97 | 4,273 | 455 | ||||||||||||
|
Mississippi
|
11 | 1,527 | 40,922 | 5,996 | ||||||||||||
|
Missouri
|
3 | 407 | 15,483 | 1,642 | ||||||||||||
|
New Hampshire
|
1 | 68 | 4,143 | 518 | ||||||||||||
|
New Jersey
|
1 | 176 | 4,273 | 530 | ||||||||||||
|
Ohio
|
20 | 2,746 | 175,784 | 19,758 | ||||||||||||
|
Oklahoma
|
3 | 668 | 18,654 | 2,596 | ||||||||||||
|
Oregon
|
1 | 114 | 3,667 | 645 | ||||||||||||
|
Pennsylvania
|
2 | 341 | 12,101 | 1,497 | ||||||||||||
|
Tennessee
|
22 | 3,008 | 203,188 | 26,258 | ||||||||||||
|
Texas
|
26 | 3,470 | 182,959 | 19,356 | ||||||||||||
|
Virginia
|
10 | 1,239 | 61,413 | 6,191 | ||||||||||||
|
Total Skilled Nursing Facilities
|
214 | 28,692 | 1,496,360 | 179,148 | ||||||||||||
37
Table of Contents
|
Number of
|
Number of
|
Total
|
Annualized
|
|||||||||||||
| Properties | Beds | Investment | Income(1) | |||||||||||||
|
Hospitals:
|
||||||||||||||||
|
California
|
5 | 569 | $ | 168,420 | $ | 7,298 | ||||||||||
|
Idaho
|
1 | 60 | 23,446 | 2,460 | ||||||||||||
|
Illinois
|
1 | 72 | 5,550 | 0 | ||||||||||||
|
Indiana
|
2 | 90 | 30,759 | 3,440 | ||||||||||||
|
Kentucky
|
1 | 60 | 29,456 | 2,843 | ||||||||||||
|
Louisiana
|
1 | 50 | 11,211 | 744 | ||||||||||||
|
Massachusetts
|
2 | 0 | 11,120 | 450 | ||||||||||||
|
Nebraska
|
1 | 60 | 80,686 | 0 | ||||||||||||
|
New Jersey
|
1 | 76 | 36,783 | 3,570 | ||||||||||||
|
Ohio
|
2 | 102 | 34,069 | 3,583 | ||||||||||||
|
Oklahoma
|
2 | 91 | 11,553 | 1,092 | ||||||||||||
|
Texas
|
9 | 424 | 173,058 | 16,612 | ||||||||||||
|
Wisconsin
|
1 | 62 | 23,819 | 2,632 | ||||||||||||
|
Total Hospitals
|
29 | 1,716 | 639,930 | 44,724 | ||||||||||||
|
Number of
|
Total
|
Annualized
|
||||||||||||||
| Properties | Sq. Ft. | Investment | Income(1) | |||||||||||||
|
Medical Office Buildings:
|
||||||||||||||||
|
Alabama
|
5 | 303,908 | $ | 40,981 | $ | 3,972 | ||||||||||
|
Alaska
|
1 | 63,164 | 27,609 | 2,525 | ||||||||||||
|
Arizona
|
5 | 339,205 | 86,817 | 5,564 | ||||||||||||
|
California
|
9 | 534,333 | 163,156 | 11,066 | ||||||||||||
|
Colorado
|
1 | 36,386 | 6,887 | 585 | ||||||||||||
|
Florida
|
26 | 918,153 | 255,033 | 18,009 | ||||||||||||
|
Georgia
|
7 | 286,151 | 64,923 | 5,843 | ||||||||||||
|
Illinois
|
3 | 71,345 | 10,080 | 1,323 | ||||||||||||
|
Indiana
|
1 | 90,403 | 21,232 | 1,913 | ||||||||||||
|
Kentucky
|
1 | 59,011 | 9,383 | 171 | ||||||||||||
|
Missouri
|
2 | 170,373 | 28,600 | 1,412 | ||||||||||||
|
Nevada
|
9 | 324,992 | 109,974 | 7,904 | ||||||||||||
|
New Jersey
|
5 | 406,985 | 106,787 | 9,108 | ||||||||||||
|
New York
|
7 | 276,388 | 58,352 | 5,219 | ||||||||||||
|
North Carolina
|
10 | 156,398 | 23,983 | 1,550 | ||||||||||||
|
Ohio
|
1 | 20,106 | 7,013 | 696 | ||||||||||||
|
Oklahoma
|
1 | 44,803 | 11,852 | 1,097 | ||||||||||||
|
Pennsylvania
|
1 | 98,132 | 20,982 | 2,016 | ||||||||||||
|
South Carolina
|
1 | 47,114 | 16,564 | 921 | ||||||||||||
|
Tennessee
|
5 | 247,417 | 62,467 | 5,764 | ||||||||||||
|
Texas
|
15 | 787,643 | 192,444 | 14,685 | ||||||||||||
|
Virginia
|
1 | 58,142 | 11,244 | 1,165 | ||||||||||||
|
Wisconsin
|
1 | 293,629 | 90,978 | 7,567 | ||||||||||||
|
Total Medical Office Buildings
|
118 | 5,634,181 | 1,427,341 | 110,075 | ||||||||||||
|
Total All Properties
|
590 | $ | 6,085,803 | $ | 558,274 | |||||||||||
| (1) | Reflects contract rate of interest for loans, annual straight-line rent for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves if applicable. |
38
Table of Contents
The following table sets forth occupancy and average annualized
income for these property types:
|
Average Annualized Income
|
||||||||||||||
| Occupancy(1) | (2) | |||||||||||||
|
|
2009 | 2008 | 2009 | 2008 | ||||||||||
|
Medical office buildings
|
91.3 | % | 90.4 | % | $ | 20 | $18 per sq ft | |||||||
|
Investment properties:
|
||||||||||||||
|
Independent living/CCRCs
|
89.6 | % | 90.6 | % | $ | 12,215 | $11,701 per unit | |||||||
|
Assisted living facilities
|
89.0 | % | 88.8 | % | $ | 12,438 | $10,805 per unit | |||||||
|
Skilled nursing facilities
|
84.2 | % | 83.9 | % | $ | 6,244 | $5,972 per bed | |||||||
|
Hospitals
|
56.5 | % | 49.5 | % | $ | 26,063 | $28,107 per bed | |||||||
| (1) | Medical office building occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month and holdover leases and excluding terminations and discontinued operations) as of December 31, 2009 and 2008. Occupancy for investment properties represents average quarterly operating occupancy based on the quarters ended September 30, 2009 and 2008 and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The Company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy for investment properties and has not independently verified the information. | |
| (2) | Average annualized income represents annualized income divided by total beds, units or square feet. |
The following table sets forth information regarding lease
expirations as of December 31, 2009 (dollars in thousands):
|
Independent
|
Assisted
|
Skilled
|
Total
|
Medical
|
||||||||||||||||||||||||
|
Living/
|
Living
|
Nursing
|
Investment
|
Office
|
Total Rental
|
|||||||||||||||||||||||
|
Year
|
CCRCs | Facilities | Facilities | Hospitals | Properties | Buildings | Income(1) | |||||||||||||||||||||
|
2010
|
$ | 0 | $ | 0 | $ | 2,937 | $ | 0 | $ | 2,937 | $ | 6,756 | $ | 9,693 | ||||||||||||||
|
2011
|
0 | 988 | 0 | 0 | 988 | 10,137 | 11,125 | |||||||||||||||||||||
|
2012
|
1,760 | 3,741 | 6,887 | 0 | 12,388 | 10,655 | 23,043 | |||||||||||||||||||||
|
2013
|
6,932 | 1,516 | 0 | 0 | 8,448 | 8,465 | 16,913 | |||||||||||||||||||||
|
2014
|
0 | 2,859 | 6,230 | 0 | 9,089 | 10,928 | 20,017 | |||||||||||||||||||||
|
2015
|
0 | 0 | 1,934 | 0 | 1,934 | 8,822 | 10,756 | |||||||||||||||||||||
|
2016
|
0 | 0 | 6,374 | 0 | 6,374 | 13,497 | 19,871 | |||||||||||||||||||||
|
2017
|
0 | 14,742 | 3,632 | 2,350 | 20,724 | 5,860 | 26,584 | |||||||||||||||||||||
|
2018
|
3,997 | 33,873 | 16,705 | 0 | 54,575 | 2,399 | 56,974 | |||||||||||||||||||||
|
2019
|
0 | 18,636 | 17,851 | 0 | 36,487 | 9,461 | 45,948 | |||||||||||||||||||||
|
Thereafter
|
71,170 | 45,071 | 101,820 | 40,304 | 258,365 | 22,343 | 280,708 | |||||||||||||||||||||
|
Total
|
$ | 83,859 | $ | 121,426 | $ | 164,370 | $ | 42,654 | $ | 412,309 | $ | 109,323 | $ | 521,632 | ||||||||||||||
| (1) | Rental income represents annualized base rent for effective lease agreements. The amounts are derived from the current contracted monthly base rent including straight-line for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectability reserves, if applicable. Rental income does not include common area maintenance charges or the amortization of above/below market lease intangibles. |
| Item 3. | Legal Proceedings |
From time to time, there are various legal proceedings pending
to which we are a party or to which some of our properties are
subject arising in the normal course of business. We do not
believe that the ultimate resolution of these proceedings will
have a material adverse effect on our consolidated financial
position or results of operations.
| Item 4. | Submission of Matters to a Vote of Security Holders |
None.
39
Table of Contents
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
There were 5,071 stockholders of record as of February 12,
2010. The following table sets forth, for the periods indicated,
the high and low prices of our common stock on the New York
Stock Exchange, as reported on the Composite Tape, and common
dividends paid per share:
| Sales Price |
Dividends
|
|||||||||||
| High | Low | Paid | ||||||||||
|
2009
|
||||||||||||
|
First Quarter
|
$ | 42.32 | $ | 25.86 | $ | 0.68 | ||||||
|
Second Quarter
|
36.41 | 29.62 | 0.68 | |||||||||
|
Third Quarter
|
44.40 | 32.64 | 0.68 | |||||||||
|
Fourth Quarter
|
46.74 | 40.53 | 0.68 | |||||||||
|
2008
|
||||||||||||
|
First Quarter
|
$ | 46.45 | $ | 39.26 | $ | 0.66 | ||||||
|
Second Quarter
|
50.49 | 44.00 | 0.68 | |||||||||
|
Third Quarter
|
53.98 | 42.54 | 0.68 | |||||||||
|
Fourth Quarter
|
53.50 | 30.14 | 0.68 | |||||||||
Our Board of Directors has approved a quarterly dividend rate of
$0.68 per share of common stock per quarter. Our dividend policy
is reviewed annually by the Board of Directors. The declaration
and payment of quarterly dividends remains subject to the review
and approval of the Board of Directors.
40
Table of Contents
Stockholder
Return Performance Presentation
Set forth below is a line graph comparing the yearly percentage
change and the cumulative total stockholder return on our shares
of common stock against the cumulative total return of the
S & P Composite-500 Stock Index and the FTSE NAREIT
Equity Index. As of December 31, 2009, 106 companies
comprised the FTSE NAREIT Equity Index. The Index consists of
REITs identified by NAREIT as equity (those REITs which have at
least 75% of their investments in real property). Upon written
request sent to the Senior Vice President-Administration and
Corporate Secretary, Health Care REIT, Inc., One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio,
43603-1475,
we will provide stockholders with the names of the component
issuers. The data are based on the closing prices as of December
31 for each of the five years. 2004 equals $100 and dividends
are assumed to be reinvested.
| 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | |||||||||||||
|
S & P 500
|
100.0 | 104.91 | 121.48 | 128.15 | 80.74 | 102.11 | ||||||||||||
|
Health Care REIT, Inc.
|
100.0 | 95.33 | 130.59 | 143.19 | 143.62 | 162.08 | ||||||||||||
|
FTSE NAREIT Equity
|
100.0 | 112.17 | 151.49 | 127.72 | 79.54 | 101.80 | ||||||||||||
Except to the extent that we specifically incorporate this
information by reference, the foregoing Stockholder Return
Performance Presentation shall not be deemed incorporated by
reference by any general statement incorporating by reference
this Annual Report on
Form 10-K
into any filing under the Securities Act of 1933, as amended, or
under the Securities Exchange Act of 1934, as amended. This
information shall not otherwise be deemed filed under such acts.
41
Table of Contents
| Item 6. | Selected Financial Data |
The following selected financial data for the five years ended
December 31, 2009 are derived from our audited consolidated
financial statements (in thousands, except per share data):
| Year Ended December 31, | ||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
|
Operating Data
|
||||||||||||||||||||
|
Revenues(1)
|
$ | 220,948 | $ | 267,609 | $ | 429,486 | $ | 526,406 | $ | 568,973 | ||||||||||
|
Expenses:
|
||||||||||||||||||||
|
Interest expense(1)
|
65,522 | 82,718 | 131,271 | 130,153 | 106,231 | |||||||||||||||
|
Depreciation and amortization(1)
|
55,517 | 71,897 | 124,232 | 144,361 | 157,049 | |||||||||||||||
|
Property operating expenses(1)
|
0 | 1,003 | 33,410 | 42,634 | 45,896 | |||||||||||||||
|
General and administrative(1)
|
15,881 | 25,922 | 37,465 | 47,193 | 49,691 | |||||||||||||||
|
Provision for loan losses
|
1,200 | 1,000 | 0 | 94 | 23,261 | |||||||||||||||
|
Realized loss on derivatives
|
0 | 0 | 0 | 23,393 | 0 | |||||||||||||||
|
Loss (gain) on extinguishment of debt
|
21,484 | 0 | (1,081 | ) | (2,094 | ) | 25,107 | |||||||||||||
|
Total expenses
|
159,604 | 182,540 | 325,297 | 385,734 | 407,235 | |||||||||||||||
|
Income from continuing operations before income taxes
|
61,344 | 85,069 | 104,189 | 140,672 | 161,738 | |||||||||||||||
|
Income tax expense
|
(282 | ) | (82 | ) | (188 | ) | (1,306 | ) | (168 | ) | ||||||||||
|
Income from continuing operations
|
61,062 | 84,987 | 104,001 | 139,366 | 161,570 | |||||||||||||||
|
Income from discontinued operations, net(1)
|
23,224 | 17,669 | 34,592 | 144,059 | 31,357 | |||||||||||||||
|
Net income
|
84,286 | 102,656 | 138,593 | 283,425 | 192,927 | |||||||||||||||
|
Preferred stock dividends
|
21,594 | 21,463 | 25,130 | 23,201 | 22,079 | |||||||||||||||
|
Net income attributable to noncontrolling interests
|
0 | 13 | 238 | 126 | (342 | ) | ||||||||||||||
|
Net income attributable to common stockholders
|
$ | 62,692 | $ | 81,180 | $ | 113,225 | $ | 260,098 | $ | 171,190 | ||||||||||
|
Other Data
|
||||||||||||||||||||
|
Average number of common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
54,110 | 61,661 | 78,861 | 93,732 | 114,207 | |||||||||||||||
|
Diluted
|
54,499 | 62,045 | 79,409 | 94,309 | 114,612 | |||||||||||||||
|
Per Share Data
|
||||||||||||||||||||
|
Basic:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 0.73 | $ | 1.03 | $ | 1.00 | $ | 1.24 | $ | 1.22 | ||||||||||
|
Discontinued operations, net
|
0.43 | 0.29 | 0.44 | 1.54 | 0.27 | |||||||||||||||
|
Net income attributable to common stockholders*
|
$ | 1.16 | $ | 1.32 | $ | 1.44 | $ | 2.77 | $ | 1.50 | ||||||||||
|
Diluted:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 0.72 | $ | 1.02 | $ | 0.99 | $ | 1.23 | $ | 1.22 | ||||||||||
|
Discontinued operations, net
|
0.43 | 0.28 | 0.44 | 1.53 | 0.27 | |||||||||||||||
|
Net income attributable to common stockholders*
|
$ | 1.15 | $ | 1.31 | $ | 1.43 | $ | 2.76 | $ | 1.49 | ||||||||||
|
Cash distributions per common share
|
$ | 2.46 | $ | 2.8809 | $ | 2.2791 | $ | 2.70 | $ | 2.72 | ||||||||||
| * | Amounts may not sum due to rounding |
42
Table of Contents
| (1) | We have reclassified the income and expenses attributable to the properties sold prior to or held for sale at December 31, 2009, to discontinued operations for all periods presented. See Note 3 to our audited consolidated financial statements. |
| December 31, | ||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
|
Balance Sheet Data
|
||||||||||||||||||||
|
Net real estate investments
|
$ | 2,849,518 | $ | 4,122,893 | $ | 5,012,620 | $ | 5,854,179 | $ | 6,080,620 | ||||||||||
|
Total assets
|
2,972,164 | 4,282,885 | 5,219,240 | 6,215,031 | 6,367,186 | |||||||||||||||
|
Total long-term obligations
|
1,500,818 | 2,191,698 | 2,683,760 | 2,847,676 | 2,414,022 | |||||||||||||||
|
Total liabilities
|
1,541,408 | 2,295,561 | 2,784,289 | 2,976,746 | 2,559,735 | |||||||||||||||
|
Total redeemable preferred stock
|
276,875 | 338,993 | 330,243 | 289,929 | 288,683 | |||||||||||||||
|
Total stockholders’ equity
|
1,430,756 | 1,987,324 | 2,434,951 | 3,238,285 | 3,807,451 | |||||||||||||||
43
Table of Contents
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis is based primarily on the
consolidated financial statements of Health Care REIT, Inc. for
the periods presented and should be read together with the notes
thereto contained in this Annual Report on
Form 10-K.
Other important factors are identified in
“Item 1 — Business” and
“Item 1A — Risk Factors” above.
Executive
Overview
Company
Overview
Health Care REIT, Inc., an S&P 500 company, is a real
estate investment trust that invests in senior housing and
health care real estate. Founded in 1970, we were the first REIT
to invest exclusively in health care properties. The following
table summarizes our portfolio as of December 31, 2009:
|
Investments
|
Percentage of
|
Number of
|
# Beds/Units
|
Investment per
|
||||||||||||||||||||
|
Type of Property
|
(in thousands) | Investments | Properties | or Sq. Ft. | metric(1) | States | ||||||||||||||||||
|
Independent living/CCRCs
|
$ | 1,210,005 | 19.8 | % | 50 | 7,046 units | $ | 174,552 per unit | 19 | |||||||||||||||
|
Assisted living facilities
|
1,312,167 | 21.6 | % | 179 | 11,116 units | 119,273 per unit | 30 | |||||||||||||||||
|
Skilled nursing facilities
|
1,496,360 | 24.6 | % | 214 | 28,692 beds | 52,153 per bed | 26 | |||||||||||||||||
|
Hospitals
|
639,930 | 10.5 | % | 29 | 1,716 beds | 461,084 per bed | 13 | |||||||||||||||||
|
Medical office buildings
|
1,427,341 | 23.5 | % | 118 | 5,634,181sq. ft. | 259 per sq. ft. | 23 | |||||||||||||||||
|
Totals
|
$ | 6,085,803 | 100.0 | % | 590 | 39 | ||||||||||||||||||
| (1) | Investment per metric was computed by using the total investment amount of $6,299,748,000 which includes real estate investments and unfunded construction commitments for which initial funding has commenced which amounted to $6,085,803,000 and $213,945,000, respectively. |
Health
Care Industry
The demand for health care services, and consequently health
care properties, is projected to reach unprecedented levels in
the near future. The Centers for Medicare and Medicaid Services
projects that national health expenditures will rise to $3.4
trillion in 2015 or 17.7% of gross domestic product
(“GDP”). This is up from $2 trillion or 15.9% of GDP
in 2005. Health expenditures per capita are projected to rise
approximately 4.7% per year from 2005 to 2015. While
demographics are the primary driver of demand, economic
conditions and availability of services contribute to health
care service utilization rates. We believe the health care
property market is less susceptible to fluctuations and economic
downturns relative to other property sectors. Investor interest
in the market remains strong, especially in specific sectors
such as medical office buildings, regardless of the current
stringent lending environment. As a REIT, we believe we are
situated to benefit from any turbulence in the capital markets
due to our access to capital.
The total U.S. population is projected to increase by 16.4%
through 2030. The elderly are an important component of health
care utilization, especially independent living services,
assisted living services, skilled nursing services, inpatient
and outpatient hospital services and physician ambulatory care.
The elderly population aged 65 and over is projected to increase
by 76.6% through 2030. Most health care services are provided
within a health care facility such as a hospital, a
physician’s office or a senior housing facility. Therefore,
we believe there will be continued demand for companies such as
ours with expertise in health care real estate.
44
Table of Contents
The following chart illustrates the projected increase in the
elderly population aged 65 and over:
Source: U.S. Census Bureau
Health care real estate investment opportunities tend to
increase as demand for health care services increases. We
recognize the need for health care real estate as it correlates
to health care service demand. Health care providers require
real estate to house their businesses and expand their services.
We believe that investment opportunities in health care real
estate will continue to be present due to the:
| • | Specialized nature of the industry which enhances the credibility and experience of our company; | |
| • | Projected population growth combined with stable or increasing health care utilization rates which ensures demand; and | |
| • | On-going merger and acquisition activity. |
Recent Developments.
Both the Senate and House
of Representatives have passed legislation to reform the
U.S. health care system. By the time this report is
released, final reform legislation may already have been passed.
The legislation involves the expansion of insurance coverage
primarily through reform of the private insurance market, as
well as changes to existing government programs. The reform
efforts are intended to lead to more efficient, effective care,
reduce waste, and benefit the most efficient, quality-conscious
providers. As a company, we are well-situated to respond to any
changes in health care delivery and organization resulting from
this legislation. Future reform, broadened insurance coverage,
changes in Medicare and Medicaid, changes in provider
reimbursement, and changes in health care sector funding could
have a significant impact on our operators’ financial
situation and strategy, which we will continue to monitor.
Economic
Outlook
Beginning in late 2007, the U.S. and global economy entered
a serious recession. The current economic environment is
characterized by a severe residential housing slump, depressed
commercial real estate valuations, weakened consumer confidence,
rising unemployment and concerns regarding inflation, deflation
and stagflation. Numerous financial systems around the globe
have become illiquid and banks have become less willing to lend
to other banks and borrowers. Further, capital markets have
become and remain volatile as risk is repriced and investments
are revalued. Uncertainty remains in terms of the depth and
duration of these adverse economic conditions.
The conditions described above have created an environment of
limited capital availability and increasing capital costs. This
was most evident in the credit markets, where lending
institutions cut back on loans, tightened credit standards and
significantly increased interest rate spreads. The equity
markets were characterized by sporadic accessibility until late
2008, when share prices in most sectors declined significantly.
Continued volatility in the capital markets could limit our
ability to access debt or equity funds which, in turn, could
impact our ability to finance future investments and react to
changing economic and business conditions. This difficult
operating environment also may make it more difficult for some
of our operators/tenants to meet their obligations to us.
45
Table of Contents
During 2008, our focus gradually shifted from investment to
capital preservation. To that end, our efforts in 2009 were
directed towards: liquidity, portfolio management and investment
strategy.
| • | Liquidity. Liquidity has become increasingly important and we have concentrated our efforts on further strengthening our balance sheet. We raised over $1 billion in funds during each of 2008 and 2009 from a combination of common stock offerings, our dividend reinvestment plan, our equity shelf program, property sales and loan payoffs. As always, we will continue to closely monitor the credit and capital markets for opportunities to raise reasonably priced capital. | |
| • | Portfolio Management. Our investment approach has produced a portfolio that is very diverse with strong property level payment coverages. Yet, today’s adverse economic conditions can negatively impact even the strongest portfolio. Our portfolio management program is designed to maintain our portfolio’s strength through a combination of extensive industry research, stringent origination and underwriting protocols and a rigorous asset management process. | |
| • | Investment Strategy. For the short-term, we expect to fund our ongoing development projects and will evaluate new investments selectively and only when funding sources are clearly identified. However, we will continue to strengthen our existing customer relationships and begin to cultivate new relationships. We remain focused on preserving liquidity, but we intend to take advantage of what we believe will be increasingly attractive investment opportunities over time. |
Business
Strategy
Our primary objectives are to protect stockholder capital and
enhance stockholder value. We seek to pay consistent cash
dividends to stockholders and create opportunities to increase
dividend payments to stockholders as a result of annual
increases in rental and interest income and portfolio growth. To
meet these objectives, we invest across the full spectrum of
senior housing and health care real estate and diversify our
investment portfolio by property type, operator/tenant and
geographic location.
Substantially all of our revenues and sources of cash flows from
operations are derived from operating lease rentals and interest
earned on outstanding loans receivable. These items represent
our primary source of liquidity to fund distributions and are
dependent upon our obligors’ continued ability to make
contractual rent and interest payments to us. To the extent that
our obligors experience operating difficulties and are unable to
generate sufficient cash to make payments to us, there could be
a material adverse impact on our consolidated results of
operations, liquidity
and/or
financial condition. To mitigate this risk, we monitor our
investments through a variety of methods determined by the type
of property and operator/tenant. Our asset management process
includes review of monthly financial statements for each
property, periodic review of obligor credit, periodic property
inspections and review of covenant compliance relating to
licensure, real estate taxes, letters of credit and other
collateral. In monitoring our portfolio, our personnel use a
proprietary database to collect and analyze property-specific
data. Additionally, we conduct extensive research to ascertain
industry trends and risks. Through these asset management and
research efforts, we are typically able to intervene at an early
stage to address payment risk, and in so doing, support both the
collectability of revenue and the value of our investment.
In addition to our asset management and research efforts, we
also structure our investments to help mitigate payment risk.
Operating leases and loans are normally credit enhanced by
guaranties
and/or
letters of credit. In addition, operating leases are typically
structured as master leases and loans are generally
cross-defaulted and cross-collateralized with other loans,
operating leases or agreements between us and the obligor and
its affiliates.
For the year ended December 31, 2009, rental income and
interest income represented 90% and 7%, respectively, of total
gross revenues (including discontinued operations).
Substantially all of our operating leases are designed with
either fixed or contingent escalating rent structures. Leases
with fixed annual rental escalators are generally recognized on
a straight-line basis over the initial lease period, subject to
a collectability assessment. Rental income related to leases
with contingent rental escalators is generally recorded based on
the contractual cash rental payments due for the period. Our
yield on loans receivable depends upon a number of factors,
including the stated interest rate, the average principal amount
outstanding during the term of the loan and any interest rate
adjustments.
46
Table of Contents
Depending upon the availability and cost of external capital, we
believe our liquidity is sufficient to fund operations, meet
debt service obligations (both principal and interest), make
dividend distributions and complete construction projects in
process. We also anticipate evaluating opportunities to finance
future investments. New investments are generally funded from
temporary borrowings under our unsecured line of credit
arrangement, internally generated cash and the proceeds from
sales of real property. Our investments generate internal cash
from rent and interest receipts and principal payments on loans
receivable. Permanent financing for future investments, which
replaces funds drawn under the unsecured line of credit
arrangement, has historically been provided through a
combination of public and private offerings of debt and equity
securities and the incurrence or assumption of secured debt.
Depending upon market conditions, we believe that new
investments will be available in the future with spreads over
our cost of capital that will generate appropriate returns to
our stockholders. We expect to complete gross new investments of
$1.0 to $1.2 billion in 2010, comprised of new investments
totaling $700,000,000 to $800,000,000 and funded new development
of $300,000,000 to $400,000,000. We anticipate the sale of real
property and the repayment of loans receivable totaling
approximately $300,000,000 during 2010. It is possible that
additional loan repayments or sales of real property may occur
in the future. To the extent that loan repayments and real
property sales exceed new investments, our revenues and cash
flows from operations could be adversely affected. We expect to
reinvest the proceeds from any loan repayments and real property
sales in new investments. To the extent that new investment
requirements exceed our available cash on-hand, we expect to
borrow under our unsecured line of credit arrangement. At
December 31, 2009, we had $35,476,000 of cash and cash
equivalents, $23,237,000 of restricted cash and $1,010,000,000
of available borrowing capacity under our unsecured line of
credit arrangement. Our investment activity may exceed our
borrowing capacity under our unsecured line of credit. To the
extent that we are unable to issue equity or debt securities to
provide additional capital, we may not be able to fund all of
our potential investments, which could have an adverse effect on
our revenues and cash flows from operations.
Key
Transactions in 2009
We completed the following key transactions during the year
ended December 31, 2009:
| • | we completed $716,649,000 of gross investments offset by $280,569,000 of investment payoffs; | |
| • | we were added to the S&P 500 Index in January 2009; | |
| • | we completed a public offering of 5,816,870 shares of common stock with net proceeds of approximately $210,880,000 in February 2009; | |
| • | we completed $265,527,000 of first mortgage loans secured by 31 senior housing properties with multiple levels of service. The debt has terms ranging from seven to ten years. The debt had weighted average initial interest rates of 5.98% after giving effect to certain interest rate swap agreements. KeyBank Capital Markets, Inc. originated the loans and sold them to Freddie Mac; | |
| • | we extinguished $81,715,000 of secured debt with weighted average interest rates of 7.21% prior to maturity; | |
| • | we extinguished $183,147,000 of unsecured senior notes with weighted average interest rates of 7.82%; and | |
| • | we completed a public offering of 9,200,000 shares of common stock with net proceeds of approximately $356,554,000 in September 2009. |
Recent
Events
We completed the following investments in February 2010:
| • | We completed the acquisition of a portfolio of 17 medical office buildings located in Wisconsin totaling 1.15 million square feet through a joint venture with Hammes Company. Our $192 million investment includes the assumption of $106 million in secured debt at an average rate of 7.35%. The assets will be 100% |
47
Table of Contents
| master leased to Aurora Health Care, an investment grade rated, non-profit health system based in Wisconsin. Our initial cash yield is 9.1% and the leases have an average remaining term of 13 years. |
| • | We formed a $668 million joint venture with Forest City Enterprises (NYSE:FCE.A and FCE.B). We acquired a 49% interest in a seven-building life sciences campus with 1.2 million square feet located in University Park in Cambridge, MA. The value of our investment is $327 million. We invested $170 million of cash and the joint venture assumed $320 million of non-recourse secured debt with a weighted average interest rate of 7.1%. Projected 2010 cash net operating income for the portfolio is approximately $51 million. |
Key
Performance Indicators, Trends and Uncertainties
We utilize several key performance indicators to evaluate the
various aspects of our business. These indicators are discussed
below and relate to operating performance, credit strength and
concentration risk. Management uses these key performance
indicators to facilitate internal and external comparisons to
our historical operating results and in making operating
decisions.
Operating Performance.
We believe that net
income attributable to common stockholders (“NICS”) is
the most appropriate earnings measure. Other useful supplemental
measures of our operating performance include funds from
operations (“FFO”) and net operating income
(“NOI”); however, these supplemental measures are not
defined by U.S. generally accepted accounting principles
(“U.S. GAAP”). Please refer to the section
entitled “Non-GAAP Financial Measures” for
further discussion of FFO and NOI and for reconciliations of FFO
and NOI. These earnings measures and their relative per share
amounts are widely used by investors and analysts in the
valuation, comparison and investment recommendations of REITs.
The following table reflects the recent historical trends of our
operating performance measures (in thousands, except per share
data):
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Net income attributable to common stockholders
|
$ | 113,225 | $ | 260,098 | $ | 171,190 | ||||||
|
Funds from operations
|
248,070 | 258,868 | 289,521 | |||||||||
|
Net operating income
|
455,680 | 526,136 | 547,678 | |||||||||
|
Per share data (fully diluted):
|
||||||||||||
|
Net income attributable to common stockholders
|
$ | 1.43 | $ | 2.76 | $ | 1.49 | ||||||
|
Funds from operations
|
3.12 | 2.74 | 2.53 | |||||||||
Credit Strength.
We measure our credit
strength both in terms of leverage ratios and coverage ratios.
Our leverage ratios include debt to book capitalization, debt to
undepreciated book capitalization and debt to market
capitalization. The leverage ratios indicate how much of our
balance sheet capitalization is related to total debt. Our
coverage ratios include interest coverage ratio and fixed charge
coverage ratio. The coverage ratios indicate our ability to
service interest and fixed charges (interest plus preferred
dividends and secured debt principal amortizations). We expect
to maintain capitalization ratios and coverage ratios sufficient
to maintain investment grade ratings with Moody’s Investors
Service, Standard & Poor’s Ratings Services and
Fitch Ratings. The coverage ratios are based on adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”) which is discussed in further
detail, and reconciled to net income, below in
“Non-GAAP Financial Measures.” Leverage ratios
and coverage ratios are widely used by investors, analysts and
rating agencies in the valuation, comparison,
48
Table of Contents
investment recommendations and rating of companies. The
following table reflects the recent historical trends for our
credit strength measures:
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Debt to book capitalization ratio
|
52 | % | 47 | % | 39 | % | ||||||
|
Debt to undepreciated book capitalization ratio
|
48 | % | 43 | % | 35 | % | ||||||
|
Debt to market capitalization ratio
|
39 | % | 38 | % | 30 | % | ||||||
|
Adjusted interest coverage ratio
|
2.94 | x | 3.84 | x | 3.78 | x | ||||||
|
Adjusted fixed charge coverage ratio
|
2.41 | x | 3.20 | x | 3.09 | x | ||||||
Concentration Risk.
We evaluate our
concentration risk in terms of asset mix, investment mix,
customer mix and geographic mix. Concentration risk is a
valuable measure in understanding what portion of our
investments could be at risk if certain sectors were to
experience downturns. Asset mix measures the portion of our
investments that are real property. In order to qualify as an
equity REIT, at least 75% of our real estate investments must be
real property whereby each property, which includes the land,
buildings, improvements, intangibles and related rights, is
owned by us and leased to an operator pursuant to a long-term
operating lease. Investment mix measures the portion of our
investments that relate to our various property types. Customer
mix measures the portion of our investments that relate to our
top five customers. Geographic mix measures the portion of our
investments that relate to our top five states. The following
table reflects our recent historical trends of concentration
risk:
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Asset mix:
|
||||||||||||
|
Real property
|
92 | % | 92 | % | 93 | % | ||||||
|
Loans receivable
|
8 | % | 8 | % | 7 | % | ||||||
|
Investment mix:
|
||||||||||||
|
Assisted living facilities
|
21 | % | 20 | % | 22 | % | ||||||
|
Skilled nursing facilities
|
32 | % | 27 | % | 25 | % | ||||||
|
Independent/CCRC
|
15 | % | 19 | % | 20 | % | ||||||
|
Hospitals
|
7 | % | 11 | % | 10 | % | ||||||
|
Medical office buildings
|
25 | % | 23 | % | 23 | % | ||||||
|
Customer mix:
|
||||||||||||
|
Senior Living Communities, LLC
|
4 | % | 6 | % | 7 | % | ||||||
|
Brookdale Senior Living Inc
|
5 | % | 5 | % | 5 | % | ||||||
|
Signature Healthcare LLC
|
6 | % | 5 | % | 5 | % | ||||||
|
Emeritus Corporation
|
7 | % | 4 | % | 4 | % | ||||||
|
Life Care Centers of America, Inc.
|
5 | % | 5 | % | 3 | % | ||||||
|
Remaining portfolio
|
73 | % | 75 | % | 76 | % | ||||||
|
Geographic mix:
|
||||||||||||
|
Florida
|
15 | % | 14 | % | 12 | % | ||||||
|
Texas
|
13 | % | 11 | % | 11 | % | ||||||
|
California
|
7 | % | 8 | % | 9 | % | ||||||
|
Massachusetts
|
7 | % | 7 | % | 7 | % | ||||||
|
Ohio
|
6 | % | ||||||||||
|
Tennessee
|
6 | % | 6 | % | ||||||||
|
Remaining portfolio
|
52 | % | 54 | % | 55 | % | ||||||
We evaluate our key performance indicators in conjunction with
current expectations to determine if historical trends are
indicative of future results. Our expected results may not be
achieved and actual results may differ
49
Table of Contents
materially from our expectations. Management regularly monitors
various economic and other factors to develop strategic and
tactical plans designed to improve performance and maximize our
competitive position. Our ability to achieve our financial
objectives is dependent upon our ability to effectively execute
these plans and to appropriately respond to emerging economic
and company-specific trends. Please refer to
“Item 1A — Risk Factors” above for
further discussion.
Portfolio
Update
Net operating income.
The primary performance
measure for our properties is net operating income
(“NOI”) as discussed below in
“Non-GAAP Financial Measures.” The following
table summarizes our net operating income for the periods
indicated (in thousands):
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Net operating income:
|
||||||||||||
|
Investment properties
|
$ | 379,516 | $ | 436,811 | $ | 457,690 | ||||||
|
Medical office buildings
|
74,636 | 87,633 | 88,818 | |||||||||
|
Non-segment/corporate
|
1,528 | 1,692 | 1,170 | |||||||||
|
Net operating income
|
$ | 455,680 | $ | 526,136 | $ | 547,678 | ||||||
Payment coverage.
Payment coverage of the
operators in our investment property portfolio has stabilized.
Our overall payment coverage is at 2.01 times and represents an
increase of two basis points from 2007 and an increase of five
basis points from 2008. The following table reflects our recent
historical trends of portfolio coverage. Coverage data reflects
the 12 months ended for the periods presented. CBMF
represents the ratio of facilities’ earnings before
interest, taxes, depreciation, amortization, rent and management
fees to contractual rent or interest due us. CAMF represents the
ratio of earnings before interest, taxes, depreciation,
amortization, and rent (but after imputed management fees) to
contractual rent or interest due us.
| September 30, 2007 | September 30, 2008 | September 30, 2009 | ||||||||||||||||||||||
| CBMF | CAMF | CBMF | CAMF | CBMF | CAMF | |||||||||||||||||||
|
Independent living/CCRCs
|
1.47 | x | 1.26 | x | 1.31 | x | 1.11 | x | 1.27 | x | 1.08 | x | ||||||||||||
|
Assisted living facilities
|
1.57 | x | 1.35 | x | 1.55 | x | 1.32 | x | 1.58 | x | 1.36 | x | ||||||||||||
|
Skilled nursing facilities
|
2.25 | x | 1.65 | x | 2.26 | x | 1.66 | x | 2.29 | x | 1.69 | x | ||||||||||||
|
Hospitals
|
2.72 | x | 2.16 | x | 2.26 | x | 1.83 | x | 2.47 | x | 2.14 | x | ||||||||||||
|
Weighted averages
|
1.99 | x | 1.55 | x | 1.96 | x | 1.52 | x | 2.01 | x | 1.59 | x | ||||||||||||
Corporate
Governance
Maintaining investor confidence and trust has become
increasingly important in today’s business environment. Our
Board of Directors and management are strongly committed to
policies and procedures that reflect the highest level of
ethical business practices. Our corporate governance guidelines
provide the framework for our business operations and emphasize
our commitment to increase stockholder value while meeting all
applicable legal requirements. The Board of Directors adopted
and annually reviews its Corporate Governance Guidelines. These
guidelines meet the listing standards adopted by the New York
Stock Exchange and are available on the Internet at
www.hcreit.com and from us upon written request sent to the
Senior Vice President — Administration and Corporate
Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio,
43603-1475.
Liquidity
and Capital Resources
Sources
and Uses of Cash
Our primary sources of cash include rent and interest receipts,
borrowings under our unsecured line of credit arrangement,
public and private offerings of debt and equity securities,
proceeds from the sales of real property and principal payments
on loans receivable. Our primary uses of cash include dividend
distributions, debt service
50
Table of Contents
payments (including principal and interest), real property
acquisitions, loan advances and general and administrative
expenses. These sources and uses of cash are reflected in our
Consolidated Statements of Cash Flows and are discussed in
further detail below.
The following is a summary of our sources and uses of cash flows
(dollars in thousands):
|
One Year
|
One Year
|
Two Year
|
||||||||||||||||||||||||||||||||||
| Year Ended | Change | Year Ended | Change | Change | ||||||||||||||||||||||||||||||||
| Dec. 31, 2007 | Dec. 31, 2008 | $ | % | Dec. 31, 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Cash and cash equivalents at beginning of period
|
$ | 36,216 | $ | 30,269 | $ | (5,947 | ) | (16 | )% | $ | 23,370 | $ | (6,899 | ) | (23 | )% | $ | (12,846 | ) | (35 | )% | |||||||||||||||
|
Cash provided from operating activities
|
283,987 | 360,683 | 76,696 | 27 | % | 381,259 | 20,576 | 6 | % | 97,272 | 34 | % | ||||||||||||||||||||||||
|
Cash used in investing activities
|
(905,440 | ) | (1,035,525 | ) | (130,085 | ) | 14 | % | (270,060 | ) | 765,465 | (74 | )% | 635,380 | (70 | )% | ||||||||||||||||||||
|
Cash provided from (used in) financing activities
|
615,506 | 667,943 | 52,437 | 9 | % | (99,093 | ) | (767,036 | ) | n/a | (714,599 | ) | n/a | |||||||||||||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 30,269 | $ | 23,370 | $ | (6,899 | ) | (23 | )% | $ | 35,476 | $ | 12,106 | 52 | % | $ | 5,207 | 17 | % | |||||||||||||||||
Operating Activities.
The increases in net
cash provided from operating activities are primarily
attributable to net income excluding gains/losses on sales of
real property and impairments. See the discussion of investing
activities and results of operations below for additional
details. To the extent that we acquire or dispose of additional
properties in the future, our results of operations will change
accordingly.
The following is a summary of our straight-line rent (dollars in
thousands):
| Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
| Dec. 31, 2007 | Dec. 31, 2008 | $ | % | Dec. 31, 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Gross straight-line rental income
|
$ | 17,029 | $ | 20,489 | $ | 3,460 | 20 | % | $ | 19,415 | $ | (1,074 | ) | (5 | )% | $ | 2,386 | 14 | % | |||||||||||||||||
|
Cash receipts due to real property sales
|
(4,527 | ) | (2,187 | ) | 2,340 | (52 | )% | (4,422 | ) | (2,235 | ) | 102 | % | 105 | (2 | )% | ||||||||||||||||||||
|
Prepaid rent receipts
|
(12,942 | ) | (26,095 | ) | (13,153 | ) | 102 | % | (26,252 | ) | (157 | ) | 1 | % | (13,310 | ) | 103 | % | ||||||||||||||||||
|
Amortization related to above/ (below) market leases, net
|
792 | 1,039 | 247 | 31 | % | 1,713 | 674 | 65 | % | 921 | 116 | % | ||||||||||||||||||||||||
| $ | 352 | $ | (6,754 | ) | $ | (7,106 | ) | n/a | $ | (9,546 | ) | $ | (2,792 | ) | 41 | % | $ | (9,898 | ) | n/a | ||||||||||||||||
Gross straight-line rental income represents the non-cash
difference between contractual cash rent due and the average
rent recognized pursuant to U.S. GAAP for leases with fixed
rental escalators, net of collectability reserves, if any. This
amount is positive in the first half of a lease term (but
declining every year due to annual increases in cash rent due)
and is negative in the second half of a lease term. The
fluctuation in cash receipts due to real property sales is
attributable to a decline in straight-line rent receivable
balances on properties sold. The change in prepaid rent cash
receipts is due to the mix of real property acquisitions during
the periods presented. We typically receive prepaid rent in
connection with investment property acquisitions.
51
Table of Contents
Investing Activities.
The changes in net cash
used in investing activities are primarily attributable to
changes in loans receivable and real property investments. The
following is a summary of our investment and disposition
activities (dollars in thousands):
| Year Ended | ||||||||||||||||||||||||
| December 31, 2007(1) | December 31, 2008 | December 31, 2009 | ||||||||||||||||||||||
| Facilities | Amount | Facilities | Amount | Facilities | Amount | |||||||||||||||||||
|
Real property acquisitions:
|
||||||||||||||||||||||||
|
Independent living/CCRCs
|
1 | $ | 43,000 | 2 | $ | 68,300 | ||||||||||||||||||
|
Assisted living facilities
|
4 | 36,233 | 3 | 45,490 | ||||||||||||||||||||
|
Skilled nursing facilities
|
8 | 122,875 | 1 | 11,360 | 1 | $ | 11,650 | |||||||||||||||||
|
Hospitals
|
1 | 11,923 | 7 | 196,303 | 1 | 20,500 | ||||||||||||||||||
|
Medical office buildings
|
28 | 381,134 | 7 | 121,809 | 1 | 35,523 | ||||||||||||||||||
|
Land parcels
|
8,928 | 1 | 10,000 | 0 | ||||||||||||||||||||
|
Total acquisitions
|
42 | 604,093 | 21 | 453,262 | 3 | 67,673 | ||||||||||||||||||
|
Less: Assumed debt
|
(166,188 | ) | 0 | 0 | ||||||||||||||||||||
|
Assumed other assets/(liabilities), net
|
(2,432 | ) | (1,899 | ) | 0 | |||||||||||||||||||
|
Cash disbursed for acquisitions
|
435,473 | 451,363 | 67,673 | |||||||||||||||||||||
|
Construction in progress additions
|
295,102 | 595,452 | 492,897 | |||||||||||||||||||||
|
Capital improvements to existing properties
|
39,976 | 25,561 | 38,389 | |||||||||||||||||||||
|
Total cash invested in real property
|
770,551 | 1,072,376 | 598,959 | |||||||||||||||||||||
|
Real property dispositions:
|
||||||||||||||||||||||||
|
Independent living/CCRCs
|
1 | 5,346 | 2 | 15,547 | 1 | 24,342 | ||||||||||||||||||
|
Assisted living facilities
|
10 | 57,351 | 30 | 148,075 | 11 | 30,978 | ||||||||||||||||||
|
Skilled nursing facilities
|
7 | 18,107 | 4 | 6,290 | 9 | 45,835 | ||||||||||||||||||
|
Hospitals
|
0 | 1 | 8,735 | 2 | 40,841 | |||||||||||||||||||
|
Medical office buildings
|
0 | 1 | 6,781 | 13 | 44,717 | |||||||||||||||||||
|
Land parcels
|
3,073 | 73 | 0 | |||||||||||||||||||||
|
Total dispositions
|
18 | 83,877 | 38 | 185,501 | 36 | 186,713 | ||||||||||||||||||
|
Less: Gains on sales of real property
|
14,437 | 163,933 | 43,394 | |||||||||||||||||||||
|
LandAmerica settlement
|
0 | 2,500 | 0 | |||||||||||||||||||||
|
Extinguishment of other assets/(liabilities)
|
0 | (116 | ) | 0 | ||||||||||||||||||||
|
Seller financing on sales of real property
|
0 | (64,771 | ) | (6,100 | ) | |||||||||||||||||||
|
Proceeds from real property sales
|
98,314 | 287,047 | 224,007 | |||||||||||||||||||||
|
Net cash investments in real property
|
24 | $ | 672,237 | (17 | ) | $ | 785,329 | (33 | ) | $ | 374,952 | |||||||||||||
|
Advances on real estate loans receivable:
|
||||||||||||||||||||||||
|
Investments in new loans
|
$ | 205,770 | $ | 121,493 | $ | 20,036 | ||||||||||||||||||
|
Draws on existing loans
|
30,124 | 21,265 | 54,381 | |||||||||||||||||||||
|
Total gross investments in real estate loans
|
235,894 | 142,758 | 74,417 | |||||||||||||||||||||
|
Less: Seller financing on sales of real property
|
(59,649 | ) | 0 | |||||||||||||||||||||
|
Net cash advances on real estate loans receivable
|
235,894 | 83,109 | 74,417 | |||||||||||||||||||||
|
Receipts on real estate loans receivable:
|
||||||||||||||||||||||||
|
Loan payoffs
|
42,028 | 8,815 | 93,856 | |||||||||||||||||||||
|
Principal payments on loans
|
10,318 | 9,354 | 17,923 | |||||||||||||||||||||
|
Total principal receipts on real estate loans
|
52,346 | 18,169 | 111,779 | |||||||||||||||||||||
|
Net cash advances/(receipts) on real estate loans
|
$ | 183,548 | $ | 64,940 | $ | (37,362 | ) | |||||||||||||||||
| (1) | 2007 includes the Rendina/Paramount acquisition. |
52
Table of Contents
The investment in Rendina/Paramount primarily represented cash
consideration of $141,967,000 offset by $4,000 of cash assumed
from Paramount.
Financing Activities.
The changes in net cash
provided from or used in financing activities are primarily
attributable to changes related to our debt, common stock
issuances, and cash distributions to stockholders.
The changes in our senior unsecured notes include: (i) the
issuance $400,000,000 of our 4.75% convertible senior unsecured
notes in July 2007; (ii) the extinguishment of $52,500,000
of 7.5% senior unsecured notes in August 2007;
(iii) the extinguishment of $42,330,000 of
7.625% senior unsecured notes in March 2008; and
(iv) the extinguishment of $183,147,000 of senior unsecured
notes with a weighted-average interest rate of 7.82% in 2009 and
recognized extinguishment losses of $19,269,000.
During the year ended December 31, 2009, we extinguished 20
secured debt loans totaling $81,715,000 with a weighted-average
interest rate of 7.21% and recognized extinguishment losses of
$5,838,000. During the year ended December 31, 2008, we
extinguished eight secured debt loans totaling $50,475,000 with
a weighted-average interest rate of 6.67% and recognized
extinguishment gains of $2,094,000. During the year ended
December 31, 2007, we extinguished five secured debt loans
totaling $29,797,000 with a weighted-average interest rate of
7.34%.
In November 2007, we repurchased $50,000,000 liquidation amount
of preferred securities of a subsidiary trust and, in December
2007, obtained the satisfaction and discharge of a related
$51,000,000 liability of an operating partnership and recorded a
$1,081,000 gain on extinguishment of debt.
The change in common stock is primarily attributable to public
issuances and issuances under our dividend reinvestment and
stock purchase plan (“DRIP”) and our equity shelf
program. The remaining difference in common stock issuances is
primarily due to issuances pursuant to stock incentive plans.
The following is a summary of our common stock issuances for the
years presented (dollars in thousands, except per share amounts):
|
Date Issued
|
Shares Issued | Average Price | Gross Proceeds | Net Proceeds | ||||||||||||
|
April 2007 public issuance
|
6,325,000 | $ | 44.01 | $ | 278,363 | $ | 265,294 | |||||||||
|
December 2007 public issuance
|
3,500,000 | 42.14 | 147,490 | 147,139 | ||||||||||||
|
2007 Dividend reinvestment plan issuances
|
1,626,000 | 41.81 | 67,985 | 67,985 | ||||||||||||
|
2007 Option exercises
|
401,630 | 27.82 | 11,175 | 11,175 | ||||||||||||
|
2007 Totals
|
11,852,630 | $ | 505,013 | $ | 491,593 | |||||||||||
|
March 2008 public issuance
|
3,000,000 | $ | 41.44 | $ | 124,320 | $ | 118,555 | |||||||||
|
July 2008 public issuance
|
4,600,000 | 44.50 | 204,700 | 193,157 | ||||||||||||
|
September 2008 public issuance
|
8,050,000 | 48.00 | 386,400 | 369,699 | ||||||||||||
|
2008 Dividend reinvestment plan issuances
|
1,546,074 | 43.37 | 67,055 | 67,055 | ||||||||||||
|
2008 Equity shelf program issuances
|
794,221 | 39.28 | 31,196 | 30,272 | ||||||||||||
|
2008 Option exercises
|
118,895 | 29.83 | 3,547 | 3,547 | ||||||||||||
|
2008 Totals
|
18,109,190 | $ | 817,218 | $ | 782,285 | |||||||||||
|
February 2009 public issuance
|
5,816,870 | $ | 36.85 | $ | 214,352 | $ | 210,880 | |||||||||
|
September 2009 public issuance
|
9,200,000 | 40.40 | 371,680 | 356,554 | ||||||||||||
|
2009 Dividend reinvestment plan issuances
|
1,499,497 | 37.22 | 55,818 | 55,818 | ||||||||||||
|
2009 Equity shelf program issuances
|
1,952,600 | 40.69 | 79,447 | 77,605 | ||||||||||||
|
2009 Option exercises
|
96,166 | 38.23 | 3,676 | 3,676 | ||||||||||||
|
2009 Totals
|
18,565,133 | $ | 724,973 | $ | 704,533 | |||||||||||
In order to qualify as a REIT for federal income tax purposes,
we must distribute at least 90% of our taxable income (including
100% of capital gains) to our stockholders. The increases in
dividends are primarily attributable to increases in the number
of outstanding common and preferred shares as discussed above,
increases in our annual
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Table of Contents
common stock dividend per share and the payment of a prorated
dividend of $0.2991 in February 2007 as a result of the $0.3409
prorated dividend paid in December 2006 in conjunction with the
Windrose merger.
The following is a summary of our dividend payments (in
thousands, except per share amounts):
| Year Ended | ||||||||||||||||||||||||
| December 31, 2007 | December 31, 2008 | December 31, 2009 | ||||||||||||||||||||||
| Per Share | Amount | Per Share | Amount | Per Share | Amount | |||||||||||||||||||
|
Common Stock
|
$ | 2.2791 | $ | 182,969 | $ | 2.70 | $ | 253,659 | $ | 2.72 | $ | 311,760 | ||||||||||||
|
Series D Preferred Stock
|
1.96875 | 7,875 | 1.96875 | 7,875 | 1.96875 | 7,875 | ||||||||||||||||||
|
Series E Preferred Stock
|
1.50 | 112 | 1.50 | 112 | 1.50 | 112 | ||||||||||||||||||
|
Series F Preferred Stock
|
1.90625 | 13,344 | 1.90625 | 13,344 | 1.90625 | 13,344 | ||||||||||||||||||
|
Series G Preferred Stock
|
1.875 | 3,799 | 1.875 | 1,870 | 1.875 | 748 | ||||||||||||||||||
|
Totals
|
$ | 208,099 | $ | 276,860 | $ | 333,839 | ||||||||||||||||||
Off-Balance
Sheet Arrangements
At December 31, 2009, we had three outstanding letter of
credit obligations totaling $3,579,000 and expiring between 2010
and 2013. Please see Note 10 to our consolidated financial
statements for additional information.
We are exposed to various market risks, including the potential
loss arising from adverse changes in interest rates. We may or
may not elect to use financial derivative instruments to hedge
interest rate exposure. These decisions are principally based on
the general trend in interest rates at the applicable dates, our
perception of the future volatility of interest rates and our
relative levels of variable rate debt and variable rate
investments. Please see Note 9 to our audited consolidated
financial statements for additional information.
Contractual
Obligations
The following table summarizes our payment requirements under
contractual obligations as of December 31, 2009 (in
thousands):
| Payments Due by Period | ||||||||||||||||||||
|
Contractual Obligations
|
Total | 2010 | 2011-2012 | 2013-2014 | Thereafter | |||||||||||||||
|
Unsecured line of credit arrangement
|
$ | 140,000 | $ | 0 | $ | 140,000 | $ | 0 | $ | 0 | ||||||||||
|
Senior unsecured notes(1)
|
1,661,853 | 0 | 76,853 | 300,000 | 1,285,000 | |||||||||||||||
|
Secured debt(1)
|
623,046 | 12,204 | 31,904 | 196,019 | 382,919 | |||||||||||||||
|
Contractual interest obligations
|
1,108,235 | 126,204 | 248,331 | 206,646 | 527,054 | |||||||||||||||
|
Capital lease obligations
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
|
Operating lease obligations
|
182,040 | 4,603 | 9,018 | 8,744 | 159,675 | |||||||||||||||
|
Purchase obligations
|
224,265 | 95,237 | 129,028 | 0 | 0 | |||||||||||||||
|
Other long-term liabilities
|
5,283 | 412 | 1,065 | 1,903 | 1,903 | |||||||||||||||
|
Total contractual obligations
|
$ | 3,944,722 | $ | 238,660 | $ | 636,199 | $ | 713,312 | $ | 2,356,551 | ||||||||||
| (1) | Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet. |
At December 31, 2009, we had an unsecured credit
arrangement with a consortium of sixteen banks providing for a
revolving line of credit in the amount of $1,150,000,000, which
is scheduled to expire on August 5, 2011 (with the ability
to extend for one year at our discretion if we are in compliance
with all covenants). Borrowings under the agreement are subject
to interest payable in periods no longer than three months at
either the agent bank’s prime rate of interest or the
applicable margin over LIBOR interest rate, at our option (0.84%
at December 31, 2009). The applicable margin is based on
our ratings with Moody’s Investors Service and
Standard & Poor’s Ratings Services and was 0.6%
at December 31, 2009. In addition, we pay a facility fee
annually to each bank based on the bank’s
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Table of Contents
commitment under the revolving credit facility. The facility fee
depends on our ratings with Moody’s Investors Service and
Standard & Poor’s Ratings Services and was 0.15%
at December 31, 2009. We also pay an annual agent’s
fee of $50,000. Principal is due upon expiration of the
agreement. At December 31, 2009, we had $140,000,000
outstanding under the unsecured line of credit arrangement and
estimated total contractual interest obligations of $2,196,000.
Contractual interest obligations are estimated based on the
assumption that the balance of $140,000,000 at December 31,
2009 is constant until maturity at interest rates in effect at
December 31, 2009.
We have $1,661,853,000 of senior unsecured notes principal
outstanding with fixed annual interest rates ranging from 4.75%
to 8.0%, payable semi-annually. Total contractual interest
obligations on senior unsecured notes totaled $904,406,000 at
December 31, 2009. $735,000,000 of our senior unsecured
notes are convertible notes that also contain put features.
Please see Note 8 to our consolidated financial statements
for additional information.
Additionally, we have secured debt with total outstanding
principal of $623,046,000, collateralized by owned properties,
with annual interest rates ranging from 4.89% to 6.99%, payable
monthly. The carrying values of the properties securing the
mortgage loans totaled $901,013,000 at December 31, 2009.
Total contractual interest obligations on mortgage loans totaled
$201,633,000 at December 31, 2009.
At December 31, 2009, we had operating lease obligations of
$182,040,000 relating primarily to ground leases at certain of
our properties and office space leases.
Purchase obligations are comprised of unfunded construction
commitments and contingent purchase obligations. At
December 31, 2009, we had outstanding construction
financings of $456,832,000 for leased properties and were
committed to providing additional financing of approximately
$213,945,000 to complete construction. At December 31,
2009, we had contingent purchase obligations totaling
$10,320,000. These contingent purchase obligations primarily
relate to deferred acquisition fundings and capital
improvements. Deferred acquisition fundings are contingent upon
a tenant satisfying certain conditions in the lease. Upon
funding, amounts due from the tenant are increased to reflect
the additional investment in the property.
Other long-term liabilities relate to our Supplemental Executive
Retirement Plan (“SERP”) and certain non-compete
agreements. We have a SERP, a non-qualified defined benefit
pension plan, which provides one executive officer with
supplemental deferred retirement benefits. The SERP provides an
opportunity for participants to receive retirement benefits that
cannot be paid under our tax-qualified plans because of the
restrictions imposed by ERISA and the Internal Revenue Code of
1986, as amended. Benefits are based on compensation and length
of service and the SERP is unfunded. No contributions by the
Company are anticipated for the 2010 fiscal year. Benefit
payments are expected to total $4,758,000 during the next five
fiscal years and no benefit payments are expected to occur
during the succeeding five fiscal years. We use a December 31
measurement date for the SERP. The accrued liability on our
balance sheet for the SERP was $3,287,000 at December 31,
2009 ($3,109,000 at December 31, 2008).
In connection with the Windrose merger, we entered into
consulting agreements with Fred S. Klipsch and Frederick L.
Farrar, which expired in December 2008. We entered into a new
consulting agreement with Mr. Farrar in December 2008,
which expired in December 2009. Each consultant has agreed not
to compete with the Company for a period of two years following
termination or expiration of the agreement. In exchange for
complying with the covenant not to compete, Messers. Klipsch and
Farrar are entitled to receive eight quarterly payments of
$75,000 and $37,500, respectively, with the first payment to be
made on the date of termination or expiration of the agreement.
The first payment to Mr. Klipsch was made in December 2008.
The first payment to Mr. Farrar was made in January 2010.
Capital
Structure
As of December 31, 2009, we had stockholders’ equity
of $3,807,451,000 and a total outstanding debt balance of
$2,414,022,000, which represents a debt to total book
capitalization ratio of 39%. Our ratio of debt to market
capitalization was 30% at December 31, 2009. For the twelve
months ended December 31, 2009, our adjusted interest
coverage ratio was 3.78 to 1.00. For the twelve months ended
December 31, 2009, our adjusted fixed charge coverage ratio
was 3.09 to 1.00. Also, at December 31, 2009, we had
$35,476,000 of cash and cash equivalents,
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Table of Contents
$23,237,000 of restricted cash and $1,010,000,000 of available
borrowing capacity under our unsecured line of credit
arrangement.
Our debt agreements contain various covenants, restrictions and
events of default. Among other things, these provisions require
us to maintain certain financial ratios and minimum net worth
and impose certain limits on our ability to incur indebtedness,
create liens and make investments or acquisitions. As of
December 31, 2009, we were in compliance with all of the
covenants under our debt agreements. None of our debt agreements
contain provisions for acceleration which could be triggered by
our debt ratings with Moody’s Investors Service and
Standard & Poor’s Ratings Services. However,
under our unsecured line of credit arrangement, these ratings on
our senior unsecured notes are used to determine the fees and
interest payable.
As of February 12, 2010, our senior unsecured notes were
rated Baa2 (stable), BBB- (positive) and BBB (stable) by
Moody’s Investors Service, Standard & Poor’s
Ratings Services and Fitch Ratings, respectively. We plan to
manage the company to maintain investment grade status with a
capital structure consistent with our current profile. Any
downgrades in terms of ratings or outlook by any or all of the
noted rating agencies could have a material adverse impact on
our cost and availability of capital, which could in turn have a
material adverse impact on our consolidated results of
operations, liquidity
and/or
financial condition.
On May 7, 2009, we filed an open-ended automatic or
“universal” shelf registration statement with the
Securities and Exchange Commission covering an indeterminate
amount of future offerings of debt securities, common stock,
preferred stock, depositary shares, warrants and units. As of
February 12, 2010, we had an effective registration
statement on file in connection with our enhanced DRIP program
under which we may issue up to 10,760,247 shares of common
stock. As of February 12, 2010, 6,402,507 shares of
common stock remained available for issuance under this
registration statement. In November 2008, we entered into an
Equity Distribution Agreement with UBS Securities LLC relating
to the offer and sale from time to time of up to $250,000,000
aggregate amount of our common stock (“Equity Shelf
Program”). As of February 12, 2010, we had
$139,356,000 of remaining capacity under the Equity Shelf
Program. Depending upon market conditions, we anticipate issuing
securities under our registration statements to invest in
additional properties and to repay borrowings under our
unsecured line of credit arrangement.
Results
of Operations
Our primary sources of revenue include rent and interest. Our
primary expenses include interest expense, depreciation and
amortization, property operating expenses and general and
administrative expenses. These revenues and expenses are
reflected in our Consolidated Statements of Income and are
discussed in further detail below. The following is a summary of
our results of operations (dollars in thousands except per share
amounts):
|
One Year
|
Two Year
|
|||||||||||||||||||||||||||||||||||
| Year Ended | One Year Change | Year Ended | Change | Change | ||||||||||||||||||||||||||||||||
| Dec. 31, 2007 | Dec. 31, 2008 | $ | % | Dec. 31, 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Net income attributable to common stockholders
|
$ | 113,225 | $ | 260,098 | $ | 146,873 | 130 | % | $ | 171,190 | $ | (88,908 | ) | (34 | )% | $ | 57,965 | 51 | % | |||||||||||||||||
|
Funds from operations
|
248,070 | 258,868 | 10,798 | 4 | % | 289,521 | 30,653 | 12 | % | 41,451 | 17 | % | ||||||||||||||||||||||||
|
Net operating income
|
455,680 | 526,136 | 70,456 | 15 | % | 547,678 | 21,542 | 4 | % | 91,998 | 20 | % | ||||||||||||||||||||||||
|
Adjusted EBITDA
|
439,702 | 595,365 | 155,663 | 35 | % | 525,791 | (69,574 | ) | (12 | )% | 86,089 | 20 | % | |||||||||||||||||||||||
The components of the changes in revenues, expenses and other
items are discussed in detail below. The following is a summary
of certain items that impact the results of operations for the
year ended December 31, 2009:
| • | $3,909,000 ($0.03 per diluted share) of non-recurring general and administrative expenses; | |
| • | $25,107,000 ($0.22 per diluted share) of net losses on extinguishments of debt; | |
| • | $25,223,000 ($0.22 per diluted share) of impairment charges; | |
| • | $23,261,000 ($0.20 per diluted share) of provisions for loan losses; | |
| • | $8,059,000 ($0.07 per diluted share) of additional other income related to a lease termination; |
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Table of Contents
| • | $2,400,000 ($0.02 per diluted share) of prepayment fees; and | |
| • | $43,394,000 ($0.38 per diluted share) of gains on the sales of real property. |
The following is a summary of certain items that impact the
results of operations for the year ended December 31, 2008:
| • | $2,291,000 ($0.02 per diluted share) of non-recurring terminated transaction costs; | |
| • | $1,325,000 ($0.01 per diluted share) of non-recurring income tax expense; | |
| • | $23,393,000 ($0.25 per diluted share) of realized loss on derivatives; | |
| • | $32,648,000 ($0.35 per diluted share) of impairment charges; | |
| • | $2,094,000 ($0.02 per diluted share) of net gains on extinguishments of debt; | |
| • | $2,500,000 ($0.03 per diluted share) of additional other income related to a lease termination; and | |
| • | $163,933,000 ($1.74 per diluted share) of gains on the sales of real property. |
The following is a summary of certain items that impact the
results of operations for the year ended December 31, 2007:
| • | $1,750,000 ($0.02 per diluted share) of one-time acquisition finders’ fees; | |
| • | $1,081,000 ($0.01 per diluted share) of net gains on extinguishments of debt; | |
| • | $3,900,000 ($0.05 per diluted share) of additional other income related to the payoff of a warrant equity investment; and | |
| • | $14,437,000 ($0.18 per diluted share) of gains on the sales of real property. |
The increase in fully diluted average common shares outstanding
is primarily the result of public common stock offerings and
common stock issuances pursuant to our DRIP and equity shelf
program (“ESP”). The following table represents the
changes in outstanding common stock for the period from
January 1, 2007 to December 31, 2009 (in thousands):
| Year Ended | ||||||||||||||||
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
||||||||||||||
| 2007 | 2008 | 2009 | Totals | |||||||||||||
|
Beginning balance
|
73,192 | 85,496 | 104,704 | 73,192 | ||||||||||||
|
Public offerings
|
9,825 | 15,650 | 15,017 | 40,492 | ||||||||||||
|
DRIP issuances
|
1,626 | 1,546 | 1,499 | 4,671 | ||||||||||||
|
ESP issuances
|
0 | 794 | 1,953 | 2,747 | ||||||||||||
|
Preferred stock conversions
|
212 | 975 | 30 | 1,217 | ||||||||||||
|
Option exercises
|
402 | 119 | 96 | 617 | ||||||||||||
|
Other, net
|
239 | 124 | 86 | 449 | ||||||||||||
|
Ending balance
|
85,496 | 104,704 | 123,385 | 123,385 | ||||||||||||
|
Average number of common shares outstanding:
|
||||||||||||||||
|
Basic
|
78,861 | 93,732 | 114,207 | |||||||||||||
|
Diluted
|
79,409 | 94,309 | 114,612 | |||||||||||||
We evaluate our business and make resource allocations on our
two business segments — investment properties and
medical office buildings. Under the investment property segment,
properties are primarily leased under
triple-net
leases and we are not involved in the management of the
property. Under the medical office building segment, our
properties are typically leased under gross leases, modified
gross leases or
triple-net
leases, to multiple tenants, and generally require a certain
level of property management. There are no intersegment sales or
transfers. Non-segment revenue consists mainly of interest
income on non-real estate investments and other income. Non-
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Table of Contents
property specific revenues and expenses are not allocated to
individual segments in determining net operating income. Please
see Note 18 to our consolidated financial statements for
additional information.
Investment
Properties
The following is a summary of our results of operations for the
investment properties segment (dollars in thousands):
| Year Ended | Year Ended | |||||||||||||||||||||||||||||||||||
|
Dec. 31,
|
Dec. 31,
|
One Year Change |
Dec. 31,
|
One Year Change | Two Year Change | |||||||||||||||||||||||||||||||
| 2007 | 2008 | $ | % | 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||||||||||||||||||
|
Rental income
|
$ | 291,471 | $ | 349,782 | $ | 58,311 | 20 | % | $ | 388,260 | $ | 38,478 | 11 | % | $ | 96,789 | 33 | % | ||||||||||||||||||
|
Interest income
|
25,823 | 40,063 | 14,240 | 55 | % | 40,885 | 822 | 2 | % | 15,062 | 58 | % | ||||||||||||||||||||||||
|
Other income
|
8,010 | 7,899 | (111 | ) | (1 | )% | 3,269 | (4,630 | ) | (59 | )% | (4,741 | ) | (59 | )% | |||||||||||||||||||||
|
Prepayment fees
|
0 | 0 | 0 | n/a | 2,400 | 2,400 | n/a | 2,400 | n/a | |||||||||||||||||||||||||||
| 325,304 | 397,744 | 72,440 | 22 | % | 434,814 | 37,070 | 9 | % | 109,510 | 34 | % | |||||||||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||||||||||||||
|
Interest expense
|
(3,422 | ) | (1,467 | ) | 1,955 | (57 | )% | 9,644 | 11,111 | n/a | 13,066 | n/a | ||||||||||||||||||||||||
|
Depreciation and amortization
|
83,134 | 97,108 | 13,974 | 17 | % | 107,998 | 10,890 | 11 | % | 24,864 | 30 | % | ||||||||||||||||||||||||
|
Loss/(gain) on extinguishment of debt
|
0 | (808 | ) | (808 | ) | n/a | 2,057 | 2,865 | n/a | 2,057 | n/a | |||||||||||||||||||||||||
|
Provision for loan losses
|
0 | 94 | 94 | n/a | 23,261 | 23,167 | 24646 | % | 23,261 | n/a | ||||||||||||||||||||||||||
| 79,712 | 94,927 | 15,215 | 19 | % | 142,960 | 48,033 | 51 | % | 63,248 | 79 | % | |||||||||||||||||||||||||
|
Income from continuing operations before income taxes
|
245,592 | 302,817 | 57,225 | 23 | % | 291,854 | (10,963 | ) | (4 | )% | 46,262 | 19 | % | |||||||||||||||||||||||
|
Income tax (expense) benefit
|
293 | (1,693 | ) | (1,986 | ) | n/a | (607 | ) | 1,086 | (64 | )% | (900 | ) | n/a | ||||||||||||||||||||||
|
Income from continuing operations
|
245,885 | 301,124 | 55,239 | 22 | % | 291,247 | (9,877 | ) | (3 | )% | 45,362 | 18 | % | |||||||||||||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||||||||||||||||||
|
Gain on sales of properties
|
14,437 | 164,998 | 150,561 | 1043 | % | 46,439 | (118,559 | ) | (72 | )% | 32,002 | 222 | % | |||||||||||||||||||||||
|
Impairment of assets
|
0 | 0 | 0 | n/a | (10,266 | ) | (10,266 | ) | n/a | (10,266 | ) | n/a | ||||||||||||||||||||||||
|
Income from discontinued operations, net
|
21,925 | 15,598 | (6,327 | ) | (29 | )% | 13,424 | (2,174 | ) | (14 | )% | (8,501 | ) | (39 | )% | |||||||||||||||||||||
| 36,362 | 180,596 | 144,234 | 397 | % | 49,597 | (130,999 | ) | (73 | )% | 13,235 | 36 | % | ||||||||||||||||||||||||
|
Net income attributable to common stockholders
|
$ | 282,247 | $ | 481,720 | $ | 199,473 | 71 | % | $ | 340,844 | $ | (140,876 | ) | (29 | )% | $ | 58,597 | 21 | % | |||||||||||||||||
The increase in rental income is primarily attributable to the
acquisitions of new investment properties from which we receive
rent. See the discussion of investing activities in
“Liquidity and Capital Resources” above for further
information. Certain of our leases contain annual rental
escalators that are contingent upon changes in the Consumer
Price Index
and/or
changes in the gross operating revenues of the tenant’s
properties. These escalators are not fixed, so no straight-line
rent is recorded; however, rental income is recorded based on
the contractual cash rental payments due for the period. If
gross operating revenues at our facilities
and/or
the
Consumer Price Index do not increase, a portion of our revenues
may not continue to increase. Sales of real property would
offset revenue increases and, to the extent that they exceed new
acquisitions, could result in decreased revenues. Our leases
could renew above or below current rent rates, resulting in an
increase or decrease in rental income. Interest income increased
from 2007 primarily due to an increase in the balance of
outstanding loans.
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Table of Contents
Interest expense for the years ended December 31, 2009,
2008 and 2007 represents $12,229,000, $7,176,000 and $8,763,000,
respectively, of secured debt interest expense offset by
interest allocated to discontinued operations. The change in
secured debt interest expense is due to the net effect and
timing of assumptions, extinguishments and principal
amortizations. During the year ended December 31, 2009, we
extinguished 12 investment property secured debt loans and
recognized extinguishment losses of $2,057,000. During the year
ended December 31, 2008, we extinguished four investment
property secured debt loans and recognized extinguishment gains
of $808,000. The following is a summary of our investment
property secured debt principal activity (dollars in thousands):
| Year Ended December 31, 2007 | Year Ended December 31, 2008 | Year Ended December 31, 2009 | ||||||||||||||||||||||
|
Weighted Average
|
Weighted Average
|
Weighted Average
|
||||||||||||||||||||||
| Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
|
Beginning balance
|
$ | 129,617 | 7.134 | % | $ | 114,543 | 7.000 | % | $ | 94,234 | 6.996 | % | ||||||||||||
|
Debt issued
|
265,527 | 5.982 | % | |||||||||||||||||||||
|
Debt extinguished
|
(12,083 | ) | 8.421 | % | (17,821 | ) | 7.022 | % | (47,502 | ) | 7.414 | % | ||||||||||||
|
Principal payments
|
(2,991 | ) | 7.085 | % | (2,488 | ) | 6.974 | % | (13,767 | ) | 7.640 | % | ||||||||||||
|
Ending balance
|
$ | 114,543 | 7.000 | % | $ | 94,234 | 6.996 | % | $ | 298,492 | 5.998 | % | ||||||||||||
|
Monthly averages
|
$ | 121,562 | 7.065 | % | $ | 103,927 | 6.996 | % | $ | 205,549 | 6.309 | % | ||||||||||||
Depreciation and amortization increased primarily as a result of
additional investments in properties owned directly by us. See
the discussion of investing activities in “Liquidity and
Capital Resources” above for additional details. To the
extent that we acquire or dispose of additional properties in
the future, our provision for depreciation and amortization will
change accordingly.
At December 31, 2009, we had two skilled nursing facilities
and one hospital that satisfied the requirements for held for
sale treatment. We did not recognize an impairment loss on the
skilled nursing facilities as the fair value less estimated
costs to sell exceeded our carrying value. In determining the
fair value of the hospital, we used a combination of third party
appraisals based on market comparable transactions, other market
listings and asset quality. Management’s estimates
projected that the carrying value of the asset was more than the
estimated fair value and an impairment charge of $10,266,000 was
recorded to reduce the property to its estimated fair value less
costs to sell. During the year ended December 31, 2009, we
sold 23 investment properties with carrying values of
$141,996,000 for net gains of $46,439,000. The following
illustrates the reclassification impact as a result of
classifying investment properties as discontinued operations for
the periods presented. Please refer to Note 3 to our
consolidated financial statements for further discussion.
| Year Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Revenues:
|
||||||||||||
|
Rental Income
|
$ | 54,212 | $ | 39,067 | $ | 14,817 | ||||||
|
Other income
|
0 | 0 | 8,059 | |||||||||
|
Expenses:
|
||||||||||||
|
Interest expense
|
12,185 | 8,643 | 2,585 | |||||||||
|
Depreciation and amortization
|
20,102 | 14,826 | 6,867 | |||||||||
|
Income (loss) from discontinued operations, net
|
$ | 21,925 | $ | 15,598 | $ | 13,424 | ||||||
During the three months ended December 31, 2007, we
recognized $3,900,000 of additional other income related to the
payoff of a warrant equity investment. During the three months
ended March 31, 2008, we determined that $1,325,000 of
income taxes were due in connection with that investment gain.
During the three months ended December 31, 2008, we
recognized $2,500,000 of additional other income related to a
lease termination. During the three months ended
December 31, 2009, we recognized $8,059,000 of additional
other income related to a lease termination, which is included
in discontinued operations, and $2,400,000 of prepayment fees.
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Table of Contents
As a result of our quarterly evaluations, we recorded
$23,261,000 of provision for loan losses during the year ended
December 31, 2009. This amount includes the write-off of
loans totaling $25,578,000 primarily relating to certain early
stage senior housing operators offset by a net reduction in the
allowance for loan losses of $2,457,000. The provision for loan
losses is related to our critical accounting estimate for the
allowance for loan losses and is discussed below in
“Critical Accounting Policies.”
Medical
Office Buildings
The following is a summary of our results of operations for the
medical office building segment (dollars in thousands):
| Year Ended |
One Year
|
Year Ended |
One Year
|
Two Year
|
||||||||||||||||||||||||||||||||
|
Dec. 31,
|
Dec. 31,
|
Change |
Dec. 31,
|
Change | Change | |||||||||||||||||||||||||||||||
| 2007 | 2008 | $ | % | 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||||||||||||||||||
|
Rental income
|
$ | 102,157 | $ | 126,040 | $ | 23,883 | 23 | % | $ | 132,040 | $ | 6,000 | 5 | % | $ | 29,883 | 29 | % | ||||||||||||||||||
|
Other income
|
497 | 930 | 433 | 87 | % | 949 | 19 | 2 | % | 452 | 91 | % | ||||||||||||||||||||||||
| 102,654 | 126,970 | 24,316 | 24 | % | 132,989 | 6,019 | 5 | % | 30,335 | 30 | % | |||||||||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||||||||||||||
|
Interest expense
|
21,408 | 19,565 | (1,843 | ) | (9 | )% | 19,628 | 63 | 0 | % | (1,780 | ) | (8 | )% | ||||||||||||||||||||||
|
Property operating expenses
|
33,410 | 42,634 | 9,224 | 28 | % | 45,896 | 3,262 | 8 | % | 12,486 | 37 | % | ||||||||||||||||||||||||
|
Depreciation and amortization
|
41,098 | 47,253 | 6,155 | 15 | % | 49,051 | 1,798 | 4 | % | 7,953 | 19 | % | ||||||||||||||||||||||||
|
Loss/(gain) on extinguishment of debt
|
(1,081 | ) | (1,286 | ) | (205 | ) | 19 | % | 3,781 | 5,067 | n/a | 4,862 | n/a | |||||||||||||||||||||||
| 94,835 | 108,166 | 13,331 | 14 | % | 118,356 | 10,190 | 9 | % | 23,521 | 25 | % | |||||||||||||||||||||||||
|
Income from continuing operations before income taxes
|
7,819 | 18,804 | 10,985 | 140 | % | 14,633 | (4,171 | ) | (22 | )% | 6,814 | 87 | % | |||||||||||||||||||||||
|
Income tax (expense) benefit
|
12 | (51 | ) | (63 | ) | n/a | (233 | ) | (182 | ) | 357 | % | (245 | ) | n/a | |||||||||||||||||||||
|
Income from continuing operations
|
7,831 | 18,753 | 10,922 | 139 | % | 14,400 | (4,353 | ) | (23 | )% | 6,569 | 84 | % | |||||||||||||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||||||||||||||||||
|
Loss on sales of properties
|
0 | (1,065 | ) | (1,065 | ) | n/a | (3,045 | ) | (1,980 | ) | 186 | % | (3,045 | ) | n/a | |||||||||||||||||||||
|
Impairment of assets
|
0 | (32,648 | ) | (32,648 | ) | n/a | (14,957 | ) | 17,691 | (54 | )% | (14,957 | ) | n/a | ||||||||||||||||||||||
|
Income from discontinued operations, net
|
(1,770 | ) | (2,824 | ) | (1,054 | ) | 60 | % | (238 | ) | 2,586 | (92 | )% | 1,532 | (87 | )% | ||||||||||||||||||||
| (1,770 | ) | (36,537 | ) | (34,767 | ) | 1964 | % | (18,240 | ) | 18,297 | (50 | )% | (16,470 | ) | 931 | % | ||||||||||||||||||||
|
Net income (loss)
|
6,061 | (17,784 | ) | (23,845 | ) | n/a | (3,840 | ) | 13,944 | (78 | )% | (9,901 | ) | n/a | ||||||||||||||||||||||
|
Net income (loss) attributable to noncontrolling interests
|
238 | 126 | (112 | ) | (47 | )% | (342 | ) | (468 | ) | n/a | (580 | ) | n/a | ||||||||||||||||||||||
|
Net income (loss) attributable to common stockholders
|
$ | 5,823 | $ | (17,910 | ) | $ | (23,733 | ) | n/a | $ | (3,498 | ) | $ | 14,412 | (80 | )% | $ | (9,321 | ) | n/a | ||||||||||||||||
In May 2007, we completed the acquisition of 17 medical office
buildings and Paramount Real Estate Services, a property
management company, from affiliates of Rendina Companies. The
results of operations for these properties and Paramount have
been included in our consolidated results of operations from the
date of acquisition and represent the primary component of
change in results of operations for this segment from 2007 to
2008.
The increase in rental income is primarily attributable to the
acquisitions of medical office buildings from which we receive
rent. See the discussion of investing activities in
“Liquidity and Capital Resources” above for further
information. Certain of our leases contain annual rental
escalators that are contingent upon changes in the Consumer
Price Index. These escalators are not fixed, so no straight-line
rent is recorded; however, rental income is recorded based on
the contractual cash rental payments due for the period. If the
Consumer Price Index does not increase, a portion of our
revenues may not continue to increase. Sales of real property
would offset revenue
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Table of Contents
increases and, to the extent that they exceed new acquisitions,
could result in decreased revenues. Our leases could renew above
or below current rent rates, resulting in an increase or
decrease in rental income. The increase in other income is
attributable to third party management fee income.
Interest expense for the years ended December 31, 2009,
2008 and 2007 represents $20,584,000, $21,828,000, and
$20,174,000, respectively, of secured debt interest expense
offset by interest allocated to discontinued operations.
Interest expense for the year ended December 31, 2007 also
includes $3,104,000 of interest expense related to the trust
preferred liability. The change in secured debt interest expense
is primarily due to the net effect and timing of assumptions,
extinguishments and principal amortizations. During the year
ended December 31, 2009, we extinguished eight medical
office building secured debt loans and recognized extinguishment
losses of $3,781,000. During the year ended December 31,
2008, we extinguished four medical office building secured debt
loans and recognized extinguishment gains of $1,286,000. The
following is a summary of our medical office building secured
debt principal activity (dollars in thousands):
| Year Ended December 31, 2007 | Year Ended December 31, 2008 | Year Ended December 31, 2009 | ||||||||||||||||||||||
|
Weighted Average
|
Weighted Average
|
Weighted Average
|
||||||||||||||||||||||
| Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
|
Beginning balance
|
$ | 248,783 | 5.939 | % | $ | 392,430 | 5.854 | % | $ | 354,146 | 5.799 | % | ||||||||||||
|
Debt assumed
|
166,331 | 5.808 | % | |||||||||||||||||||||
|
Debt extinguished
|
(17,713 | ) | 6.599 | % | (32,653 | ) | 6.473 | % | (34,213 | ) | 6.933 | % | ||||||||||||
|
Principal payments
|
(4,971 | ) | 5.881 | % | (5,631 | ) | 5.741 | % | (5,868 | ) | 5.721 | % | ||||||||||||
|
Ending balance
|
$ | 392,430 | 5.854 | % | $ | 354,146 | 5.799 | % | $ | 314,065 | 5.677 | % | ||||||||||||
|
Monthly averages
|
$ | 335,234 | 5.892 | % | $ | 365,661 | 5.802 | % | $ | 341,103 | 5.764 | % | ||||||||||||
At January 1, 2007, we had $51,000,000 of trust preferred
liability principal outstanding with a fixed annual interest
rate of 7.22%. On November 6, 2007, we purchased all
$50,000,000 of the outstanding trust preferred securities at par
for the purpose of unwinding this financing arrangement and
extinguishing the liability of the operating partnership to the
subsidiary trust and recorded a $1,081,000 gain on
extinguishment of debt.
The increase in property operating expenses is primarily
attributable to the acquisition of new medical office buildings
for which we incur certain property operating expenses offset by
property operating expenses associated with discontinued
operations.
Depreciation and amortization increased primarily as a result of
additional investments in properties owned directly by us. See
the discussion of investing activities in “Liquidity and
Capital Resources” above for additional details. To the
extent that we acquire or dispose of additional properties in
the future, our provision for depreciation and amortization will
change accordingly.
Income tax expense is related to third party management fee
income.
At December 31, 2009, we had seven medical office buildings
that satisfied the requirements for held for sale treatment. In
determining the fair value of the assets, we used a combination
of third party appraisals based on market comparable
transactions, other market listings and asset quality as well as
management calculations based on projected net operating income
and published capitalization rates. Management’s estimates
projected that the carrying value of the assets was more than
the estimated fair value and an impairment charge of $14,957,000
was recorded to reduce the properties to their estimated fair
value. During the year ended December 31, 2009, we sold 13
medical office buildings with carrying values of $44,717,000 for
a loss of $3,045,000. The following illustrates the
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Table of Contents
reclassification impact as a result of classifying these medical
office buildings as discontinued operations for the periods
presented. Please refer to Note 3 to our consolidated
financial statements for further discussion.
| Year Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Revenues:
|
||||||||||||
|
Rental Income
|
$ | 9,457 | $ | 7,292 | $ | 4,794 | ||||||
|
Expenses:
|
||||||||||||
|
Interest expense
|
1,870 | 2,263 | 956 | |||||||||
|
Property operating expenses
|
4,065 | 3,995 | 3,069 | |||||||||
|
Depreciation and amortization
|
5,292 | 3,858 | 1,007 | |||||||||
|
Income (loss) from discontinued operations, net
|
$ | (1,770 | ) | $ | (2,824 | ) | $ | (238 | ) | |||
Non-Segment/Corporate
The following is a summary of our results of operations for the
non-segment/corporate activities (dollars in thousands):
|
One Year
|
Two Year
|
|||||||||||||||||||||||||||||||||||
| Year Ended | One Year Change | Year Ended | Change | Change | ||||||||||||||||||||||||||||||||
| Dec. 31, 2007 | Dec. 31, 2008 | $ | % | Dec. 31, 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||||||||||||||||||
|
Other income
|
$ | 1,528 | $ | 1,692 | $ | 164 | 11 | % | $ | 1,170 | $ | (522 | ) | (31 | )% | $ | (358 | ) | (23 | )% | ||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||||||||||||||
|
Interest expense
|
113,285 | 112,055 | (1,230 | ) | (1 | )% | 76,959 | (35,096 | ) | (31 | )% | (36,326 | ) | (32 | )% | |||||||||||||||||||||
|
General and administrative
|
37,465 | 47,193 | 9,728 | 26 | % | 49,691 | 2,498 | 5 | % | 12,226 | 33 | % | ||||||||||||||||||||||||
|
Realized loss on derivatives
|
0 | 23,393 | 23,393 | n/a | 0 | (23,393 | ) | (100 | )% | 0 | n/a | |||||||||||||||||||||||||
|
Loss on extinguishment of debt
|
0 | 0 | 0 | n/a | 19,269 | 19,269 | n/a | 19,269 | n/a | |||||||||||||||||||||||||||
| 150,750 | 182,641 | 31,891 | 21 | % | 145,919 | (36,722 | ) | (20 | )% | (4,831 | ) | (3 | )% | |||||||||||||||||||||||
|
Loss from continuing operations before income taxes
|
(149,222 | ) | (180,949 | ) | (31,727 | ) | 21 | % | (144,749 | ) | 36,200 | (20 | )% | 4,473 | (3 | )% | ||||||||||||||||||||
|
Income tax (expense) benefit
|
(493 | ) | 438 | 931 | n/a | 672 | 234 | 53 | % | 1,165 | n/a | |||||||||||||||||||||||||
|
Loss from continuing operations
|
(149,715 | ) | (180,511 | ) | (30,796 | ) | 21 | % | (144,077 | ) | 36,434 | (20 | )% | 5,638 | (4 | )% | ||||||||||||||||||||
|
Preferred stock dividends
|
25,130 | 23,201 | (1,929 | ) | (8 | )% | 22,079 | (1,122 | ) | (5 | )% | (3,051 | ) | (12 | )% | |||||||||||||||||||||
|
Loss attributable to common stockholders
|
$ | (174,845 | ) | $ | (203,712 | ) | $ | (28,867 | ) | 17 | % | $ | (166,156 | ) | $ | 37,556 | (18 | )% | $ | 8,689 | (5 | )% | ||||||||||||||
Other income primarily represents income from non-real estate
activities such as interest earned on temporary investments of
cash reserves.
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Table of Contents
The following is a summary of our non-segment/corporate interest
expense (dollars in thousands):
| Year Ended | One Year Change | Year Ended | One Year Change | Two Year Change | ||||||||||||||||||||||||||||||||
| Dec. 31, 2007 | Dec. 31, 2008 | $ | % | Dec. 31, 2009 | $ | % | $ | % | ||||||||||||||||||||||||||||
|
Senior unsecured notes
|
$ | 104,665 | $ | 111,544 | $ | 6,879 | 7 | % | $ | 106,347 | $ | (5,197 | ) | (5 | )% | $ | 1,682 | 2 | % | |||||||||||||||||
|
Secured debt
|
0 | 0 | 0 | n/a | 265 | 265 | n/a | 265 | n/a | |||||||||||||||||||||||||||
|
Unsecured lines of credit
|
15,653 | 18,878 | 3,225 | 21 | % | 4,629 | (14,249 | ) | (75 | )% | (11,024 | ) | (70 | )% | ||||||||||||||||||||||
|
Capitalized interest
|
(12,526 | ) | (25,029 | ) | (12,503 | ) | 100 | % | (41,170 | ) | (16,141 | ) | 64 | % | (28,644 | ) | 229 | % | ||||||||||||||||||
|
SWAP losses (savings)
|
(89 | ) | (161 | ) | (72 | ) | 81 | % | (161 | ) | 0 | 0 | % | (72 | ) | 81 | % | |||||||||||||||||||
|
Loan expense
|
5,582 | 6,823 | 1,241 | 22 | % | 7,049 | 226 | 3 | % | 1,467 | 26 | % | ||||||||||||||||||||||||
|
Totals
|
$ | 113,285 | $ | 112,055 | $ | (1,230 | ) | (1 | )% | $ | 76,959 | $ | (35,096 | ) | (31 | )% | $ | (36,326 | ) | (32 | )% | |||||||||||||||
The change in interest expense on senior unsecured notes is due
to the net effect and timing of issuances and extinguishments.
The following is a summary of our senior unsecured notes
activity (dollars in thousands):
| Year Ended December 31, 2007 | Year Ended December 31, 2008 | Year Ended December 31, 2009 | ||||||||||||||||||||||
|
Weighted Average
|
Weighted Average
|
Weighted Average
|
||||||||||||||||||||||
| Amount | Interest Rate | Amount | Interest Rate | Amount | Interest Rate | |||||||||||||||||||
|
Beginning balance
|
$ | 1,539,830 | 6.159 | % | $ | 1,887,330 | 5.823 | % | $ | 1,845,000 | 5.782 | % | ||||||||||||
|
Debt issued
|
400,000 | 4.750 | % | |||||||||||||||||||||
|
Debt extinguished
|
(52,500 | ) | 7.500 | % | (42,330 | ) | 7.625 | % | (183,147 | ) | 7.823 | % | ||||||||||||
|
Ending balance
|
$ | 1,887,330 | 5.823 | % | $ | 1,845,000 | 5.782 | % | $ | 1,661,853 | 5.557 | % | ||||||||||||
|
Monthly averages
|
$ | 1,704,253 | 5.991 | % | $ | 1,854,768 | 5.792 | % | $ | 1,778,621 | 5.713 | % | ||||||||||||
The change in interest expense on unsecured lines of credit
arrangements is due primarily to changes in average amounts
outstanding and fluctuating variable interest rates. The
following is a summary of our unsecured lines of credit
arrangements (dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Balance outstanding at December 31
|
$ | 307,000 | $ | 570,000 | $ | 140,000 | ||||||
|
Maximum amount outstanding at any month end
|
434,000 | 744,000 | 559,000 | |||||||||
|
Average amount outstanding (total of daily principal balances
divided by days in year)
|
234,392 | 500,561 | 241,463 | |||||||||
|
Weighted average interest rate (actual interest expense divided
by average borrowings outstanding)
|
6.68 | % | 3.77 | % | 1.92 | % | ||||||
We capitalize certain interest costs associated with funds used
to finance the construction of properties owned directly by us.
The amount capitalized is based upon the borrowings outstanding
during the construction period using the rate of interest that
approximates our cost of financing. Our interest expense is
reduced by the amount capitalized. Capitalized interest for the
years ended December 31, 2007, 2008 and 2009 totaled
$12,526,000, $25,029,000 and $41,170,000, respectively.
Please see Note 9 to our unaudited consolidated financial
statements for a discussion of our interest rate swap agreements
and their impact on interest expense.
Loan expense represents the amortization of deferred loan costs
incurred in connection with the issuance and amendments of debt.
The change in loan expense is primarily due to costs associated
with the issuance of $400,000,000 of senior unsecured
convertible notes in July 2007 and costs associated with the
extension and expansion of our unsecured line of credit in
August 2007.
General and administrative expenses as a percentage of
consolidated revenues (including revenues from discontinued
operations) for the year ended December 31, 2009 were
8.33%, as compared with 8.24% and 7.64% for the same periods in
2008 and 2007. During the year ended December 31, 2007, we
recorded $1,750,000 of one-
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Table of Contents
time acquisition finders’ fees paid to former Windrose
management in connection with the closing of the
Rendina/Paramount transaction. These fees relate to services
rendered prior to the consummation of the Windrose merger in
December 2006. Due to the recipients’ then current
employment status with the company, the fees were expensed as
compensation rather than included in the purchase price of the
acquisition, as is typical with such fees. The increase from
2007 to 2008 is primarily due to $2,291,000 of non-recurring
terminated transaction costs and costs associated with our
initiatives to attract and retain appropriate personnel to
achieve our business objectives. The terminated transaction
costs primarily related to the termination of the
Arcapita/Sunrise agreement. The increase from 2008 to 2009 is
primarily due to $3,909,000 of non-recurring expenses recognized
in connection with the departure of Raymond W. Braun who
formerly served as president of the company.
The change in preferred dividends is primarily due to the change
in average outstanding preferred shares. The following is a
summary of our preferred stock activity:
| Year Ended December 31, 2007 | Year Ended December 31, 2008 | Year Ended December 31, 2009 | ||||||||||||||||||||||
|
Weighted Average
|
Weighted Average
|
Weighted Average
|
||||||||||||||||||||||
| Shares | Dividend Rate | Shares | Dividend Rate | Shares | Dividend Rate | |||||||||||||||||||
|
Beginning balance
|
13,174,989 | 7.672 | % | 12,879,189 | 7.676 | % | 11,516,302 | 7.696 | % | |||||||||||||||
|
Shares converted
|
(295,800 | ) | 7.500 | % | (1,362,887 | ) | 7.500 | % | (42,209 | ) | 7.478 | % | ||||||||||||
|
Ending balance
|
12,879,189 | 7.676 | % | 11,516,302 | 7.696 | % | 11,474,093 | 7.697 | % | |||||||||||||||
|
Monthly averages
|
13,129,481 | 7.672 | % | 12,138,161 | 7.686 | % | 11,482,557 | 7.697 | % | |||||||||||||||
Non-GAAP Financial
Measures
We believe that net income attributable to common stockholders,
as defined by U.S. GAAP, is the most appropriate earnings
measurement. However, we consider FFO to be a useful
supplemental measure of our operating performance. Historical
cost accounting for real estate assets in accordance with
U.S. GAAP implicitly assumes that the value of real estate
assets diminishes predictably over time as evidenced by the
provision for depreciation. However, since real estate values
have historically risen or fallen with market conditions, many
industry investors and analysts have considered presentations of
operating results for real estate companies that use historical
cost accounting to be insufficient. In response, the National
Association of Real Estate Investment Trusts
(“NAREIT”) created FFO as a supplemental measure of
operating performance for REITs that excludes historical cost
depreciation from net income attributable to common
stockholders. FFO, as defined by NAREIT, means net income
attributable to common stockholders, computed in accordance with
U.S. GAAP, excluding gains (or losses) from sales of real
estate, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
Net operating income (“NOI”) is used to evaluate the
operating performance of our properties. We define NOI as total
revenues, including tenant reimbursements, less property
operating expenses, which exclude depreciation and amortization,
general and administrative expenses, impairments and interest
expense. We believe NOI provides investors relevant and useful
information because it measures the operating performance of our
properties at the property level on an unleveraged basis. We use
NOI to make decisions about resource allocations and to assess
the property level performance of our properties.
EBITDA stands for earnings before interest, taxes, depreciation
and amortization. A covenant in our line of credit arrangement
contains a financial ratio based on a definition of EBITDA that
is specific to that agreement. Failure to satisfy this covenant
could result in an event of default that could have a material
adverse impact on our cost and availability of capital, which
could in turn have a material adverse impact on our consolidated
results of operations, liquidity
and/or
financial condition. Due to the materiality of this debt
agreement and the financial covenant, we have disclosed Adjusted
EBITDA, which represents EBITDA as defined above and adjusted
for stock-based compensation expense, provision for loan losses
and gain/loss on extinguishment of debt. We use Adjusted EBITDA
to measure our adjusted fixed charge coverage ratio, which
represents Adjusted EBITDA divided by fixed charges on a
trailing twelve months basis. Fixed charges include total
interest (excluding capitalized interest), secured debt
principal amortization and preferred dividends. Our covenant
requires an adjusted fixed charge ratio of at least 1.75 times.
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Table of Contents
Other than Adjusted EBITDA, our supplemental reporting measures
and similarly entitled financial measures are widely used by
investors, equity and debt analysts and rating agencies in the
valuation, comparison, rating and investment recommendations of
companies. Management uses these financial measures to
facilitate internal and external comparisons to our historical
operating results and in making operating decisions.
Additionally, these measures are utilized by the Board of
Directors to evaluate management. Adjusted EBITDA is used solely
to determine our compliance with a financial covenant of our
line of credit arrangement and is not being presented for use by
investors for any other purpose. None of our supplemental
measures represent net income or cash flow provided from
operating activities as determined in accordance with
U.S. GAAP and should not be considered as alternative
measures of profitability or liquidity. Finally, the
supplemental reporting measures, as defined by us, may not be
comparable to similarly entitled items reported by other real
estate investment trusts or other companies. Multi-period
amounts may not equal the sum of the individual quarterly
amounts due to rounding.
The table below reflects the reconciliation of FFO to net income
attributable to common stockholders, the most directly
comparable U.S. GAAP measure, for the periods presented.
The provisions for depreciation and amortization include
provisions for depreciation and amortization from discontinued
operations. Amounts are in thousands except for per share data.
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
FFO Reconciliation:
|
||||||||||||
|
Net income attributable to common stockholders
|
$ | 113,225 | $ | 260,098 | $ | 171,190 | ||||||
|
Depreciation and amortization
|
149,626 | 163,045 | 164,923 | |||||||||
|
Loss (gain) on sales of properties
|
(14,437 | ) | (163,933 | ) | (43,394 | ) | ||||||
|
Noncontrolling interests
|
(344 | ) | (342 | ) | (798 | ) | ||||||
|
Prepayment fees
|
0 | 0 | (2,400 | ) | ||||||||
|
Funds from operations
|
$ | 248,070 | $ | 258,868 | $ | 289,521 | ||||||
|
Average common shares outstanding:
|
||||||||||||
|
Basic
|
78,861 | 93,732 | 114,207 | |||||||||
|
Diluted
|
79,409 | 94,309 | 114,612 | |||||||||
|
Per share data:
|
||||||||||||
|
Net income attributable to common stockholders
|
||||||||||||
|
Basic
|
$ | 1.44 | $ | 2.77 | $ | 1.50 | ||||||
|
Diluted
|
1.43 | 2.76 | 1.49 | |||||||||
|
Funds from operations
|
||||||||||||
|
Basic
|
$ | 3.15 | $ | 2.76 | $ | 2.54 | ||||||
|
Diluted
|
3.12 | 2.74 | 2.53 | |||||||||
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Table of Contents
The table below reflects the reconciliation of NOI for the
periods presented. All amounts include amounts from discontinued
operations, if applicable. Amounts are in thousands.
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
NOI Reconciliation:
|
||||||||||||
|
Total revenues:
|
||||||||||||
|
Investment properties:
|
||||||||||||
|
Rental income:
|
||||||||||||
|
Independent living/CCRCs
|
$ | 43,072 | $ | 66,402 | $ | 77,673 | ||||||
|
Assisted living facilities
|
108,475 | 117,009 | 113,011 | |||||||||
|
Skilled nursing facilities
|
167,718 | 161,642 | 167,425 | |||||||||
|
Hospitals
|
26,418 | 43,796 | 44,968 | |||||||||
|
Investment property rental income
|
345,683 | 388,849 | 403,077 | |||||||||
|
Interest income
|
25,823 | 40,063 | 40,885 | |||||||||
|
Other income/prepayment fees
|
8,010 | 7,899 | 13,728 | |||||||||
|
Total investment property revenues
|
379,516 | 436,811 | 457,690 | |||||||||
|
Medical office buildings:
|
||||||||||||
|
Rental income
|
111,614 | 133,332 | 136,834 | |||||||||
|
Other income
|
497 | 930 | 949 | |||||||||
|
Total medical office building revenues
|
112,111 | 134,262 | 137,783 | |||||||||
|
Corporate other income
|
1,528 | 1,692 | 1,170 | |||||||||
|
Total revenues
|
493,155 | 572,765 | 596,643 | |||||||||
|
Property operating expenses:
|
||||||||||||
|
Investment properties
|
0 | 0 | 0 | |||||||||
|
Medical office buildings
|
37,475 | 46,629 | 48,965 | |||||||||
|
Non-segment/corporate
|
0 | 0 | 0 | |||||||||
|
Total property operating expenses
|
37,475 | 46,629 | 48,965 | |||||||||
|
Net operating income:
|
||||||||||||
|
Investment properties
|
379,516 | 436,811 | 457,690 | |||||||||
|
Medical office buildings
|
74,636 | 87,633 | 88,818 | |||||||||
|
Non-segment/corporate
|
1,528 | 1,692 | 1,170 | |||||||||
|
Net operating income
|
$ | 455,680 | $ | 526,136 | $ | 547,678 | ||||||
66
Table of Contents
The table below reflects the reconciliation of Adjusted EBITDA
to net income, the most directly comparable U.S. GAAP
measure, for the periods presented. Interest expense and the
provisions for depreciation and amortization include
discontinued operations. Dollars are in thousands.
| Year Ended | ||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Adjusted EBITDA Reconciliation:
|
||||||||||||
|
Net income
|
$ | 138,593 | $ | 283,425 | $ | 192,927 | ||||||
|
Interest expense
|
145,326 | 141,059 | 109,772 | |||||||||
|
Tax expense
|
188 | 1,306 | 168 | |||||||||
|
Depreciation and amortization
|
149,626 | 163,045 | 164,923 | |||||||||
|
Stock-based compensation expense
|
7,050 | 8,530 | 9,633 | |||||||||
|
Provision for loan losses
|
0 | 94 | 23,261 | |||||||||
|
Loss/(gain) on extinguishment of debt, net
|
(1,081 | ) | (2,094 | ) | 25,107 | |||||||
|
Adjusted EBITDA
|
$ | 439,702 | $ | 595,365 | $ | 525,791 | ||||||
|
Interest Coverage Ratio:
|
||||||||||||
|
Interest expense
|
$ | 145,326 | $ | 141,059 | $ | 109,772 | ||||||
|
Non-cash interest expense
|
(8,413 | ) | (11,231 | ) | (11,898 | ) | ||||||
|
Capitalized interest
|
12,526 | 25,029 | 41,170 | |||||||||
|
Total interest
|
149,439 | 154,857 | 139,044 | |||||||||
|
Adjusted EBITDA
|
$ | 439,702 | $ | 595,365 | $ | 525,791 | ||||||
|
Adjusted interest coverage ratio
|
2.94 | x | 3.84 | x | 3.78 | x | ||||||
|
Fixed Charge Coverage Ratio:
|
||||||||||||
|
Total interest
|
$ | 149,439 | $ | 154,857 | $ | 139,044 | ||||||
|
Secured debt prinicipal amortization
|
7,950 | 8,119 | 9,292 | |||||||||
|
Preferred dividends
|
25,130 | 23,201 | 22,079 | |||||||||
|
Total fixed charges
|
182,519 | 186,177 | 170,415 | |||||||||
|
Adjusted EBITDA
|
$ | 439,702 | $ | 595,365 | $ | 525,791 | ||||||
|
Adjusted fixed charge coverage ratio
|
2.41 | x | 3.20 | x | 3.09x | |||||||
Critical
Accounting Policies
Our consolidated financial statements are prepared in accordance
with U.S. GAAP, which requires us to make estimates and
assumptions. Management considers accounting estimates or
assumptions critical if:
| • | the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and | |
| • | the impact of the estimates and assumptions on financial condition or operating performance is material. |
Management has discussed the development and selection of its
critical accounting policies with the Audit Committee of the
Board of Directors and the Audit Committee has reviewed the
disclosure presented below relating to them. Management believes
the current assumptions and other considerations used to
estimate amounts reflected in our consolidated financial
statements are appropriate and are not reasonably likely to
change in the future. However, since these estimates require
assumptions to be made that were uncertain at the time the
estimate was made, they bear the risk of change. If actual
experience differs from the assumptions and other considerations
used in estimating amounts reflected in our consolidated
financial statements, the resulting changes could have a
material adverse effect on our consolidated results of
operations, liquidity
and/or
financial condition. Please refer to Note 1 of our audited
consolidated financial statements for further information on
significant accounting policies that impact us. There were no
material changes to these policies in 2009.
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Table of Contents
The following table presents information about our critical
accounting policies, as well as the material assumptions used to
develop each estimate:
|
Nature of Critical
|
Assumptions/
|
|
|
Accounting Estimate
|
Approach Used
|
|
| Allowance for Losses on Loans Receivable | ||
| The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of all outstanding loans. If this evaluation indicates that there is a greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status. |
The determination of the allowance is based on a quarterly
evaluation of all outstanding loans, including general economic
conditions and estimated collectability of loan payments and
principal. We evaluate the collectability of our loans
receivable based on a combination of factors, including, but not
limited to, delinquency status, historical loan charge-offs,
financial strength of the borrower and guarantors and value of
the underlying property.
As a result of our quarterly evaluations, we recorded $23,261,000 of provisions for loan losses during the year ended December 31, 2009. This amount includes the write-off of loans totaling $25,578,000 primarily relating to certain early stage senior housing operators offset by a reduction in the allowance for loan losses of $2,457,000. This results in an allowance for loan losses of $5,183,000 relating to loans with outstanding balances of $82,353,000 at December 31, 2009. Also at December 31, 2009, we had real estate loans with outstanding balances of $67,126,000 on non-accrual status. |
|
| Business Combinations | ||
| Substantially all of the properties owned by us are leased under operating leases and are recorded at cost. The cost of our real property is allocated to land, buildings, improvements and intangibles. |
We compute depreciation and amortization on our properties using
the straight-line method based on their estimated useful lives
which range from 15 to 40 years for buildings and five to
15 years for improvements. Lives for intangibles are based
on the remaining term of the underlying leases.
For the year ended December 31, 2009, we recorded $121,510,000, $33,690,000 and $9,722,000 as provisions for depreciation and amortization relating to buildings, improvements and intangibles, respectively, including amounts reclassified as discontinued operations. The average useful life of our buildings, improvements and intangibles was 36.7 years, 10.9 years and 8.4 years, respectively, for the year ended December 31, 2009. |
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Table of Contents
|
Nature of Critical
|
Assumptions/
|
|
|
Accounting Estimate
|
Approach Used
|
|
| Impairment of Long-Lived Assets | ||
| We periodically review our long-lived assets for potential impairment. An impairment charge must be recognized when the carrying value of a long-lived asset is not recoverable. The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that a permanent impairment of a long-lived asset has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recognized for the difference between the carrying value and the fair value. |
The net book value of long-lived assets is reviewed quarterly on
a property by property basis to determine if there are
indicators of impairment. These indicators may include
anticipated operating losses at the property level, the
tenant’s inability to make rent payments, a decision to
dispose of an asset before the end of its estimated useful life
and changes in the market that may permanently reduce the value
of the property. If indicators of impairment exist, then the
undiscounted future cash flows from the most likely use of the
property are compared to the current net book value. This
analysis requires us to determine if indicators of impairment
exist and to estimate the most likely stream of cash flows to be
generated from the property during the period the property is
expected to be held.
At December 31, 2009, we had seven medical office buildings, two skilled nursing facilities and one hospital that satisfied the requirements for held for sale treatment. During the year ended December 31, 2009, impairment charges of $25,223,000 were recorded to further reduce the carrying value of the assets to their estimated fair value less costs to sell. In determining the fair value of the assets, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as third party offers to purchase. |
|
| Fair Value of Derivative Instruments | ||
| The valuation of derivative instruments requires companies to record derivatives at fair market value on the balance sheet as assets or liabilities. | The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by utilizing pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates which may change in the future. At December 31, 2009, we participated in two interest rate swap agreements which are reported at their fair value of $2,381,000 and are included in other liabilities with the change in value recorded in accumulated other comprehensive income. | |
| Revenue Recognition | ||
| Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. If the collectability of revenue is determined incorrectly, the amount and timing of our reported revenue could be significantly affected. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain fixed and/or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. |
We evaluate the collectability of our revenues and related
receivables on an on-going basis. We evaluate collectability
based on assumptions and other considerations including, but not
limited to, the certainty of payment, payment history, the
financial strength of the investment’s underlying
operations as measured by cash flows and payment coverages, the
value of the underlying collateral and guaranties and current
economic conditions.
If our evaluation indicates that collectability is not reasonably assured, we may place an investment on non-accrual or reserve against all or a portion of current income as an offset to revenue. For the year ended December 31, 2009, we recognized $40,885,000 of interest income and $539,911,000 of rental income, including discontinued operations. Cash receipts on leases with deferred revenue provisions were $30,674,000 as compared to gross straight-line rental income recognized of $19,415,000 for the year ended December 31, 2009. At December 31, 2009, our net straight-line receivable balance was $79,760,000, net of reserves totaling $273,000. Also at December 31, 2009, we had real estate loans with outstanding balances of $67,126,000 on non-accrual status. |
Impact of
Inflation
During the past three years, inflation has not significantly
affected our earnings because of the moderate inflation rate.
Additionally, our earnings are primarily long-term investments
with fixed rates of return. These
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Table of Contents
investments are mainly financed with a combination of equity,
senior unsecured notes and borrowings under our unsecured lines
of credit arrangements. During inflationary periods, which
generally are accompanied by rising interest rates, our ability
to grow may be adversely affected because the yield on new
investments may increase at a slower rate than new borrowing
costs. Presuming the current inflation rate remains moderate and
long-term interest rates do not increase significantly, we
believe that inflation will not impact the availability of
equity and debt financing for us.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
We are exposed to various market risks, including the potential
loss arising from adverse changes in interest rates. We seek to
mitigate the effects of fluctuations in interest rates by
matching the terms of new investments with new long-term fixed
rate borrowings to the extent possible. We may or may not elect
to use financial derivative instruments to hedge interest rate
exposure. These decisions are principally based on our policy to
match our variable rate investments with comparable borrowings,
but are also based on the general trend in interest rates at the
applicable dates and our perception of the future volatility of
interest rates. This section is presented to provide a
discussion of the risks associated with potential fluctuations
in interest rates.
We historically borrow on our unsecured line of credit
arrangement to acquire, construct or make loans relating to
health care and senior housing properties. Then, as market
conditions dictate, we will issue equity or long-term fixed rate
debt to repay the borrowings under the unsecured line of credit
arrangement.
A change in interest rates will not affect the interest expense
associated with our fixed rate debt. Interest rate changes,
however, will affect the fair value of our fixed rate debt.
Changes in the interest rate environment upon maturity of this
fixed rate debt could have an effect on our future cash flows
and earnings, depending on whether the debt is replaced with
other fixed rate debt, variable rate debt or equity or repaid by
the sale of assets. To illustrate the impact of changes in the
interest rate markets, we performed a sensitivity analysis on
our fixed rate debt instruments whereby we modeled the change in
net present values arising from a hypothetical 1% increase in
interest rates to determine the instruments’ change in fair
value. The following table summarizes the analysis performed as
of the dates indicated (in thousands):
| December 31, 2009 | December 31, 2008 | |||||||||||||||
|
Principal
|
Change in
|
Principal
|
Change in
|
|||||||||||||
| Balance | Fair Value | Balance | Fair Value | |||||||||||||
|
Senior unsecured notes
|
$ | 1,661,853 | $ | (129,350 | ) | $ | 1,845,000 | $ | (112,438 | ) | ||||||
|
Fixed rate secured debt
|
491,094 | (22,522 | ) | 448,378 | (17,966 | ) | ||||||||||
|
Totals
|
$ | 2,152,947 | $ | (151,872 | ) | $ | 2,293,378 | $ | (130,404 | ) | ||||||
On August 7, 2009, we entered into an interest rate swap
(the “August 2009 Swap”) for a total notional amount
of $52,198,000 to hedge seven years of interest payments
associated with long-term LIBOR based borrowings. The August
2009 Swap has an effective date of August 12, 2009 and a
maturity date of September 1, 2016. The August 2009 Swap
has the economic effect of fixing $52,198,000 at 3.93% plus a
credit spread for seven years. The August 2009 Swap has been
designated as a cash flow hedge and we expect it to be highly
effective at offsetting changes in cash flows of interest
payments on $52,198,000 of long-term debt due to changes in the
LIBOR swap rate.
On September 28, 2009, we entered into an interest rate
swap (the “September 2009 Swap”) for a total notional
amount of $48,155,000 to hedge seven years of interest payments
associated with long-term LIBOR based borrowings. The September
2009 Swap has an effective date of September 30, 2009 and a
maturity date of October 1, 2016. The September 2009 Swap
has the economic effect of fixing $48,155,000 at 3.2675% plus a
credit spread for seven years. The September 2009 Swap has been
designated as a cash flow hedge and we expect it to be highly
effective at offsetting changes in cash flows of interest
payments on $48,155,000 of long-term debt due to changes in the
LIBOR swap rate.
Our variable rate debt, including our unsecured line of credit
arrangement, is reflected at fair value. At December 31,
2009, we had $140,000,000 outstanding related to our variable
rate line of credit and $131,952,000 outstanding related to our
variable rate secured debt. Assuming no changes in outstanding
balances, a 1% increase in interest rates would result in
increased annual interest expense of $2,720,000. At
December 31, 2008, we had
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Table of Contents
$570,000,000 outstanding related to our variable rate debt and
assuming no changes in outstanding balances, a 1% increase in
interest rates would have resulted in increased annual interest
expense of $5,700,000.
We are subject to risks associated with debt financing,
including the risk that existing indebtedness may not be
refinanced or that the terms of refinancing may not be as
favorable as the terms of current indebtedness. The majority of
our borrowings were completed under indentures or contractual
agreements that limit the amount of indebtedness we may incur.
Accordingly, in the event that we are unable to raise additional
equity or borrow money because of these limitations, our ability
to acquire additional properties may be limited.
For additional information regarding fair values of financial
instruments, see “Item 7 — Management’s
Discussion and Analysis of Financial Condition and Results of
Operations — Critical Accounting Policies” and
Note 15 to our audited consolidated financial statements.
71
Table of Contents
| Item 8. | Financial Statements and Supplementary Data |
The Board of Directors and Shareholders of Health Care REIT, Inc.
We have audited the accompanying consolidated balance sheets of
Health Care REIT, Inc. as of December 31, 2009 and 2008,
and the related consolidated statements of income,
stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2009. Our audits
also included the financial statement schedules listed in
Item 15(a) (2) of this
Form 10-K.
These financial statements and schedules are the responsibility
of the Company’s management. Our responsibility is to
express an opinion on these financial statements and schedules
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Health Care REIT, Inc. at
December 31, 2009 and 2008, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2009, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note 21 to the consolidated financial
statements, the accompanying consolidated financial statements
have been retrospectively adjusted for the adoption of new
accounting standards which changed the presentation of
noncontrolling interests in subsidiaries and the accounting for
convertible debt instruments that may be settled in cash upon
conversion.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Health Care REIT, Inc.’s internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 26, 2010 expressed
an unqualified opinion thereon.
/s/
Ernst &
Young
LLP
Toledo, Ohio
February 26, 2010
72
Table of Contents
HEALTH
CARE REIT, INC.
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
ASSETS
|
||||||||
|
Real estate investments:
|
||||||||
|
Real property owned
|
||||||||
|
Land and land improvements
|
$ | 521,055 | $ | 504,907 | ||||
|
Buildings and improvements
|
5,185,328 | 4,653,871 | ||||||
|
Acquired lease intangibles
|
127,390 | 133,324 | ||||||
|
Real property held for sale, net of accumulated depreciation
|
45,686 | 48,054 | ||||||
|
Construction in progress
|
456,832 | 639,419 | ||||||
| 6,336,291 | 5,979,575 | |||||||
|
Less accumulated depreciation and amortization
|
(677,851 | ) | (600,781 | ) | ||||
|
Total real property owned
|
5,658,440 | 5,378,794 | ||||||
|
Real estate loans receivable
|
427,363 | 482,885 | ||||||
|
Less allowance for losses on loans receivable
|
(5,183 | ) | (7,500 | ) | ||||
| 422,180 | 475,385 | |||||||
|
Net real estate investments
|
6,080,620 | 5,854,179 | ||||||
|
Other assets:
|
||||||||
|
Equity investments
|
5,816 | 1,030 | ||||||
|
Deferred loan expenses
|
22,698 | 23,579 | ||||||
|
Cash and cash equivalents
|
35,476 | 23,370 | ||||||
|
Restricted cash
|
23,237 | 154,070 | ||||||
|
Receivables and other assets
|
199,339 | 158,803 | ||||||
| 286,566 | 360,852 | |||||||
|
Total assets
|
$ | 6,367,186 | $ | 6,215,031 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
Liabilities:
|
||||||||
|
Borrowings under unsecured lines of credit arrangements
|
$ | 140,000 | $ | 570,000 | ||||
|
Senior unsecured notes
|
1,653,027 | 1,831,151 | ||||||
|
Secured debt
|
620,995 | 446,525 | ||||||
|
Accrued expenses and other liabilities
|
145,713 | 129,070 | ||||||
|
Total liabilities
|
2,559,735 | 2,976,746 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock, $1.00 par value:
|
288,683 | 289,929 | ||||||
|
Authorized — 50,000,000 shares
|
||||||||
|
Issued and outstanding — 11,474,093 shares in
2009 and 11,516,302 shares in 2008 at liquidation preference
|
||||||||
|
Common stock, $1.00 par value:
|
123,385 | 104,635 | ||||||
|
Authorized — 225,000,000 shares
|
||||||||
|
Issued — 123,583,242 shares in 2009 and
104,835,626 shares in 2008
|
||||||||
|
Outstanding — 123,385,317 shares in 2009 and
104,703,702 shares in 2008
|
||||||||
|
Capital in excess of par value
|
3,900,666 | 3,204,690 | ||||||
|
Treasury stock
|
(7,619 | ) | (5,145 | ) | ||||
|
Cumulative net income
|
1,547,669 | 1,354,400 | ||||||
|
Cumulative dividends
|
(2,057,658 | ) | (1,723,819 | ) | ||||
|
Accumulated other comprehensive income
|
(2,891 | ) | (1,113 | ) | ||||
|
Other equity
|
4,804 | 4,105 | ||||||
|
Total Health Care REIT, Inc. stockholders’ equity
|
3,797,039 | 3,227,682 | ||||||
|
Noncontrolling interests
|
10,412 | 10,603 | ||||||
|
Total equity
|
3,807,451 | 3,238,285 | ||||||
|
Total liabilities and equity
|
$ | 6,367,186 | $ | 6,215,031 | ||||
See accompanying notes
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Table of Contents
HEALTH
CARE REIT, INC.
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands, except per share data) | ||||||||||||
|
Revenues:
|
||||||||||||
|
Rental income
|
$ | 520,300 | $ | 475,822 | $ | 393,628 | ||||||
|
Interest income
|
40,885 | 40,063 | 25,823 | |||||||||
|
Other income
|
5,388 | 10,521 | 10,035 | |||||||||
|
Prepayment fees
|
2,400 | 0 | 0 | |||||||||
| 568,973 | 526,406 | 429,486 | ||||||||||
|
Expenses:
|
||||||||||||
|
Interest expense
|
106,231 | 130,153 | 131,271 | |||||||||
|
Property operating expenses
|
45,896 | 42,634 | 33,410 | |||||||||
|
Depreciation and amortization
|
157,049 | 144,361 | 124,232 | |||||||||
|
General and administrative
|
49,691 | 47,193 | 37,465 | |||||||||
|
Realized loss on derivatives
|
0 | 23,393 | 0 | |||||||||
|
Loss (gain) on extinguishment of debt
|
25,107 | (2,094 | ) | (1,081 | ) | |||||||
|
Provision for loan losses
|
23,261 | 94 | 0 | |||||||||
| 407,235 | 385,734 | 325,297 | ||||||||||
|
Income from continuing operations before income taxes
|
161,738 | 140,672 | 104,189 | |||||||||
|
Income tax (expense) benefit
|
(168 | ) | (1,306 | ) | (188 | ) | ||||||
|
Income from continuing operations
|
161,570 | 139,366 | 104,001 | |||||||||
|
Discontinued operations:
|
||||||||||||
|
Gain (loss) on sales of properties
|
43,394 | 163,933 | 14,437 | |||||||||
|
Impairment of assets
|
(25,223 | ) | (32,648 | ) | 0 | |||||||
|
Income from discontinued operations, net
|
13,186 | 12,774 | 20,155 | |||||||||
| 31,357 | 144,059 | 34,592 | ||||||||||
|
Net income
|
192,927 | 283,425 | 138,593 | |||||||||
|
Less: Preferred stock dividends
|
22,079 | 23,201 | 25,130 | |||||||||
|
Net income attributable to noncontrolling interests
|
(342 | ) | 126 | 238 | ||||||||
|
Net income attributable to common stockholders
|
$ | 171,190 | $ | 260,098 | $ | 113,225 | ||||||
|
Average number of common shares outstanding:
|
||||||||||||
|
Basic
|
114,207 | 93,732 | 78,861 | |||||||||
|
Diluted
|
114,612 | 94,309 | 79,409 | |||||||||
|
Earnings per share:
|
||||||||||||
|
Basic:
|
||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.22 | $ | 1.24 | $ | 1.00 | ||||||
|
Discontinued operations, net
|
0.27 | 1.54 | 0.44 | |||||||||
|
Net income attributable to common stockholders*
|
$ | 1.50 | $ | 2.77 | $ | 1.44 | ||||||
|
Diluted:
|
||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.22 | $ | 1.23 | $ | 0.99 | ||||||
|
Discontinued operations, net
|
0.27 | 1.53 | 0.44 | |||||||||
|
Net income attributable to common stockholders*
|
$ | 1.49 | $ | 2.76 | $ | 1.43 | ||||||
| * | Amounts may not sum due to rounding |
See accompanying notes
74
Table of Contents
HEALTH
CARE REIT, INC.
|
Accumulated
|
||||||||||||||||||||||||||||||||||||||||
|
Capital in
|
Other
|
|||||||||||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Excess of
|
Treasury
|
Cumulative
|
Cumulative
|
Comprehensive
|
Other
|
Noncontrolling
|
||||||||||||||||||||||||||||||||
| Stock | Stock | Par Value | Stock | Net Income | Dividends | Income | Equity | Interests | Total | |||||||||||||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||
|
Balances at December 31, 2006
|
$ | 338,993 | $ | 73,152 | $ | 1,880,221 | $ | (2,866 | ) | $ | 932,746 | $ | (1,238,860 | ) | $ | (135 | ) | $ | 1,845 | $ | 2,228 | $ | 1,987,324 | |||||||||||||||||
|
Net income
|
138,355 | 238 | 138,593 | |||||||||||||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on equity investments
|
(192 | ) | (192 | ) | ||||||||||||||||||||||||||||||||||||
|
Unrealized actuarial gain/(loss)
|
140 | 140 | ||||||||||||||||||||||||||||||||||||||
|
Cash flow hedge activity
|
(7,194 | ) | (7,194 | ) | ||||||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
131,347 | |||||||||||||||||||||||||||||||||||||||
|
Adjustment to adopt FSP14-1
|
17,652 | 17,652 | ||||||||||||||||||||||||||||||||||||||
|
Contributions by noncontrolling interests
|
7,640 | 7,640 | ||||||||||||||||||||||||||||||||||||||
|
Distributions to noncontrolling interests
|
(419 | ) | (419 | ) | ||||||||||||||||||||||||||||||||||||
|
Amounts related to issuance of common stock from dividend
reinvestment and stock incentive plans, net of forfeitures
|
2,223 | 85,080 | (1,086 | ) | (250 | ) | 85,967 | |||||||||||||||||||||||||||||||||
|
Option compensation expense
|
1,106 | 1,106 | ||||||||||||||||||||||||||||||||||||||
|
Net proceeds from sale of common stock
|
9,825 | 402,608 | 412,433 | |||||||||||||||||||||||||||||||||||||
|
Conversion of preferred stock
|
(8,750 | ) | 212 | 8,538 | 0 | |||||||||||||||||||||||||||||||||||
|
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||
|
Common stock-$2.2791 per share
|
(182,969 | ) | (182,969 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series D-$1.96875
per share
|
(7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series E-$1.50
per share
|
(112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series F-$1.90625
per share
|
(13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series G-$1.875
per share
|
(3,799 | ) | (3,799 | ) | ||||||||||||||||||||||||||||||||||||
|
Balances at December 31, 2007
|
330,243 | 85,412 | 2,394,099 | (3,952 | ) | 1,071,101 | (1,446,959 | ) | (7,381 | ) | 2,701 | 9,687 | 2,434,951 | |||||||||||||||||||||||||||
|
Net income
|
283,299 | 126 | 283,425 | |||||||||||||||||||||||||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on equity investments
|
(846 | ) | (846 | ) | ||||||||||||||||||||||||||||||||||||
|
Unrealized actuarial gain/(loss)
|
(715 | ) | (715 | ) | ||||||||||||||||||||||||||||||||||||
|
Cash flow hedge activity
|
7,829 | 7,829 | ||||||||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
289,693 | |||||||||||||||||||||||||||||||||||||||
|
Contributions by noncontrolling interests
|
3,556 | 3,556 | ||||||||||||||||||||||||||||||||||||||
|
Distributions to noncontrolling interests
|
(2,766 | ) | (2,766 | ) | ||||||||||||||||||||||||||||||||||||
|
Amounts related to issuance of common
|
||||||||||||||||||||||||||||||||||||||||
|
stock from dividend reinvestment and stock
|
||||||||||||||||||||||||||||||||||||||||
|
incentive plans, net of forfeitures
|
1,804 | 76,013 | (1,193 | ) | (99 | ) | 76,525 | |||||||||||||||||||||||||||||||||
|
Conversion of preferred stock
|
(40,314 | ) | 975 | 39,339 | 0 | |||||||||||||||||||||||||||||||||||
|
Option compensation expense
|
1,503 | 1,503 | ||||||||||||||||||||||||||||||||||||||
|
Net proceeds from sale of common stock
|
16,444 | 695,239 | 711,683 | |||||||||||||||||||||||||||||||||||||
|
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||
|
Common stock-$2.70 per share
|
(253,659 | ) | (253,659 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series D-$1.96875
per share
|
(7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series E-$1.50
per share
|
(112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series F-$1.90625
per share
|
(13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series G-$1.875
per share
|
(1,870 | ) | (1,870 | ) | ||||||||||||||||||||||||||||||||||||
|
Balances at December 31, 2008
|
289,929 | 104,635 | 3,204,690 | (5,145 | ) | 1,354,400 | (1,723,819 | ) | (1,113 | ) | 4,105 | 10,603 | 3,238,285 | |||||||||||||||||||||||||||
|
Net income
|
193,269 | (342 | ) | 192,927 | ||||||||||||||||||||||||||||||||||||
|
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||
|
Unrealized loss on equity investments
|
487 | 487 | ||||||||||||||||||||||||||||||||||||||
|
Unrecognized actuarial gain/(loss)
|
277 | 277 | ||||||||||||||||||||||||||||||||||||||
|
Cash flow hedge activity
|
(2,542 | ) | (2,542 | ) | ||||||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
191,149 | |||||||||||||||||||||||||||||||||||||||
|
Contributions by noncontrolling interests
|
2,255 | 2,255 | ||||||||||||||||||||||||||||||||||||||
|
Distributions to noncontrolling interests
|
(2,104 | ) | (2,104 | ) | ||||||||||||||||||||||||||||||||||||
|
Amounts related to issuance of common
|
||||||||||||||||||||||||||||||||||||||||
|
stock from dividend reinvestment and stock
|
||||||||||||||||||||||||||||||||||||||||
|
incentive plans, net of forfeitures
|
1,751 | 66,690 | (2,474 | ) | (930 | ) | 65,037 | |||||||||||||||||||||||||||||||||
|
Conversion of preferred stock
|
(1,246 | ) | 30 | 1,216 | 0 | |||||||||||||||||||||||||||||||||||
|
Option compensation expense
|
1,629 | 1,629 | ||||||||||||||||||||||||||||||||||||||
|
Net proceeds from sale of common stock
|
16,969 | 628,070 | 645,039 | |||||||||||||||||||||||||||||||||||||
|
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||
|
Common stock-$2.72 per share
|
(311,760 | ) | (311,760 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series D-$1.96875
per share
|
(7,875 | ) | (7,875 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series E-$1.50
per share
|
(112 | ) | (112 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series F-$1.90625
per share
|
(13,344 | ) | (13,344 | ) | ||||||||||||||||||||||||||||||||||||
|
Preferred stock,
Series G-$1.875
per share
|
(748 | ) | (748 | ) | ||||||||||||||||||||||||||||||||||||
|
Balances at December 31, 2009
|
$ | 288,683 | $ | 123,385 | $ | 3,900,666 | $ | (7,619 | ) | $ | 1,547,669 | $ | (2,057,658 | ) | $ | (2,891 | ) | $ | 4,804 | $ | 10,412 | $ | 3,807,451 | |||||||||||||||||
See accompanying notes
75
Table of Contents
HEALTH
CARE REIT, INC.
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Operating activities
|
||||||||||||
|
Net income
|
$ | 192,927 | $ | 283,425 | $ | 138,593 | ||||||
|
Adjustments to reconcile net income to net cash provided from
operating activities:
|
||||||||||||
|
Depreciation and amortization
|
164,923 | 163,045 | 149,626 | |||||||||
|
Other amortization expenses
|
15,412 | 14,837 | 9,065 | |||||||||
|
Stock-based compensation expense
|
9,633 | 8,530 | 7,050 | |||||||||
|
Provision for loan losses
|
23,261 | 94 | 0 | |||||||||
|
Impairment of assets
|
25,223 | 32,648 | 0 | |||||||||
|
Loss (gain) on extinguishment of debt, net
|
25,107 | (2,094 | ) | (1,081 | ) | |||||||
|
Gain on sale of investment
|
0 | 0 | (3,900 | ) | ||||||||
|
Amortization of above/below market leases, net
|
(1,713 | ) | (1,039 | ) | (792 | ) | ||||||
|
Rental income less than (in excess of) cash received
|
11,259 | 7,793 | 440 | |||||||||
|
Loss (gain) on sales of properties
|
(43,394 | ) | (163,933 | ) | (14,437 | ) | ||||||
|
Other income less than (in excess of) cash received
|
(5,000 | ) | 0 | 0 | ||||||||
|
Deferred gain on sales of properties
|
0 | 3,708 | 0 | |||||||||
|
Increase (decrease) in accrued expenses and other liabilities
|
(311 | ) | 17,363 | (3,253 | ) | |||||||
|
Decrease (increase) in receivables and other assets
|
(36,068 | ) | (3,694 | ) | 2,676 | |||||||
|
Net cash provided from operating activities
|
381,259 | 360,683 | 283,987 | |||||||||
|
Investing activities
|
||||||||||||
|
Investment in real property
|
(598,959 | ) | (1,072,376 | ) | (631,209 | ) | ||||||
|
Capitalized interest
|
(41,170 | ) | (25,029 | ) | (12,526 | ) | ||||||
|
Investment in loans receivable
|
(74,417 | ) | (83,109 | ) | (235,894 | ) | ||||||
|
Other investments, net of payments
|
(22,133 | ) | (21,725 | ) | (26,930 | ) | ||||||
|
Principal collected on loans receivable
|
111,779 | 18,169 | 52,346 | |||||||||
|
Investment in Rendina/Paramount, net of cash assumed
|
0 | 0 | (141,963 | ) | ||||||||
|
Decrease (increase) in restricted cash
|
130,833 | (138,502 | ) | (7,578 | ) | |||||||
|
Proceeds from sales of properties
|
224,007 | 287,047 | 98,314 | |||||||||
|
Net cash provided used in investing activities
|
(270,060 | ) | (1,035,525 | ) | (905,440 | ) | ||||||
|
Financing activities
|
||||||||||||
|
Net increase (decrease) under unsecured lines of credit
arrangements
|
(430,000 | ) | 263,000 | 82,000 | ||||||||
|
Proceeds from issuance of secured debt
|
276,277 | 0 | 0 | |||||||||
|
Proceeds from derivative transactions
|
0 | 0 | 2,858 | |||||||||
|
Proceeds from issuance of senior unsecured notes
|
0 | 0 | 388,943 | |||||||||
|
Payments to extinguish senior unsecured notes
|
(201,048 | ) | (42,330 | ) | (52,500 | ) | ||||||
|
Payments to extinguish liability to subsidiary trust issuing
preferred securities
|
0 | 0 | (50,000 | ) | ||||||||
|
Payments to extinguish secured debt
|
(107,736 | ) | (58,594 | ) | (37,758 | ) | ||||||
|
Net proceeds from the issuance of common stock
|
704,533 | 782,285 | 491,593 | |||||||||
|
Contributions by noncontrolling interests
|
2,255 | 3,556 | 2,865 | |||||||||
|
Distributions to noncontrolling interests
|
(2,104 | ) | (2,766 | ) | (419 | ) | ||||||
|
Decrease (increase) in deferred loan expense
|
(7,431 | ) | (348 | ) | (3,977 | ) | ||||||
|
Cash distributions to stockholders
|
(333,839 | ) | (276,860 | ) | (208,099 | ) | ||||||
|
Net cash provided from (used in) financing activities
|
(99,093 | ) | 667,943 | 615,506 | ||||||||
|
Increase (decrease) in cash and cash equivalents
|
12,106 | (6,899 | ) | (5,947 | ) | |||||||
|
Cash and cash equivalents at beginning of year
|
23,370 | 30,269 | 36,216 | |||||||||
|
Cash and cash equivalents at end of year
|
$ | 35,476 | $ | 23,370 | $ | 30,269 | ||||||
See accompanying notes
76
Table of Contents
HEALTH
CARE REIT, INC.
| 1. | Accounting Policies and Related Matters |
Business
Health Care REIT, Inc., an S&P 500 company with
headquarters in Toledo, Ohio, is an equity real estate
investment trust (“REIT”) that invests in senior
housing and health care real estate. Our full service platform
also offers property management and development services to our
customers. As of December 31, 2009, our broadly diversified
portfolio consisted of 590 properties in 39 states. Founded
in 1970, we were the first real estate investment trust to
invest exclusively in health care facilities. More information
is available on our website at www.hcreit.com.
Principles
of Consolidation
The consolidated financial statements include our accounts, the
accounts of our wholly-owned subsidiaries and the accounts of
our majority owned and controlled joint ventures. All material
intercompany accounts and transactions have been eliminated.
Use of
Estimates
The preparation of the financial statements in conformity with
U.S. generally accepted accounting principles
(“U.S. GAAP”) requires us to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Revenue
Recognition
Revenue is recorded in accordance with U.S. GAAP, which
requires that revenue be recognized after four basic criteria
are met. These four criteria include persuasive evidence of an
arrangement, the rendering of service, fixed and determinable
income and reasonably assured collectability. Interest income on
loans is recognized as earned based upon the principal amount
outstanding subject to an evaluation of collectability risk.
Substantially all of our operating leases contain either fixed
or contingent escalating rent structures. Leases with fixed
annual rental escalators are generally recognized on a
straight-line basis over the initial lease period, subject to a
collectability assessment. Rental income related to leases with
contingent rental escalators is generally recorded based on the
contractual cash rental payments due for the period.
Cash
and Cash Equivalents
Cash and cash equivalents consist of all highly liquid
investments with an original maturity of three months or less.
Restricted
Cash
Restricted cash primarily consists of amounts held by lenders to
provide future payments for real estate taxes, insurance, tenant
and capital improvements and amounts held in escrow relating to
acquisitions we are entitled to receive over a period of time as
outlined in the escrow agreement.
Deferred
Loan Expenses
Deferred loan expenses are costs incurred by us in connection
with the issuance, assumption and amendments of debt
arrangements. We amortize these costs over the term of the debt
using the straight-line method, which approximates the effective
interest method.
77
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Equity
Investments
Equity investments at December 31, 2009 and 2008 include an
investment in a public company that has a readily determinable
fair market value. We classify this equity investment as
available-for-sale
and, accordingly, record this investment at its fair market
value with unrealized gains and losses included in accumulated
other comprehensive income, a separate component of
stockholders’ equity. Equity investments at
December 31, 2009 and 2008 also include an investment in a
private company. We do not have the ability to exercise
influence over the company, so the investment is accounted for
under the cost method. Under the cost method of accounting,
investments in private companies are carried at cost and are
adjusted only for
other-than-temporary
declines in fair value, return of capital and additional
investments. These equity investments represented a minimal
ownership interest in these companies. Additionally, equity
investments at December 31, 2009 include an investment in
an unconsolidated joint venture.
Investments
in Unconsolidated Joint Ventures
Investments in entities which we do not consolidate but for
which we have the ability to exercise significant influence over
operating and financial policies are reported under the equity
method of accounting. Under the equity method of accounting, our
share of the investee’s earnings or losses is included in
our consolidated results of operations. The initial carrying
value of investments in unconsolidated joint ventures is based
on the amount paid to purchase the joint venture interest or the
estimated fair value of the assets prior to the sale of
interests in the joint venture. We evaluate our equity method
investments for impairment based upon a comparison of the
estimated fair value of the equity method investment to its
carrying value. When we determine a decline in the estimated
fair value of such an investment below its carrying value is
other-than-temporary,
an impairment is recorded.
Real
Property Owned
Real property developed by us is recorded at cost, including the
capitalization of construction period interest. The cost of real
property acquired is allocated to net tangible and identifiable
intangible assets based on their respective fair values.
Substantially all of the properties owned by us are leased under
operating leases and are recorded at cost. These properties are
depreciated on a straight-line basis over their estimated useful
lives which range from 15 to 40 years for buildings and
five to 15 years for improvements. We consider costs
incurred in conjunction with re-leasing properties, including
tenant improvements and lease commissions, to represent the
acquisition of productive assets and, accordingly, such costs
are reflected as investment activities in our statement of cash
flows.
The remaining purchase price is allocated among identifiable
intangible assets primarily consisting of the above or below
market component of in-place leases and the value of in-place
leases. The value allocable to the above or below market
component of the acquired in-place lease is determined based
upon the present value (using a discount rate which reflects the
risks associated with the acquired leases) of the difference
between (i) the contractual amounts to be paid pursuant to
the lease over its remaining term, and
(ii) management’s estimate of the amounts that would
be paid using fair market rates over the remaining term of the
lease. The amounts allocated to above market leases are included
in acquired lease intangibles and below market leases are
included in other liabilities in the balance sheet and are
amortized to rental income over the remaining terms of the
respective leases.
The total amount of other intangible assets acquired is further
allocated to in-place lease values and customer relationship
values based on management’s evaluation of the specific
characteristics of each tenant’s lease and the
Company’s overall relationship with that respective tenant.
Characteristics considered by management in allocating these
values include the nature and extent of the Company’s
existing business relationships with the tenant, growth
prospects for developing new business with the tenant, the
tenant’s credit quality and expectations of lease renewals,
78
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
among other factors. The estimated aggregate amortization
expense for acquired lease intangibles is expected to be
recognized over a weighted average period of 30.0 years and
is as follows for the periods indicated (in thousands):
|
2010
|
$ | 9,895 | ||
|
2011
|
8,204 | |||
|
2012
|
6,517 | |||
|
2013
|
5,583 | |||
|
2014
|
4,889 | |||
|
Thereafter
|
62,605 | |||
|
Totals
|
$ | 97,693 | ||
The net book value of long-lived assets is reviewed quarterly on
a property by property basis to determine if facts and
circumstances suggest that the assets may be impaired or that
the depreciable life may need to be changed. We consider
external factors relating to each asset. If these external
factors and the projected undiscounted cash flows of the asset
over the remaining depreciation period indicate that the asset
will not be recoverable, the carrying value is reduced to the
estimated fair market value.
Capitalization
of Construction Period Interest
We capitalize interest costs associated with funds used to
finance the construction of properties owned directly by us. The
amount capitalized is based upon the balance outstanding during
the construction period using the rate of interest which
approximates our cost of financing. We capitalized interest
costs of $41,170,000, $25,029,000, and $12,526,000 during 2009,
2008 and 2007, respectively, related to construction of real
property owned by us. Our interest expense reflected in the
consolidated statements of income has been reduced by the
amounts capitalized.
Gain
on Sale of Assets
We recognize sales of assets only upon the closing of the
transaction with the purchaser. Payments received from
purchasers prior to closing are recorded as deposits and
classified as other assets on our Consolidated Balance Sheets.
Gains on assets sold are recognized using the full accrual
method upon closing when the collectability of the sales price
is reasonably assured, we are not obligated to perform
significant activities after the sale to earn the profit, we
have received adequate initial investment from the buyer and
other profit recognition criteria have been satisfied. Gains may
be deferred in whole or in part until the sales satisfy the
requirements of gain recognition on sales of real estate.
Real
Estate Loans Receivable
Real estate loans receivable consist of mortgage loans and other
real estate loans. Interest income on loans is recognized as
earned based upon the principal amount outstanding subject to an
evaluation of collectability risks. The loans are primarily
collateralized by a first, second or third mortgage lien, a
leasehold mortgage on, or an assignment of the partnership
interest in, the related properties, corporate guaranties
and/or
personal guaranties.
Allowance
for Losses on Loans Receivable
The allowance for losses on loans receivable is maintained at a
level believed adequate to absorb potential losses in our loans
receivable. The determination of the allowance is based on a
quarterly evaluation of these loans, including general economic
conditions and estimated collectability of loan payments. We
evaluate the collectability of our loans receivable based on a
combination of factors, including, but not limited to,
delinquency status, historical loan charge-offs, financial
strength of the borrower and guarantors and value of the
underlying collateral. If such factors indicate that there is
greater risk of loan charge-offs, additional allowances or
placement on non-accrual status may be required. A loan is
impaired when, based on current information and events, it is
probable that
79
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
we will be unable to collect all amounts due as scheduled
according to the contractual terms of the original loan
agreement. Consistent with this definition, all loans on
non-accrual are deemed impaired. At December 31, 2009, we
had loans with outstanding balances of $67,126,000 on
non-accrual status ($72,770,000 at December 31, 2008). To
the extent circumstances improve and the risk of collectability
is diminished, we will return these loans to full accrual
status. While a loan is on non-accrual status, any cash receipts
are applied against the outstanding principal balance.
Fair
Value of Derivative Instruments
The valuation of derivative instruments requires us to make
estimates and judgments that affect the fair value of the
instruments. Fair values for our derivatives are estimated by
utilizing pricing models that consider forward yield curves and
discount rates. Such amounts and the recognition of such amounts
are subject to significant estimates that may change in the
future. See Note 9 for additional information.
Federal
Income Tax
No provision has been made for federal income taxes since we
have elected to be treated as a real estate investment trust
under the applicable provisions of the Internal Revenue Code,
and we believe that we have met the requirements for
qualification as such for each taxable year. Our taxable REIT
subsidiaries are subject to federal, state and local income
taxes. See Note 13 for additional information.
Earnings
Per Share
Basic earnings per share is computed by dividing net income
available to common stockholders by the weighted-average number
of shares outstanding for the period adjusted for non-vested
shares of restricted stock. The computation of diluted earnings
per share is similar to basic earnings per share, except that
the number of shares is increased to include the number of
additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued.
Segment
Reporting
We report consolidated financial statements in accordance with
U.S. GAAP. Segments are based on our method of internal
reporting which classifies operations by leasing activities. Our
segments include investment properties and medical office
buildings. See Note 18 for additional information.
New
Accounting Standards
In June 2009, the Financial Accounting Standards Board
(“FASB”) amended the consolidation guidance for
variable interest entities. The new guidance requires
enterprises to perform a qualitative approach to determining
whether or not a variable interest entity will need to be
consolidated on a continuous basis. This evaluation will be
based on an enterprise’s ability to direct and influence
the activities of a variable interest entity that most
significantly impact its economic performance. This amendment is
effective for interim periods and fiscal years beginning after
November 15, 2009. We do not expect adoption of this
guidance to have a material impact on our consolidated financial
position or results of operations, although additional
disclosures may be required.
Reclassifications
Certain amounts in prior years have been reclassified to conform
to the current year presentation.
80
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2. | Real Property Owned |
The following is a summary of our real property investment
activity for the periods presented (in thousands):
| Year Ended | ||||||||||||||||||||||||||||||||||||
| December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||||||||||||||
|
Medical
|
Medical
|
Medical
|
||||||||||||||||||||||||||||||||||
|
Investment
|
Office
|
Investment
|
Office
|
Investment
|
Office
|
|||||||||||||||||||||||||||||||
| Properties | Buildings | Totals | Properties | Buildings | Totals | Properties | Buildings | Totals(1) | ||||||||||||||||||||||||||||
|
Real property acquisitions:
|
||||||||||||||||||||||||||||||||||||
|
Independent living/CCRCs
|
$ | 68,300 | $ | 68,300 | $ | 43,000 | $ | 43,000 | ||||||||||||||||||||||||||||
|
Assisted living facilities
|
45,490 | 45,490 | 36,233 | 36,233 | ||||||||||||||||||||||||||||||||
|
Skilled nursing facilities
|
$ | 11,650 | $ | 11,650 | 11,360 | 11,360 | 122,875 | 122,875 | ||||||||||||||||||||||||||||
|
Hospitals
|
20,500 | 20,500 | 196,303 | 196,303 | 11,923 | 11,923 | ||||||||||||||||||||||||||||||
|
Medical office buildings
|
$ | 35,523 | 35,523 | $ | 121,809 | 121,809 | $ | 381,134 | 381,134 | |||||||||||||||||||||||||||
|
Land parcels
|
0 | 10,000 | 10,000 | 8,928 | 8,928 | |||||||||||||||||||||||||||||||
|
Total acquisitions
|
32,150 | 35,523 | 67,673 | 331,453 | 121,809 | 453,262 | 222,959 | 381,134 | 604,093 | |||||||||||||||||||||||||||
|
Less:
|
||||||||||||||||||||||||||||||||||||
|
Assumed debt
|
0 | 0 | (166,188 | ) | (166,188 | ) | ||||||||||||||||||||||||||||||
|
Assumed other assets/(liabilities)
|
0 | (1,899 | ) | (1,899 | ) | (2,432 | ) | (2,432 | ) | |||||||||||||||||||||||||||
|
Cash disbursed for acquisitions
|
32,150 | 35,523 | 67,673 | 331,453 | 119,910 | 451,363 | 222,959 | 212,514 | 435,473 | |||||||||||||||||||||||||||
|
Construction in progress additions:
|
||||||||||||||||||||||||||||||||||||
|
Independent living/CCRCs
|
166,381 | 166,381 | 272,136 | 272,136 | 154,648 | 154,648 | ||||||||||||||||||||||||||||||
|
Assisted living facilities
|
143,929 | 143,929 | 147,486 | 147,486 | 55,929 | 55,929 | ||||||||||||||||||||||||||||||
|
Skilled nursing facilities
|
23,262 | 23,262 | 29,429 | 29,429 | 21,924 | 21,924 | ||||||||||||||||||||||||||||||
|
Hospitals
|
113,907 | 113,907 | 77,642 | 77,642 | 60,326 | 60,326 | ||||||||||||||||||||||||||||||
|
Medical office buildings
|
107,853 | 107,853 | 93,907 | 93,907 | 14,688 | 14,688 | ||||||||||||||||||||||||||||||
|
Total CIP additions
|
447,479 | 107,853 | 555,332 | 526,693 | 93,907 | 620,600 | 292,827 | 14,688 | 307,515 | |||||||||||||||||||||||||||
|
Less:
|
||||||||||||||||||||||||||||||||||||
|
Capitalized interest
|
(35,891 | ) | (5,078 | ) | (40,969 | ) | (22,716 | ) | (2,313 | ) | (25,029 | ) | (12,134 | ) | (279 | ) | (12,413 | ) | ||||||||||||||||||
|
Capitalized other
|
0 | 0 | 0 | (119 | ) | (119 | ) | 0 | ||||||||||||||||||||||||||||
|
Accruals(2)
|
0 | (21,466 | ) | (21,466 | ) | 0 | 0 | |||||||||||||||||||||||||||||
|
Cash disbursed for CIP
|
411,588 | 81,309 | 492,897 | 503,858 | 91,594 | 595,452 | 280,693 | 14,409 | 295,102 | |||||||||||||||||||||||||||
|
Capital improvements
|
19,227 | 19,162 | 38,389 | 17,468 | 8,093 | 25,561 | 34,680 | 5,296 | 39,976 | |||||||||||||||||||||||||||
|
Total cash invested in real property
|
$ | 462,965 | $ | 135,994 | $ | 598,959 | $ | 852,779 | $ | 219,597 | $ | 1,072,376 | $ | 538,332 | $ | 232,219 | $ | 770,551 | ||||||||||||||||||
| (1) | 2007 includes the Rendina/Paramount acquisition. | |
| (2) | Represents non-cash accruals for amounts to be paid in future periods relating to properties that converted in the period noted above. |
81
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following is a summary of the development projects that were
placed into service and began earning rent during the periods
presented (in thousands):
| Year Ended | ||||||||||||||||||||||||||||||||
| December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||||||||||
|
Medical
|
Medical
|
|||||||||||||||||||||||||||||||
|
Investment
|
Office
|
Investment
|
Office
|
Investment
|
||||||||||||||||||||||||||||
| Properties | Buildings | Totals | Properties | Buildings | Totals | Properties | Totals | |||||||||||||||||||||||||
|
Development projects:
|
||||||||||||||||||||||||||||||||
|
Independent living/CCRCs
|
$ | 285,336 | $ | 285,336 | $ | 144,088 | $ | 144,088 | $ | 22,601 | $ | 22,601 | ||||||||||||||||||||
|
Assisted living facilities
|
219,801 | 219,801 | 45,956 | 45,956 | 56,599 | 56,599 | ||||||||||||||||||||||||||
|
Skilled nursing facilities
|
45,367 | 45,367 | 16,918 | 16,918 | 16,568 | 16,568 | ||||||||||||||||||||||||||
|
Hospitals
|
0 | 35,151 | 35,151 | 33,771 | 33,771 | |||||||||||||||||||||||||||
|
Medical office buildings
|
$ | 183,127 | 183,127 | $ | 11,823 | 11,823 | 0 | |||||||||||||||||||||||||
|
Total development projects
|
550,504 | 183,127 | 733,631 | 242,113 | 11,823 | 253,936 | 129,539 | 129,539 | ||||||||||||||||||||||||
|
Expansion projects
|
4,288 | 4,288 | 40,954 | 40,954 | 2,489 | 2,489 | ||||||||||||||||||||||||||
|
Total construction conversions
|
$ | 554,792 | $ | 183,127 | $ | 737,919 | $ | 283,067 | $ | 11,823 | $ | 294,890 | $ | 132,028 | $ | 132,028 | ||||||||||||||||
The following table summarizes certain information about our
real property owned as of December 31, 2009 (dollars in
thousands):
|
Buildings,
|
Accumulated
|
|||||||||||||||||||
|
Number of
|
Intangibles &
|
Gross
|
Depreciation
|
|||||||||||||||||
| Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
|
Independent Living/CCRC Facilities:
|
||||||||||||||||||||
|
Arizona
|
1 | $ | 950 | $ | 9,086 | $ | 10,036 | $ | 2,364 | |||||||||||
|
California
|
8 | 20,174 | 156,951 | 177,125 | 14,267 | |||||||||||||||
|
Colorado
|
2 | 10,766 | 71,135 | 81,901 | 3,480 | |||||||||||||||
|
Florida
|
4 | 15,006 | 150,804 | 165,810 | 17,754 | |||||||||||||||
|
Georgia
|
4 | 9,696 | 75,555 | 85,251 | 14,274 | |||||||||||||||
|
Idaho
|
1 | 550 | 14,740 | 15,290 | 2,930 | |||||||||||||||
|
Indiana
|
2 | 3,120 | 100,734 | 103,854 | 5,298 | |||||||||||||||
|
Kansas
|
1 | 1,400 | 11,000 | 12,400 | 845 | |||||||||||||||
|
Massachusetts
|
1 | 3,500 | 54,099 | 57,599 | 0 | |||||||||||||||
|
Missouri
|
1 | 510 | 5,490 | 6,000 | 430 | |||||||||||||||
|
Nevada
|
1 | 1,144 | 10,831 | 11,975 | 5,735 | |||||||||||||||
|
North Carolina
|
3 | 15,970 | 32,909 | 48,879 | 2,688 | |||||||||||||||
|
South Carolina
|
6 | 20,490 | 220,432 | 240,922 | 8,395 | |||||||||||||||
|
Texas
|
1 | 4,790 | 7,100 | 11,890 | 1,756 | |||||||||||||||
|
Washington
|
1 | 620 | 4,780 | 5,400 | 792 | |||||||||||||||
|
Wisconsin
|
1 | 400 | 23,237 | 23,637 | 606 | |||||||||||||||
|
Construction in progress
|
2 | 0 | 0 | 158,684 | 0 | |||||||||||||||
| 40 | 109,086 | 948,883 | 1,216,653 | 81,614 | ||||||||||||||||
82
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
Building,
|
Accumulated
|
|||||||||||||||||||
|
Number of
|
Intangibles &
|
Gross
|
Depreciation
|
|||||||||||||||||
| Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
|
Assisted Living Facilities:
|
||||||||||||||||||||
|
Arizona
|
3 | $ | 3,060 | $ | 10,921 | $ | 13,981 | $ | 2,127 | |||||||||||
|
California
|
7 | 7,970 | 54,031 | 62,001 | 10,863 | |||||||||||||||
|
Colorado
|
1 | 940 | 3,721 | 4,661 | 816 | |||||||||||||||
|
Connecticut
|
5 | 8,030 | 38,300 | 46,330 | 7,648 | |||||||||||||||
|
Delaware
|
1 | 560 | 21,220 | 21,780 | 2,900 | |||||||||||||||
|
Florida
|
10 | 5,307 | 61,820 | 67,127 | 16,542 | |||||||||||||||
|
Georgia
|
1 | 460 | 1,304 | 1,764 | 243 | |||||||||||||||
|
Illinois
|
6 | 10,661 | 65,266 | 75,927 | 2,332 | |||||||||||||||
|
Indiana
|
2 | 220 | 5,520 | 5,740 | 1,311 | |||||||||||||||
|
Iowa
|
1 | 1,403 | 35,893 | 37,296 | 80 | |||||||||||||||
|
Kansas
|
1 | 600 | 10,590 | 11,190 | 1,473 | |||||||||||||||
|
Louisiana
|
1 | 1,100 | 10,161 | 11,261 | 5,079 | |||||||||||||||
|
Massachusetts
|
5 | 5,590 | 49,051 | 54,641 | 7,614 | |||||||||||||||
|
Mississippi
|
1 | 520 | 7,675 | 8,195 | 1,296 | |||||||||||||||
|
Montana
|
3 | 1,460 | 14,772 | 16,232 | 2,887 | |||||||||||||||
|
Nevada
|
4 | 5,520 | 71,652 | 77,172 | 5,920 | |||||||||||||||
|
New Jersey
|
2 | 740 | 7,447 | 8,187 | 1,611 | |||||||||||||||
|
New York
|
3 | 1,930 | 31,917 | 33,847 | 2,947 | |||||||||||||||
|
North Carolina
|
40 | 15,514 | 181,382 | 196,896 | 39,559 | |||||||||||||||
|
Ohio
|
7 | 3,294 | 30,985 | 34,279 | 10,058 | |||||||||||||||
|
Oklahoma
|
17 | 3,134 | 37,420 | 40,554 | 9,027 | |||||||||||||||
|
Oregon
|
1 | 449 | 5,172 | 5,621 | 1,579 | |||||||||||||||
|
Pennsylvania
|
4 | 4,894 | 41,219 | 46,113 | 3,127 | |||||||||||||||
|
South Carolina
|
2 | 642 | 7,308 | 7,950 | 1,526 | |||||||||||||||
|
Tennessee
|
3 | 5,581 | 34,177 | 39,758 | 2,627 | |||||||||||||||
|
Texas
|
21 | 9,495 | 94,384 | 103,878 | 13,411 | |||||||||||||||
|
Utah
|
1 | 360 | 6,700 | 7,060 | 961 | |||||||||||||||
|
Virginia
|
4 | 2,509 | 32,425 | 34,934 | 4,599 | |||||||||||||||
|
Washington
|
5 | 5,010 | 45,201 | 50,211 | 3,966 | |||||||||||||||
|
Wisconsin
|
9 | 7,610 | 79,936 | 87,546 | 5,229 | |||||||||||||||
|
Construction in progress
|
5 | 0 | 0 | 87,234 | 0 | |||||||||||||||
| 176 | 114,563 | 1,097,570 | 1,299,366 | 169,358 | ||||||||||||||||
83
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
Building,
|
Accumulated
|
|||||||||||||||||||
|
Number of
|
Intangibles &
|
Gross
|
Depreciation
|
|||||||||||||||||
| Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
|
Skilled Nursing Facilities:
|
||||||||||||||||||||
|
Alabama
|
7 | $ | 2,520 | $ | 36,990 | $ | 39,510 | $ | 7,584 | |||||||||||
|
Arizona
|
1 | 930 | 13,399 | 14,329 | 1,538 | |||||||||||||||
|
Colorado
|
3 | 3,210 | 21,855 | 25,065 | 4,302 | |||||||||||||||
|
Connecticut
|
6 | 2,700 | 22,851 | 25,551 | 6,922 | |||||||||||||||
|
Florida
|
37 | 20,000 | 243,789 | 263,788 | 40,296 | |||||||||||||||
|
Georgia
|
3 | 2,650 | 14,932 | 17,582 | 2,818 | |||||||||||||||
|
Idaho
|
3 | 4,110 | 29,678 | 33,788 | 5,202 | |||||||||||||||
|
Illinois
|
4 | 1,110 | 24,700 | 25,810 | 12,498 | |||||||||||||||
|
Indiana
|
6 | 1,959 | 36,904 | 38,863 | 9,118 | |||||||||||||||
|
Kansas
|
2 | 4,850 | 35,436 | 40,286 | 1,007 | |||||||||||||||
|
Kentucky
|
10 | 3,015 | 65,432 | 68,447 | 10,592 | |||||||||||||||
|
Louisiana
|
7 | 783 | 34,717 | 35,500 | 4,648 | |||||||||||||||
|
Maryland
|
2 | 840 | 14,966 | 15,806 | 1,734 | |||||||||||||||
|
Massachusetts
|
20 | 18,890 | 210,513 | 229,403 | 40,663 | |||||||||||||||
|
Mississippi
|
11 | 1,625 | 52,651 | 54,276 | 13,354 | |||||||||||||||
|
Missouri
|
3 | 1,247 | 23,827 | 25,074 | 9,591 | |||||||||||||||
|
New Hampshire
|
1 | 340 | 4,360 | 4,700 | 557 | |||||||||||||||
|
New Jersey
|
1 | 1,850 | 3,050 | 4,900 | 627 | |||||||||||||||
|
Ohio
|
20 | 11,785 | 193,388 | 205,173 | 29,389 | |||||||||||||||
|
Oklahoma
|
3 | 1,464 | 21,884 | 23,348 | 4,693 | |||||||||||||||
|
Oregon
|
1 | 300 | 5,316 | 5,616 | 1,948 | |||||||||||||||
|
Pennsylvania
|
2 | 2,595 | 13,421 | 16,016 | 4,147 | |||||||||||||||
|
Tennessee
|
22 | 8,730 | 122,604 | 131,334 | 29,912 | |||||||||||||||
|
Texas
|
21 | 16,853 | 166,351 | 183,204 | 17,750 | |||||||||||||||
|
Virginia
|
10 | 7,121 | 59,169 | 66,290 | 4,877 | |||||||||||||||
|
Assets held for sale
|
2 | 0 | 0 | 25,098 | 0 | |||||||||||||||
| 208 | 121,477 | 1,472,183 | 1,618,757 | 265,767 | ||||||||||||||||
|
Hospitals:
|
||||||||||||||||||||
|
California
|
3 | $ | 6,200 | $ | 72,439 | $ | 78,638 | $ | 2,714 | |||||||||||
|
Idaho
|
1 | 3,600 | 21,053 | 24,653 | 1,207 | |||||||||||||||
|
Indiana
|
2 | 870 | 20,086 | 20,956 | 992 | |||||||||||||||
|
Kentucky
|
1 | 3,800 | 26,714 | 30,514 | 1,058 | |||||||||||||||
|
Louisiana
|
1 | 1,928 | 10,509 | 12,437 | 1,225 | |||||||||||||||
|
New Jersey
|
1 | 0 | 38,300 | 38,300 | 1,517 | |||||||||||||||
|
Ohio
|
2 | 1,500 | 33,000 | 34,500 | 431 | |||||||||||||||
|
Oklahoma
|
2 | 3,149 | 9,899 | 13,048 | 1,494 | |||||||||||||||
|
Texas
|
8 | 9,824 | 156,712 | 166,536 | 14,667 | |||||||||||||||
|
Wisconsin
|
1 | 4,700 | 20,669 | 25,369 | 1,550 | |||||||||||||||
|
Construction in progress
|
3 | 0 | 0 | 189,416 | 0 | |||||||||||||||
|
Assets held for sale
|
1 | 0 | 0 | 5,550 | 0 | |||||||||||||||
| 26 | 35,571 | 409,381 | 639,917 | 26,855 | ||||||||||||||||
84
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
Building,
|
Accumulated
|
|||||||||||||||||||
|
Number of
|
Intangibles &
|
Gross
|
Depreciation
|
|||||||||||||||||
| Properties | Land | Improvements | Investment | and Amortization | ||||||||||||||||
|
Medical Office Buildings:
|
||||||||||||||||||||
|
Alabama
|
4 | $ | 1,987 | $ | 42,888 | $ | 44,875 | $ | 5,220 | |||||||||||
|
Alaska
|
1 | 217 | 30,089 | 30,306 | 2,697 | |||||||||||||||
|
Arizona
|
5 | 5,585 | 90,488 | 96,073 | 9,254 | |||||||||||||||
|
California
|
8 | 7,560 | 160,669 | 168,229 | 13,643 | |||||||||||||||
|
Colorado
|
1 | 877 | 6,707 | 7,584 | 697 | |||||||||||||||
|
Florida
|
24 | 38,801 | 243,267 | 282,069 | 31,234 | |||||||||||||||
|
Georgia
|
6 | 12,500 | 59,039 | 71,539 | 8,016 | |||||||||||||||
|
Illinois
|
1 | 1,419 | 2,881 | 4,300 | 464 | |||||||||||||||
|
Indiana
|
1 | 0 | 22,134 | 22,134 | 902 | |||||||||||||||
|
Kentucky
|
1 | 1,290 | 8,093 | 9,383 | 0 | |||||||||||||||
|
Missouri
|
1 | 336 | 17,255 | 17,591 | 1,919 | |||||||||||||||
|
Nevada
|
9 | 16,804 | 104,488 | 121,293 | 11,318 | |||||||||||||||
|
New Jersey
|
5 | 9,804 | 100,672 | 110,476 | 3,689 | |||||||||||||||
|
New York
|
7 | 4,389 | 61,565 | 65,954 | 7,603 | |||||||||||||||
|
North Carolina
|
10 | 8,085 | 19,322 | 27,407 | 3,425 | |||||||||||||||
|
Ohio
|
1 | 610 | 7,433 | 8,043 | 1,030 | |||||||||||||||
|
Oklahoma
|
1 | 132 | 13,008 | 13,140 | 1,289 | |||||||||||||||
|
Pennsylvania
|
1 | 154 | 23,169 | 23,323 | 2,340 | |||||||||||||||
|
South Carolina
|
1 | 171 | 17,791 | 17,962 | 1,398 | |||||||||||||||
|
Tennessee
|
5 | 8,946 | 60,193 | 69,139 | 6,672 | |||||||||||||||
|
Texas
|
14 | 17,792 | 193,178 | 210,971 | 20,396 | |||||||||||||||
|
Virginia
|
1 | 0 | 11,370 | 11,370 | 127 | |||||||||||||||
|
Wisconsin
|
1 | 2,899 | 89,002 | 91,901 | 924 | |||||||||||||||
|
Construction in progress
|
2 | 0 | 0 | 21,498 | 0 | |||||||||||||||
|
Assets held for sale
|
7 | 0 | 0 | 15,038 | 0 | |||||||||||||||
| 118 | 140,358 | 1,384,701 | 1,561,598 | 134,257 | ||||||||||||||||
|
Total Real Property Owned
|
568 | $ | 521,055 | $ | 5,312,718 | $ | 6,336,291 | $ | 677,851 | |||||||||||
85
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following is a summary of our real estate intangibles as of
the dates indicated (dollars in thousands):
| December 31, 2009 | December 31, 2008 | |||||||
|
Assets:
|
||||||||
|
In place lease intangibles
|
$ | 74,199 | $ | 81,500 | ||||
|
Above market tenant leases
|
10,232 | 9,658 | ||||||
|
Below market ground leases
|
39,806 | 39,806 | ||||||
|
Lease commissions
|
3,154 | 2,360 | ||||||
|
Gross historical cost
|
127,391 | 133,324 | ||||||
|
Accumulated amortization
|
(29,698 | ) | (31,452 | ) | ||||
|
Net book value
|
$ | 97,693 | $ | 101,872 | ||||
|
Weighted-average amortization period in years
|
30.0 | 28.9 | ||||||
|
Liabilities:
|
||||||||
|
Below market tenant leases
|
$ | 22,961 | $ | 25,265 | ||||
|
Above market ground leases
|
4,084 | 3,419 | ||||||
|
Gross historical cost
|
27,045 | 28,684 | ||||||
|
Accumulated amortization
|
(10,478 | ) | (8,671 | ) | ||||
|
Net book value
|
$ | 16,567 | $ | 20,013 | ||||
|
Weighted-average amortization period in years
|
12.1 | 8.9 | ||||||
At December 31, 2009, future minimum lease payments
receivable under operating leases are as follows (in thousands):
|
2010
|
$ | 507,269 | ||
|
2011
|
519,378 | |||
|
2012
|
490,889 | |||
|
2013
|
475,948 | |||
|
2014
|
461,221 | |||
|
Thereafter
|
2,904,323 | |||
|
Totals
|
$ | 5,359,028 | ||
We purchased $23,097,000 of real property that had previously
been financed by the Company with loans in 2008. We acquired
properties, which included the assumption of debt totaling
$166,188,000 in 2007. These non-cash activities are
appropriately not reflected in the accompanying statements of
cash flows.
| 3. | Dispositions, Assets Held for Sale and Discontinued Operations |
During the year ended December 31, 2009, we completed the
sale of 36 properties and recognized $43,394,000 of net gains on
sales. At December 31, 2009, we had one hospital, two
skilled nursing facilities and seven medical office buildings
that satisfied the requirements of held for sale treatment. We
did not recognize any impairment loss on the skilled nursing
facilities as the fair value less estimated costs to sell
exceeded our carrying value. The fair value was estimated based
on a third party offer to purchase. In determining the fair
value of the medical office buildings and hospital, we used a
combination of third party appraisals based on market comparable
transactions, other market listings and asset quality as well as
management calculations based on projected net operating income
and published capitalization rates. Management’s estimates
projected that the carrying value of the assets was greater than
the estimated fair value and an impairment charge of $25,223,000
was recorded to reduce the properties
86
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
to their estimated fair value less costs to sell. The following
is a summary of our real property disposition activity for the
periods presented (in thousands):
| Year Ended | ||||||||||||||||||||||||||||||||
| December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||||||||||
|
Medical
|
Medical
|
|||||||||||||||||||||||||||||||
|
Investment
|
Office
|
Investment
|
Office
|
Investment
|
||||||||||||||||||||||||||||
| Properties | Buildings | Totals | Properties | Buildings | Totals | Properties | Totals | |||||||||||||||||||||||||
|
Real property dispositions:
|
||||||||||||||||||||||||||||||||
|
Independent living/CCRCs
|
$ | 24,342 | $ | 24,342 | $ | 15,547 | $ | 15,547 | $ | 5,346 | $ | 5,346 | ||||||||||||||||||||
|
Assisted living facilities
|
30,978 | 30,978 | 148,075 | 148,075 | 57,351 | 57,351 | ||||||||||||||||||||||||||
|
Skilled nursing facilities
|
45,835 | 45,835 | 6,290 | 6,290 | 18,107 | 18,107 | ||||||||||||||||||||||||||
|
Hospitals
|
40,841 | 40,841 | 8,735 | 8,735 | 0 | |||||||||||||||||||||||||||
|
Medical office buildings
|
$ | 44,717 | 44,717 | $ | 6,781 | 6,781 | 0 | |||||||||||||||||||||||||
|
Land parcels
|
0 | 73 | 73 | 3,073 | 3,073 | |||||||||||||||||||||||||||
|
Total dispositions
|
141,996 | 44,717 | 186,713 | 178,720 | 6,781 | 185,501 | 83,877 | 83,877 | ||||||||||||||||||||||||
|
Adjusted for:
|
||||||||||||||||||||||||||||||||
|
Gain/(loss) on sales
|
46,439 | (3,045 | ) | 43,394 | 164,998 | (1,065 | ) | 163,933 | 14,437 | 14,437 | ||||||||||||||||||||||
|
LandAmerica settlement
|
0 | 2,500 | 2,500 | 0 | ||||||||||||||||||||||||||||
|
Other assets/(liabilities) disposal
|
0 | (116 | ) | (116 | ) | 0 | ||||||||||||||||||||||||||
|
Seller financing
|
(6,100 | ) | (6,100 | ) | (59,649 | ) | (5,122 | ) | (64,771 | ) | 0 | |||||||||||||||||||||
|
Proceeds from real property sales
|
$ | 188,435 | $ | 35,572 | $ | 224,007 | $ | 286,569 | $ | 478 | $ | 287,047 | $ | 98,314 | $ | 98,314 | ||||||||||||||||
During the year ended December 31, 2008, we completed the
sale of 29 properties to Emeritus Corporation for $299,413,000,
consisting of $249,413,000 in cash proceeds and $50,000,000 of
seller financing, and we recognized a gain on sale of
$145,646,000. Total funds of $299,413,000 were held in escrow
for use in an Internal Revenue Code Section 1031 exchange,
of which $162,558,000 was utilized during the year ended
December 31, 2008. We had retained LandAmerica 1031
Exchange Services, Inc. (“LES”) to act as a qualified
intermediary. On November 26, 2008, LES and its parent,
LandAmerica Financial Group, filed for bankruptcy protection. At
that time, we had approximately $136,855,000 in two segregated
escrow accounts (the “Exchange Funds”) held by
Centennial Bank, an affiliate of LES. Although the terms of our
agreements with LES required that the Exchange Funds be returned
to us, the return of the Exchange Funds was stayed by the
bankruptcy proceedings. On February 23, 2009, the United
States Bankruptcy Court for the Eastern District of Virginia,
Richmond Division, entered an order approving the stipulation
and settlement agreement among LES, the unsecured creditors
committees and us. Pursuant to the terms of that settlement
agreement, the Exchange Funds plus $918,000 of interest were
returned to us on February 23, 2009, and we made a
settlement payment of $2,000,000 to the LES bankruptcy estate.
In connection with these proceedings, we incurred approximately
$500,000 in expenses. The settlement payment and expenses were
recorded as reductions of gains on sales in 2008.
87
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
We have reclassified the income and expenses attributable to all
properties sold prior to or held for sale at December 31,
2009 to discontinued operations. Expenses include an allocation
of interest expense based on property carrying values and our
weighted average cost of debt. The following illustrates the
reclassification impact as a result of classifying properties as
discontinued operations for the periods presented (in thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Revenues:
|
||||||||||||
|
Rental income
|
$ | 19,611 | $ | 46,359 | $ | 63,669 | ||||||
|
Other income
|
8,059 | 0 | 0 | |||||||||
|
Expenses:
|
||||||||||||
|
Interest expense
|
3,541 | 10,906 | 14,055 | |||||||||
|
Property operating expenses
|
3,069 | 3,995 | 4,065 | |||||||||
|
Depreciation and amortization
|
7,874 | 18,684 | 25,394 | |||||||||
|
Income (loss) from discontinued operations, net
|
$ | 13,186 | $ | 12,774 | $ | 20,155 | ||||||
| 4. | Real Estate Loans Receivable |
The following is a summary of real estate loans receivable (in
thousands):
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Mortgage loans
|
$ | 74,517 | $ | 137,292 | ||||
|
Other real estate loans
|
352,846 | 345,593 | ||||||
|
Totals
|
$ | 427,363 | $ | 482,885 | ||||
All real estate loans receivable are in our investment property
segment. The following is a summary of our real estate loan
activity for the periods presented (in thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| Amount | Amount | Amount | ||||||||||
|
Advances on real estate loans receivable:
|
||||||||||||
|
Investments in new loans
|
$ | 20,036 | $ | 121,493 | $ | 205,770 | ||||||
|
Draws on existing loans
|
54,381 | 21,265 | 30,124 | |||||||||
|
Total gross investments in real estate loans
|
74,417 | 142,758 | 235,894 | |||||||||
|
Less: Seller financing on sales of real property
|
0 | (59,649 | ) | 0 | ||||||||
|
Net cash advances on real estate loans receivable
|
74,417 | 83,109 | 235,894 | |||||||||
|
Receipts on real estate loans receivable:
|
||||||||||||
|
Loan payoffs
|
93,856 | 8,815 | 42,028 | |||||||||
|
Principal payments on loans
|
17,923 | 9,354 | 10,318 | |||||||||
|
Total principal receipts on real estate loans
|
111,779 | 18,169 | 52,346 | |||||||||
|
Net cash advances (receipts) on real estate loans receivable
|
$ | (37,362 | ) | $ | 64,940 | $ | 183,548 | |||||
88
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following is a summary of mortgage loans at
December 31, 2009:
|
Final
|
Number
|
Principal
|
||||||||||||
|
Payment
|
of
|
Amount at
|
Carrying
|
|||||||||||
|
Due
|
Loans | Payment Terms | Inception | Amount | ||||||||||
| (In thousands) | ||||||||||||||
|
2009
|
3 | Monthly payments from $5,333 to $149,720, | $ | 26,756 | $ | 11,450 | ||||||||
| including interest from 9.63% to 19.26% | ||||||||||||||
|
2010
|
3 | Monthly payments from $15,633 to $113,740, | 16,185 | 13,756 | ||||||||||
| including interest from 9.50% to 12.41% | ||||||||||||||
|
2011
|
2 | Monthly payments from $2,336 to $26,072, | 3,150 | 3,317 | ||||||||||
| including interest from 12.10% to 19.26% | ||||||||||||||
|
2012
|
3 | Monthly payments from $26,278 to $76,514, | 19,617 | 10,420 | ||||||||||
| including interest from 7.00% to 19.26% | ||||||||||||||
|
2013
|
2 | Monthly payments from $12,280 to $136,006, | 22,300 | 25,626 | ||||||||||
| including interest from 3.55% to 7.60% | ||||||||||||||
|
2015
|
2 | Monthly payments from $18,802 to $41,828, | 3,365 | 5,675 | ||||||||||
| including interest from 9.50% to 15.21% | ||||||||||||||
|
2020
|
1 | Monthly payments of $41,282, | 4,500 | 4,273 | ||||||||||
| including interest of 10.65% | ||||||||||||||
| Totals | $ | 95,873 | $ | 74,517 | ||||||||||
| 5. | Allowance for Losses on Loans Receivable |
|
The following is a summary of the allowance for losses on loans
receivable (in thousands):
|
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Balance at beginning of year
|
$ | 7,500 | $ | 7,406 | $ | 7,406 | ||||||
|
Provision for loan losses
|
23,261 | 94 | 0 | |||||||||
|
Charge-offs
|
(25,578 | ) | 0 | 0 | ||||||||
|
Balance at end of year
|
$ | 5,183 | $ | 7,500 | $ | 7,406 | ||||||
As a result of our quarterly evaluations, we recorded
$23,261,000 of provision for loan losses during the year ended
December 31, 2009. This amount includes the write-off of
loans totaling $25,578,000 primarily relating to certain early
stage senior housing operators offset by a net reduction in the
allowance for loan losses of $2,457,000.
The following is a summary of our loan impairments (in
thousands):
| December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Balance of impaired loans at year end
|
$ | 67,126 | $ | 72,770 | $ | 799 | ||||||
|
Allowance for loan losses
|
5,183 | 7,500 | 7,406 | |||||||||
|
Balance of impaired loans not reserved(1)
|
$ | 61,943 | $ | 65,270 | $ | 0 | ||||||
|
Average impaired loans for the year
|
$ | 69,948 | $ | 36,785 | $ | 5,664 | ||||||
|
Interest recognized on impaired loans(2)
|
530 | 3,288 | 0 | |||||||||
| (1) | At December 31, 2007, the allowance for losses on loans receivable exceeds the balance of impaired loans. | |
| (2) | Represents interest recognized prior to placement on non-accrual status. |
89
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 6. | Concentration of Risk |
As of December 31, 2009, long-term care facilities, which
include skilled nursing, independent living/continuing care
retirement communities and assisted living facilities, comprised
66% (66% at December 31, 2008) of our real estate
investments and were located in 39 states. The following
table summarizes certain information about our customer
concentration as of December 31, 2009 (dollars in
thousands):
|
Number of
|
Total
|
Percent of
|
||||||||||
| Properties | Investment | Investment(1) | ||||||||||
|
Concentration by investment:
|
||||||||||||
|
Senior Living Communities, LLC
|
10 | $ | 419,406 | 7 | % | |||||||
|
Brookdale Senior Living, Inc
|
86 | 310,126 | 5 | % | ||||||||
|
Signature Healthcare LLC
|
32 | 270,775 | 5 | % | ||||||||
|
Emeritus Corporation
|
21 | 241,288 | 4 | % | ||||||||
|
Life Care Centers of America, Inc.
|
18 | 204,558 | 3 | % | ||||||||
|
Remaining portfolio
|
423 | 4,639,650 | 76 | % | ||||||||
|
Totals
|
590 | $ | 6,085,803 | 100 | % | |||||||
| (1) | Investments with top five customers comprised 25% of total investments at December 31, 2008. |
| 7. | Borrowings Under Line of Credit Arrangement and Related Items |
At December 31, 2009, we had an unsecured credit
arrangement with a consortium of sixteen banks providing for a
revolving line of credit in the amount of $1,150,000,000, which
is scheduled to expire on August 5, 2011 (with the ability
to extend for one year at our discretion if we are in compliance
with all covenants). Borrowings under the agreement are subject
to interest payable in periods no longer than three months at
either the agent bank’s prime rate of interest or the
applicable margin over LIBOR interest rate, at our option (0.84%
at December 31, 2009). The applicable margin is based on
our ratings with Moody’s Investors Service and
Standard & Poor’s Ratings Services and was 0.6%
at December 31, 2009. In addition, we pay a facility fee
annually to each bank based on the bank’s commitment under
the revolving credit facility. The facility fee depends on our
ratings with Moody’s Investors Service and
Standard & Poor’s Ratings Services and was 0.15%
at December 31, 2009. We also pay an annual agent’s
fee of $50,000. Principal is due upon expiration of the
agreement.
The following information relates to aggregate borrowings under
the unsecured lines of credit arrangements (dollars in
thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Balance outstanding at December 31
|
$ | 140,000 | $ | 570,000 | $ | 307,000 | ||||||
|
Maximum amount outstanding at any month end
|
$ | 559,000 | $ | 744,000 | $ | 434,000 | ||||||
|
Average amount outstanding (total of daily principal balances
divided by days in year)
|
$ | 241,463 | $ | 500,561 | $ | 234,392 | ||||||
|
Weighted average interest rate (actual interest expense divided
by average borrowings outstanding)
|
1.92 | % | 3.77 | % | 6.68 | % | ||||||
| 8. | Senior Unsecured Notes and Secured Debt |
We have $1,653,027,000 of senior unsecured notes with annual
interest rates ranging from 4.75% to 8.00%. The carrying amounts
of the senior unsecured notes represent the par value of
$1,661,853,000 adjusted for any unamortized premiums or
discounts and other basis adjustments related to hedging the
debt with derivative
90
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
instruments. See Note 9 for further discussion regarding
derivative instruments. During the year ended December 31,
2009, we completed the following senior unsecured notes
extinguishments (in thousands):
|
Notes
|
Principal | Cash Paid | Gain/(Loss) | |||||||||
|
4.75% convertible notes due 2026
|
$ | 5,000 | $ | 4,494 | $ | 446 | ||||||
|
4.75% convertible notes due 2027
|
5,000 | 4,312 | 594 | |||||||||
|
8.0% notes due 2012
|
173,147 | 192,242 | (20,309 | ) | ||||||||
| $ | 183,147 | $ | 201,048 | $ | (19,269 | ) | ||||||
During the three months ended December 31 2006, we issued
$345,000,000 of 4.75% senior unsecured convertible notes
due December 2026, generating net proceeds of $337,517,000. The
notes are convertible, in certain circumstances, into cash and,
if applicable, shares of common stock at an initial conversion
rate of 20.8833 shares per $1,000 principal amount of
notes, which represents an initial conversion price of
approximately $47.89 per share. In general, upon conversion, the
holder of each note would receive, in respect of the conversion
value of such note, cash up to the principal amount of such note
and common stock for the note’s conversion value in excess
of such principal amount. In addition, on each of
December 1, 2011, December 1, 2016 and
December 1, 2021, holders may require us to purchase all or
a portion of their notes at a purchase price in cash equal to
100% of the principal amount of the notes to be purchased, plus
any accrued and unpaid interest. As of December 31, 2009,
we had $340,000,000 of these notes outstanding.
In July 2007, we issued $400,000,000 of 4.75% senior
unsecured convertible notes due July 2027, generating net
proceeds of $388,943,000. The notes are convertible, in certain
circumstances, into cash and, if applicable, shares of our
common stock at an initial conversion rate of
20.0000 shares per $1,000 principal amount of notes, which
represents an initial conversion price of approximately $50.00
per share. In general, upon conversion, the holder of each note
would receive, in respect of the conversion value of such note,
cash up to the principal amount of such note and common stock
for the note’s conversion value in excess of such principal
amount. In addition, on each of July 15, 2012,
July 15, 2017 and July 15, 2022, holders may require
us to purchase all or a portion of their notes at a purchase
price in cash equal to 100% of the principal amount of the notes
to be purchased, plus any accrued and unpaid interest. As of
December 31, 2009, we had $395,000,000 of these notes
outstanding.
We have mortgage loans totaling $620,995,000, collateralized by
owned properties, with annual interest rates ranging from 4.89%
to 6.99%. The carrying amounts of the mortgages represent the
par value of $623,046,000 adjusted for any unamortized fair
value adjustments. The carrying values of the properties
securing the mortgage loans totaled $901,013,000 at
December 31, 2009. During the year ended December 31,
2009, we completed $276,277,000 of first mortgage loans secured
by 31 senior housing properties with multiple levels of service
and one commercial office campus. During the year ended
December 31, 2009, we extinguished $81,715,000 of secured
debt prior to maturity and recognized debt extinguishment losses
of $5,838,000.
Our debt agreements contain various covenants, restrictions and
events of default. Among other things, these provisions require
us to maintain certain financial ratios and minimum net worth
and impose certain limits on our ability to incur indebtedness,
create liens and make investments or acquisitions. As of
December 31, 2009, we were in compliance with all of the
covenants under our debt agreements.
91
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
At December 31, 2009, the annual principal payments on
these debt obligations are as follows (in thousands):
|
Senior
|
Secured
|
|||||||||||
| Unsecured Notes(1) | Debt(1) | Totals | ||||||||||
|
2010
|
$ | 0 | $ | 12,204 | $ | 12,204 | ||||||
|
2011
|
0 | 12,883 | 12,883 | |||||||||
|
2012
|
76,853 | 19,021 | 95,874 | |||||||||
|
2013
|
300,000 | 67,787 | 367,787 | |||||||||
|
2014
|
0 | 128,232 | 128,232 | |||||||||
|
Thereafter
|
1,285,000 | 382,919 | 1,667,919 | |||||||||
|
Totals
|
$ | 1,661,853 | $ | 623,046 | $ | 2,284,899 | ||||||
| (1) | Amounts above represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet. |
| 9. | Derivative Instruments |
We are exposed to various market risks, including the potential
loss arising from adverse changes in interest rates. We may
elect to use financial derivative instruments to hedge interest
rate exposure. These decisions are principally based on our
policy to manage the general trend in interest rates at the
applicable dates and our perception of the future volatility of
interest rates. Derivatives are recorded at fair market value on
the balance sheet as assets or liabilities. The valuation of
derivative instruments requires us to make estimates and
judgments that affect the fair value of the instruments. Fair
values for our derivatives are estimated by pricing models that
consider forward yield curves and discount rates. Such amounts
and the recognition of such amounts are subject to significant
estimates that may change in the future.
The following is a summary of the fair value of our derivative
instruments (dollars in thousands):
|
Balance Sheet
|
Fair Value | |||||||||
| Location | Dec. 31, 2009 | Dec. 31, 2008 | ||||||||
|
Cash flow hedge interest rate swaps
|
Other liabilities | $ | 2,381 | $ | 0 | |||||
Cash
Flow Hedges
For instruments that are designated and qualify as a cash flow
hedge, the effective portion of the gain or loss on the
derivative is reported as a component of other comprehensive
income (“OCI”), and reclassified into earnings in the
same period, or periods, during which the hedged transaction
affects earnings. Gains and losses on the derivative
representing either hedge ineffectiveness or hedge components
excluded from the assessment of effectiveness are recognized in
earnings. Approximately $2,893,000 of losses, which are included
in other comprehensive income, are expected to be reclassified
into earnings in the next 12 months.
The following presents the impact of derivative instruments on
the statement of operations and OCI for the year ended
December 31, 2009 (dollars in thousands):
| Location | Amount | |||||
|
Gain (loss) on interest rate swap recognized in OCI (effective
portion)
|
n/a | $ | (3,514 | ) | ||
|
Gain (loss) reclassified from AOCI into income (effective
portion)
|
Interest expense | $ | 971 | |||
|
Gain (loss) recognized in income (ineffective portion and
|
||||||
|
amount excluded from effectiveness testing)
|
Realized loss | $ | 0 | |||
92
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
On August 7, 2009, we entered into an interest rate swap
(the “August 2009 Swap”) for a total notional amount
of $52,198,000 to hedge seven years of interest payments
associated with long-term LIBOR based borrowings. The August
2009 Swap has an effective date of August 12, 2009 and a
maturity date of September 1, 2016. The August 2009 Swap
has the economic effect of fixing $52,198,000 at 3.93% plus a
credit spread for seven years. The August 2009 Swap has been
designated as a cash flow hedge and we expect it to be highly
effective at offsetting changes in cash flows of interest
payments on $52,198,000 of long-term debt due to changes in the
LIBOR swap rate.
On September 28, 2009, we entered into an interest rate
swap (the “September 2009 Swap”) for a total notional
amount of $48,155,000 to hedge seven years of interest payments
associated with long-term LIBOR based borrowings. The September
2009 Swap has an effective date of September 30, 2009 and a
maturity date of October 1, 2016. The September 2009 Swap
has the economic effect of fixing $48,155,000 at 3.2675% plus a
credit spread for seven years. The September 2009 Swap has been
designated as a cash flow hedge and we expect it to be highly
effective at offsetting changes in cash flows of interest
payments on $48,155,000 of long-term debt due to changes in the
LIBOR swap rate.
During the year ended December 31, 2008, we recognized a
realized loss on derivatives of $23,393,000 related to
forward-starting interest rate swaps that were in place to hedge
future debt issuances when the timing of those issuances were
revised.
Fair
Value Hedges
For derivative instruments that are designated as a fair value
hedge, the gain or loss on the derivative as well as the
offsetting loss or gain on the hedged risk are recognized in
current earnings. There were no outstanding fair value hedges at
December 31, 2009.
| 10. | Commitments and Contingencies |
We have an outstanding letter of credit issued for the benefit
of certain insurance companies that provide workers’
compensation insurance to one of our tenants. Our obligation to
provide the letter of credit terminates in 2013. At
December 31, 2009, our obligation under the letter of
credit was $2,450,000.
We have an outstanding letter of credit issued for the benefit
of certain insurance companies that provide liability insurance
to one of our tenants. Our obligation to the tenant to provide
the letter of credit terminates in 2013. At December 31,
2009, our obligation under the letter of credit was $1,000,000.
We have an outstanding letter of credit issued for the benefit
of a village in Illinois that secures the completion and
installation of certain public improvements by one of our
tenants in connection with the development of a property. Our
obligation to provide the letter of credit terminates in 2010.
At December 31, 2009, our obligation under the letter of
credit was $129,057.
At December 31, 2009, we had outstanding construction
financings of $456,832,000 for leased properties and were
committed to providing additional financing of approximately
$213,945,000 to complete construction. At December 31,
2009, we had contingent purchase obligations totaling
$10,320,000. These contingent purchase obligations primarily
relate to deferred acquisition fundings and capital
improvements. Deferred acquisition fundings are contingent upon
an operator satisfying certain conditions such as payment
coverage and value tests. Amounts due from the tenant are
increased to reflect the additional investment in the property.
At December 31, 2009, we had operating lease obligations of
$182,040,000 relating to certain ground leases and Company
office space. We incurred rental expense relating to our Company
office space of $1,138,000, $1,452,000 and $678,000 for the
years ended December 31, 2009, 2008 and 2007, respectively.
Regarding the property leases, we have sublease agreements with
certain of our operators that require the operators to reimburse
us for our monthly operating lease obligations. At
December 31, 2009, aggregate future minimum rentals to be
received under these noncancelable subleases totaled $33,071,000.
93
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
At December 31, 2009, future minimum lease payments due
under operating leases are as follows (in thousands):
|
2010
|
$ | 4,603 | ||
|
2011
|
4,669 | |||
|
2012
|
4,349 | |||
|
2013
|
4,361 | |||
|
2014
|
4,383 | |||
|
Thereafter
|
159,675 | |||
|
Totals
|
$ | 182,040 | ||
| 11. | Stockholders’ Equity |
Preferred
Stock
In July 2003, we closed a public offering of
4,000,000 shares of 7.875% Series D Cumulative
Redeemable Preferred Stock. These shares have a liquidation
value of $25.00 per share. Dividends are payable quarterly in
arrears. The preferred stock, which has no stated maturity, may
be redeemed by us at a redemption price of $25.00 per share,
plus accrued and unpaid dividends on such shares to the
redemption date, on or after July 9, 2008.
In September 2003, we issued 1,060,000 shares of 6%
Series E Cumulative Convertible and Redeemable Preferred
Stock as partial consideration for an acquisition of assets by
the Company, with the shares valued at $26,500,000 for such
purposes. The shares were issued to Southern Assisted Living,
Inc. and certain of its stockholders without registration in
reliance upon the federal statutory exemption of
Section 4(2) of the Securities Act of 1933, as amended. The
shares have a liquidation value of $25.00 per share. Dividends
are payable quarterly in arrears. The preferred stock, which has
no stated maturity, may be redeemed by us at a redemption price
of $25.00 per share, plus accrued and unpaid dividends on such
shares to the redemption date, on or after August 15, 2008.
The preferred shares are convertible by the holder into common
stock at a conversion price of $32.66 per share at any time. At
December 31, 2009, there were 74,380 of such shares
outstanding.
In September 2004, we closed a public offering of
7,000,000 shares of 7.625% Series F Cumulative
Redeemable Preferred Stock. These shares have a liquidation
value of $25.00 per share. Dividends are payable quarterly in
arrears. The preferred stock, which has no stated maturity, may
be redeemed by us at a redemption price of $25.00 per share,
plus accrued and unpaid dividends on such shares to the
redemption date, on or after September 14, 2009.
In conjunction with the acquisition of Windrose Medical
Properties Trust in December 2006, we issued
2,100,000 shares of 7.5% Series G Cumulative
Convertible Preferred Stock. These shares have a liquidation
value of $25.00 per share and a book value of $29.58 per share.
Dividends are payable quarterly in arrears. The preferred stock,
which has no stated maturity, may be redeemed by us at a
redemption price of $25.00 per share, plus accrued and unpaid
dividends on such shares to the redemption date, on or after
June 30, 2010. Each Series G Preferred Share is
convertible by the holder into our common stock at a conversion
price of $34.93, equivalent to a conversion rate of 0.7157
common shares per Series G Preferred Share. The
Series G Preferred Shares require cumulative distributions.
During the year ended December 31, 2007, certain holders of
our Series G Preferred Stock converted 295,800 shares
into 211,702 shares of our common stock, leaving 1,804,200
of such shares outstanding at December 31, 2007. During the
year ended December 31, 2008, certain holders of our
Series G Preferred Stock converted 1,362,887 shares
into 975,397 shares of our common stock, leaving 441,313 of
such shares outstanding at December 31, 2008. During the
year ended December 31, 2009, certain holders of our
Series G Preferred Stock converted 41,600 shares into
29,771 shares of our common stock, leaving 399,713 of such
shares outstanding at December 31, 2009.
94
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Common
Stock
The following is a summary of our common stock issuances for the
years presented (dollars in thousands, except per share amounts):
|
Date Issued
|
Shares Issued | Average Price | Gross Proceeds | Net Proceeds | ||||||||||||
|
April 2007 public issuance
|
6,325,000 | $ | 44.01 | $ | 278,363 | $ | 265,294 | |||||||||
|
December 2007 public issuance
|
3,500,000 | 42.14 | 147,490 | 147,139 | ||||||||||||
|
2007 Dividend reinvestment plan issuances
|
1,626,000 | 41.81 | 67,985 | 67,985 | ||||||||||||
|
2007 Option exercises
|
401,630 | 27.82 | 11,175 | 11,175 | ||||||||||||
|
2007 Totals
|
11,852,630 | $ | 505,013 | $ | 491,593 | |||||||||||
|
March 2008 public issuance
|
3,000,000 | $ | 41.44 | $ | 124,320 | $ | 118,555 | |||||||||
|
July 2008 public issuance
|
4,600,000 | 44.50 | 204,700 | 193,157 | ||||||||||||
|
September 2008 public issuance
|
8,050,000 | 48.00 | 386,400 | 369,699 | ||||||||||||
|
2008 Dividend reinvestment plan issuances
|
1,546,074 | 43.37 | 67,055 | 67,055 | ||||||||||||
|
2008 Equity shelf program issuances
|
794,221 | 39.28 | 31,196 | 30,272 | ||||||||||||
|
2008 Option exercises
|
118,895 | 29.83 | 3,547 | 3,547 | ||||||||||||
|
2008 Totals
|
18,109,190 | $ | 817,218 | $ | 782,285 | |||||||||||
|
February 2009 public issuance
|
5,816,870 | $ | 36.85 | $ | 214,352 | $ | 210,880 | |||||||||
|
September 2009 public issuance
|
9,200,000 | 40.40 | 371,680 | 356,554 | ||||||||||||
|
2009 Dividend reinvestment plan issuances
|
1,499,497 | 37.22 | 55,818 | 55,818 | ||||||||||||
|
2009 Equity shelf program issuances
|
1,952,600 | 40.69 | 79,447 | 77,605 | ||||||||||||
|
2009 Option exercises
|
96,166 | 38.23 | 3,676 | 3,676 | ||||||||||||
|
2009 Totals
|
18,565,133 | $ | 724,973 | $ | 704,533 | |||||||||||
Comprehensive
Income
The following is a summary of accumulated other comprehensive
income as of the dates indicated (in thousands):
| December 31, 2009 | December 31, 2008 | |||||||
|
Unrecognized gains (losses) on cash flow hedges
|
$ | (1,907 | ) | $ | 635 | |||
|
Unrecognized gains (losses) on equity investments
|
(550 | ) | (1,038 | ) | ||||
|
Unrecognized actuarial gains (losses)
|
(434 | ) | (710 | ) | ||||
|
Totals
|
$ | (2,891 | ) | $ | (1,113 | ) | ||
95
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following is a summary of comprehensive income for the
periods indicated (in thousands):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Unrecognized gains (losses) on cash flow hedges
|
$ | (2,542 | ) | $ | 7,829 | $ | (7,194 | ) | ||||
|
Unrecognized losses (gains) on equity investments
|
487 | (846 | ) | (192 | ) | |||||||
|
Unrecognized actuarial gains/(losses)
|
277 | (715 | ) | 140 | ||||||||
|
Total other comprehensive income
|
(1,778 | ) | 6,268 | (7,246 | ) | |||||||
|
Net income attributable to controlling interests
|
193,269 | 283,299 | 138,355 | |||||||||
|
Comprehensive income attributable to controlling interests
|
191,491 | 289,567 | 131,109 | |||||||||
|
Net and comprehensive income attributable to noncontrolling
interests
|
(342 | ) | 126 | 238 | ||||||||
|
Total comprehensive income
|
$ | 191,149 | $ | 289,693 | $ | 131,347 | ||||||
Other
Equity
Other equity consists of accumulated option compensation expense
which represents the amount of amortized compensation costs
related to stock options awarded to employees and directors
subsequent to January 1, 2003. Expense, which is recognized
as the options vest based on the market value at the date of the
award, totaled $1,629,000, $1,503,000 and $1,106,000 for the
years ended December 31, 2009, 2008 and 2007, respectively.
| 12. | Stock Incentive Plans |
Our Amended and Restated 2005 Long-Term Incentive Plan
authorizes up to 6,200,000 shares of common stock to be
issued at the discretion of the Compensation Committee of the
Board of Directors. The 2005 Plan replaced the 1995 Stock
Incentive Plan and the Stock Plan for Non-Employee Directors.
The options granted to officers and key employees under the 1995
Plan continue to vest through 2010 and expire ten years from the
date of grant. Our non-employee directors, officers and key
employees are eligible to participate in the 2005 Plan. The 2005
Plan allows for the issuance of, among other things, stock
options, restricted stock, deferred stock units and dividend
equivalent rights. Vesting periods for options, deferred stock
units and restricted shares generally range from three years for
non-employee directors to five years for officers and key
employees. Options expire ten years from the date of grant. We
granted 159,805, 161,101 and 272,057 restricted shares during
2009, 2008 and 2007, respectively, including 18,243, 14,504 and
10,717 deferred stock units to non-employee directors in 2009,
2008 and 2007, respectively.
Option
Valuation Assumptions
The fair value of each option grant is estimated on the date of
grant using a Black-Scholes-Merton option pricing model with the
following weighted-average assumptions:
| 2009 | 2008 | 2007 | ||||||||||
|
Dividend yield(1)
|
7.35 | % | 6.47 | % | 5.60 | % | ||||||
|
Expected volatility
|
29.4 | % | 20.5 | % | 19.9 | % | ||||||
|
Risk-free interest rate
|
2.33 | % | 3.42 | % | 4.74 | % | ||||||
|
Expected life (in years)
|
7.0 | 6.5 | 5.0 | |||||||||
|
Weighted-average fair value(1)
|
$ | 4.38 | $ | 6.25 | $ | 8.31 | ||||||
| (1) | Certain options granted to employees include dividend equivalent rights. The fair value of options with DERs also includes the net present value of projected future dividend payments over the expected life of the option discounted at the dividend yield rate. |
96
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The dividend yield represented the dividend yield of our common
stock on the dates of grant. Our computation of expected
volatility was based on historical volatility. The risk-free
interest rates used were the
7-year
U.S. Treasury Notes yield on the date of grant for the 2009
and 2008 grants and the
5-year
U.S. Treasury Notes yield on the date of grant for the 2007
grants. The expected life was based on historical experience of
similar awards, giving consideration to the contractual terms,
vesting schedules and expectations regarding future employee
behavior.
Option
Award Activity
The following table summarizes information about stock option
activity for the periods indicated (shares in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||||||||||
|
Number
|
Weighted Average
|
Number
|
Weighted Average
|
Number
|
Weighted Average
|
|||||||||||||||||||
|
Stock Options
|
of Shares | Exercise Price | of Shares | Exercise Price | of Shares | Exercise Price | ||||||||||||||||||
|
Options at beginning of year
|
817 | $ | 38.29 | 637 | $ | 35.54 | 917 | $ | 30.79 | |||||||||||||||
|
Options granted
|
366 | 37.00 | 307 | 40.83 | 124 | 45.73 | ||||||||||||||||||
|
Options exercised
|
(96 | ) | 38.22 | (119 | ) | 29.83 | (402 | ) | 27.82 | |||||||||||||||
|
Options terminated
|
(25 | ) | 44.50 | (8 | ) | 42.00 | (2 | ) | 39.72 | |||||||||||||||
|
Options at end of year
|
1,062 | $ | 37.71 | 817 | $ | 38.29 | 637 | $ | 35.54 | |||||||||||||||
|
Options exercisable at end of year
|
388 | $ | 35.85 | 281 | $ | 33.94 | 256 | $ | 32.26 | |||||||||||||||
|
Weighted average fair value of options granted during the year
|
$ | 4.38 | $ | 6.25 | $ | 8.31 | ||||||||||||||||||
The following table summarizes information about stock options
outstanding at December 31, 2009 (options in thousands):
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||
|
Weighted
|
Weighted
|
|||||||||||||||||||||||
|
Range of Per
|
Weighted
|
Average
|
Weighted
|
Average
|
||||||||||||||||||||
|
Share Exercise
|
Number
|
Average
|
Remaining
|
Number
|
Average
|
Remaining
|
||||||||||||||||||
|
Prices
|
Outstanding | Exercise Price | Contract Life | Exercisable | Exercise Price | Contract Life | ||||||||||||||||||
|
$16-$20
|
8 | $ | 16.81 | 1.0 | 8 | $ | 16.81 | 1.0 | ||||||||||||||||
|
$20-$30
|
62 | 25.62 | 3.7 | 62 | 25.62 | 3.7 | ||||||||||||||||||
|
$30-$40
|
641 | 36.68 | 8.3 | 215 | 36.28 | 5.9 | ||||||||||||||||||
|
$40 +
|
351 | 42.25 | 8.7 | 103 | 42.78 | 8.6 | ||||||||||||||||||
|
Totals
|
1,062 | $ | 37.71 | 8.1 | 388 | $ | 35.85 | 6.2 | ||||||||||||||||
|
Aggregate intrinsic value
|
$ | 7,161,000 | $ | 3,341,000 | ||||||||||||||||||||
The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying options and the
quoted price of our common stock for the options that were
in-the-money
at December 31, 2009. During the years ended
December 31, 2009, 2008 and 2007, the aggregate intrinsic
value of options exercised under our stock incentive plans was
$737,000, $2,042,000 and $6,600,000, respectively, determined as
of the date of option exercise. Cash received from option
exercises under our stock incentive plans for the years ended
December 31, 2009, 2008 and 2007 was $3,676,000, $3,547,000
and $17,775,000, respectively.
As of December 31, 2009, there was approximately $1,717,000
of total unrecognized compensation cost related to unvested
stock options granted under our stock incentive plans. That cost
is expected to be recognized over a weighted average period of
four years. As of December 31, 2009, there was
approximately $6,492,000 of
97
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
total unrecognized compensation cost related to unvested
restricted stock granted under our stock incentive plans. That
cost is expected to be recognized over a weighted average period
of three years.
The following table summarizes information about non-vested
stock incentive awards as of December 31, 2009 and changes
for the year ended December 31, 2009:
| Stock Options | Restricted Stock | |||||||||||||||
|
Number of
|
Weighted Average
|
Number of
|
Weighted Average
|
|||||||||||||
|
Shares
|
Grant Date
|
Shares
|
Grant Date
|
|||||||||||||
| (000’s) | Fair Value | (000’s) | Fair Value | |||||||||||||
|
Non-vested at December 31, 2008
|
534 | $ | 6.98 | 443 | $ | 41.95 | ||||||||||
|
Vested
|
(220 | ) | 7.41 | (196 | ) | 41.48 | ||||||||||
|
Granted
|
366 | 4.38 | 160 | 37.07 | ||||||||||||
|
Terminated
|
(5 | ) | 6.14 | (2 | ) | 40.65 | ||||||||||
|
Non-vested at December 31, 2009
|
675 | $ | 5.44 | 405 | $ | 40.26 | ||||||||||
We adopted the fair value-based method of accounting for
share-based payments effective January 1, 2003 using the
prospective method. Currently, we use the Black-Scholes-Merton
option pricing model to estimate the value of stock option
grants and expect to continue to use this acceptable option
valuation model. We recognize compensation cost for share-based
grants on a straight-line basis through the date the awards
become fully vested or to the retirement eligible date, if
sooner. Compensation cost totaled $9,633,000, $8,530,000 and
$7,050,000 for the years ended December 31, 2009, 2008 and
2007, respectively.
| 13. | Income Taxes and Distributions |
To qualify as a real estate investment trust for federal income
tax purposes, 90% of taxable income (including 100% of capital
gains) must be distributed to stockholders. Real estate
investment trusts that do not distribute a certain amount of
current year taxable income in the current year are also subject
to a 4% federal excise tax. The main differences between
undistributed net income for federal income tax purposes and
financial statement purposes are the recognition of
straight-line rent for reporting purposes, differing useful
lives and depreciation and amortization methods for real
property and the provision for loan losses for reporting
purposes versus bad debt expense for tax purposes. At
December 31, 2009, we had U.S. federal tax losses of
$18,616,000, as well as apportioned state tax losses of
$17,297,000 available for carryforward. Valuation allowances
have been provided for those items for which, based upon an
assessment, it is more likely than not that some portion may not
be realized. The U.S. federal and state tax loss
carryforwards expire from 2010 through 2030.
Cash distributions paid to common stockholders, for federal
income tax purposes, are as follows:
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Per Share:
|
||||||||||||
|
Ordinary income
|
$ | 1.9865 | $ | 1.6196 | $ | 1.8295 | ||||||
|
Return of capital
|
0.4864 | 0.8904 | 0.3596 | |||||||||
|
1250 gains
|
0.2471 | 0.1900 | 0.0900 | |||||||||
|
Totals
|
$ | 2.7200 | $ | 2.7000 | $ | 2.2791 | ||||||
During the three months ended December 31, 2007, we
recognized $3,900,000 of additional other income related to the
payoff of a warrant equity investment. During the three months
ended March 31, 2008, we determined that $1,325,000 of
income taxes were due in connection with that investment gain.
98
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 14. | Earnings Per Share |
The following table sets forth the computation of basic and
diluted earnings per share (in thousands, except per share data):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Numerator for basic and diluted earnings per share —
net income attributable to common stockholders
|
$ | 171,190 | $ | 260,098 | $ | 113,225 | ||||||
|
Denominator for basic earnings per share — weighted
average shares
|
114,207 | 93,732 | 78,861 | |||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Employee stock options
|
0 | 82 | 150 | |||||||||
|
Non-vested restricted shares
|
405 | 443 | 398 | |||||||||
|
Convertible senior unsecured notes
|
0 | 52 | 0 | |||||||||
|
Potentially dilutive common shares
|
405 | 577 | 548 | |||||||||
|
Denominator for diluted earnings per share — adjusted
weighted average shares
|
114,612 | 94,309 | 79,409 | |||||||||
|
Basic earnings per share
|
$ | 1.50 | $ | 2.77 | $ | 1.44 | ||||||
|
Diluted earnings per share
|
$ | 1.49 | $ | 2.76 | $ | 1.43 | ||||||
The diluted earnings per share calculations exclude the dilutive
effect of 351,000, 0 and 123,000 options for 2009, 2008 and
2007, respectively, because the exercise price was greater than
the average market price. The Series E Cumulative
Convertible and Redeemable Preferred Stock and the Series G
Cumulative Convertible Preferred Stock were not included in the
calculations for 2009, 2008 and 2007 as the effect of the
conversions was anti-dilutive to income from continuing
operations attributable to common stockholders (the
“control number” as defined in U.S. GAAP). The
$340,000,000 Convertible Senior Notes due December 2026 were not
included in the calculation for 2009 and 2007 as the effect of
the conversion was anti-dilutive. The $395,000,000 Convertible
Senior Notes due July 2027 were not included in the calculation
for 2009, 2008 and 2007 as the effect of the conversion was
anti-dilutive.
We adopted FASB authoritative guidance on determining whether
instruments granted in share-based payment transactions are
participating securities, effective January 1, 2009, which
required retrospective application. The guidance clarifies that
instruments granted in share-based payment transactions that are
considered to be participating securities prior to vesting
should be included in the earnings allocation under the
two-class method of calculating earnings per share. We
determined that our restricted shares granted under our
long-term incentive plans are participating securities because
the restricted shares participate in non-forfeitable dividends
prior to vesting. Applying the guidance did not have an impact
on the amounts for any period presented.
| 15. | Disclosure about Fair Value of Financial Instruments |
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value.
Mortgage Loans and Other Real Estate Loans
Receivable
— The fair value of mortgage loans and
other real estate loans receivable is generally estimated by
discounting the estimated future cash flows using the current
rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
99
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Cash and Cash Equivalents
— The carrying amount
approximates fair value.
Equity Investments
— Available-for-sale
investments are recorded at their fair market value. Other
equity investments are recorded at cost which approximates fair
value.
Borrowings Under Unsecured Lines of Credit
Arrangements
— The carrying amount of the
unsecured line of credit arrangement approximates fair value
because the borrowings are interest rate adjustable.
Senior Unsecured Notes
— The fair value of the
senior unsecured notes payable was estimated based on publicly
available trading prices.
Secured Debt
— The fair value of fixed rate
secured debt is estimated by discounting the estimated future
cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the
same remaining maturities. The carrying amount of variable rate
secured debt approximates fair value because the borrowings are
interest rate adjustable.
Interest Rate Swap Agreements
— Interest rate
swap agreements, if any, are recorded as assets or liabilities
on the balance sheet at fair market value. Fair market value is
estimated by utilizing pricing models that consider forward
yield curves and discount rates.
The carrying amounts and estimated fair values of our financial
instruments are as follows (in thousands):
| December 31,2009 | December 31, 2008 | |||||||||||||||
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
|
Financial Assets:
|
||||||||||||||||
|
Mortgage loans receivable
|
$ | 74,517 | $ | 74,765 | $ | 137,292 | $ | 143,285 | ||||||||
|
Other real estate loans receivable
|
352,846 | 354,429 | 345,593 | 302,584 | ||||||||||||
|
Equity investments
|
5,816 | 5,816 | 1,030 | 1,030 | ||||||||||||
|
Cash and cash equivalents
|
35,476 | 35,476 | 23,370 | 23,370 | ||||||||||||
|
Financial Liabilities:
|
||||||||||||||||
|
Borrowings under unsecured lines of credit arrangements
|
$ | 140,000 | $ | 140,000 | $ | 570,000 | $ | 570,000 | ||||||||
|
Senior unsecured notes
|
1,653,027 | 1,762,129 | 1,831,151 | 1,605,770 | ||||||||||||
|
Secured debt
|
620,995 | 623,266 | 446,525 | 452,262 | ||||||||||||
|
Interest rate swap agreements
|
2,381 | 2,381 | n/a | n/a | ||||||||||||
U.S. GAAP provides authoritative guidance for measuring and
disclosing fair value measurements of assets and liabilities.
The guidance for financial assets and liabilities was previously
adopted as the standard for those assets and liabilities as of
January 1, 2008. Additional guidance for non-financial
assets and liabilities is effective for fiscal years beginning
after November 15, 2008, and was adopted as the standard
for those assets and liabilities as of January 1, 2009. The
impact of adoption was not significant. The guidance defines
fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the
measurement date. The guidance also establishes a fair value
hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs
when measuring fair value. The guidance describes three levels
of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for
identical assets or liabilities.
Level 2 — Observable inputs other than
Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities. Interest
100
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
rate swap agreements are valued using models that assume a
hypothetical transaction to sell the asset or transfer the
liability in the principal market for the asset or liability
based on market data derived from interest rates and yield
curves observable at commonly quoted intervals, volatilities,
prepayment timing, loss severities, credit risks and default
rates.
Level 3 — Unobservable inputs that are supported
by little or no market activity and that are significant to the
fair value of the assets or liabilities.
The market approach is utilized to measure fair value for our
financial assets and liabilities. The market approach uses
prices and other relevant information generated by market
transactions involving identical or comparable assets or
liabilities.
|
Fair Value Measurements as of
|
||||||||||||||||
| December 31, 2009 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Equity investments(1)
|
$ | 1,049 | $ | 1,049 | $ | 0 | $ | 0 | ||||||||
|
Assets-held-for sale(2)
|
20,588 | 0 | 20,588 | 0 | ||||||||||||
|
Interest rate swap agreements(3)
|
(2,381 | ) | 0 | (2,381 | ) | 0 | ||||||||||
|
Totals
|
$ | 19,256 | $ | 1,049 | $ | 18,207 | $ | 0 | ||||||||
| (1) | Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date. | |
| (2) | Please see Note 3 for additional information. | |
| (3) | Please see Note 9 for additional information. |
| 16. | Retirement Arrangements |
Under the retirement plan and trust (the “401(k)
Plan”), eligible employees may make contributions, and we
may make matching contributions and a profit sharing
contribution. Our contributions to the 401(k) Plan totaled
$1,201,000, $1,013,000 and $441,000 in 2009, 2008 and 2007,
respectively.
We have a Supplemental Executive Retirement Plan
(“SERP”), a non-qualified defined benefit pension
plan, which provides one executive officer with supplemental
deferred retirement benefits. The SERP provides an opportunity
for participants to receive retirement benefits that cannot be
paid under our tax-qualified plans because of the restrictions
imposed by ERISA and the Internal Revenue Code of 1986, as
amended. Benefits are based on compensation and length of
service and the SERP is unfunded. No contributions by the
Company are anticipated for the 2010 fiscal year. Benefit
payments are expected to total $4,758,000 during the next five
fiscal years and no benefit payments are expected to occur
during the succeeding five fiscal years. We use a December 31
measurement date for the SERP. The accrued liability on our
balance sheet for the SERP was $3,287,000 at December 31,
2009 ($3,109,000 at December 31, 2008).
101
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following tables provide a reconciliation of the changes in
the SERP’s benefit obligations and a statement of the
funded status for the periods indicated (in thousands):
| Year Ended December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Reconciliation of benefit obligation:
|
||||||||
|
Obligation at January 1
|
$ | 3,109 | $ | 1,915 | ||||
|
Service cost
|
389 | 364 | ||||||
|
Interest cost
|
164 | 115 | ||||||
|
Actuarial (gain)/loss
|
434 | 715 | ||||||
|
Benefit payments
|
(29 | ) | 0 | |||||
|
Curtailments
|
(780 | ) | 0 | |||||
|
Obligation at December 31
|
$ | 3,287 | $ | 3,109 | ||||
| December 31 | ||||||||
| 2009 | 2008 | |||||||
|
Funded status:
|
||||||||
|
Funded status at December 31
|
$ | (3,287 | ) | $ | (3,109 | ) | ||
|
Unrecognized (gain)/loss
|
0 | 0 | ||||||
|
Prepaid/(accrued) benefit cost
|
$ | (3,287 | ) | $ | (3,109 | ) | ||
The following table shows the components of net periodic benefit
costs for the periods indicated (in thousands):
|
Year Ended
|
||||||||
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Service cost
|
$ | 389 | $ | 364 | ||||
|
Interest cost
|
164 | 115 | ||||||
|
Curtailment income
|
(87 | ) | 0 | |||||
|
Net actuarial loss
|
16 | 0 | ||||||
|
Net periodic benefit cost
|
$ | 482 | $ | 479 | ||||
The following table provides information for the SERP, which has
an accumulated benefit in excess of plan assets (in thousands):
| December 31 | ||||||||
| 2009 | 2008 | |||||||
|
Projected benefit obligation
|
$ | 3,287 | $ | 3,109 | ||||
|
Accumulated benefit obligation
|
2,956 | 2,026 | ||||||
|
Fair value of assets
|
n/a | n/a | ||||||
102
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table reflects the weighted-average assumptions
used to determine the benefit obligations and net periodic
benefit cost for the SERP:
|
Benefit
|
||||||||||||||||
| Obligations | Net Periodic Benefit Cost | |||||||||||||||
| December 31 | Year Ended December 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Discount rate
|
3.50 | % | 6.25 | % | 6.25 | % | 6.00 | % | ||||||||
|
Rate of compensation increase
|
4.50 | % | 4.50 | % | 4.50 | % | 4.25 | % | ||||||||
|
Expected long-term return on plan assets
|
n/a | n/a | n/a | n/a | ||||||||||||
| 17. | Supplemental Cash Flow Information |
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Supplemental cash flow information — interest paid
|
$ | 143,697 | $ | 156,914 | $ | 140,166 | ||||||
|
Supplemental cash flow information — taxes paid
|
854 | 1,789 | 238 | |||||||||
|
Supplemental schedule of non-cash activities:
|
||||||||||||
|
Assets and liabilities assumed from real property acquisitions:
|
||||||||||||
|
Secured debt
|
$ | 0 | $ | 0 | $ | 19,731 | ||||||
|
Other liabilities
|
0 | 1,899 | 3,597 | |||||||||
|
Other assets
|
0 | 0 | 712 | |||||||||
|
Assets and liabilities assumed from business combinations:
|
||||||||||||
|
Real estate investments
|
$ | 0 | $ | 0 | $ | 285,302 | ||||||
|
Other assets acquired
|
0 | 0 | 10,050 | |||||||||
|
Secured debt
|
0 | 0 | 146,457 | |||||||||
|
Liability to subsidiary trust issuing preferred securities
|
0 | 0 | 0 | |||||||||
|
Other liabilities
|
0 | 0 | 6,932 | |||||||||
|
Noncontrolling interests
|
0 | 0 | 0 | |||||||||
|
Issuance of common stock
|
0 | 0 | 0 | |||||||||
|
Issuance of preferred stock
|
0 | 0 | 0 | |||||||||
| 18. | Segment Reporting |
We invest in senior housing and health care real estate. We
evaluate our business and make resource allocations on our two
business segments — investment properties and medical
office buildings. Under the investment property segment, we
invest in senior housing and health care real estate through
acquisition and financing of primarily single tenant properties.
Properties acquired are primarily leased under
triple-net
leases and we are not involved in the management of the
property. Our primary investment property types include skilled
nursing facilities, assisted living facilities, independent
living/continuing care retirement communities and hospitals.
Under the medical office building segment, our properties are
typically leased under gross leases, modified gross leases or
triple-net
leases, to multiple tenants, and generally require a certain
level of property management. The accounting policies of the
segments are the same as those described in the summary of
significant accounting policies in Note 1. There are no
intersegment sales or transfers. We evaluate performance based
upon net operating income of the combined properties in each
segment.
103
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Non-segment revenue consists mainly of interest income on
non-real estate investments and other income. Non-segment assets
consist of corporate assets including cash, deferred loan
expenses and corporate office equipment among others.
Non-property specific revenues and expenses are not allocated to
individual segments in determining net operating income.
Summary information for the reportable segments is as follows
(in thousands):
|
Property
|
Net
|
Real Estate
|
||||||||||||||||||||||||||||||||||
|
Rental
|
Interest
|
Other
|
Total
|
Operating
|
Operating
|
Depreciation/
|
Interest
|
Total
|
||||||||||||||||||||||||||||
| Income(1) | Income | Income(1) | Revenues | Expenses(1) | Income(2) | Amortization(1) | Expense(1) | Assets | ||||||||||||||||||||||||||||
|
Year ended December 31, 2009:
|
||||||||||||||||||||||||||||||||||||
|
Investment properties
|
$ | 403,077 | $ | 40,885 | $ | 13,728 | $ | 457,690 | $ | 0 | $ | 457,690 | $ | 114,865 | $ | 12,229 | $ | 4,802,301 | ||||||||||||||||||
|
Medical office buildings
|
136,834 | 0 | 949 | 137,783 | 48,965 | 88,818 | 50,058 | 20,584 | 1,467,221 | |||||||||||||||||||||||||||
|
Non-segment/corporate
|
0 | 0 | 1,170 | 1,170 | 0 | 1,170 | 0 | 76,959 | 97,664 | |||||||||||||||||||||||||||
| $ | 539,911 | $ | 40,885 | $ | 15,847 | $ | 596,643 | $ | 48,965 | $ | 547,678 | $ | 164,923 | $ | 109,772 | $ | 6,367,186 | |||||||||||||||||||
|
Property
|
Net
|
Real Estate
|
||||||||||||||||||||||||||||||||||
|
Rental
|
Interest
|
Other
|
Total
|
Operating
|
Operating
|
Depreciation/
|
Interest
|
Total
|
||||||||||||||||||||||||||||
| Income(1) | Income | Income | Revenues | Expenses(1) | Income(2) | Amortization(1) | Expense(1) | Assets | ||||||||||||||||||||||||||||
|
Year ended December 31, 2008:
|
||||||||||||||||||||||||||||||||||||
|
Investment properties
|
$ | 388,849 | $ | 40,063 | $ | 7,899 | $ | 436,811 | $ | 0 | $ | 436,811 | $ | 111,934 | $ | 7,176 | $ | 4,720,720 | ||||||||||||||||||
|
Medical office buildings
|
133,332 | 0 | 930 | 134,262 | 46,629 | 87,633 | 51,111 | 21,828 | 1,421,548 | |||||||||||||||||||||||||||
|
Non-segment/corporate
|
0 | 0 | 1,692 | 1,692 | 0 | 1,692 | 0 | 112,055 | 72,763 | |||||||||||||||||||||||||||
| $ | 522,181 | $ | 40,063 | $ | 10,521 | $ | 572,765 | $ | 46,629 | $ | 526,136 | $ | 163,045 | $ | 141,059 | $ | 6,215,031 | |||||||||||||||||||
|
Property
|
Net
|
Real Estate
|
||||||||||||||||||||||||||||||
|
Rental
|
Interest
|
Other
|
Total
|
Operating
|
Operating
|
Depreciation/
|
Interest
|
|||||||||||||||||||||||||
| Income(1) | Income | Income | Revenues | Expenses(1) | Income(2) | Amortization(1) | Expense(1) | |||||||||||||||||||||||||
|
Year ended December 31, 2007:
|
||||||||||||||||||||||||||||||||
|
Investment properties
|
$ | 345,683 | $ | 25,823 | $ | 8,010 | $ | 379,516 | $ | 0 | $ | 379,516 | $ | 103,236 | $ | 8,763 | ||||||||||||||||
|
Medical office buildings
|
111,614 | 0 | 497 | 112,111 | 37,475 | 74,636 | 46,390 | 23,278 | ||||||||||||||||||||||||
|
Non-segment/corporate
|
0 | 0 | 1,528 | 1,528 | 0 | 1,528 | 0 | 113,285 | ||||||||||||||||||||||||
| $ | 457,297 | $ | 25,823 | $ | 10,035 | $ | 493,155 | $ | 37,475 | $ | 455,680 | $ | 149,626 | $ | 145,326 | |||||||||||||||||
| (1) | Includes amounts from discontinued operations. | |
| (2) | Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. |
| 19. | Quarterly Results of Operations (Unaudited) |
The following is a summary of our unaudited quarterly results of
operations for the years ended December 31, 2009 and 2008
(in thousands, except per share data). The sum of individual
quarterly amounts may not agree to the annual amounts per the
consolidated statements of income due to rounding.
104
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Year Ended December 31, 2009 | ||||||||||||||||
| 1st Quarter | 2nd Quarter | 3rd Quarter(2) | 4th Quarter | |||||||||||||
|
Revenues — as reported
|
$ | 144,328 | $ | 141,686 | $ | 145,098 | $ | 147,261 | ||||||||
|
Discontinued operations
|
(5,027 | ) | (2,192 | ) | (2,181 | ) | 0 | |||||||||
|
Revenues — as adjusted(1)
|
$ | 139,301 | $ | 139,494 | $ | 142,917 | $ | 147,261 | ||||||||
|
Net income attributable to common stockholders
|
$ | 61,119 | $ | 59,240 | $ | 19,130 | $ | 31,700 | ||||||||
|
Net income attributable to common stockholders per share:
|
||||||||||||||||
|
Basic
|
$ | 0.56 | $ | 0.53 | $ | 0.17 | $ | 0.26 | ||||||||
|
Diluted
|
0.56 | 0.53 | 0.17 | 0.26 | ||||||||||||
| Year Ended December 31, 2008 | ||||||||||||||||
| 1st Quarter | 2nd Quarter(3) | 3rd Quarter | 4th Quarter(4) | |||||||||||||
|
Revenues — as reported
|
$ | 135,852 | $ | 135,888 | $ | 145,096 | $ | 147,123 | ||||||||
|
Discontinued operations
|
(14,295 | ) | (9,042 | ) | (8,195 | ) | (6,022 | ) | ||||||||
|
Revenues — as adjusted(1)
|
$ | 121,557 | $ | 126,846 | $ | 136,901 | $ | 141,101 | ||||||||
|
Net income attributable to common stockholders
|
$ | 29,249 | $ | 155,410 | $ | 53,589 | $ | 21,849 | ||||||||
|
Net income attributable to common stockholders per share:
|
||||||||||||||||
|
Basic
|
$ | 0.34 | $ | 1.74 | $ | 0.56 | $ | 0.21 | ||||||||
|
Diluted
|
0.34 | 1.73 | 0.55 | 0.21 | ||||||||||||
| (1) | We have reclassified the income attributable to the properties sold subsequent to January 1, 2002 and attributable to the properties held for sale at December 31, 2009 to discontinued operations. See Note 3. | |
| (2) | The decreases in net income and amounts per share are primarily attributable to losses on extinguishment of debt ($26,374,000). | |
| (3) | The increases in net income and amounts per share are primarily attributable to gains on sales of real property ($118,168,000). | |
| (4) | The decreases in net income and amounts per share are primarily attributable to impairment charges ($32,648,000) and realized loss on derivatives ($23,393,000) offset by gains on sales of real property ($33,120,000). |
| 20. | Subsequent Events |
We have evaluated subsequent events for recognition or
disclosure through the time we filed this Annual Report on
Form 10-K
with the SEC on February 26, 2010 and noted no events
requiring disclosure.
| 21. | Retrospective Application of New Accounting Standards |
We adopted FASB Accounting Standards Codification
(“ASC”) topic for Noncontrolling Interests in
Consolidated Financial Statements (“Noncontrolling Interest
Guidance”) and ASC topic for Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement) (“Convertible Debt
Guidance”), effective January 1, 2009, each of which
required retrospective application. Noncontrolling Interest
Guidance changed the accounting and reporting for minority
interests, which have been re-characterized as noncontrolling
interests and classified as a component of equity. Convertible
Debt Guidance provides guidance on accounting for convertible
debt that may be settled in cash upon conversion. It requires
bifurcation of the convertible debt instrument into a debt
component and an equity component. The value of the debt
component
105
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
is based upon the estimated fair value of a similar debt
instrument without the conversion feature. The difference
between the contractual principal on the debt and the value
allocated to the debt is recorded as an equity component and
represents the conversion feature of the instrument. The excess
of the contractual principal amount of the debt over its
estimated fair value is amortized to interest expense using the
effective interest method over the period used to estimate the
fair value. The following tables illustrate the retrospective
restatement of our previously reported consolidated balance
sheet amounts adjusted for certain balance sheet
reclassifications to reflect the application of the new guidance
for the periods indicated (in thousands):
| As of December 31, 2008 | ||||||||||||||||
|
Convertible
|
Noncontrolling
|
|||||||||||||||
|
As Previously
|
Debt
|
Interests
|
As
|
|||||||||||||
| Reported | Adjustment | Adjustment | Adjusted | |||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Borrowings under unsecured lines of credit arrangements
|
$ | 570,000 | $ | 570,000 | ||||||||||||
|
Senior unsecured notes
|
1,847,247 | $ | (16,096 | ) | 1,831,151 | |||||||||||
|
Secured debt
|
446,525 | 446,525 | ||||||||||||||
|
Accrued expenses and other liabilities
|
129,070 | 129,070 | ||||||||||||||
|
Total liabilities
|
2,992,842 | (16,096 | ) | $ | 0 | 2,976,746 | ||||||||||
|
Minority interests
|
10,603 | (10,603 | ) | 0 | ||||||||||||
|
Equity:
|
||||||||||||||||
|
Preferred stock, $1.00 par value
|
289,929 | 289,929 | ||||||||||||||
|
Common stock, $1.00 par value
|
104,635 | 104,635 | ||||||||||||||
|
Capital in excess of par value
|
3,180,628 | 24,062 | 3,204,690 | |||||||||||||
|
Treasury stock
|
(5,145 | ) | (5,145 | ) | ||||||||||||
|
Cumulative net income
|
1,362,366 | (7,966 | ) | 1,354,400 | ||||||||||||
|
Cumulative dividends
|
(1,723,819 | ) | (1,723,819 | ) | ||||||||||||
|
Accumulated other comprehensive income
|
(1,113 | ) | (1,113 | ) | ||||||||||||
|
Other equity
|
4,105 | 4,105 | ||||||||||||||
|
Total Health Care REIT, Inc. stockholders’ equity
|
3,211,586 | 16,096 | 0 | 3,227,682 | ||||||||||||
|
Noncontrolling interests
|
0 | 10,603 | 10,603 | |||||||||||||
|
Total equity
|
3,211,586 | 16,096 | 10,603 | 3,238,285 | ||||||||||||
|
Total liabilities and equity
|
$ | 6,215,031 | $ | 0 | $ | 0 | $ | 6,215,031 | ||||||||
106
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HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following tables illustrate the retrospective restatement of
our previously reported consolidated statements of income
amounts to reflect the application of the aforementioned new
guidance as well as discontinued operations reclassifications
for the periods indicated (amounts in thousands, except per
share amounts):
| Year Ended December 31, 2008 | ||||||||||||||||||||
|
Convertible
|
Noncontrolling
|
Discontinued
|
||||||||||||||||||
|
As Previously
|
Debt
|
Interests
|
Operations
|
As
|
||||||||||||||||
| Reported | Adjustment | Adjustment | Adjustment | Adjusted | ||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Rental income
|
$ | 500,630 | $ | 0 | $ | 0 | $ | (24,808 | ) | $ | 475,822 | |||||||||
|
Interest income
|
40,063 | 40,063 | ||||||||||||||||||
|
Other income
|
10,521 | 10,521 | ||||||||||||||||||
| 551,214 | 0 | 0 | (24,808 | ) | 526,406 | |||||||||||||||
|
Expenses:
|
||||||||||||||||||||
|
Interest and loan expenses
|
130,813 | 4,812 | (5,472 | ) | 130,153 | |||||||||||||||
|
Property operating expenses
|
43,990 | (1,356 | ) | 42,634 | ||||||||||||||||
|
Depreciation and amortization
|
156,154 | (11,793 | ) | 144,361 | ||||||||||||||||
|
General and administrative
|
47,193 | 47,193 | ||||||||||||||||||
|
Realized loss on derivatives
|
23,393 | 23,393 | ||||||||||||||||||
|
Loss (gain) on extinguishment of debt
|
(2,094 | ) | (2,094 | ) | ||||||||||||||||
|
Provision for loan losses
|
94 | 94 | ||||||||||||||||||
| 399,543 | 4,812 | 0 | (18,621 | ) | 385,734 | |||||||||||||||
|
Income from continuing operations before income taxes and
minority interests
|
151,671 | (4,812 | ) | 0 | (6,187 | ) | 140,672 | |||||||||||||
|
Income tax (expense) benefit
|
(1,306 | ) | (1,306 | ) | ||||||||||||||||
|
Income before minority interests
|
150,365 | (4,812 | ) | 0 | (6,187 | ) | 139,366 | |||||||||||||
|
Minority interests
|
(126 | ) | 126 | 0 | ||||||||||||||||
|
Income from continuing operations
|
150,239 | (4,812 | ) | 126 | (6,187 | ) | 139,366 | |||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||
|
Gain (loss) on sales of properties
|
163,933 | 163,933 | ||||||||||||||||||
|
Impairment of assets
|
(32,648 | ) | (32,648 | ) | ||||||||||||||||
|
Income from discontinued operations, net
|
6,587 | 6,187 | 12,774 | |||||||||||||||||
| 137,872 | 0 | 0 | 6,187 | 144,059 | ||||||||||||||||
|
Net income
|
288,111 | (4,812 | ) | 126 | 0 | 283,425 | ||||||||||||||
|
Less: Preferred stock dividends
|
23,201 | 23,201 | ||||||||||||||||||
|
Net income attributable to noncontrolling interests
|
0 | 126 | 126 | |||||||||||||||||
|
Net income attributable to common stockholders
|
$ | 264,910 | $ | (4,812 | ) | $ | 0 | $ | 0 | $ | 260,098 | |||||||||
|
Average number of common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
93,732 | 93,732 | 93,732 | 93,732 | 93,732 | |||||||||||||||
|
Diluted
|
94,309 | 94,309 | 94,309 | 94,309 | 94,309 | |||||||||||||||
|
Earnings per share:
|
||||||||||||||||||||
|
Basic:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.36 | $ | (0.05 | ) | $ | 0.00 | $ | (0.07 | ) | $ | 1.24 | ||||||||
|
Discontinued operations, net
|
1.47 | 0.00 | 0.00 | 0.07 | 1.54 | |||||||||||||||
|
Net income attributable to common stockholders
|
$ | 2.83 | $ | (0.05 | ) | $ | 0.00 | $ | 0.00 | $ | 2.77 | |||||||||
|
Diluted:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.35 | $ | (0.05 | ) | $ | 0.00 | $ | (0.07 | ) | $ | 1.23 | ||||||||
|
Discontinued operations, net
|
1.46 | 0.00 | 0.00 | 0.07 | 1.53 | |||||||||||||||
|
Net income attributable to common stockholders
|
$ | 2.81 | $ | (0.05 | ) | $ | 0.00 | $ | 0.00 | $ | 2.76 | |||||||||
107
Table of Contents
HEALTH
CARE REIT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Year Ended December 31, 2007 | ||||||||||||||||||||
|
Convertible
|
Noncontrolling
|
Discontinued
|
||||||||||||||||||
|
As Previously
|
Debt
|
Interests
|
Operations
|
As
|
||||||||||||||||
| Reported | Adjustment | Adjustment | Adjustment | Adjusted | ||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Rental income
|
$ | 417,673 | $ | 0 | $ | 0 | $ | (24,045 | ) | $ | 393,628 | |||||||||
|
Interest income
|
25,823 | 25,823 | ||||||||||||||||||
|
Other income
|
10,035 | 10,035 | ||||||||||||||||||
| 453,531 | 0 | 0 | (24,045 | ) | 429,486 | |||||||||||||||
|
Expenses:
|
||||||||||||||||||||
|
Interest expense
|
131,893 | 3,047 | (3,669 | ) | 131,271 | |||||||||||||||
|
Property operating expenses
|
34,707 | (1,297 | ) | 33,410 | ||||||||||||||||
|
Depreciation and amortization
|
135,224 | (10,992 | ) | 124,232 | ||||||||||||||||
|
General and administrative
|
37,465 | 37,465 | ||||||||||||||||||
|
Realized loss on derivatives
|
0 | 0 | ||||||||||||||||||
|
Loss (gain) on extinguishment of debt
|
(1,081 | ) | (1,081 | ) | ||||||||||||||||
| 338,208 | 3,047 | 0 | (15,958 | ) | 325,297 | |||||||||||||||
|
Income from continuing operations before income taxes and
minority interests
|
115,323 | (3,047 | ) | 0 | (8,087 | ) | 104,189 | |||||||||||||
|
Income tax (expense) benefit
|
(188 | ) | (188 | ) | ||||||||||||||||
|
Income before minority interests
|
115,135 | (3,047 | ) | 0 | (8,087 | ) | 104,001 | |||||||||||||
|
Minority interests
|
(238 | ) | 238 | 0 | ||||||||||||||||
|
Income from continuing operations
|
114,897 | (3,047 | ) | 238 | (8,087 | ) | 104,001 | |||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||
|
Gain (loss) on sales of properties
|
14,437 | 14,437 | ||||||||||||||||||
|
Income from discontinued operations, net
|
12,068 | 8,087 | 20,155 | |||||||||||||||||
| 26,505 | 0 | 0 | 8,087 | 34,592 | ||||||||||||||||
|
Net income
|
141,402 | (3,047 | ) | 238 | 0 | 138,593 | ||||||||||||||
|
Less: Preferred stock dividends
|
25,130 | 25,130 | ||||||||||||||||||
|
Net income attributable to noncontrolling interests
|
0 | 238 | 238 | |||||||||||||||||
|
Net income attributable to common stockholders
|
$ | 116,272 | $ | (3,047 | ) | $ | 0 | $ | 0 | $ | 113,225 | |||||||||
|
Average number of common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
78,861 | 78,861 | 78,861 | 78,861 | 78,861 | |||||||||||||||
|
Diluted
|
79,409 | 79,409 | 79,409 | 79,409 | 79,409 | |||||||||||||||
|
Earnings per share:
|
||||||||||||||||||||
|
Basic:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.14 | $ | (0.04 | ) | $ | 0.00 | $ | (0.10 | ) | $ | 1.00 | ||||||||
|
Discontinued operations, net
|
0.34 | 0.00 | 0.00 | 0.10 | 0.44 | |||||||||||||||
|
Net income attributable to common stockholders
|
$ | 1.47 | $ | (0.04 | ) | $ | 0.00 | $ | 0.00 | $ | 1.44 | |||||||||
|
Diluted:
|
||||||||||||||||||||
|
Income from continuing operations attributable to common
stockholders
|
$ | 1.13 | $ | (0.04 | ) | $ | 0.00 | $ | (0.10 | ) | $ | 0.99 | ||||||||
|
Discontinued operations, net
|
0.33 | 0.00 | 0.00 | 0.10 | 0.44 | |||||||||||||||
|
Net income attributable to common stockholders
|
$ | 1.46 | $ | (0.04 | ) | $ | 0.00 | $ | 0.00 | $ | 1.43 | |||||||||
108
Table of Contents
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
| Item 9A. | Controls and Procedures |
Disclosure
Controls and Procedures
An evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures
were effective as of the end of the period covered by this
report.
Management’s
Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in
Rule 13a-15(f)
of the Securities Exchange Act of 1934, as amended). The
Company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. The
Company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with
U.S. generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of
the Company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the Company’s assets that could have a
material effect on the financial statements. Because of its
inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management has assessed the effectiveness of the Company’s
internal control over financial reporting as of
December 31, 2009 based on the criteria established by the
Committee of Sponsoring Organizations of the Treadway Commission
in a report entitled Internal Control — Integrated
Framework. Based on this assessment, using the criteria above,
management concluded that the Company’s system of internal
control over financial reporting was effective as of
December 31, 2009.
The independent registered public accounting firm of
Ernst & Young LLP, as auditors of the Company’s
consolidated financial statements, has issued an attestation
report on the Company’s internal control over financial
reporting.
Changes
in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as
defined in
Rule 13a-15(f)
of the Securities Exchange Act of 1934, as amended) occurred
during the fourth quarter of the one-year period covered by this
report that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
109
Table of Contents
Report of
Independent Registered Public Accounting Firm on Internal
Control over Financial Reporting
The Board of Directors and Shareholders of Health Care REIT, Inc.
We have audited Health Care REIT, Inc.’s internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Health Care REIT,
Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management
Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Health Care REIT, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2009, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Health Care REIT, Inc. as of
December 31, 2009 and 2008, and the related consolidated
statements of income, stockholders’ equity, and cash flows
for each of the three years in the period ended
December 31, 2009 of Health Care REIT, Inc. and our report
dated February 26, 2010 expressed an unqualified opinion
thereon.
/s/
Ernst &
Young LLP
Toledo, Ohio
February 26, 2010
111
Table of Contents
| Item 9B. | Other Information |
None.
| Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by this Item is incorporated herein by
reference to the information under the headings “Election
of Directors,” “Executive Officers,” “Board
and Committees,” “Communications with the Board”
and “Security Ownership of Directors and Management and
Certain Beneficial Owners — Section 16(a)
Compliance” in our definitive proxy statement, which will
be filed with the Securities and Exchange Commission
(“Commission”) prior to April 30, 2010.
We have adopted a Code of Business Conduct & Ethics
that applies to our directors, officers and employees. The code
is posted on the Internet at www.hcreit.com. Any amendment to,
or waivers from, the code that relate to any officer or director
of the Company will be promptly disclosed on the Internet at
www.hcreit.com.
In addition, the Board has adopted charters for the Audit,
Compensation and Nominating/Corporate Governance Committees.
These charters are posted on the Internet at www.hcreit.com.
| Item 11. | Executive Compensation |
The information required by this Item is incorporated herein by
reference to the information under the headings “Executive
Compensation,” “Compensation Committee Report”
and “Director Compensation” in our definitive proxy
statement, which will be filed with the Commission prior to
April 30, 2010.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required by this Item is incorporated herein by
reference to the information under the headings “Security
Ownership of Directors and Management and Certain Beneficial
Owners” and “Equity Compensation Plan
Information” in our definitive proxy statement, which will
be filed with the Commission prior to April 30, 2010.
| Item 13. | Certain Relationships and Related Transactions and Director Independence |
The information required by this Item is incorporated herein by
reference to the information under the headings “Board and
Committees — Independence and Meetings” and
“Certain Relationships and Related Transactions” in
our definitive proxy statement, which will be filed with the
Commission prior to April 30, 2010.
| Item 14. | Principal Accounting Fees and Services |
The information required by this Item is incorporated herein by
reference to the information under the headings
“Ratification of the Appointment of the Independent
Registered Public Accounting Firm” and “Pre-Approval
Policies and Procedures” in our definitive proxy statement,
which will be filed with the Commission prior to April 30,
2010.
112
| Item 15. | Exhibits and Financial Statement Schedules |
(a) 1.
Our Consolidated Financial Statements are
included in Part II, Item 8:
| 72 | ||||
| 73 | ||||
| 74 | ||||
| 75 | ||||
| 76 | ||||
| 77 |
2.
The following Financial Statement Schedules are
included in Item 15(c):
III — Real Estate and Accumulated Depreciation
IV — Mortgage Loans on Real Estate
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.
3. Exhibit Index:
| 1 | .1(a) | Equity Distribution Agreement, dated as of November 6, 2008, by and among the Company and UBS Securities LLC (filed with the Commission as Exhibit 1.1 to the Company’s Form 8-K filed November 7, 2008 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 1 | .1(b) | Amendment No. 1 to Equity Distribution Agreement, dated as of May 8, 2009, by and among the Company and UBS Securities LLC (filed with the Commission as Exhibit 1.1 to the Company’s Form 10-Q filed August 6, 2009 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 2 | .1(a) | Agreement and Plan of Merger, dated as of September 12, 2006, by and among the Company, Heat Merger Sub, LLC, Heat OP Merger Sub, L.P., Windrose Medical Properties Trust and Windrose Medical Properties, L.P. (filed with the Commission as Exhibit 2.1 to the Company’s Form 8-K filed September 15, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 2 | .1(b) | Amendment No. 1 to Agreement and Plan of Merger, dated as of October 12, 2006, by and among the Company, Heat Merger Sub, LLC, Heat OP Merger Sub, L.P., Windrose Medical Properties Trust and Windrose Medical Properties, L.P. (filed with the Commission as Exhibit 2.1 to the Company’s Form 8-K filed October 13, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(a) | Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(b) | Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A, of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(c) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(d) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed June 13, 2003 (File No. 001-08923), and incorporated herein by reference thereto). |
113
Table of Contents
| 3 | .1(e) | Certificate of Designation of 7 7 / 8 % Series D Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A/A filed July 8, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(f) | Certificate of Designation of 6% Series E Cumulative Convertible and Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed October 1, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(g) | Certificate of Designation of 7 5 / 8 % Series F Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A filed September 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(h) | Certificate of Designation of 7.5% Series G Cumulative Convertible Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed December 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(i) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.9 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .2 | Second Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed October 29, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .1 | The Company, by signing this Report, agrees to furnish the Securities and Exchange Commission upon its request a copy of any instrument that defines the rights of holders of long-term debt of the Company and authorizes a total amount of securities not in excess of 10% of the total assets of the Company. | ||
| 4 | .2(a) | Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(b) | Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(c) | Amendment No. 1, dated March 12, 2003, to Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 14, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(d) | Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(e) | Amendment No. 1, dated September 16, 2003, to Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.4 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(f) | Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed October 30, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(g) | Amendment No. 1, dated September 13, 2004, to Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A., as successor to Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 13, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(h) | Supplemental Indenture No. 4, dated as of April 27, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed April 28, 2005 (File No. 001-08923), and incorporated herein by reference thereto). |
114
Table of Contents
| 4 | .2(i) | Supplemental Indenture No. 5, dated as of November 30, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 30, 2005 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(a) | Indenture, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(b) | Supplemental Indenture No. 1, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(c) | Supplemental Indenture No. 2, dated as of July 20, 2007, between the Company and The Bank of New York Trust Company, N.A. (filed with the SEC as Exhibit 4.1 to the Company’s Form 8-K filed July 20, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .4 | Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as Exhibit 4.9 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto). | ||
| 4 | .5 | Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as Exhibit 4.10 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto). | ||
| 4 | .6 | Form of Indenture for Senior Debt Securities (filed with the Commission as Exhibit 4.6 to the Company’s Form S-3 (File No. 333-159040) filed May 7, 2009, and incorporated herein by reference thereto). | ||
| 10 | .1 | Fourth Amended and Restated Loan Agreement, dated as of August 6, 2007, by and among the Company and certain of its subsidiaries, the banks signatory thereto, KeyBank National Association, as administrative agent, Deutsche Bank Securities Inc., as syndication agent, and UBS Securities LLC, Bank of America, N.A., JPMorgan Chase Bank, N.A., Calyon New York Branch, Barclays Bank PLC and Fifth Third Bank, as documentation agents (filed with the SEC as Exhibit 10.2 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 10 | .2 | Health Care REIT, Inc. Interest Rate & Currency Risk Management Policy adopted on May 6, 2004 (filed with the Commission as Exhibit 10.6 to the Company’s Form 10-Q filed July 23, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 10 | .3(a) | The 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Appendix II to the Company’s Proxy Statement for the 1995 Annual Meeting of Stockholders, filed September 29, 1995 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(b) | First Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.2 to the Company’s Form S-8 (File No. 333-40771) filed November 21, 1997, and incorporated herein by reference thereto).* | ||
| 10 | .3(c) | Second Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.3 to the Company’s Form S-8 (File No. 333-73916) filed November 21, 2001, and incorporated herein by reference thereto).* | ||
| 10 | .3(d) | Third Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.15 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(e) | Form of Stock Option Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed with the Commission as Exhibit 10.17 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(f) | Form of Restricted Stock Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(a) | Stock Plan for Non-Employee Directors of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* |
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Table of Contents
| 10 | .4(b) | First Amendment to the Stock Plan for Non-Employee Directors of Health Care REIT, Inc. effective April 21, 1998 (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(c) | Form of Stock Option Agreement under the Stock Plan for Non-Employee Directors (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q/A filed October 27, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(d) | Form of Restricted Stock Agreement under the Stock Plan for Non-Employee Directors (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(a) | Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (filed with the Commission as Appendix A to the Company’s Proxy Statement for the 2009 Annual Meeting of Stockholders, filed March 25, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(b) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(c) | Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.6 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(d) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.8 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(e) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.19 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(f) | Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.7 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(g) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.9 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(h) | Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(i) | Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.21 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(j) | Form of Restricted Stock Agreement for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.22 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(k) | Form of Restricted Stock Agreement for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.23 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(l) | Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.24 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(m) | Form of Amendment to Deferred Stock Unit Grant Agreements for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.10 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* |
116
Table of Contents
| 10 | .5(n) | Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.11 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(o) | Stock Option Agreement, dated December 20, 2006, between the Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed May 10, 2007 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(p) | Restricted Stock Agreement, dated January 22, 2007, by and between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.2 to the Company’s Form 8-K filed January 25, 2007 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(q) | Stock Option Agreement (with Dividend Equivalent Rights), dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(r) | Stock Option Agreement (without Dividend Equivalent Rights), dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(s) | Restricted Stock Agreement, dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .6 | Fourth Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and George L. Chapman (filed with the Commission as Exhibit 10.6 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .7 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Scott A. | ||
| Estes (filed with the Commission as Exhibit 10.4 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||||
| 10 | .8 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.3 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .9 | Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Jeffrey H. Miller (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .10 | Employment Agreement, dated January 19, 2009, between the Company and John T. Thomas (filed with the Commission as Exhibit 10.10 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .11 | Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Erin C. Ibele (filed with the Commission as Exhibit 10.11 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .12 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.12 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .13 | Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Fred S. Klipsch (filed with the Commission as Exhibit 10.5 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .14 | Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.14 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .15(a) | Consulting Agreement, dated February 1, 2009, between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.15(a) to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* |
117
Table of Contents
| 10 | .15(b) | Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.2 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .16 | Amended and Restated Health Care REIT, Inc. Supplemental Executive Retirement Plan, dated December 29, 2008 (filed with the Commission as Exhibit 10.12 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .17 | Form of Indemnification Agreement between the Company and each director, executive officer and officer of the Company (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 18, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .18 | Summary of Director Compensation (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 9, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 12 | Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited). | |||
| 14 | Code of Business Conduct and Ethics (filed with the Commission as Exhibit 14 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | |||
| 21 | Subsidiaries of the Company. | |||
| 23 | Consent of Ernst & Young LLP, independent registered public accounting firm. | |||
| 24 | .1 | Power of Attorney executed by William C. Ballard, Jr. (Director). | ||
| 24 | .2 | Power of Attorney executed by Pier C. Borra (Director). | ||
| 24 | .3 | Power of Attorney executed by Thomas J. DeRosa (Director). | ||
| 24 | .4 | Power of Attorney executed by Jeffrey H. Donahue (Director). | ||
| 24 | .5 | Power of Attorney executed by Peter J. Grua (Director). | ||
| 24 | .6 | Power of Attorney executed by Fred S. Klipsch (Director). | ||
| 24 | .7 | Power of Attorney executed by Sharon M. Oster (Director). | ||
| 24 | .8 | Power of Attorney executed by Jeffrey R. Otten (Director). | ||
| 24 | .9 | Power of Attorney executed by R. Scott Trumbull (Director). | ||
| 24 | .10 | Power of Attorney executed by George L. Chapman (Director, Chairman of the Board, Chief Executive Officer and President and Principal Executive Officer). | ||
| 24 | .11 | Power of Attorney executed by Scott A. Estes (Executive Vice President and Chief Financial Officer and Principal Financial Officer). | ||
| 24 | .12 | Power of Attorney executed by Paul D. Nungester, Jr. (Vice President and Controller and Principal Accounting Officer). | ||
| 31 | .1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. | ||
| 31 | .2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. | ||
| 32 | .1 | Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer. | ||
| 32 | .2 | Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer. |
| * | Management Contract or Compensatory Plan or Arrangement. |
(b)
Exhibits:
The exhibits listed in Item 15(a)(3) above are either filed
with this
Form 10-K
or incorporated by reference in accordance with
Rule 12b-32
of the Securities Exchange Act of 1934.
(c)
Financial Statement Schedules:
Financial statement schedules are included on pages 120 through
132.
118
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned
hereunto duly authorized.
HEALTH CARE REIT, INC.
| By: |
/s/
George
L. Chapman
|
Chairman, Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on February 26,
2010, by the following person on behalf of the Company and in
the capacities indicated.
|
/s/
William
C. Ballard, Jr.**
|
/s/
Sharon
M. Oster**
|
|
|
/s/
Pier
C. Borra**
|
/s/
Jeffrey
R. Otten**
|
|
|
/s/
Thomas
J. Derosa**
|
/s/
R.
Scott Trumbull**
|
|
|
/s/
Jeffrey
H. Donahue**
|
/s/
George
L. Chapman
Officer, President and Director (Principal Executive Officer) |
|
|
/s/
Peter
J. Grua**
|
/s/
Scott
A. ESTES**
Financial Officer (Principal Financial Officer) |
|
|
/s/
Fred
S. Klipsch**
|
/s/
Paul
D. Nungester, Jr.**
(Principal Accounting Officer) |
|
|
**By:
/s/
George
L. Chapman
|
119
Table of Contents
HEALTH
CARE REIT, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2009
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2009
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Assisted Living Facilities:
|
||||||||||||||||||||||||||||||||||||
|
Asheboro, NC
|
$ | 0 | $ | 290 | $ | 5,032 | $ | 165 | $ | 290 | $ | 5,197 | $ | 901 | 2003 | 1998 | ||||||||||||||||||||
|
Asheville, NC
|
0 | 204 | 3,489 | 0 | 204 | 3,489 | 1,105 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Asheville, NC
|
0 | 280 | 1,955 | 351 | 280 | 2,306 | 451 | 2003 | 1992 | |||||||||||||||||||||||||||
|
Austin, TX(9)
|
20,052 | 880 | 9,520 | 0 | 880 | 9,520 | 2,968 | 1999 | 1998 | |||||||||||||||||||||||||||
|
Azusa, CA
|
0 | 570 | 3,141 | 5,936 | 570 | 9,077 | 809 | 1998 | 1988 | |||||||||||||||||||||||||||
|
Bartlesville, OK
|
0 | 100 | 1,380 | 0 | 100 | 1,380 | 537 | 1996 | 1995 | |||||||||||||||||||||||||||
|
Bellevue, WI
|
0 | 1,740 | 18,260 | 571 | 1,740 | 18,831 | 1,706 | 2006 | 2004 | |||||||||||||||||||||||||||
|
Bethel Park, PA
|
0 | 1,700 | 16,455 | 0 | 1,700 | 16,455 | 338 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Bradenton, FL
|
0 | 252 | 3,298 | 0 | 252 | 3,298 | 1,301 | 1996 | 1995 | |||||||||||||||||||||||||||
|
Bremerton, WA
|
0 | 390 | 2,210 | 144 | 390 | 2,354 | 180 | 2006 | 1999 | |||||||||||||||||||||||||||
|
Burlington, NC
|
0 | 280 | 4,297 | 707 | 280 | 5,004 | 858 | 2003 | 2000 | |||||||||||||||||||||||||||
|
Burlington, NC
|
0 | 460 | 5,467 | 0 | 460 | 5,467 | 966 | 2003 | 1997 | |||||||||||||||||||||||||||
|
Butte, MT
|
0 | 550 | 3,957 | 43 | 550 | 4,000 | 1,001 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Canton, OH
|
0 | 300 | 2,098 | 0 | 300 | 2,098 | 661 | 1998 | 1998 | |||||||||||||||||||||||||||
|
Cape Coral, FL
|
0 | 530 | 3,281 | 0 | 530 | 3,281 | 713 | 2002 | 2000 | |||||||||||||||||||||||||||
|
Cary, NC
|
0 | 1,500 | 4,350 | 986 | 1,500 | 5,336 | 1,533 | 1998 | 1996 | |||||||||||||||||||||||||||
|
Cedar Hill, TX
|
0 | 171 | 1,490 | 0 | 171 | 1,490 | 562 | 1997 | 1996 | |||||||||||||||||||||||||||
|
Chapel Hill, NC
|
0 | 354 | 2,646 | 783 | 354 | 3,429 | 694 | 2002 | 1997 | |||||||||||||||||||||||||||
|
Chelmsford, MA(11)
|
13,102 | 1,040 | 10,951 | 0 | 1,040 | 10,951 | 1,815 | 2003 | 1997 | |||||||||||||||||||||||||||
|
Chickasha, OK
|
0 | 85 | 1,395 | 0 | 85 | 1,395 | 537 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Claremore, OK
|
0 | 155 | 1,428 | 0 | 155 | 1,428 | 530 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Clarksville, TN
|
0 | 330 | 2,292 | 0 | 330 | 2,292 | 715 | 1998 | 1998 | |||||||||||||||||||||||||||
|
Cleburne, TX(10)
|
5,999 | 520 | 5,369 | 0 | 520 | 5,369 | 364 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Columbia, TN
|
0 | 341 | 2,295 | 0 | 341 | 2,295 | 722 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Concord, NC
|
0 | 550 | 3,921 | 55 | 550 | 3,976 | 778 | 2003 | 1997 | |||||||||||||||||||||||||||
|
Crystal Lake, IL
|
0 | 840 | 7,290 | 0 | 840 | 7,290 | 253 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Danville, VA
|
0 | 410 | 3,954 | 722 | 410 | 4,676 | 836 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Davenport, IA
|
0 | 1,403 | 35,893 | 0 | 1,403 | 35,893 | 80 | 2006 | 2009 | |||||||||||||||||||||||||||
|
Dayton, OH
|
0 | 690 | 2,970 | 1,428 | 690 | 4,398 | 1,535 | 2003 | 1994 | |||||||||||||||||||||||||||
|
DeForest, WI
|
0 | 250 | 5,350 | 354 | 250 | 5,704 | 390 | 2007 | 2006 | |||||||||||||||||||||||||||
|
Desoto, TX
|
0 | 205 | 1,383 | 0 | 205 | 1,383 | 507 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Duncan, OK
|
0 | 103 | 1,347 | 0 | 103 | 1,347 | 514 | 1995 | 1996 | |||||||||||||||||||||||||||
|
Durham, NC
|
0 | 1,476 | 10,659 | 2,196 | 1,476 | 12,855 | 6,362 | 1997 | 1999 | |||||||||||||||||||||||||||
|
Eden, NC(1)
|
2,822 | 390 | 4,877 | 0 | 390 | 4,877 | 881 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Edmond, OK
|
0 | 175 | 1,564 | 0 | 175 | 1,564 | 587 | 1995 | 1996 | |||||||||||||||||||||||||||
|
Elizabeth City, NC
|
0 | 200 | 2,760 | 2,011 | 200 | 4,771 | 1,222 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Encinitas, CA
|
0 | 1,460 | 7,721 | 0 | 1,460 | 7,721 | 2,114 | 2000 | 2000 | |||||||||||||||||||||||||||
|
Enid, OK
|
0 | 90 | 1,390 | 0 | 90 | 1,390 | 541 | 1995 | 1995 | |||||||||||||||||||||||||||
|
Everett, WA
|
0 | 1,400 | 5,476 | 0 | 1,400 | 5,476 | 1,616 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Fairfield, CA
|
0 | 1,460 | 14,040 | 0 | 1,460 | 14,040 | 3,109 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Fairhaven, MA
|
0 | 770 | 6,230 | 0 | 770 | 6,230 | 951 | 2004 | 1999 | |||||||||||||||||||||||||||
|
Fayetteville, NY
|
0 | 410 | 3,962 | 500 | 410 | 4,462 | 949 | 2001 | 1997 | |||||||||||||||||||||||||||
|
Findlay, OH
|
0 | 200 | 1,800 | 0 | 200 | 1,800 | 634 | 1997 | 1997 | |||||||||||||||||||||||||||
|
Florence, NJ
|
0 | 300 | 2,978 | 0 | 300 | 2,978 | 643 | 2002 | 1999 | |||||||||||||||||||||||||||
|
Forest City, NC
|
0 | 320 | 4,497 | 0 | 320 | 4,497 | 818 | 2003 | 1999 | |||||||||||||||||||||||||||
|
Fredericksburg, VA(3)
|
6,571 | 1,000 | 20,000 | 303 | 1,000 | 20,303 | 2,508 | 2005 | 1999 | |||||||||||||||||||||||||||
|
Gastonia, NC
|
0 | 470 | 6,129 | 0 | 470 | 6,129 | 1,075 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Gastonia, NC
|
0 | 310 | 3,096 | 22 | 310 | 3,118 | 586 | 2003 | 1994 | |||||||||||||||||||||||||||
|
Gastonia, NC
|
0 | 400 | 5,029 | 120 | 400 | 5,149 | 905 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Georgetown, TX
|
0 | 200 | 2,100 | 0 | 200 | 2,100 | 725 | 1997 | 1997 | |||||||||||||||||||||||||||
|
Greenfield, WI
|
0 | 600 | 6,626 | 328 | 600 | 6,954 | 434 | 2006 | 2006 | |||||||||||||||||||||||||||
|
Greensboro, NC
|
0 | 330 | 2,970 | 554 | 330 | 3,524 | 645 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Greensboro, NC
|
0 | 560 | 5,507 | 1,013 | 560 | 6,520 | 1,184 | 2003 | 1997 | |||||||||||||||||||||||||||
|
Greenville, NC
|
0 | 290 | 4,393 | 168 | 290 | 4,561 | 791 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Greenville, SC(1)
|
3,093 | 310 | 4,750 | 0 | 310 | 4,750 | 734 | 2004 | 1997 | |||||||||||||||||||||||||||
|
Hamden, CT
|
0 | 1,470 | 4,530 | 0 | 1,470 | 4,530 | 1,165 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Hamilton, NJ
|
0 | 440 | 4,469 | 0 | 440 | 4,469 | 967 | 2001 | 1998 | |||||||||||||||||||||||||||
|
Harleysville, PA
|
0 | 960 | 11,355 | 0 | 960 | 11,355 | 178 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Hemet, CA
|
0 | 870 | 3,405 | 0 | 870 | 3,405 | 239 | 2007 | 1996 | |||||||||||||||||||||||||||
|
Henderson, NV
|
0 | 380 | 9,220 | 65 | 380 | 9,285 | 2,693 | 1998 | 1998 | |||||||||||||||||||||||||||
|
Henderson, NV
|
0 | 380 | 4,360 | 41 | 380 | 4,401 | 1,085 | 1999 | 2000 | |||||||||||||||||||||||||||
|
Hickory, NC
|
0 | 290 | 987 | 232 | 290 | 1,219 | 299 | 2003 | 1994 | |||||||||||||||||||||||||||
120
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
High Point, NC
|
$ | 0 | $ | 560 | $ | 4,443 | $ | 793 | $ | 560 | $ | 5,236 | $ | 940 | 2003 | 2000 | ||||||||||||||||||||
|
High Point, NC
|
0 | 370 | 2,185 | 410 | 370 | 2,595 | 499 | 2003 | 1999 | |||||||||||||||||||||||||||
|
High Point, NC
|
0 | 330 | 3,395 | 28 | 330 | 3,423 | 620 | 2003 | 1994 | |||||||||||||||||||||||||||
|
High Point, NC
|
0 | 430 | 4,143 | 0 | 430 | 4,143 | 744 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Highlands Ranch, CO
|
0 | 940 | 3,721 | 0 | 940 | 3,721 | 816 | 2002 | 1999 | |||||||||||||||||||||||||||
|
Hopedale, MA
|
0 | 130 | 8,170 | 0 | 130 | 8,170 | 1,067 | 2005 | 1999 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 360 | 2,640 | 0 | 360 | 2,640 | 561 | 2002 | 1999 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 360 | 2,640 | 0 | 360 | 2,640 | 555 | 2002 | 1999 | |||||||||||||||||||||||||||
|
Hutchinson, KS(11)
|
10,673 | 600 | 10,590 | 0 | 600 | 10,590 | 1,473 | 2004 | 1997 | |||||||||||||||||||||||||||
|
Irving, TX
|
0 | 1,030 | 6,823 | 267 | 1,030 | 7,090 | 239 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Jonesboro, GA
|
0 | 460 | 1,304 | 0 | 460 | 1,304 | 243 | 2003 | 1992 | |||||||||||||||||||||||||||
|
Kalispell, MT
|
0 | 360 | 3,282 | 0 | 360 | 3,282 | 1,009 | 1998 | 1998 | |||||||||||||||||||||||||||
|
Kenner, LA
|
0 | 1,100 | 10,036 | 125 | 1,100 | 10,161 | 5,079 | 1998 | 2000 | |||||||||||||||||||||||||||
|
Kenosha, WI
|
0 | 1,500 | 9,139 | 0 | 1,500 | 9,139 | 227 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Kent, WA
|
0 | 940 | 20,318 | 10,381 | 940 | 30,699 | 1,223 | 2007 | 2000 | |||||||||||||||||||||||||||
|
Kirkland, WA(11)
|
4,979 | 1,880 | 4,315 | 0 | 1,880 | 4,315 | 761 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Lake Havasu City, AZ
|
0 | 450 | 4,223 | 0 | 450 | 4,223 | 1,226 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Lake Havasu City, AZ
|
0 | 110 | 2,244 | 136 | 110 | 2,380 | 732 | 1998 | 1994 | |||||||||||||||||||||||||||
|
Lecanto, FL(11)
|
4,211 | 200 | 6,900 | 0 | 200 | 6,900 | 1,022 | 2004 | 1986 | |||||||||||||||||||||||||||
|
Lenoir, NC
|
0 | 190 | 3,748 | 641 | 190 | 4,389 | 784 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Lexington, NC
|
0 | 200 | 3,900 | 1,015 | 200 | 4,915 | 972 | 2002 | 1997 | |||||||||||||||||||||||||||
|
Longview, TX(10)
|
7,339 | 610 | 5,520 | 0 | 610 | 5,520 | 385 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Manassas, VA(11)
|
7,904 | 750 | 7,446 | 0 | 750 | 7,446 | 1,256 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Mansfield, TX(10)
|
5,272 | 660 | 5,251 | 0 | 660 | 5,251 | 370 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Margate, FL
|
0 | 500 | 7,303 | 2,459 | 500 | 9,762 | 6,016 | 1998 | 1972 | |||||||||||||||||||||||||||
|
Martinsville, VA
|
0 | 349 | 0 | 0 | 349 | 0 | 0 | 2003 | ||||||||||||||||||||||||||||
|
Marysville, CA
|
0 | 450 | 4,172 | 44 | 450 | 4,216 | 1,059 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Matthews, NC(1)
|
3,527 | 560 | 4,738 | 0 | 560 | 4,738 | 884 | 2003 | 1998 | |||||||||||||||||||||||||||
|
McHenry, IL
|
0 | 1,632 | 0 | 0 | 1,632 | 0 | 0 | 2006 | ||||||||||||||||||||||||||||
|
McHenry, IL
|
0 | 3,550 | 15,300 | 6,718 | 3,550 | 22,018 | 1,390 | 2006 | 2004 | |||||||||||||||||||||||||||
|
Menomonee Falls, WI
|
0 | 1,020 | 6,984 | 0 | 1,020 | 6,984 | 420 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Middleburg Heights, OH
|
0 | 960 | 7,780 | 0 | 960 | 7,780 | 1,104 | 2004 | 1998 | |||||||||||||||||||||||||||
|
Middleton, WI
|
0 | 420 | 4,006 | 600 | 420 | 4,606 | 869 | 2001 | 1991 | |||||||||||||||||||||||||||
|
Midwest City, OK
|
0 | 95 | 1,385 | 0 | 95 | 1,385 | 539 | 1996 | 1995 | |||||||||||||||||||||||||||
|
Missoula, MT(2)
|
6,048 | 550 | 7,490 | 0 | 550 | 7,490 | 878 | 2005 | 1998 | |||||||||||||||||||||||||||
|
Monroe, NC
|
0 | 470 | 3,681 | 648 | 470 | 4,329 | 793 | 2003 | 2001 | |||||||||||||||||||||||||||
|
Monroe, NC
|
0 | 310 | 4,799 | 857 | 310 | 5,656 | 976 | 2003 | 2000 | |||||||||||||||||||||||||||
|
Monroe, NC
|
0 | 450 | 4,021 | 114 | 450 | 4,135 | 752 | 2003 | 1997 | |||||||||||||||||||||||||||
|
Morehead City, NC
|
0 | 200 | 3,104 | 1,648 | 200 | 4,752 | 1,209 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Mt. Vernon, WA
|
0 | 400 | 2,200 | 156 | 400 | 2,356 | 186 | 2006 | 2001 | |||||||||||||||||||||||||||
|
Nacogdoches, TX(10)
|
6,245 | 390 | 5,754 | 0 | 390 | 5,754 | 390 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Nashville, TN
|
0 | 4,910 | 29,590 | 0 | 4,910 | 29,590 | 1,191 | 2008 | 2007 | |||||||||||||||||||||||||||
|
New York, NY
|
0 | 1,440 | 21,460 | 975 | 1,440 | 22,435 | 1,702 | 2006 | 1959 | |||||||||||||||||||||||||||
|
Newark, DE(11)
|
14,473 | 560 | 21,220 | 0 | 560 | 21,220 | 2,900 | 2004 | 1998 | |||||||||||||||||||||||||||
|
Newburyport, MA
|
0 | 960 | 8,290 | 0 | 960 | 8,290 | 1,750 | 2002 | 1999 | |||||||||||||||||||||||||||
|
Norman, OK
|
0 | 55 | 1,484 | 0 | 55 | 1,484 | 657 | 1995 | 1995 | |||||||||||||||||||||||||||
|
North Augusta, SC
|
0 | 332 | 2,558 | 0 | 332 | 2,558 | 792 | 1999 | 1998 | |||||||||||||||||||||||||||
|
North Miami Beach, FL
|
0 | 300 | 5,709 | 2,006 | 300 | 7,715 | 4,653 | 1998 | 1987 | |||||||||||||||||||||||||||
|
North Oklahoma City, OK
|
0 | 87 | 1,508 | 0 | 87 | 1,508 | 553 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Ocala, FL
|
0 | 1,340 | 10,564 | 0 | 1,340 | 10,564 | 75 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Ogden, UT(11)
|
7,411 | 360 | 6,700 | 0 | 360 | 6,700 | 961 | 2004 | 1998 | |||||||||||||||||||||||||||
|
Oklahoma City, OK
|
0 | 130 | 1,350 | 0 | 130 | 1,350 | 516 | 1995 | 1996 | |||||||||||||||||||||||||||
|
Oklahoma City, OK
|
0 | 220 | 2,943 | 0 | 220 | 2,943 | 860 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Oklahoma City, OK
|
0 | 590 | 7,513 | 0 | 590 | 7,513 | 311 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Oklahoma City, OK
|
0 | 760 | 7,017 | 0 | 760 | 7,017 | 154 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Oneonta, NY
|
0 | 80 | 5,020 | 0 | 80 | 5,020 | 297 | 2007 | 1996 | |||||||||||||||||||||||||||
|
Oshkosh, WI
|
0 | 900 | 3,800 | 3,687 | 900 | 7,487 | 672 | 2006 | 2005 | |||||||||||||||||||||||||||
|
Oswego, IL
|
0 | 900 | 8,047 | 0 | 900 | 8,047 | 281 | 2006 | 2008 | |||||||||||||||||||||||||||
|
Owasso, OK
|
0 | 215 | 1,380 | 0 | 215 | 1,380 | 512 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Palestine, TX
|
0 | 173 | 1,410 | 0 | 173 | 1,410 | 524 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Palestine, TX
|
0 | 180 | 4,320 | 1,300 | 180 | 5,620 | 424 | 2006 | 2005 | |||||||||||||||||||||||||||
|
Paris, TX(10)
|
6,527 | 490 | 5,452 | 0 | 490 | 5,452 | 1,150 | 2005 | 2006 | |||||||||||||||||||||||||||
|
Paso Robles, CA
|
0 | 1,770 | 8,630 | 0 | 1,770 | 8,630 | 1,898 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Pinehurst, NC
|
0 | 290 | 2,690 | 484 | 290 | 3,174 | 602 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Piqua, OH
|
0 | 204 | 1,885 | 0 | 204 | 1,885 | 618 | 1997 | 1997 | |||||||||||||||||||||||||||
|
Pittsburgh, PA(11)
|
6,259 | 1,750 | 8,572 | 115 | 1,750 | 8,687 | 1,162 | 2005 | 1998 | |||||||||||||||||||||||||||
|
Ponca City, OK
|
0 | 114 | 1,536 | 0 | 114 | 1,536 | 594 | 1995 | 1995 | |||||||||||||||||||||||||||
|
Quincy, MA
|
0 | 2,690 | 15,410 | 0 | 2,690 | 15,410 | 2,030 | 2004 | 1999 | |||||||||||||||||||||||||||
|
Reidsville, NC
|
0 | 170 | 3,830 | 857 | 170 | 4,687 | 939 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Reno, NV
|
0 | 1,060 | 11,440 | 0 | 1,060 | 11,440 | 1,622 | 2004 | 1998 | |||||||||||||||||||||||||||
121
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Ridgeland, MS
|
$ | 0 | $ | 520 | $ | 7,675 | $ | 0 | $ | 520 | $ | 7,675 | $ | 1,296 | 2003 | 1997 | ||||||||||||||||||||
|
Rocky Hill, CT
|
0 | 1,460 | 7,040 | 0 | 1,460 | 7,040 | 1,639 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Rocky Hill, CT
|
0 | 1,090 | 6,710 | 1,500 | 1,090 | 8,210 | 1,184 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Romeoville, IL
|
0 | 854 | 12,646 | 0 | 854 | 12,646 | 169 | 2006 | 2009 | |||||||||||||||||||||||||||
|
Romeroville, IL
|
0 | 1,895 | 0 | 0 | 1,895 | 0 | 0 | 2006 | ||||||||||||||||||||||||||||
|
Salem, OR
|
0 | 449 | 5,172 | 0 | 449 | 5,172 | 1,579 | 1999 | 1998 | |||||||||||||||||||||||||||
|
Salisbury, NC
|
0 | 370 | 5,697 | 168 | 370 | 5,865 | 1,021 | 2003 | 1997 | |||||||||||||||||||||||||||
|
San Angelo, TX(11)
|
4,907 | 260 | 8,800 | 0 | 260 | 8,800 | 1,223 | 2004 | 1997 | |||||||||||||||||||||||||||
|
San Juan Capistrano, CA
|
0 | 1,390 | 6,942 | 0 | 1,390 | 6,942 | 1,635 | 2000 | 2001 | |||||||||||||||||||||||||||
|
Sarasota, FL
|
0 | 475 | 3,175 | 0 | 475 | 3,175 | 1,252 | 1996 | 1995 | |||||||||||||||||||||||||||
|
Scottsdale, AZ
|
0 | 2,500 | 3,890 | 430 | 2,500 | 4,320 | 168 | 2008 | 1999 | |||||||||||||||||||||||||||
|
Seven Fields, PA(11)
|
2,991 | 484 | 4,663 | 59 | 484 | 4,722 | 1,449 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Shawnee, OK
|
0 | 80 | 1,400 | 0 | 80 | 1,400 | 541 | 1996 | 1995 | |||||||||||||||||||||||||||
|
Sheboygan, WI
|
0 | 80 | 5,320 | 0 | 80 | 5,320 | 510 | 2006 | 2006 | |||||||||||||||||||||||||||
|
Sherman, TX(10)
|
3,566 | 700 | 5,221 | 0 | 700 | 5,221 | 424 | 2005 | 2006 | |||||||||||||||||||||||||||
|
Smithfield, NC
|
0 | 290 | 5,680 | 0 | 290 | 5,680 | 1,010 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Sparks, NV
|
0 | 3,700 | 46,526 | 0 | 3,700 | 46,526 | 521 | 2007 | 2009 | |||||||||||||||||||||||||||
|
St. Charles, IL
|
0 | 990 | 15,265 | 0 | 990 | 15,265 | 239 | 2006 | 2009 | |||||||||||||||||||||||||||
|
Statesville, NC
|
0 | 150 | 1,447 | 266 | 150 | 1,713 | 323 | 2003 | 1990 | |||||||||||||||||||||||||||
|
Statesville, NC
|
0 | 310 | 6,183 | 8 | 310 | 6,191 | 1,059 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Statesville, NC(1)
|
2,309 | 140 | 3,627 | 0 | 140 | 3,627 | 646 | 2003 | 1999 | |||||||||||||||||||||||||||
|
Stillwater, OK
|
0 | 80 | 1,400 | 0 | 80 | 1,400 | 544 | 1995 | 1995 | |||||||||||||||||||||||||||
|
Texarkana, TX
|
0 | 192 | 1,403 | 0 | 192 | 1,403 | 519 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Troy, OH
|
0 | 200 | 2,000 | 0 | 200 | 2,000 | 694 | 1997 | 1997 | |||||||||||||||||||||||||||
|
Tyler, TX(10)
|
7,051 | 650 | 5,268 | 0 | 650 | 5,268 | 369 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Valparaiso, IN
|
0 | 112 | 2,558 | 0 | 112 | 2,558 | 615 | 2001 | 1998 | |||||||||||||||||||||||||||
|
Valparaiso, IN
|
0 | 108 | 2,962 | 0 | 108 | 2,962 | 697 | 2001 | 1999 | |||||||||||||||||||||||||||
|
Venice Beach, FL
|
0 | 1,150 | 10,674 | 0 | 1,150 | 10,674 | 0 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Vero Beach, FL
|
0 | 263 | 3,187 | 0 | 263 | 3,187 | 742 | 2001 | 1999 | |||||||||||||||||||||||||||
|
Vero Beach, FL
|
0 | 297 | 3,263 | 0 | 297 | 3,263 | 767 | 2001 | 1996 | |||||||||||||||||||||||||||
|
W. Hartford, CT
|
0 | 2,650 | 5,980 | 0 | 2,650 | 5,980 | 976 | 2004 | 1905 | |||||||||||||||||||||||||||
|
Wake Forest, NC
|
0 | 200 | 3,003 | 1,743 | 200 | 4,746 | 1,281 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Waterford, CT
|
0 | 1,360 | 12,540 | 0 | 1,360 | 12,540 | 2,685 | 2002 | 2000 | |||||||||||||||||||||||||||
|
Waukesha, WI
|
0 | 1,100 | 14,910 | 0 | 1,100 | 14,910 | 0 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Waxahachie, TX
|
0 | 154 | 1,429 | 0 | 154 | 1,429 | 530 | 1996 | 1996 | |||||||||||||||||||||||||||
|
Waxahachie, TX(10)
|
4,092 | 650 | 5,763 | 0 | 650 | 5,763 | 251 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Weatherford, TX(10)
|
5,858 | 660 | 5,261 | 0 | 660 | 5,261 | 371 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Westerville, OH
|
0 | 740 | 8,287 | 2,737 | 740 | 11,024 | 4,812 | 1998 | 2001 | |||||||||||||||||||||||||||
|
Wilmington, NC
|
0 | 210 | 2,991 | 0 | 210 | 2,991 | 906 | 1999 | 1999 | |||||||||||||||||||||||||||
|
Winston-Salem, NC
|
0 | 360 | 2,514 | 460 | 360 | 2,974 | 543 | 2003 | 1996 | |||||||||||||||||||||||||||
|
Total Assisted Living Facilities
|
173,281 | 114,563 | 1,033,937 | 63,633 | 114,563 | 1,097,570 | 169,358 | |||||||||||||||||||||||||||||
|
Skilled Nuring Facilities:
|
||||||||||||||||||||||||||||||||||||
|
Agawam, MA
|
0 | 880 | 16,112 | 2,134 | 880 | 18,246 | 3,644 | 2002 | 1993 | |||||||||||||||||||||||||||
|
Akron, OH
|
0 | 290 | 8,219 | 491 | 290 | 8,710 | 1,034 | 2005 | 1961 | |||||||||||||||||||||||||||
|
Akron, OH
|
0 | 630 | 7,535 | 184 | 630 | 7,719 | 759 | 2006 | 1915 | |||||||||||||||||||||||||||
|
Alexandria, VA
|
0 | 1,330 | 7,820 | 0 | 1,330 | 7,820 | 229 | 2008 | 1955 | |||||||||||||||||||||||||||
|
Alliance, OH(4)
|
4,742 | 270 | 7,723 | 107 | 270 | 7,830 | 855 | 2006 | 1982 | |||||||||||||||||||||||||||
|
Amarillo, TX
|
0 | 540 | 7,260 | 0 | 540 | 7,260 | 957 | 2005 | 1986 | |||||||||||||||||||||||||||
|
Arcadia, LA
|
0 | 240 | 5,460 | 0 | 240 | 5,460 | 693 | 2006 | 2006 | |||||||||||||||||||||||||||
|
Atlanta, GA
|
0 | 460 | 5,540 | 0 | 460 | 5,540 | 794 | 2005 | 1972 | |||||||||||||||||||||||||||
|
Auburndale, FL
|
0 | 750 | 5,950 | 0 | 750 | 5,950 | 811 | 2005 | 1983 | |||||||||||||||||||||||||||
|
Austin, TX
|
0 | 730 | 18,970 | 0 | 730 | 18,970 | 1,403 | 2007 | 2006 | |||||||||||||||||||||||||||
|
Baltic, OH(4)
|
3,886 | 50 | 8,709 | 189 | 50 | 8,898 | 950 | 2006 | 1983 | |||||||||||||||||||||||||||
|
Baytown, TX
|
0 | 450 | 6,150 | 0 | 450 | 6,150 | 1,332 | 2002 | 2000 | |||||||||||||||||||||||||||
|
Baytown, TX
|
0 | 540 | 11,110 | 0 | 540 | 11,110 | 28 | 2009 | 2008 | |||||||||||||||||||||||||||
|
Beachwood, OH
|
0 | 1,260 | 23,478 | 0 | 1,260 | 23,478 | 5,223 | 2001 | 1990 | |||||||||||||||||||||||||||
|
Beattyville, KY
|
0 | 100 | 6,900 | 0 | 100 | 6,900 | 861 | 2005 | 1972 | |||||||||||||||||||||||||||
|
Bernice, LA
|
0 | 16 | 1,017 | 0 | 16 | 1,017 | 261 | 2005 | 1969 | |||||||||||||||||||||||||||
|
Birmingham, AL
|
0 | 390 | 4,902 | 0 | 390 | 4,902 | 1,007 | 2003 | 1977 | |||||||||||||||||||||||||||
|
Birmingham, AL
|
0 | 340 | 5,734 | 0 | 340 | 5,734 | 1,113 | 2003 | 1974 | |||||||||||||||||||||||||||
|
Boise, ID
|
0 | 810 | 5,401 | 0 | 810 | 5,401 | 2,084 | 1998 | 1966 | |||||||||||||||||||||||||||
|
Boonville, IN
|
0 | 190 | 5,510 | 0 | 190 | 5,510 | 1,189 | 2002 | 2000 | |||||||||||||||||||||||||||
|
Boynton Beach, FL
|
0 | 980 | 8,112 | 0 | 980 | 8,112 | 1,271 | 2004 | 1999 | |||||||||||||||||||||||||||
|
Braintree, MA
|
0 | 170 | 7,157 | 1,290 | 170 | 8,447 | 5,411 | 1997 | 1968 | |||||||||||||||||||||||||||
|
Brandon, MS
|
0 | 115 | 9,549 | 0 | 115 | 9,549 | 1,857 | 2003 | 1963 | |||||||||||||||||||||||||||
|
Bridgewater, NJ
|
0 | 1,850 | 3,050 | 0 | 1,850 | 3,050 | 627 | 2004 | 1970 | |||||||||||||||||||||||||||
|
Brighton, MA
|
0 | 240 | 3,859 | 2,126 | 240 | 5,985 | 775 | 2005 | 1982 | |||||||||||||||||||||||||||
|
Broadview Heights, OH
|
0 | 920 | 12,400 | 42 | 920 | 12,442 | 2,766 | 2001 | 1984 | |||||||||||||||||||||||||||
|
Bunnell, FL
|
0 | 260 | 7,118 | 0 | 260 | 7,118 | 1,181 | 2004 | 1985 | |||||||||||||||||||||||||||
122
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Butler, AL
|
$ | 0 | $ | 90 | $ | 3,510 | $ | 0 | $ | 90 | $ | 3,510 | $ | 633 | 2004 | 1960 | ||||||||||||||||||||
|
Byrdstown, TN
|
0 | 0 | 2,414 | 0 | 0 | 2,414 | 925 | 2004 | 1982 | |||||||||||||||||||||||||||
|
Canton, MA
|
0 | 820 | 8,201 | 263 | 820 | 8,464 | 1,948 | 2002 | 1993 | |||||||||||||||||||||||||||
|
Carrollton, TX
|
0 | 730 | 2,770 | 0 | 730 | 2,770 | 457 | 2005 | 1976 | |||||||||||||||||||||||||||
|
Centerville, MA
|
0 | 1,490 | 9,650 | 11,315 | 1,490 | 20,965 | 1,884 | 2004 | 1982 | |||||||||||||||||||||||||||
|
Clarksville, TN
|
0 | 480 | 5,020 | 0 | 480 | 5,020 | 529 | 2006 | 1989 | |||||||||||||||||||||||||||
|
Clearwater, FL
|
0 | 160 | 7,218 | 0 | 160 | 7,218 | 1,084 | 2004 | 1961 | |||||||||||||||||||||||||||
|
Clearwater, FL
|
0 | 1,260 | 2,740 | 0 | 1,260 | 2,740 | 485 | 2005 | 1983 | |||||||||||||||||||||||||||
|
Cleveland, MS
|
0 | 0 | 1,850 | 0 | 0 | 1,850 | 1,203 | 2003 | 1977 | |||||||||||||||||||||||||||
|
Cleveland, TN
|
0 | 350 | 5,000 | 122 | 350 | 5,122 | 1,226 | 2001 | 1987 | |||||||||||||||||||||||||||
|
Coeur d’Alene, ID
|
0 | 600 | 7,878 | 0 | 600 | 7,878 | 2,660 | 1998 | 1996 | |||||||||||||||||||||||||||
|
Colorado Springs, CO
|
0 | 310 | 6,290 | 0 | 310 | 6,290 | 881 | 2005 | 1985 | |||||||||||||||||||||||||||
|
Columbia, TN
|
0 | 590 | 3,787 | 0 | 590 | 3,787 | 877 | 2003 | 1974 | |||||||||||||||||||||||||||
|
Columbus, IN
|
0 | 530 | 5,170 | 1,540 | 530 | 6,710 | 1,307 | 2002 | 2001 | |||||||||||||||||||||||||||
|
Columbus, OH
|
0 | 1,070 | 11,726 | 1,204 | 1,070 | 12,930 | 1,432 | 2005 | 1968 | |||||||||||||||||||||||||||
|
Columbus, OH(4)
|
4,397 | 1,010 | 4,931 | 91 | 1,010 | 5,022 | 602 | 2006 | 1983 | |||||||||||||||||||||||||||
|
Columbus, OH
|
0 | 1,860 | 16,624 | 1,077 | 1,860 | 17,701 | 1,878 | 2006 | 1978 | |||||||||||||||||||||||||||
|
Corpus Christi, TX
|
0 | 307 | 443 | 0 | 307 | 443 | 166 | 2005 | 1985 | |||||||||||||||||||||||||||
|
Corpus Christi, TX
|
0 | 400 | 1,916 | 0 | 400 | 1,916 | 345 | 2005 | 1985 | |||||||||||||||||||||||||||
|
Dade City, FL
|
0 | 250 | 7,150 | 0 | 250 | 7,150 | 1,110 | 2004 | 1975 | |||||||||||||||||||||||||||
|
Daytona Beach, FL
|
0 | 470 | 5,930 | 0 | 470 | 5,930 | 1,002 | 2004 | 1986 | |||||||||||||||||||||||||||
|
Daytona Beach, FL
|
0 | 490 | 5,710 | 0 | 490 | 5,710 | 1,001 | 2004 | 1961 | |||||||||||||||||||||||||||
|
Daytona Beach, FL
|
0 | 1,850 | 2,650 | 0 | 1,850 | 2,650 | 487 | 2005 | 1964 | |||||||||||||||||||||||||||
|
DeBary, FL
|
0 | 440 | 7,460 | 0 | 440 | 7,460 | 1,152 | 2004 | 1965 | |||||||||||||||||||||||||||
|
Dedham, MA
|
0 | 1,360 | 9,830 | 0 | 1,360 | 9,830 | 2,298 | 2002 | 1996 | |||||||||||||||||||||||||||
|
Defuniak Springs, FL
|
0 | 1,350 | 10,250 | 0 | 1,350 | 10,250 | 983 | 2006 | 1980 | |||||||||||||||||||||||||||
|
DeLand, FL
|
0 | 220 | 7,080 | 0 | 220 | 7,080 | 1,103 | 2004 | 1967 | |||||||||||||||||||||||||||
|
Denton, MD
|
0 | 390 | 4,010 | 206 | 390 | 4,216 | 910 | 2003 | 1982 | |||||||||||||||||||||||||||
|
Denver, CO
|
0 | 2,530 | 9,514 | 0 | 2,530 | 9,514 | 1,123 | 2005 | 1986 | |||||||||||||||||||||||||||
|
Douglasville, GA
|
0 | 1,350 | 7,471 | 0 | 1,350 | 7,471 | 1,541 | 2003 | 1975 | |||||||||||||||||||||||||||
|
Easton, PA
|
0 | 285 | 6,315 | 0 | 285 | 6,315 | 3,162 | 1993 | 1959 | |||||||||||||||||||||||||||
|
Eight Mile, AL
|
0 | 410 | 6,110 | 0 | 410 | 6,110 | 1,312 | 2003 | 1973 | |||||||||||||||||||||||||||
|
El Paso, TX
|
0 | 539 | 8,961 | 0 | 539 | 8,961 | 1,190 | 2005 | 1970 | |||||||||||||||||||||||||||
|
El Paso, TX
|
0 | 642 | 3,958 | 1,100 | 642 | 5,058 | 664 | 2005 | 1969 | |||||||||||||||||||||||||||
|
Elizabethton, TN
|
0 | 310 | 4,604 | 336 | 310 | 4,940 | 1,226 | 2001 | 1980 | |||||||||||||||||||||||||||
|
Erin, TN
|
0 | 440 | 8,060 | 134 | 440 | 8,194 | 1,880 | 2001 | 1981 | |||||||||||||||||||||||||||
|
Eugene, OR
|
0 | 300 | 5,316 | 0 | 300 | 5,316 | 1,948 | 1998 | 1972 | |||||||||||||||||||||||||||
|
Fairfield, AL
|
0 | 530 | 9,134 | 0 | 530 | 9,134 | 1,787 | 2003 | 1965 | |||||||||||||||||||||||||||
|
Fall River, MA
|
0 | 620 | 5,829 | 4,856 | 620 | 10,685 | 3,191 | 1996 | 1973 | |||||||||||||||||||||||||||
|
Farmerville, LA
|
0 | 147 | 4,087 | 0 | 147 | 4,087 | 605 | 2005 | 1984 | |||||||||||||||||||||||||||
|
Florence, AL
|
0 | 320 | 3,975 | 0 | 320 | 3,975 | 919 | 2003 | 1972 | |||||||||||||||||||||||||||
|
Fork Union, VA
|
0 | 310 | 2,490 | 60 | 310 | 2,550 | 81 | 2008 | 1990 | |||||||||||||||||||||||||||
|
Fort Pierce, FL
|
0 | 440 | 3,560 | 0 | 440 | 3,560 | 478 | 2005 | 1973 | |||||||||||||||||||||||||||
|
Goochland, VA
|
0 | 350 | 3,697 | 0 | 350 | 3,697 | 118 | 2008 | 1991 | |||||||||||||||||||||||||||
|
Goshen, IN
|
0 | 210 | 6,120 | 0 | 210 | 6,120 | 668 | 2005 | 2006 | |||||||||||||||||||||||||||
|
Graceville, FL
|
0 | 150 | 13,000 | 0 | 150 | 13,000 | 1,212 | 2006 | 1980 | |||||||||||||||||||||||||||
|
Grand Prairie, TX
|
0 | 574 | 3,426 | 0 | 574 | 3,426 | 547 | 2005 | 1982 | |||||||||||||||||||||||||||
|
Granite City, IL
|
0 | 610 | 7,143 | 842 | 610 | 7,985 | 4,298 | 1998 | 1973 | |||||||||||||||||||||||||||
|
Granite City, IL
|
0 | 400 | 4,303 | 707 | 400 | 5,010 | 2,637 | 1999 | 1964 | |||||||||||||||||||||||||||
|
Greeneville, TN
|
0 | 400 | 8,290 | 0 | 400 | 8,290 | 1,385 | 2004 | 1979 | |||||||||||||||||||||||||||
|
Hanover, IN
|
0 | 210 | 4,430 | 0 | 210 | 4,430 | 717 | 2004 | 2000 | |||||||||||||||||||||||||||
|
Hardin, IL
|
0 | 50 | 5,350 | 135 | 50 | 5,485 | 2,629 | 2002 | 1996 | |||||||||||||||||||||||||||
|
Harriman, TN
|
0 | 590 | 8,060 | 158 | 590 | 8,218 | 2,008 | 2001 | 1972 | |||||||||||||||||||||||||||
|
Herculaneum, MO
|
0 | 127 | 10,373 | 393 | 127 | 10,766 | 5,045 | 2002 | 1984 | |||||||||||||||||||||||||||
|
Hilliard, FL
|
0 | 150 | 6,990 | 0 | 150 | 6,990 | 2,289 | 1999 | 1990 | |||||||||||||||||||||||||||
|
Homestead, FL
|
0 | 2,750 | 11,750 | 0 | 2,750 | 11,750 | 1,120 | 2006 | 1994 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 600 | 2,700 | 0 | 600 | 2,700 | 451 | 2005 | 1974 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 860 | 18,715 | 0 | 860 | 18,715 | 1,133 | 2007 | 2006 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 5,090 | 9,471 | 0 | 5,090 | 9,471 | 146 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 630 | 5,970 | 750 | 630 | 6,720 | 1,400 | 2002 | 1995 | |||||||||||||||||||||||||||
|
Huron, OH
|
0 | 160 | 6,088 | 1,452 | 160 | 7,540 | 750 | 2005 | 1983 | |||||||||||||||||||||||||||
|
Jackson, MS
|
0 | 410 | 1,814 | 0 | 410 | 1,814 | 434 | 2003 | 1968 | |||||||||||||||||||||||||||
|
Jackson, MS
|
0 | 0 | 4,400 | 0 | 0 | 4,400 | 2,860 | 2003 | 1980 | |||||||||||||||||||||||||||
|
Jackson, MS
|
0 | 0 | 2,150 | 0 | 0 | 2,150 | 1,398 | 2003 | 1970 | |||||||||||||||||||||||||||
|
Jamestown, TN
|
0 | 0 | 6,707 | 0 | 0 | 6,707 | 2,571 | 2004 | 1966 | |||||||||||||||||||||||||||
|
Jefferson City, MO
|
0 | 370 | 6,730 | 301 | 370 | 7,031 | 3,284 | 2002 | 1982 | |||||||||||||||||||||||||||
|
Jefferson, OH
|
0 | 80 | 9,120 | 0 | 80 | 9,120 | 1,052 | 2006 | 1984 | |||||||||||||||||||||||||||
|
Jonesboro, GA
|
0 | 840 | 1,921 | 0 | 840 | 1,921 | 483 | 2003 | 1992 | |||||||||||||||||||||||||||
|
Kalida, OH
|
0 | 480 | 8,173 | 0 | 480 | 8,173 | 551 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Kissimmee, FL
|
0 | 230 | 3,854 | 0 | 230 | 3,854 | 601 | 2004 | 1972 | |||||||||||||||||||||||||||
|
LaBelle, FL
|
0 | 60 | 4,946 | 0 | 60 | 4,946 | 837 | 2004 | 1986 | |||||||||||||||||||||||||||
123
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Lake Placid, FL
|
$ | 0 | $ | 150 | $ | 12,850 | $ | 0 | $ | 150 | $ | 12,850 | $ | 2,039 | 2004 | 1984 | ||||||||||||||||||||
|
Lawrenceville, VA
|
0 | 170 | 4,780 | 0 | 170 | 4,780 | 147 | 2008 | 1989 | |||||||||||||||||||||||||||
|
Lee, MA
|
0 | 290 | 18,135 | 926 | 290 | 19,061 | 4,011 | 2002 | 1998 | |||||||||||||||||||||||||||
|
Littleton, MA
|
0 | 1,240 | 2,910 | 0 | 1,240 | 2,910 | 758 | 1996 | 1975 | |||||||||||||||||||||||||||
|
Longview, TX
|
0 | 293 | 1,707 | 0 | 293 | 1,707 | 316 | 2005 | 1971 | |||||||||||||||||||||||||||
|
Longwood, FL
|
0 | 480 | 7,520 | 0 | 480 | 7,520 | 1,189 | 2004 | 1980 | |||||||||||||||||||||||||||
|
Louisville, KY
|
0 | 490 | 10,010 | 0 | 490 | 10,010 | 1,590 | 2005 | 1978 | |||||||||||||||||||||||||||
|
Louisville, KY
|
0 | 430 | 7,135 | 163 | 430 | 7,298 | 1,764 | 2002 | 1974 | |||||||||||||||||||||||||||
|
Louisville, KY
|
0 | 350 | 4,675 | 109 | 350 | 4,784 | 1,182 | 2002 | 1975 | |||||||||||||||||||||||||||
|
Lowell, MA
|
0 | 370 | 7,450 | 1,550 | 370 | 9,000 | 1,087 | 2004 | 1977 | |||||||||||||||||||||||||||
|
Lufkin, TX
|
0 | 343 | 1,184 | 0 | 343 | 1,184 | 319 | 2005 | 1919 | |||||||||||||||||||||||||||
|
Manchester, NH
|
0 | 340 | 4,360 | 0 | 340 | 4,360 | 557 | 2005 | 1984 | |||||||||||||||||||||||||||
|
Marianna, FL
|
0 | 340 | 8,910 | 0 | 340 | 8,910 | 828 | 2006 | 1997 | |||||||||||||||||||||||||||
|
McComb, MS
|
0 | 120 | 5,786 | 0 | 120 | 5,786 | 1,099 | 2003 | 1973 | |||||||||||||||||||||||||||
|
Memphis, TN
|
0 | 970 | 4,246 | 0 | 970 | 4,246 | 939 | 2003 | 1981 | |||||||||||||||||||||||||||
|
Memphis, TN
|
0 | 480 | 5,656 | 0 | 480 | 5,656 | 1,158 | 2003 | 1982 | |||||||||||||||||||||||||||
|
Memphis, TN
|
0 | 940 | 5,963 | 0 | 940 | 5,963 | 1,139 | 2004 | 1951 | |||||||||||||||||||||||||||
|
Merrillville, IN
|
0 | 643 | 7,084 | 3,526 | 643 | 10,610 | 4,579 | 1997 | 1999 | |||||||||||||||||||||||||||
|
Midwest City, OK
|
0 | 470 | 5,673 | 0 | 470 | 5,673 | 2,795 | 1998 | 1958 | |||||||||||||||||||||||||||
|
Midwest City, OK
|
0 | 484 | 5,516 | 0 | 484 | 5,516 | 767 | 2005 | 1987 | |||||||||||||||||||||||||||
|
Millbury, MA
|
0 | 930 | 4,570 | 0 | 930 | 4,570 | 821 | 2004 | 1972 | |||||||||||||||||||||||||||
|
Mobile, AL
|
0 | 440 | 3,625 | 0 | 440 | 3,625 | 812 | 2003 | 1982 | |||||||||||||||||||||||||||
|
Monteagle, TN
|
0 | 310 | 3,318 | 0 | 310 | 3,318 | 714 | 2003 | 1980 | |||||||||||||||||||||||||||
|
Monterey, TN
|
0 | 0 | 4,195 | 0 | 0 | 4,195 | 1,608 | 2004 | 1977 | |||||||||||||||||||||||||||
|
Monticello, FL
|
0 | 140 | 4,471 | 0 | 140 | 4,471 | 778 | 2004 | 1986 | |||||||||||||||||||||||||||
|
Morgantown, KY
|
0 | 380 | 3,705 | 0 | 380 | 3,705 | 754 | 2003 | 1965 | |||||||||||||||||||||||||||
|
Moss Point, MS
|
0 | 120 | 7,280 | 0 | 120 | 7,280 | 1,175 | 2004 | 1933 | |||||||||||||||||||||||||||
|
Mountain City, TN
|
0 | 220 | 5,896 | 660 | 220 | 6,556 | 2,652 | 2001 | 1976 | |||||||||||||||||||||||||||
|
Naples, FL
|
0 | 550 | 5,450 | 0 | 550 | 5,450 | 856 | 2004 | 1968 | |||||||||||||||||||||||||||
|
Natchitoches, LA
|
0 | 190 | 4,096 | 0 | 190 | 4,096 | 576 | 2005 | 1975 | |||||||||||||||||||||||||||
|
Needham, MA
|
0 | 1,610 | 13,715 | 366 | 1,610 | 14,081 | 3,272 | 2002 | 1994 | |||||||||||||||||||||||||||
|
New Haven, CT
|
0 | 160 | 4,778 | 1,266 | 160 | 6,044 | 1,664 | 2006 | 1958 | |||||||||||||||||||||||||||
|
New Haven, IN
|
0 | 176 | 3,524 | 0 | 176 | 3,524 | 658 | 2004 | 1981 | |||||||||||||||||||||||||||
|
North Miami, FL
|
0 | 430 | 3,918 | 0 | 430 | 3,918 | 833 | 2004 | 1968 | |||||||||||||||||||||||||||
|
North Miami, FL
|
0 | 440 | 4,830 | 0 | 440 | 4,830 | 840 | 2004 | 1963 | |||||||||||||||||||||||||||
|
Norwalk, CT
|
0 | 410 | 2,118 | 2,225 | 410 | 4,343 | 1,431 | 2004 | 1971 | |||||||||||||||||||||||||||
|
Oklahoma City, OK
|
0 | 510 | 10,694 | 0 | 510 | 10,694 | 1,132 | 1998 | 1979 | |||||||||||||||||||||||||||
|
Ormond Beach, FL
|
0 | 0 | 2,739 | 73 | 0 | 2,812 | 1,073 | 2002 | 1983 | |||||||||||||||||||||||||||
|
Overland Park, KS
|
0 | 1,120 | 8,360 | 0 | 1,120 | 8,360 | 1,007 | 2005 | 1970 | |||||||||||||||||||||||||||
|
Overland Park, KS
|
0 | 3,730 | 27,076 | 0 | 3,730 | 27,076 | 0 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Owensboro, KY
|
0 | 240 | 6,760 | 0 | 240 | 6,760 | 937 | 1993 | 1966 | |||||||||||||||||||||||||||
|
Owensboro, KY
|
0 | 225 | 13,275 | 0 | 225 | 13,275 | 1,747 | 2005 | 1964 | |||||||||||||||||||||||||||
|
Owenton, KY
|
0 | 100 | 2,400 | 0 | 100 | 2,400 | 388 | 2005 | 1979 | |||||||||||||||||||||||||||
|
Panama City, FL
|
0 | 300 | 9,200 | 0 | 300 | 9,200 | 1,464 | 2004 | 1992 | |||||||||||||||||||||||||||
|
Pasadena, TX
|
0 | 720 | 24,080 | 0 | 720 | 24,080 | 1,754 | 2007 | 2005 | |||||||||||||||||||||||||||
|
Pigeon Forge, TN
|
0 | 320 | 4,180 | 117 | 320 | 4,297 | 1,099 | 2001 | 1986 | |||||||||||||||||||||||||||
|
Pikesville, MD
|
0 | 450 | 10,750 | 0 | 450 | 10,750 | 824 | 2007 | 1983 | |||||||||||||||||||||||||||
|
Plano, TX
|
0 | 1,305 | 9,095 | 0 | 1,305 | 9,095 | 1,237 | 2005 | 1977 | |||||||||||||||||||||||||||
|
Plymouth, MA
|
0 | 440 | 6,220 | 2,330 | 440 | 8,550 | 988 | 2004 | 1968 | |||||||||||||||||||||||||||
|
Port St. Joe, FL
|
0 | 370 | 2,055 | 0 | 370 | 2,055 | 567 | 2004 | 1982 | |||||||||||||||||||||||||||
|
Post Falls, ID
|
0 | 2,700 | 14,217 | 2,181 | 2,700 | 16,398 | 458 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Prospect, CT
|
0 | 820 | 1,441 | 2,410 | 820 | 3,851 | 1,233 | 2004 | 1970 | |||||||||||||||||||||||||||
|
Pueblo, CO
|
0 | 370 | 6,051 | 0 | 370 | 6,051 | 2,298 | 1998 | 1989 | |||||||||||||||||||||||||||
|
Quincy, FL
|
0 | 200 | 5,333 | 0 | 200 | 5,333 | 935 | 2004 | 1983 | |||||||||||||||||||||||||||
|
Quitman, MS
|
0 | 60 | 10,340 | 0 | 60 | 10,340 | 1,571 | 2004 | 1976 | |||||||||||||||||||||||||||
|
Richmond, VA
|
0 | 1,211 | 2,889 | 0 | 1,211 | 2,889 | 781 | 2003 | 1995 | |||||||||||||||||||||||||||
|
Richmond, VA
|
0 | 760 | 12,640 | 0 | 760 | 12,640 | 989 | 2007 | 1969 | |||||||||||||||||||||||||||
|
Ridgely, TN
|
0 | 300 | 5,700 | 97 | 300 | 5,797 | 1,364 | 2001 | 1990 | |||||||||||||||||||||||||||
|
Ringgold, LA
|
0 | 30 | 4,174 | 0 | 30 | 4,174 | 566 | 2005 | 1984 | |||||||||||||||||||||||||||
|
Rockledge, FL
|
0 | 360 | 4,117 | 0 | 360 | 4,117 | 1,246 | 2001 | 1970 | |||||||||||||||||||||||||||
|
Rockwood, TN
|
0 | 500 | 7,116 | 741 | 500 | 7,857 | 1,863 | 2001 | 1979 | |||||||||||||||||||||||||||
|
Rogersville, TN
|
0 | 350 | 3,278 | 0 | 350 | 3,278 | 708 | 2003 | 1980 | |||||||||||||||||||||||||||
|
Royal Palm Beach, FL
|
0 | 980 | 8,320 | 0 | 980 | 8,320 | 1,354 | 2004 | 1984 | |||||||||||||||||||||||||||
|
Ruleville, MS
|
0 | 0 | 50 | 0 | 0 | 50 | 33 | 2003 | 1978 | |||||||||||||||||||||||||||
|
Ruston, LA
|
0 | 130 | 9,403 | 0 | 130 | 9,403 | 1,130 | 2005 | 1965 | |||||||||||||||||||||||||||
|
San Antonio, TX
|
0 | 560 | 7,315 | 0 | 560 | 7,315 | 1,597 | 2002 | 2000 | |||||||||||||||||||||||||||
|
San Antonio, TX
|
0 | 640 | 13,360 | 0 | 640 | 13,360 | 1,016 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Sandwich, MA
|
0 | 1,140 | 11,190 | 335 | 1,140 | 11,525 | 1,465 | 2004 | 1987 | |||||||||||||||||||||||||||
|
Sarasota, FL
|
0 | 560 | 8,474 | 0 | 560 | 8,474 | 2,449 | 1999 | 2000 | |||||||||||||||||||||||||||
|
Sarasota, FL
|
0 | 600 | 3,400 | 0 | 600 | 3,400 | 595 | 2004 | 1982 | |||||||||||||||||||||||||||
|
Scituate, MA
|
0 | 1,740 | 10,640 | 0 | 1,740 | 10,640 | 1,187 | 2005 | 1976 | |||||||||||||||||||||||||||
124
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Seville, OH
|
$ | 0 | $ | 230 | $ | 1,770 | $ | 0 | $ | 230 | $ | 1,770 | $ | 316 | 2005 | 1981 | ||||||||||||||||||||
|
Shelby, MS
|
0 | 60 | 5,340 | 0 | 60 | 5,340 | 837 | 2004 | 1979 | |||||||||||||||||||||||||||
|
Shelbyville, KY
|
0 | 630 | 3,870 | 0 | 630 | 3,870 | 515 | 2005 | 1965 | |||||||||||||||||||||||||||
|
South Boston, MA
|
0 | 385 | 2,002 | 5,219 | 385 | 7,221 | 2,278 | 1995 | 1961 | |||||||||||||||||||||||||||
|
South Pittsburg, TN
|
0 | 430 | 5,628 | 0 | 430 | 5,628 | 1,018 | 2004 | 1979 | |||||||||||||||||||||||||||
|
Southbridge, MA
|
0 | 890 | 8,110 | 3,000 | 890 | 11,110 | 1,577 | 2004 | 1976 | |||||||||||||||||||||||||||
|
Spring City, TN
|
0 | 420 | 6,085 | 2,580 | 420 | 8,665 | 1,942 | 2001 | 1987 | |||||||||||||||||||||||||||
|
St. Louis, MO
|
0 | 750 | 6,030 | 0 | 750 | 6,030 | 1,262 | 1995 | 1994 | |||||||||||||||||||||||||||
|
Starke, FL
|
0 | 120 | 10,180 | 0 | 120 | 10,180 | 1,606 | 2004 | 1990 | |||||||||||||||||||||||||||
|
Staunton, VA
|
0 | 310 | 11,090 | 0 | 310 | 11,090 | 877 | 2007 | 1959 | |||||||||||||||||||||||||||
|
Stuart, FL
|
0 | 390 | 8,110 | 0 | 390 | 8,110 | 1,269 | 2004 | 1985 | |||||||||||||||||||||||||||
|
Swanton, OH
|
0 | 330 | 6,370 | 0 | 330 | 6,370 | 946 | 2004 | 1950 | |||||||||||||||||||||||||||
|
Tampa, FL
|
0 | 830 | 6,370 | 0 | 830 | 6,370 | 1,241 | 2004 | 1968 | |||||||||||||||||||||||||||
|
Torrington, CT
|
0 | 360 | 1,261 | 861 | 360 | 2,122 | 690 | 2004 | 1966 | |||||||||||||||||||||||||||
|
Troy, OH
|
0 | 470 | 16,730 | 0 | 470 | 16,730 | 2,391 | 2004 | 1971 | |||||||||||||||||||||||||||
|
Tucson, AZ
|
0 | 930 | 13,399 | 0 | 930 | 13,399 | 1,538 | 2005 | 1985 | |||||||||||||||||||||||||||
|
Tupelo, MS
|
0 | 740 | 4,092 | 0 | 740 | 4,092 | 888 | 2003 | 1980 | |||||||||||||||||||||||||||
|
Uhrichsville, OH
|
0 | 24 | 6,716 | 0 | 24 | 6,716 | 734 | 2006 | 1977 | |||||||||||||||||||||||||||
|
Venice, FL
|
0 | 500 | 6,000 | 0 | 500 | 6,000 | 926 | 2004 | 1987 | |||||||||||||||||||||||||||
|
Wareham, MA
|
0 | 875 | 10,313 | 1,701 | 875 | 12,014 | 2,551 | 2002 | 1989 | |||||||||||||||||||||||||||
|
Warren, OH
|
0 | 240 | 3,810 | 0 | 240 | 3,810 | 540 | 2005 | 1973 | |||||||||||||||||||||||||||
|
Waterbury, CT
|
0 | 370 | 2,166 | 1,444 | 370 | 3,610 | 979 | 2006 | 1972 | |||||||||||||||||||||||||||
|
Webster, TX
|
0 | 360 | 5,940 | 0 | 360 | 5,940 | 1,292 | 2002 | 2000 | |||||||||||||||||||||||||||
|
West Haven, CT
|
0 | 580 | 1,620 | 1,261 | 579 | 2,882 | 925 | 2004 | 1971 | |||||||||||||||||||||||||||
|
West Worthington, OH
|
0 | 510 | 5,090 | 0 | 510 | 5,090 | 583 | 2006 | 1980 | |||||||||||||||||||||||||||
|
Westlake, OH
|
0 | 1,330 | 17,926 | 0 | 1,330 | 17,926 | 4,051 | 2001 | 1985 | |||||||||||||||||||||||||||
|
Westlake, OH
|
0 | 571 | 5,411 | 0 | 571 | 5,411 | 1,978 | 1998 | 1957 | |||||||||||||||||||||||||||
|
Westmoreland, TN
|
0 | 330 | 1,822 | 2,635 | 330 | 4,457 | 1,081 | 2001 | 1994 | |||||||||||||||||||||||||||
|
White Hall, IL
|
0 | 50 | 5,550 | 670 | 50 | 6,220 | 2,933 | 2002 | 1971 | |||||||||||||||||||||||||||
|
Whitemarsh, PA
|
0 | 2,310 | 6,190 | 917 | 2,310 | 7,107 | 985 | 2005 | 1967 | |||||||||||||||||||||||||||
|
Williamsburg, VA
|
0 | 1,360 | 7,440 | 0 | 1,360 | 7,440 | 590 | 2007 | 1970 | |||||||||||||||||||||||||||
|
Williamstown, KY
|
0 | 70 | 6,430 | 0 | 70 | 6,430 | 854 | 2005 | 1987 | |||||||||||||||||||||||||||
|
Winchester, VA
|
0 | 640 | 1,510 | 0 | 640 | 1,510 | 56 | 2008 | 1964 | |||||||||||||||||||||||||||
|
Winnfield, LA
|
0 | 31 | 6,480 | 0 | 31 | 6,480 | 817 | 2005 | 1964 | |||||||||||||||||||||||||||
|
Woodbridge, VA
|
0 | 680 | 4,423 | 330 | 680 | 4,753 | 1,008 | 2002 | 1977 | |||||||||||||||||||||||||||
|
Worcester, MA
|
0 | 1,100 | 5,400 | 2,751 | 1,100 | 8,151 | 1,197 | 2004 | 1962 | |||||||||||||||||||||||||||
|
Worcester, MA
|
0 | 2,300 | 9,060 | 0 | 2,300 | 9,060 | 320 | 2008 | 1993 | |||||||||||||||||||||||||||
|
Total Skilled Nursing Facilities
|
13,025 | 121,478 | 1,396,133 | 76,049 | 121,477 | 1,472,183 | 265,767 | |||||||||||||||||||||||||||||
|
Independent Living Facilities:
|
||||||||||||||||||||||||||||||||||||
|
Amelia Island, FL
|
0 | 3,290 | 24,310 | 18,312 | 3,290 | 42,622 | 3,149 | 2005 | 1998 | |||||||||||||||||||||||||||
|
Anderson, SC
|
0 | 710 | 6,290 | 0 | 710 | 6,290 | 1,132 | 2003 | 1986 | |||||||||||||||||||||||||||
|
Atlanta, GA(9)
|
8,091 | 2,059 | 14,914 | 0 | 2,059 | 14,914 | 7,160 | 1997 | 1999 | |||||||||||||||||||||||||||
|
Aurora, CO
|
0 | 2,600 | 5,906 | 7,915 | 2,600 | 13,821 | 1,193 | 2006 | 2006 | |||||||||||||||||||||||||||
|
Aurora, CO
|
0 | 2,440 | 28,172 | 0 | 2,440 | 28,172 | 940 | 2006 | 2008 | |||||||||||||||||||||||||||
|
Carmel, IN
|
0 | 2,370 | 57,175 | 111 | 2,370 | 57,286 | 2,323 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Columbia, SC
|
0 | 2,120 | 4,860 | 5,709 | 2,120 | 10,569 | 1,203 | 2003 | 2000 | |||||||||||||||||||||||||||
|
Denver, CO
|
0 | 3,650 | 14,906 | 642 | 3,650 | 15,548 | 1,287 | 2006 | 1987 | |||||||||||||||||||||||||||
|
Denver, CO
|
0 | 2,076 | 13,594 | 0 | 2,076 | 13,594 | 60 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Douglasville, GA
|
0 | 90 | 217 | 0 | 90 | 217 | 46 | 2003 | 1985 | |||||||||||||||||||||||||||
|
Fremont, CA(9)
|
20,542 | 3,400 | 25,300 | 0 | 3,400 | 25,300 | 2,670 | 2005 | 1987 | |||||||||||||||||||||||||||
|
Gardnerville, NV(9)
|
13,275 | 1,144 | 10,831 | 0 | 1,144 | 10,831 | 5,735 | 1998 | 1999 | |||||||||||||||||||||||||||
|
Gilroy, CA
|
0 | 760 | 13,880 | 23,860 | 760 | 37,740 | 2,134 | 2006 | 2007 | |||||||||||||||||||||||||||
|
Greenville, SC
|
0 | 5,400 | 100,523 | 0 | 5,400 | 100,523 | 0 | 2006 | 2009 | |||||||||||||||||||||||||||
|
Houston, TX
|
0 | 4,790 | 7,100 | 0 | 4,790 | 7,100 | 1,756 | 2003 | 1974 | |||||||||||||||||||||||||||
|
Indianapolis, IN
|
0 | 495 | 6,287 | 22,565 | 495 | 28,852 | 2,132 | 2006 | 1981 | |||||||||||||||||||||||||||
|
Indianapolis, IN
|
0 | 255 | 2,473 | 12,123 | 255 | 14,596 | 843 | 2006 | 1981 | |||||||||||||||||||||||||||
|
Loma Linda, CA
|
0 | 2,214 | 9,586 | 0 | 2,214 | 9,586 | 444 | 2008 | 1976 | |||||||||||||||||||||||||||
|
Manteca, CA(9)
|
6,521 | 1,300 | 12,125 | 0 | 1,300 | 12,125 | 1,315 | 2005 | 1985 | |||||||||||||||||||||||||||
|
Marysville, WA(9)
|
4,832 | 620 | 4,780 | 0 | 620 | 4,780 | 792 | 2003 | 1998 | |||||||||||||||||||||||||||
|
Melbourne, FL
|
0 | 7,070 | 48,257 | 0 | 7,070 | 48,257 | 639 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Mesa, AZ(9)
|
6,440 | 950 | 9,087 | 0 | 950 | 9,087 | 2,364 | 1999 | 2000 | |||||||||||||||||||||||||||
|
Mount Airy, NC
|
0 | 270 | 6,430 | 16 | 270 | 6,446 | 680 | 2005 | 1998 | |||||||||||||||||||||||||||
|
Myrtle Beach, SC
|
0 | 6,890 | 41,526 | 0 | 6,890 | 41,526 | 561 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Naples, FL
|
0 | 1,716 | 17,306 | 0 | 1,716 | 17,306 | 11,390 | 1997 | 1999 | |||||||||||||||||||||||||||
|
Oshkosh, WI
|
0 | 400 | 23,237 | 0 | 400 | 23,237 | 606 | 2007 | 2008 | |||||||||||||||||||||||||||
|
Pawleys Island, SC
|
0 | 2,020 | 32,590 | 4,815 | 2,020 | 37,405 | 3,625 | 2005 | 1997 | |||||||||||||||||||||||||||
|
Raleigh, NC
|
0 | 10,000 | 0 | 0 | 10,000 | 0 | 0 | 2008 | ||||||||||||||||||||||||||||
|
Raytown, MO
|
0 | 510 | 5,490 | 0 | 510 | 5,490 | 430 | 2006 | 2000 | |||||||||||||||||||||||||||
125
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Rohnert Park, CA(9)
|
$ | 14,448 | $ | 6,500 | $ | 18,700 | $ | 0 | $ | 6,500 | $ | 18,700 | $ | 2,002 | 2005 | 1985 | ||||||||||||||||||||
|
Roswell, GA(9)
|
8,308 | 1,107 | 9,627 | 0 | 1,107 | 9,627 | 5,148 | 1997 | 1999 | |||||||||||||||||||||||||||
|
Sonoma, CA
|
0 | 1,100 | 18,400 | 0 | 1,100 | 18,400 | 1,957 | 2005 | 1988 | |||||||||||||||||||||||||||
|
Spartanburg, SC
|
0 | 3,350 | 15,750 | 8,368 | 3,350 | 24,118 | 1,874 | 2005 | 1997 | |||||||||||||||||||||||||||
|
St. Simon’s Island, GA
|
0 | 6,440 | 50,060 | 736 | 6,440 | 50,796 | 1,919 | 2008 | 2007 | |||||||||||||||||||||||||||
|
Twin Falls, ID
|
0 | 550 | 14,740 | 0 | 550 | 14,740 | 2,930 | 2002 | 1991 | |||||||||||||||||||||||||||
|
Vacaville, CA(9)
|
14,857 | 900 | 17,100 | 0 | 900 | 17,100 | 1,829 | 2005 | 1986 | |||||||||||||||||||||||||||
|
Vallejo, CA(9)
|
14,873 | 4,000 | 18,000 | 0 | 4,000 | 18,000 | 1,917 | 2005 | 1989 | |||||||||||||||||||||||||||
|
Vero Beach, FL
|
0 | 2,930 | 40,070 | 2,550 | 2,930 | 42,620 | 2,576 | 2007 | 2003 | |||||||||||||||||||||||||||
|
Wichita, KS
|
0 | 1,400 | 11,000 | 0 | 1,400 | 11,000 | 845 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Winston-Salem, NC
|
0 | 5,700 | 13,550 | 12,913 | 5,700 | 26,463 | 2,008 | 2005 | 1997 | |||||||||||||||||||||||||||
|
Worcester, MA
|
0 | 3,500 | 54,099 | 0 | 3,500 | 54,099 | 0 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Total Independent Living Facilities
|
112,187 | 109,086 | 828,248 | 120,635 | 109,086 | 948,883 | 81,614 | |||||||||||||||||||||||||||||
|
Hospitals:
|
||||||||||||||||||||||||||||||||||||
|
Akron, OH
|
0 | 300 | 20,200 | 0 | 300 | 20,200 | 0 | 2009 | 2008 | |||||||||||||||||||||||||||
|
Amarillo, TX
|
0 | 72 | 11,928 | 1,400 | 72 | 13,328 | 1,446 | 2005 | 1986 | |||||||||||||||||||||||||||
|
Bellaire, TX
|
0 | 4,550 | 45,900 | 205 | 4,550 | 46,105 | 3,964 | 2006 | 2005 | |||||||||||||||||||||||||||
|
Boardman, OH
|
0 | 1,200 | 12,800 | 0 | 1,200 | 12,800 | 431 | 2008 | 2008 | |||||||||||||||||||||||||||
|
Bowling Green, KY
|
0 | 3,800 | 26,700 | 14 | 3,800 | 26,714 | 1,058 | 2008 | 1992 | |||||||||||||||||||||||||||
|
Corpus Christi, TX
|
0 | 77 | 3,923 | 0 | 77 | 3,923 | 534 | 2005 | 1968 | |||||||||||||||||||||||||||
|
Crown Point, IN
|
0 | 700 | 11,699 | 154 | 700 | 11,853 | 511 | 2007 | 2008 | |||||||||||||||||||||||||||
|
El Paso, TX
|
0 | 112 | 15,888 | 0 | 112 | 15,888 | 1,848 | 2005 | 1994 | |||||||||||||||||||||||||||
|
El Paso, TX
|
0 | 2,400 | 32,800 | 0 | 2,400 | 32,800 | 1,890 | 2008 | 2003 | |||||||||||||||||||||||||||
|
Fresno, CA
|
0 | 2,500 | 35,800 | 8 | 2,500 | 35,808 | 1,418 | 2008 | 1991 | |||||||||||||||||||||||||||
|
Ft. Wayne, IN
|
0 | 170 | 8,232 | 0 | 170 | 8,232 | 482 | 2006 | 2006 | |||||||||||||||||||||||||||
|
Lafayette, LA
|
0 | 1,928 | 10,483 | 26 | 1,928 | 10,509 | 1,225 | 2006 | 1993 | |||||||||||||||||||||||||||
|
Marlton, NJ
|
0 | 0 | 38,300 | 0 | 0 | 38,300 | 1,517 | 2008 | 1994 | |||||||||||||||||||||||||||
|
Meridian, ID
|
0 | 3,600 | 20,802 | 251 | 3,600 | 21,053 | 1,207 | 2006 | 2008 | |||||||||||||||||||||||||||
|
Midwest City, OK
|
0 | 146 | 3,854 | 0 | 146 | 3,854 | 512 | 2005 | 1996 | |||||||||||||||||||||||||||
|
Plano, TX
|
0 | 195 | 14,805 | 500 | 195 | 15,305 | 1,738 | 2005 | 1995 | |||||||||||||||||||||||||||
|
San Antonio, TX
|
0 | 0 | 17,303 | 0 | 0 | 17,303 | 1,712 | 2007 | 2007 | |||||||||||||||||||||||||||
|
San Bernardino, CA
|
0 | 3,700 | 14,300 | 255 | 3,700 | 14,555 | 512 | 2008 | 1993 | |||||||||||||||||||||||||||
|
San Diego, CA
|
0 | 0 | 22,003 | 74 | 0 | 22,077 | 781 | 2008 | 1992 | |||||||||||||||||||||||||||
|
Tulsa, OK
|
0 | 3,003 | 6,025 | 20 | 3,003 | 6,045 | 983 | 2006 | 1992 | |||||||||||||||||||||||||||
|
Waukesha, WI
|
0 | 4,700 | 20,669 | 0 | 4,700 | 20,669 | 1,550 | 2007 | 2007 | |||||||||||||||||||||||||||
|
Webster, TX
|
0 | 2,418 | 12,028 | 32 | 2,418 | 12,060 | 1,536 | 2006 | 1991 | |||||||||||||||||||||||||||
|
Total Hospitals
|
0 | 35,571 | 406,442 | 2,939 | 35,571 | 409,381 | 26,855 | |||||||||||||||||||||||||||||
|
Medical Office Buildings:
|
||||||||||||||||||||||||||||||||||||
|
Arcadia, CA(5)
|
10,339 | 5,408 | 23,219 | 610 | 5,618 | 23,619 | 2,722 | 2006 | 1984 | |||||||||||||||||||||||||||
|
Atlanta, GA
|
0 | 4,931 | 18,720 | 827 | 5,151 | 19,327 | 2,779 | 2006 | 1992 | |||||||||||||||||||||||||||
|
Austell, GA
|
0 | 2,223 | 7,982 | 0 | 2,223 | 7,982 | 1,551 | 2006 | 1999 | |||||||||||||||||||||||||||
|
Bartlett, TN(6)
|
8,626 | 187 | 15,015 | 298 | 187 | 15,313 | 1,596 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Bellaire, TX
|
0 | 2,972 | 33,445 | 642 | 2,972 | 34,087 | 3,294 | 2006 | 2005 | |||||||||||||||||||||||||||
|
Birmingham, AL
|
0 | 651 | 39,552 | 1,060 | 651 | 40,612 | 4,600 | 2006 | 1971 | |||||||||||||||||||||||||||
|
Boca Raton, FL(5)
|
14,061 | 109 | 34,002 | 774 | 109 | 34,776 | 3,807 | 2006 | 1995 | |||||||||||||||||||||||||||
|
Boynton Beach, FL(5)
|
4,289 | 214 | 6,574 | 143 | 214 | 6,717 | 699 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Boynton Beach, FL(5)
|
4,687 | 2,048 | 7,692 | 129 | 2,048 | 7,821 | 1,237 | 2006 | 1995 | |||||||||||||||||||||||||||
|
Boynton Beach, FL(6)
|
4,205 | 2,048 | 7,403 | 240 | 2,048 | 7,643 | 846 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Boynton Beach, FL(6)
|
6,277 | 109 | 11,235 | 274 | 109 | 11,509 | 1,197 | 2007 | 1996 | |||||||||||||||||||||||||||
|
Claremore, OK(6)
|
8,460 | 132 | 12,829 | 179 | 132 | 13,008 | 1,289 | 2007 | 2005 | |||||||||||||||||||||||||||
|
Coral Springs, FL
|
0 | 1,598 | 10,627 | 267 | 1,600 | 10,892 | 1,468 | 2006 | 1993 | |||||||||||||||||||||||||||
|
Covington, KY
|
0 | 1,290 | 8,093 | 0 | 1,290 | 8,093 | 0 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Dallas, TX(5)
|
15,814 | 137 | 28,690 | 0 | 137 | 28,690 | 3,146 | 2006 | 1995 | |||||||||||||||||||||||||||
|
Delray Beach, FL
|
0 | 1,882 | 34,767 | 1,483 | 1,941 | 36,191 | 4,751 | 2006 | 1985 | |||||||||||||||||||||||||||
|
Denton, TX(6)
|
12,479 | 0 | 19,407 | 8 | 0 | 19,415 | 1,558 | 2007 | 2005 | |||||||||||||||||||||||||||
|
Durham, NC
|
0 | 6,814 | 10,825 | 1,265 | 7,002 | 11,902 | 2,655 | 2006 | 1980 | |||||||||||||||||||||||||||
|
Durham, NC
|
0 | 0 | 0 | 101 | 13 | 88 | 21 | 2006 | 1980 | |||||||||||||||||||||||||||
|
El Paso, TX(5)
|
10,590 | 677 | 17,075 | 326 | 677 | 17,401 | 2,051 | 2006 | 1997 | |||||||||||||||||||||||||||
|
El Paso, TX
|
0 | 600 | 6,700 | 0 | 600 | 6,700 | 335 | 2008 | 2003 | |||||||||||||||||||||||||||
|
Fayetteville, GA(5)
|
3,384 | 959 | 7,540 | 266 | 959 | 7,806 | 973 | 2006 | 1999 | |||||||||||||||||||||||||||
|
Franklin, TN
|
0 | 2,338 | 12,138 | 206 | 2,338 | 12,344 | 1,371 | 2007 | 1988 | |||||||||||||||||||||||||||
|
Frisco, TX(6)
|
9,425 | 0 | 18,635 | 63 | 0 | 18,698 | 1,774 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Frisco, TX
|
0 | 0 | 15,309 | 429 | 0 | 15,738 | 1,486 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Germantown, TN
|
0 | 3,049 | 12,456 | 732 | 3,049 | 13,188 | 1,365 | 2006 | 2002 | |||||||||||||||||||||||||||
|
Glendale, CA(6)
|
8,473 | 37 | 18,460 | 0 | 37 | 18,460 | 1,785 | 2007 | 2002 | |||||||||||||||||||||||||||
|
Greeley, CO
|
0 | 877 | 6,707 | 0 | 877 | 6,707 | 697 | 2007 | 1997 | |||||||||||||||||||||||||||
|
Jupiter, FL(5)
|
7,387 | 2,252 | 11,415 | 51 | 2,252 | 11,466 | 1,462 | 2006 | 2001 | |||||||||||||||||||||||||||
|
Jupiter, FL(6)
|
4,602 | 0 | 5,858 | 2,810 | 2,825 | 5,843 | 670 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Lakeway, TX
|
0 | 2,801 | 0 | 0 | 2,801 | 0 | 0 | 2007 | ||||||||||||||||||||||||||||
126
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Lakewood, CA
|
$ | 0 | $ | 146 | $ | 14,885 | $ | 352 | $ | 146 | $ | 15,237 | $ | 1,696 | 2006 | 1993 | ||||||||||||||||||||
|
Las Vegas, NV(5)
|
6,175 | 74 | 15,287 | 239 | 74 | 15,526 | 2,107 | 2006 | 2000 | |||||||||||||||||||||||||||
|
Las Vegas, NV
|
0 | 6,127 | 0 | 0 | 6,127 | 0 | 0 | 2007 | ||||||||||||||||||||||||||||
|
Las Vegas, NV
|
0 | 6,734 | 54,886 | 89 | 6,734 | 54,975 | 5,392 | 2006 | 1991 | |||||||||||||||||||||||||||
|
Las Vegas, NV
|
0 | 2,319 | 4,612 | 486 | 2,319 | 5,098 | 538 | 2006 | 1991 | |||||||||||||||||||||||||||
|
Las Vegas, NV(6)
|
3,157 | 0 | 6,921 | 429 | 433 | 6,917 | 716 | 2007 | 1997 | |||||||||||||||||||||||||||
|
Lawrenceville, GA
|
0 | 2,279 | 10,732 | 20 | 2,279 | 10,752 | 1,282 | 2006 | 2001 | |||||||||||||||||||||||||||
|
Lawrenceville, GA(5)
|
2,394 | 1,054 | 4,974 | 9 | 1,054 | 4,983 | 618 | 2006 | 2002 | |||||||||||||||||||||||||||
|
Los Alamitos, CA(6)
|
8,606 | 0 | 18,635 | 67 | 39 | 18,663 | 1,822 | 2007 | 2003 | |||||||||||||||||||||||||||
|
Los Gatos, CA
|
0 | 488 | 22,386 | 0 | 488 | 22,386 | 2,857 | 2006 | 1993 | |||||||||||||||||||||||||||
|
Loxahatchee, FL
|
0 | 1,340 | 6,509 | 6 | 1,340 | 6,515 | 754 | 2006 | 1993 | |||||||||||||||||||||||||||
|
Loxahatchee, FL(6)
|
2,757 | 1,553 | 4,694 | 322 | 1,562 | 5,007 | 505 | 2006 | 1994 | |||||||||||||||||||||||||||
|
Loxahatchee, FL
|
0 | 1,637 | 5,048 | 334 | 1,646 | 5,373 | 518 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Merrillville, IN
|
0 | 0 | 22,134 | 0 | 0 | 22,134 | 902 | 2008 | 2006 | |||||||||||||||||||||||||||
|
Mesa, AZ
|
0 | 1,558 | 9,561 | 9 | 1,558 | 9,570 | 941 | 2008 | 1989 | |||||||||||||||||||||||||||
|
Middletown, NY
|
0 | 1,756 | 20,364 | 338 | 1,756 | 20,702 | 3,355 | 2006 | 1998 | |||||||||||||||||||||||||||
|
Morrow, GA
|
0 | 818 | 8,064 | 140 | 834 | 8,188 | 814 | 2007 | 1990 | |||||||||||||||||||||||||||
|
Mount Juliet, TN(8)
|
5,671 | 1,566 | 11,944 | 0 | 1,566 | 11,944 | 1,262 | 2007 | 2005 | |||||||||||||||||||||||||||
|
Nashville , TN
|
0 | 1,806 | 7,165 | 239 | 1,806 | 7,404 | 1,078 | 2006 | 1986 | |||||||||||||||||||||||||||
|
Niagra Falls, NY
|
0 | 1,335 | 17,702 | 419 | 1,414 | 18,042 | 2,082 | 2007 | 1990 | |||||||||||||||||||||||||||
|
Oconomowoc, WI
|
0 | 2,899 | 89,002 | 0 | 2,899 | 89,002 | 925 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Okatie, SC(6)
|
8,131 | 171 | 17,791 | 0 | 171 | 17,791 | 1,398 | 2007 | 1998 | |||||||||||||||||||||||||||
|
Orange Village, OH
|
0 | 610 | 7,419 | 14 | 610 | 7,433 | 1,030 | 2007 | 1985 | |||||||||||||||||||||||||||
|
Palm Springs, CA
|
0 | 365 | 12,396 | 754 | 365 | 13,150 | 1,472 | 2006 | 1998 | |||||||||||||||||||||||||||
|
Palm Springs, FL(5)
|
2,824 | 739 | 4,065 | 0 | 739 | 4,065 | 518 | 2006 | 1993 | |||||||||||||||||||||||||||
|
Palm Springs, FL
|
0 | 1,182 | 7,765 | 0 | 1,182 | 7,765 | 1,140 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Palmer, AK(6)
|
19,980 | 0 | 29,705 | 602 | 217 | 30,090 | 2,697 | 2007 | 2006 | |||||||||||||||||||||||||||
|
Pearland, TX
|
0 | 781 | 5,517 | 0 | 781 | 5,517 | 756 | 2006 | 2000 | |||||||||||||||||||||||||||
|
Pearland, TX(5)
|
1,405 | 948 | 4,556 | 0 | 948 | 4,556 | 518 | 2006 | 2002 | |||||||||||||||||||||||||||
|
Phoenix, AZ(5)
|
29,787 | 1,150 | 48,016 | 0 | 1,150 | 48,016 | 4,970 | 2006 | 1998 | |||||||||||||||||||||||||||
|
Pineville, NC
|
0 | 961 | 6,974 | 468 | 1,070 | 7,333 | 748 | 2006 | 1988 | |||||||||||||||||||||||||||
|
Plano, TX
|
0 | 5,423 | 20,752 | 0 | 5,423 | 20,752 | 1,727 | 2008 | 2007 | |||||||||||||||||||||||||||
|
Plantation, FL
|
10,009 | 8,563 | 10,666 | 1,219 | 8,563 | 11,885 | 1,778 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Plantation, FL(5)
|
9,326 | 8,848 | 9,423 | 342 | 8,896 | 9,717 | 3,023 | 2006 | 1996 | |||||||||||||||||||||||||||
|
Reno, NV
|
0 | 1,117 | 21,972 | 0 | 1,117 | 21,972 | 2,565 | 2006 | 1991 | |||||||||||||||||||||||||||
|
Sacramento, CA
|
0 | 866 | 12,756 | 210 | 866 | 12,966 | 1,288 | 2006 | 1990 | |||||||||||||||||||||||||||
|
San Antonio, TX
|
0 | 2,050 | 16,251 | 303 | 2,050 | 16,554 | 2,783 | 2006 | 1999 | |||||||||||||||||||||||||||
|
Sewell, NJ
|
0 | 0 | 53,360 | 0 | 0 | 53,360 | 568 | 2007 | 2009 | |||||||||||||||||||||||||||
|
Somerville, NJ
|
0 | 3,400 | 22,244 | 2 | 3,400 | 22,246 | 788 | 2008 | 2007 | |||||||||||||||||||||||||||
|
St. Louis, MO(6)
|
7,751 | 0 | 17,247 | 344 | 336 | 17,255 | 1,919 | 2007 | 2001 | |||||||||||||||||||||||||||
|
Stafford, VA
|
0 | 0 | 11,370 | 0 | 0 | 11,370 | 127 | 2008 | 2009 | |||||||||||||||||||||||||||
|
Tempe, AZ(6)
|
5,621 | 0 | 9,112 | 1,608 | 1,486 | 9,234 | 1,068 | 2007 | 1996 | |||||||||||||||||||||||||||
|
Tomball, TX
|
0 | 1,404 | 5,071 | 0 | 1,404 | 5,071 | 968 | 2006 | 1982 | |||||||||||||||||||||||||||
|
Trussville, AL
|
0 | 1,336 | 2,177 | 99 | 1,336 | 2,276 | 618 | 2006 | 1990 | |||||||||||||||||||||||||||
|
Tucson, AZ(6)
|
10,523 | 89 | 18,339 | 314 | 90 | 18,652 | 1,747 | 2007 | 2004 | |||||||||||||||||||||||||||
|
Tucson, AZ
|
0 | 1,302 | 4,925 | 88 | 1,302 | 5,013 | 529 | 2008 | 1995 | |||||||||||||||||||||||||||
|
Van Nuys, CA
|
0 | 0 | 36,188 | 0 | 0 | 36,188 | 0 | 2009 | 1991 | |||||||||||||||||||||||||||
|
Voorhees, NJ
|
0 | 6,404 | 24,251 | 815 | 6,404 | 25,066 | 2,332 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Warrington, PA
|
0 | 85 | 23,231 | 7 | 154 | 23,169 | 2,340 | 2008 | 2001 | |||||||||||||||||||||||||||
|
Wellington, FL(6)
|
6,462 | 0 | 13,697 | 362 | 381 | 13,678 | 1,240 | 2007 | 2003 | |||||||||||||||||||||||||||
|
Wellington, FL(5)
|
7,204 | 107 | 16,933 | 53 | 107 | 16,986 | 1,941 | 2006 | 2000 | |||||||||||||||||||||||||||
|
West Palm Beach, FL(5)
|
7,272 | 628 | 14,740 | 52 | 628 | 14,792 | 1,663 | 2006 | 1993 | |||||||||||||||||||||||||||
|
West Palm Beach, FL(5)
|
6,714 | 610 | 14,618 | 9 | 610 | 14,627 | 2,019 | 2006 | 1991 | |||||||||||||||||||||||||||
|
West Seneca, NY(7)
|
12,995 | 917 | 22,435 | 688 | 1,219 | 22,821 | 2,166 | 2007 | 1990 | |||||||||||||||||||||||||||
|
Yorkville, IL
|
0 | 1,419 | 2,816 | 65 | 1,419 | 2,881 | 464 | 2006 | 1980 | |||||||||||||||||||||||||||
|
Total Medical Office Buildings
|
307,862 | 133,307 | 1,366,653 | 25,099 | 140,358 | 1,384,701 | 134,257 | |||||||||||||||||||||||||||||
|
Construction in Progress
|
0 | 0 | 456,832 | 0 | 0 | 456,832 | 0 | |||||||||||||||||||||||||||||
| 606,355 | 514,005 | 5,488,245 | 288,355 | 521,055 | 5,769,550 | 677,851 | ||||||||||||||||||||||||||||||
127
Table of Contents
|
Gross Amount at Which
|
||||||||||||||||||||||||||||||||||||
| Initial Cost to Company |
Cost Capitalized
|
Carried at Close of Period | ||||||||||||||||||||||||||||||||||
|
Buildings &
|
Subsequent to
|
Buildings &
|
Accumulated
|
Year
|
Year
|
|||||||||||||||||||||||||||||||
|
Description
|
Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Depreciation | Acquired | Built | |||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
|
Assets Held For Sale:
|
||||||||||||||||||||||||||||||||||||
|
Aurora, IL(12)
|
$ | 0 | $ | 322 | $ | 4,879 | $ | 0 | $ | 322 | $ | 4,879 | $ | 0 | 2006 | 1996 | ||||||||||||||||||||
|
Aurora, IL(12)
|
0 | 663 | 380 | 0 | 663 | 380 | 0 | 2006 | 1989 | |||||||||||||||||||||||||||
|
Chicago, IL(12)
|
0 | 3,650 | 1,900 | 0 | 3,650 | 1,900 | 0 | 2002 | 1979 | |||||||||||||||||||||||||||
|
Decatur, GA(12)
|
0 | 571 | 829 | 0 | 571 | 829 | 0 | 2006 | 1971 | |||||||||||||||||||||||||||
|
Lewisville, TX(12)
|
0 | 43 | 1,827 | 0 | 43 | 1,827 | 0 | 2006 | 1997 | |||||||||||||||||||||||||||
|
Ocala, FL(12)
|
0 | 0 | 1,200 | 0 | 0 | 1,200 | 0 | 2006 | 1991 | |||||||||||||||||||||||||||
|
Pelham, AL(12)
|
0 | 539 | 785 | 0 | 539 | 785 | 0 | 2006 | 1990 | |||||||||||||||||||||||||||
|
Rochdale, MA
|
0 | 800 | 11,010 | 0 | 800 | 11,010 | 0 | 2002 | 1995 | |||||||||||||||||||||||||||
|
Stoughton, MA
|
0 | 975 | 12,313 | 0 | 975 | 12,313 | 0 | 1996 | 1958 | |||||||||||||||||||||||||||
|
West Palm Beach, FL(5), (12)
|
6,203 | 201 | 2,799 | 0 | 201 | 2,799 | 0 | 2006 | 1995 | |||||||||||||||||||||||||||
|
Total Assets Held For Sale
|
6,203 | 7,764 | 37,922 | 0 | 7,764 | 37,922 | 0 | |||||||||||||||||||||||||||||
|
Total Investment in Real Property Owned
|
$ | 612,558 | $ | 521,769 | $ | 5,526,167 | $ | 288,355 | $ | 528,819 | $ | 5,807,472 | $ | 677,851 | ||||||||||||||||||||||
| (1) | In September 2003, 15 wholly-owned subsidiaries of the Company completed the acquisitions of 15 assisted living facilities from Southern Assisted Living, Inc. The properties were subject to existing mortgage debt of $54,492,000. The 15 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (2) | In September 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $6,705,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (3) | In January 2005, one wholly-owned subsidiary of the Company completed the acquisition of one assisted living facility from Emeritus Corporation. The property was subject to existing mortgage debt of $7,875,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (4) | In March 2006, three wholly-owned subsidiaries of the Company completed the acquisition of three skilled nursing facilities from Provider Services, Inc. The properties were subject to existing mortgage debt of $14,193,000. The wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (5) | In December 2006, the Company completed the acquisition of Windrose Medical Properties Trust. Certain of the properties were subject to existing mortgage debt of $248,844,000. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries related to the aforementioned properties be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (6) | In May 2007, a wholly-owned subsidiary of the Company completed the acquisition of 17 medical office buildings from Rendina Companies. Certain of the properties were subject to existing mortgage debt of $146,335,000. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries related to the aforementioned properties be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (7) | In August 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from C06 Holdings, LLC. The property was subject to existing mortgage debt of $13,623,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (8) | In December 2007, a wholly-owned subsidiary of the Company completed the acquisition of a medical office building from Sports Docs, L.L.C. The property was subject to existing mortgage debt of $6,374,000. The wholly-owned subsidiary is included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiary be a separate legal entity wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (9) | In April 2009, 12 wholly-owned subsidiaries of the Company incurred mortgage debt of $133,071,000. The 11 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the |
128
Table of Contents
| Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | ||
| (10) | In August 2009, 9 wholly-owned subsidiaries of the Company incurred mortgage debt of $52,198,000. The 9 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (11) | In September 2009, 11 wholly-owned subsidiaries of the Company incurred mortgage debt of $80,258,000. The 11 wholly-owned subsidiaries are included in the Company’s consolidated financial statements. Notwithstanding consolidation for financial statement purposes, it is the Company’s intention that the subsidiaries be separate legal entities wherein the assets and liabilities are not available to pay other debts or obligations of the consolidated Company. | |
| (12) | In 2009, the Company recognized $25,223,000 of impairment charges related to certain properties that it intends to sell. This charge was treated as a reduction of the initial cost to the Company. In addition, impairment charges recorded in previous years were also treated as a reduction of the initial cost to the Company. |
129
Table of Contents
HEALTH
CARE REIT, INC.
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Investment in real estate:
|
||||||||||||
|
Balance at beginning of year
|
$ | 5,979,575 | $ | 5,117,005 | $ | 4,282,858 | ||||||
|
Additions:
|
||||||||||||
|
Acquisitions
|
67,673 | 451,363 | 435,473 | |||||||||
|
Improvements
|
590,394 | 646,161 | 333,520 | |||||||||
|
Conversions from loans receivable
|
0 | 23,097 | 0 | |||||||||
|
Assumed other assets/(liabilities), net
|
0 | 1,899 | 2,432 | |||||||||
|
Assumed debt
|
0 | 0 | 166,188 | |||||||||
|
Purchase price adjustments
|
665 | 0 | 2,189 | |||||||||
|
Reclassification of lease commissions
|
0 | 2,359 | 0 | |||||||||
|
Total additions
|
658,732 | 1,124,879 | 939,802 | |||||||||
|
Deductions:
|
||||||||||||
|
Cost of real estate sold
|
(260,956 | ) | (219,079 | ) | (105,655 | ) | ||||||
|
Reclassification of accumulated depreciation
|
||||||||||||
|
for assets held for sale
|
(15,837 | ) | (10,582 | ) | 0 | |||||||
|
Impairment of assets
|
(25,223 | ) | (32,648 | ) | 0 | |||||||
|
Total deductions
|
(302,016 | ) | (262,309 | ) | (105,655 | ) | ||||||
|
Balance at end of year(1)
|
$ | 6,336,291 | $ | 5,979,575 | $ | 5,117,005 | ||||||
|
Accumulated depreciation:
|
||||||||||||
|
Balance at beginning of year
|
$ | 600,781 | $ | 478,373 | $ | 347,007 | ||||||
|
Additions:
|
||||||||||||
|
Depreciation and amortization expenses
|
164,923 | 163,045 | 149,626 | |||||||||
|
Amortization of above market leases
|
2,061 | 3,477 | 3,518 | |||||||||
|
Reclassification of lease commissions
|
0 | 423 | 0 | |||||||||
|
Total additions
|
166,984 | 166,945 | 153,144 | |||||||||
|
Deductions:
|
||||||||||||
|
Sale of properties
|
(74,244 | ) | (33,578 | ) | (21,778 | ) | ||||||
|
Reclassification of accumulated depreciation for assets held for
sale
|
(15,670 | ) | (10,959 | ) | 0 | |||||||
|
Total deductions
|
(89,914 | ) | (44,537 | ) | (21,778 | ) | ||||||
|
Balance at end of year
|
$ | 677,851 | $ | 600,781 | $ | 478,373 | ||||||
| (1) | The aggregate cost for tax purposes for real property equals $6,378,056,000, $5,977,346,000, and $5,110,696,000 at December 31, 2009, 2008 and 2007, respectively. |
130
Table of Contents
HEALTH
CARE REIT, INC.
SCHEDULE IV —
MORTGAGE LOANS ON REAL ESTATE
December 31,
2009
| (In thousands) | ||||||||||||||||||||||||||
|
Principal Amount
|
||||||||||||||||||||||||||
|
of Loans Subject
|
||||||||||||||||||||||||||
|
Final
|
Periodic
|
Carrying
|
to Delinquent
|
|||||||||||||||||||||||
|
Interest
|
Maturity
|
Payment
|
Prior
|
Face Amount
|
Amount of
|
Principal or
|
||||||||||||||||||||
|
Description
|
Rate | Date | Terms | Liens | of Mortgages | Mortgages | Interest(1) | |||||||||||||||||||
|
First mortgage loan relating to
|
7.60% | 06/30/13 | Monthly Payments | 0 | 40,000 | 21,475 | 0 | |||||||||||||||||||
|
one assisted living facility in
New York |
$136,006 | |||||||||||||||||||||||||
|
First mortgage loan relating to one
|
12.41% | 06/30/10 | Monthly Payments | 0 | 12,000 | 9,270 | 0 | |||||||||||||||||||
|
hospital in Massachusetts
|
$113,740 | |||||||||||||||||||||||||
|
Second mortgage loan relating to one
|
19.26% | 09/09/09 | Monthly Payments | 13,400 | 5,700 | 5,700 | 871 | |||||||||||||||||||
|
independent living facility in Massachusetts
|
$48,165 | |||||||||||||||||||||||||
|
Second mortgage loan relating to one
|
19.26% | 07/31/12 | Monthly Payments | 1,747 | 7,610 | 5,431 | 0 | |||||||||||||||||||
|
independent living facility in Massachusetts
|
$45,891 | |||||||||||||||||||||||||
|
First mortgage loan relating to
|
9.63% | 05/01/09 | Monthly Payments | 0 | 18,800 | 4,951 | 0 | |||||||||||||||||||
|
one hospital in California
|
$149,720 | |||||||||||||||||||||||||
|
First mortgage loan relating to one
|
10.65% | 07/01/20 | Monthly Payments | 0 | 4,500 | 4,273 | 0 | |||||||||||||||||||
|
skilled nursing facility in Michigan
|
$41,282 | |||||||||||||||||||||||||
|
First mortgage loan relating to one
|
3.55% | 01/01/13 | Monthly Payments | 0 | 4,500 | 4,151 | 954 | |||||||||||||||||||
|
independent living facility in Arizona
|
$12,280 | |||||||||||||||||||||||||
|
Second mortgage loan relating to one
|
15.21% | 01/15/15 | Monthly Payments | 0 | 3,300 | 3,300 | 0 | |||||||||||||||||||
|
assisted living facility in Wisconsin
|
$41,828 | |||||||||||||||||||||||||
|
Second mortgage loan relating to one
|
19.26% | 01/31/12 | Monthly Payments | 5,097 | 3,636 | 3,110 | 1,409 | |||||||||||||||||||
|
independent living facility in Massachusetts
|
$26,278 | |||||||||||||||||||||||||
|
Second mortgage loan relating to one
|
19.26% | 04/30/11 | Monthly Payments | 4,869 | 4,085 | 3,085 | 1,720 | |||||||||||||||||||
|
independent living facility in Massachusetts
|
$26,072 | |||||||||||||||||||||||||
|
First mortgage loan relating to one
|
9.50% | 09/01/10 | Monthly Payments | 0 | 2,635 | 2,635 | 0 | |||||||||||||||||||
|
skilled nursing facility in Texas
|
$20,859 | |||||||||||||||||||||||||
|
First mortgage loan relating to one
|
9.50% | 12/01/15 | Monthly Payments | 0 | 2,500 | 2,375 | 0 | |||||||||||||||||||
|
skilled nursing facility in Texas
|
$18,802 | |||||||||||||||||||||||||
|
Two first mortgage loans relating
|
From | From | Monthly Payments | 0 | 15,952 | 2,679 | 229 | |||||||||||||||||||
|
to one independent living
|
7.00% to | 09/1/09 to | from $5,333 | |||||||||||||||||||||||
|
facility, and six skilled nursing
|
19.00% | 08/31/12 | to $76,514 | |||||||||||||||||||||||
|
facilities
|
||||||||||||||||||||||||||
|
Two second mortgage loans relating to
|
From | From | Monthly Payments | 4,800 | 2,300 | 2,082 | 0 | |||||||||||||||||||
|
one skilled nursing facility and
|
12.10% to | 06/30/10 to | from $2,335 | |||||||||||||||||||||||
|
one hospital
|
12.17% | 07/01/11 | to $15,633 | |||||||||||||||||||||||
|
Totals
|
$ | 29,913 | $ | 127,518 | $ | 74,517 | $ | 5,183 | ||||||||||||||||||
| (1) | Represents allocation of allowance for losses on loans receivable, if applicable. |
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HEALTH
CARE REIT, INC.
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Reconciliation of mortgage loans:
|
||||||||||||
|
Balance at beginning of year
|
$ | 137,292 | $ | 143,091 | $ | 177,615 | ||||||
|
Additions:
|
||||||||||||
|
New mortgage loans
|
9,456 | 22,142 | 55,692 | |||||||||
|
Reclass from non real estate loans
|
0 | 0 | 1,607 | |||||||||
|
Total additions
|
9,456 | 22,142 | 57,299 | |||||||||
|
Deductions:
|
||||||||||||
|
Collections of principal(1)
|
(54,696 | ) | (4,844 | ) | (19,296 | ) | ||||||
|
Conversions to real property
|
0 | (23,097 | ) | 0 | ||||||||
|
Charge-offs
|
(17,535 | ) | 0 | 0 | ||||||||
|
Reclass to other real estate loans(2)
|
0 | 0 | (72,527 | ) | ||||||||
|
Total deductions
|
(72,231 | ) | (27,941 | ) | (91,823 | ) | ||||||
|
Balance at end of year
|
$ | 74,517 | $ | 137,292 | $ | 143,091 | ||||||
| (1) | Includes collection of negative principal amortization. | |
| (2) | In 2007, the Company reclassified all loans that did not have a first, second or third mortgage lien to other real estate loans. |
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EXHIBIT INDEX
| 1 | .1(a) | Equity Distribution Agreement, dated as of November 6, 2008, by and among the Company and UBS Securities LLC (filed with the Commission as Exhibit 1.1 to the Company’s Form 8-K filed November 7, 2008 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 1 | .1(b) | Amendment No. 1 to Equity Distribution Agreement, dated as of May 8, 2009, by and among the Company and UBS Securities LLC (filed with the Commission as Exhibit 1.1 to the Company’s Form 10-Q filed August 6, 2009 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 2 | .1(a) | Agreement and Plan of Merger, dated as of September 12, 2006, by and among the Company, Heat Merger Sub, LLC, Heat OP Merger Sub, L.P., Windrose Medical Properties Trust and Windrose Medical Properties, L.P. (filed with the Commission as Exhibit 2.1 to the Company’s Form 8-K filed September 15, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 2 | .1(b) | Amendment No. 1 to Agreement and Plan of Merger, dated as of October 12, 2006, by and among the Company, Heat Merger Sub, LLC, Heat OP Merger Sub, L.P., Windrose Medical Properties Trust and Windrose Medical Properties, L.P. (filed with the Commission as Exhibit 2.1 to the Company’s Form 8-K filed October 13, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(a) | Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(b) | Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A, of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(c) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(d) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed June 13, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(e) | Certificate of Designation of 7 7 / 8 % Series D Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A/A filed July 8, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(f) | Certificate of Designation of 6% Series E Cumulative Convertible and Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed October 1, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(g) | Certificate of Designation of 7 5 / 8 % Series F Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A filed September 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(h) | Certificate of Designation of 7.5% Series G Cumulative Convertible Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed December 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .1(i) | Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.9 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 3 | .2 | Second Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed October 29, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .1 | The Company, by signing this Report, agrees to furnish the Securities and Exchange Commission upon its request a copy of any instrument that defines the rights of holders of long-term debt of the Company and authorizes a total amount of securities not in excess of 10% of the total assets of the Company. | ||
| 4 | .2(a) | Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(b) | Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto). |
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| 4 | .2(c) | Amendment No. 1, dated March 12, 2003, to Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 14, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(d) | Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(e) | Amendment No. 1, dated September 16, 2003, to Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.4 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(f) | Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed October 30, 2003 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(g) | Amendment No. 1, dated September 13, 2004, to Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A., as successor to Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 13, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(h) | Supplemental Indenture No. 4, dated as of April 27, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed April 28, 2005 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .2(i) | Supplemental Indenture No. 5, dated as of November 30, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 30, 2005 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(a) | Indenture, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(b) | Supplemental Indenture No. 1, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .3(c) | Supplemental Indenture No. 2, dated as of July 20, 2007, between the Company and The Bank of New York Trust Company, N.A. (filed with the SEC as Exhibit 4.1 to the Company’s Form 8-K filed July 20, 2007 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 4 | .4 | Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as Exhibit 4.9 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto). | ||
| 4 | .5 | Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as Exhibit 4.10 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto). | ||
| 4 | .6 | Form of Indenture for Senior Debt Securities (filed with the Commission as Exhibit 4.6 to the Company’s Form S-3 (File No. 333-159040) filed May 7, 2009, and incorporated herein by reference thereto). | ||
| 10 | .1 | Fourth Amended and Restated Loan Agreement, dated as of August 6, 2007, by and among the Company and certain of its subsidiaries, the banks signatory thereto, KeyBank National Association, as administrative agent, Deutsche Bank Securities Inc., as syndication agent, and UBS Securities LLC, Bank of America, N.A., JPMorgan Chase Bank, N.A., Calyon New York Branch, Barclays Bank PLC and Fifth Third Bank, as documentation agents (filed with the SEC as Exhibit 10.2 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto). |
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| 10 | .2 | Health Care REIT, Inc. Interest Rate & Currency Risk Management Policy adopted on May 6, 2004 (filed with the Commission as Exhibit 10.6 to the Company’s Form 10-Q filed July 23, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | ||
| 10 | .3(a) | The 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Appendix II to the Company’s Proxy Statement for the 1995 Annual Meeting of Stockholders, filed September 29, 1995 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(b) | First Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.2 to the Company’s Form S-8 (File No. 333-40771) filed November 21, 1997, and incorporated herein by reference thereto).* | ||
| 10 | .3(c) | Second Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.3 to the Company’s Form S-8 (File No. 333-73916) filed November 21, 2001, and incorporated herein by reference thereto).* | ||
| 10 | .3(d) | Third Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.15 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(e) | Form of Stock Option Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed with the Commission as Exhibit 10.17 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .3(f) | Form of Restricted Stock Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(a) | Stock Plan for Non-Employee Directors of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(b) | First Amendment to the Stock Plan for Non-Employee Directors of Health Care REIT, Inc. effective April 21, 1998 (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(c) | Form of Stock Option Agreement under the Stock Plan for Non-Employee Directors (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q/A filed October 27, 2004 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .4(d) | Form of Restricted Stock Agreement under the Stock Plan for Non-Employee Directors (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(a) | Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (filed with the Commission as Appendix A to the Company’s Proxy Statement for the 2009 Annual Meeting of Stockholders, filed March 25, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(b) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(c) | Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.6 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(d) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.8 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(e) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.19 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(f) | Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.7 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* |
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| 10 | .5(g) | Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.9 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(h) | Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(i) | Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.21 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(j) | Form of Restricted Stock Agreement for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.22 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(k) | Form of Restricted Stock Agreement for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.23 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(l) | Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.24 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(m) | Form of Amendment to Deferred Stock Unit Grant Agreements for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.10 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(n) | Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.11 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(o) | Stock Option Agreement, dated December 20, 2006, between the Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed May 10, 2007 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(p) | Restricted Stock Agreement, dated January 22, 2007, by and between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.2 to the Company’s Form 8-K filed January 25, 2007 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(q) | Stock Option Agreement (with Dividend Equivalent Rights), dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(r) | Stock Option Agreement (without Dividend Equivalent Rights), dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .5(s) | Restricted Stock Agreement, dated as of January 21, 2008, by and between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed August 6, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .6 | Fourth Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and George L. Chapman (filed with the Commission as Exhibit 10.6 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .7 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Scott A. Estes (filed with the Commission as Exhibit 10.4 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .8 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.3 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .9 | Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Jeffrey H. Miller (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .10 | Employment Agreement, dated January 19, 2009, between the Company and John T. Thomas (filed with the Commission as Exhibit 10.10 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* |
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| 10 | .11 | Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Erin C. Ibele (filed with the Commission as Exhibit 10.11 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .12 | Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.12 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .13 | Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Fred S. Klipsch (filed with the Commission as Exhibit 10.5 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .14 | Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.14 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .15(a) | Consulting Agreement, dated February 1, 2009, between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.15(a) to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .15(b) | Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Raymond W. Braun (filed with the Commission as Exhibit 10.2 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .16 | Amended and Restated Health Care REIT, Inc. Supplemental Executive Retirement Plan, dated December 29, 2008 (filed | ||
| with the Commission as Exhibit 10.12 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).* | ||||
| 10 | .17 | Form of Indemnification Agreement between the Company and each director, executive officer and officer of the Company (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 18, 2005 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 10 | .18 | Summary of Director Compensation (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 9, 2008 (File No. 001-08923), and incorporated herein by reference thereto).* | ||
| 12 | Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited). | |||
| 14 | Code of Business Conduct and Ethics (filed with the Commission as Exhibit 14 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto). | |||
| 21 | Subsidiaries of the Company. | |||
| 23 | Consent of Ernst & Young LLP, independent registered public accounting firm. | |||
| 24 | .1 | Power of Attorney executed by William C. Ballard, Jr. (Director). | ||
| 24 | .2 | Power of Attorney executed by Pier C. Borra (Director). | ||
| 24 | .3 | Power of Attorney executed by Thomas J. DeRosa (Director). | ||
| 24 | .4 | Power of Attorney executed by Jeffrey H. Donahue (Director). | ||
| 24 | .5 | Power of Attorney executed by Peter J. Grua (Director). | ||
| 24 | .6 | Power of Attorney executed by Fred S. Klipsch (Director). | ||
| 24 | .7 | Power of Attorney executed by Sharon M. Oster (Director). | ||
| 24 | .8 | Power of Attorney executed by Jeffrey R. Otten (Director). | ||
| 24 | .9 | Power of Attorney executed by R. Scott Trumbull (Director). | ||
| 24 | .10 | Power of Attorney executed by George L. Chapman (Director, Chairman of the Board, Chief Executive Officer and President and Principal Executive Officer). | ||
| 24 | .11 | Power of Attorney executed by Scott A. Estes (Executive Vice President and Chief Financial Officer and Principal Financial Officer). | ||
| 24 | .12 | Power of Attorney executed by Paul D. Nungester, Jr. (Vice President and Controller and Principal Accounting Officer). | ||
| 31 | .1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. | ||
| 31 | .2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. | ||
| 32 | .1 | Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer. | ||
| 32 | .2 | Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer. |
| * | Management Contract or Compensatory Plan or Arrangement. |
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Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules