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HCP reports YOY FFO dip in Q2, adjusts guidance

HCP Inc. disclosed diluted Nareit funds from operations applicable to common shares for the second quarter of $199.9 million, or 41.0 cents per share, an 8.9% decline on a per-share basis from $209.9 million, or 45.0 cents per share, in the comparable 2018 period.

Nareit is the U.S.-based trade association for real estate investment trusts and publicly traded real estate companies.

Diluted FFO as adjusted applicable to common shares for the quarter decreased 6.4% year over year on a per-share basis to $214.4 million, or 44.0 cents per share, from $219.5 million, or 47.0 cents per share.

Total revenues for the second quarter came in at $491.6 million, an increase of 4.7% year over year from $469.6 million.

The S&P Global Market Intelligence consensus FFO-per-share estimate for the quarter was 43 cents.

HCP said it forecasts diluted Nareit FFO per share in the range of $1.62 to $1.66 for the full year, compared with previous guidance in the range of $1.67 to $1.73. The company also forecasts diluted FFO as adjusted for the full year at between $1.73 and $1.77 per share. The company previously offered guidance for diluted FFO as adjusted in the range of $1.70 to $1.76 per share.

For the full year, the S&P Global Market Intelligence consensus FFO-per-share estimate is $1.74.

HCP entered into an agreement to sell its direct financing lease interests in 13 noncore seniors-housing properties to Prime Care LLC and its affiliates for $274 million. The properties, which are leased to Prime Care under direct financing leases, were bought by HCP in 2006. Eleven of the properties are managed by Sunrise Senior Living and two are managed by Harbor Retirement Associates, or HRA. The transaction has a yield on sale of 8.2% and is expected to close in the third quarter.

In the second quarter, the company entered into an agreement with HRA to amend the parties' existing leases. HCP will sell six low-performing noncore properties and combine the remaining eight properties into a single master lease with a common maturity date in December 2028 and 2.5% annual escalators. HCP received improved lease covenants and guaranties and will fund up to $10 million of capital improvements, which it said will generate a yield of 6.5%.

Separately, HCA Healthcare committed to lease 55% of the space in a two-story medical office building on HCA's Oak Hill Hospital campus in Brooksville, Fla.

In July, the company acquired a $228 million life sciences campus in Lexington, Mass., known as The Hartwell Innovation Campus. The acquisition price represents a 5.25% year-one cash capitalization rate. The 277,000-square-foot, four-building campus is fully leased to seven biopharmaceutical and medical diagnostics tenants. The campus is the third that HCP owns in partnership with King Street Properties.

Also in July, the company acquired a portfolio of five California seniors-housing properties, operated by Oakmont Senior Living, for $284 million. The properties, totaling 430 units, are in Huntington Beach, Los Angeles, San Jose and San Francisco. In another July transaction, HCP acquired a $16 million, 56,000-square-foot office building on the company's Directors Place campus in San Diego.

In May, the company acquired a 38,000-square-foot medical office building in Overland Park, Kan., for $15 million at a 5.5% year-one cash capitalization rate. The property is 100% leased and is on the campus of HCA's Midwest Menorah Medical Center.

HCP renewed its 10-party seniors-housing master lease with Aegis Living for an additional 10 years, with the lease now maturing in July 2030.

In the second quarter, HCP completed and delivered the third phase of The Cove, a life-sciences campus in South San Francisco. The two completed buildings are 100% occupied.