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EXCEL - IDEA: XBRL DOCUMENT - WELLTOWER INC.Financial_Report.xls

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

or

 

 

 

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                      

Commission file number: 1-8923

HEALTH CARE REIT, INC.

 

(Exact name of registrant as specified in its charter

 

 

 

Delaware

 

34-1096634

 

 

 

(State or other jurisdiction of

 incorporation or organization)

 

(I.R.S. Employer

 Identification No.)

 

 

 

4500 Dorr Street, Toledo, Ohio

 

43615

 

 

 

(Address of principal executive office)

 

(Zip Code)

(419) 247-2800

(Registrant’s telephone number, including area code)  

Not Applicable

 

(Former name, former address and former fiscal year, if changed since last report)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑  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  No  o

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.

 

 

 

 

 

 

 

Large accelerated filer  

 

Accelerated filer o  

 

Non-accelerated filer   o

 (Do not check if a smaller reporting company)

 

Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  ☑

As of July 25, 2014, the registrant had 308,544,842 shares of common stock outstanding.  

 

 


TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets — June 30, 2014 and December 31, 2013

3

 

 

Consolidated Statements of Comprehensive Income — Three and six months ended June 30, 2014 and 2013

4

 

 

Consolidated Statements of Equity — Six months ended June 30, 2014 and 2013

6

 

 

Consolidated Statements of Cash Flows — Six months ended June 30, 2014 and 2013

7

 

 

Notes to Unaudited Consolidated Financial Statements

8

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

55

 

 

Item 4. Controls and Procedures

56

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

Item 1A. Risk Factors

57

 

57

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

57

 

 

Item 5. Other Information

57

 

 

Item 6. Exhibits

58

 

 

Signatures

59

 

 

  

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

 

 

June 30, 2014

 

December 31, 2013

 

 

 

 

  

(Unaudited)

 

(Note)

Assets:  

 

 

 

 

 

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

 1,916,820 

 

$

 1,878,877 

 

 

Buildings and improvements  

 

 21,151,624 

 

 

 20,625,515 

 

 

Acquired lease intangibles  

 

 1,084,703 

 

 

 1,070,754 

 

 

Real property held for sale, net of accumulated depreciation  

 

 77,436 

 

 

 18,502 

 

 

Construction in progress  

 

 124,073 

 

 

 141,085 

 

 

 

Gross real property owned  

 

 24,354,656 

 

 

 23,734,733 

 

 

Less accumulated depreciation and amortization  

 

 (2,809,530) 

 

 

 (2,386,658) 

 

 

 

Net real property owned  

 

 21,545,126 

 

 

 21,348,075 

 

Real estate loans receivable  

 

 367,186 

 

 

 332,146 

 

Net real estate investments  

 

 21,912,312 

 

 

 21,680,221 

Other assets:  

 

 

 

 

 

 

 

Investments in unconsolidated entities  

 

 680,558 

 

 

 479,629 

 

 

Goodwill  

 

 68,321 

 

 

 68,321 

 

 

Deferred loan expenses  

 

 65,479 

 

 

 70,875 

 

 

Cash and cash equivalents  

 

 207,354 

 

 

 158,780 

 

 

Restricted cash  

 

 65,139 

 

 

 72,821 

 

 

Receivables and other assets  

 

 574,727 

 

 

 553,310 

 

 

 

Total other assets  

 

 1,661,578 

 

 

 1,403,736 

Total assets  

$

 23,573,890 

 

$

 23,083,957 

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under unsecured line of credit arrangement  

$

 0 

 

$

 130,000 

 

 

Senior unsecured notes  

 

 7,411,243 

 

 

 7,379,308 

 

 

Secured debt  

 

 2,850,103 

 

 

 3,058,248 

 

 

Capital lease obligations  

 

 83,850 

 

 

 84,458 

 

 

Accrued expenses and other liabilities  

 

 678,400 

 

 

 640,573 

Total liabilities  

 

 11,023,596 

 

 

 11,292,587 

Redeemable noncontrolling interests  

 

 35,404 

  

  

 35,039 

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

 1,006,250 

 

 

 1,017,361 

 

 

Common stock  

 

 308,355 

 

 

 289,461 

 

 

Capital in excess of par value  

 

 13,524,621 

 

 

 12,418,520 

 

 

Treasury stock  

 

 (32,289) 

 

 

 (21,263) 

 

 

Cumulative net income  

 

 2,484,425 

 

 

 2,329,869 

 

 

Cumulative dividends  

 

 (5,096,110) 

 

 

 (4,600,854) 

 

 

Accumulated other comprehensive income (loss)  

 

 (18,642) 

 

 

 (24,531) 

 

 

Other equity  

 

 6,159 

 

 

 6,020 

 

 

 

Total Health Care REIT, Inc. stockholders’ equity  

 

 12,182,769 

 

 

 11,414,583 

 

 

Noncontrolling interests  

 

 332,121 

 

 

 341,748 

Total equity  

 

 12,514,890 

 

 

 11,756,331 

Total liabilities and equity  

$

 23,573,890 

 

$

 23,083,957 

 

NOTE: The consolidated balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

See notes to unaudited consolidated financial statements

 

3


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental income  

$

 347,847 

 

$

 298,873 

 

$

 684,303 

 

$

 591,516 

 

Resident fees and services

 

 467,639 

 

 

 370,995 

 

 

 923,904 

 

 

 698,319 

 

Interest income

 

 8,933 

 

 

 7,640 

 

 

 17,527 

 

 

 16,696 

 

Other income

 

 2,027 

 

 

 1,025 

 

 

 2,520 

 

 

 1,725 

 

 

Total revenues

 

 826,446 

 

 

 678,533 

 

 

 1,628,254 

 

 

 1,308,256 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 121,065 

 

 

 109,465 

 

 

 241,898 

 

 

 218,303 

 

Property operating expenses

 

 343,754 

 

 

 277,958 

 

 

 685,185 

 

 

 530,780 

 

Depreciation and amortization

 

 214,449 

 

 

 198,062 

 

 

 447,766 

 

 

 382,750 

 

General and administrative

 

 51,660 

 

 

 23,902 

 

 

 84,524 

 

 

 51,081 

 

Transaction costs

 

 7,040 

 

 

 28,136 

 

 

 7,993 

 

 

 94,116 

 

Loss (gain) on derivatives, net

 

 351 

 

 

 (2,716) 

 

 

 351 

 

 

 (407) 

 

Loss (gain) on extinguishment of debt, net

 

 531 

 

 

 - 

 

 

 383 

 

 

 (308) 

 

 

Total expenses

 

 738,850 

 

 

 634,807 

 

 

 1,468,100 

 

 

 1,276,315 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and income from unconsolidated entities

 

 87,596 

 

 

 43,726 

 

 

 160,154 

 

 

 31,941 

Income tax (expense) benefit

 

 (1,569) 

 

 

 (1,215) 

 

 

 (3,830) 

 

 

 (3,978) 

Income (loss) from unconsolidated entities

 

 (11,516) 

 

 

 (5,461) 

 

 

 (17,073) 

 

 

 (3,198) 

Income (loss) from continuing operations

 

 74,511 

 

 

 37,050 

 

 

 139,251 

 

 

 24,765 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sales of discontinued properties, net

 

 6,411 

 

 

 (29,997) 

 

 

 6,411 

 

 

 52,495 

 

Income (loss) from discontinued operations, net

 

 264 

 

 

 128 

 

 

 724 

 

 

 1,720 

 

 

Discontinued operations, net

 

 6,675 

 

 

 (29,869) 

 

 

 7,135 

 

 

 54,215 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on real estate dispositions, net

 

 6,668 

 

 

 - 

 

 

 6,668 

 

 

 - 

Net income

 

 87,854 

 

 

 7,181 

 

 

 153,054 

 

 

 78,980 

Less:

Preferred stock dividends

 

 16,352 

 

 

 16,602 

 

 

 32,705 

 

 

 33,203 

Less:

Net income (loss) attributable to noncontrolling interests(1)

 

 (327) 

 

 

 (913) 

 

 

 (1,502) 

 

 

 (774) 

Net income (loss) attributable to common stockholders

$

 71,829 

 

$

 (8,508) 

 

$

 121,851 

 

$

 46,551 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 296,256 

 

 

 273,091 

 

 

 293,046 

 

 

 266,602 

 

Diluted

 

 297,995 

 

 

 276,481 

 

 

 294,590 

 

 

 266,602 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

 0.22 

 

$

 0.08 

 

$

 0.39 

 

$

 (0.03) 

 

Discontinued operations, net

 

 0.02 

 

 

 (0.11) 

 

 

 0.02 

 

 

 0.20 

 

Net income (loss) attributable to common stockholders*

$

 0.24 

 

$

 (0.03) 

 

$

 0.42 

 

$

 0.17 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

 0.22 

 

$

 0.08 

 

$

 0.39 

 

$

 (0.03) 

 

Discontinued operations, net

 

 0.02 

 

 

 (0.11) 

 

 

 0.02 

 

 

 0.20 

 

Net income (loss) attributable to common stockholders*

$

 0.24 

 

$

 (0.03) 

 

$

 0.41 

 

$

 0.17 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

 0.795 

 

$

 0.765 

 

$

 1.590 

 

$

 1.530 

* Amounts may not sum due to rounding

(1) Includes amounts attributable to redeemable noncontrolling interests.

See notes to unaudited consolidated financial statements

 

4


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2014

 

2013

 

2014

 

2013

Net income

$

 87,854 

 

$

 7,181 

 

$

 153,054 

 

$

 78,980 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain (loss) on equity investments

 

 (160) 

 

 

 (258) 

 

 

 389 

 

 

 (86) 

 

Unrealized gains (losses) on cash flow hedges

 

 432 

 

 

 472 

 

 

 872 

 

 

 943 

 

Foreign currency translation gain (loss)

 

 13,109 

 

 

 (20,751) 

 

 

 3,220 

 

 

 (43,457) 

Total other comprehensive income (loss)

 

 13,381 

 

 

 (20,537) 

 

 

 4,481 

 

 

 (42,600) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 101,235 

 

 

 (13,356) 

 

 

 157,535 

 

 

 36,380 

Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)

 

 6,277 

 

 

 (5,367) 

 

 

 (2,910) 

 

 

 (5,228) 

Total comprehensive income (loss) attributable to common stockholders

$

 94,958 

 

$

 (7,989) 

 

$

 160,445 

 

$

 41,608 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements

 

5


CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

Six Months Ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

 1,017,361 

$

 289,461 

$

 12,418,520 

$

 (21,263) 

$

 2,329,869 

$

 (4,600,854) 

$

 (24,531) 

$

 6,020 

$

 341,748 

$

 11,756,331 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 154,556 

 

 

 

 

 

 

 

 (1,351) 

 

 153,205 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 5,889 

 

 

 

 (1,408) 

 

 4,481 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 157,686 

Net change in noncontrolling interests

 

 

 

  

 

 (4,680) 

 

 

 

 

 

 

 

 

 

 

 

 (6,868) 

 

 (11,548) 

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

 2,561 

 

 147,486 

 

 (11,026) 

 

 

 

 

 

 

 

 (320) 

 

 

 

 138,701 

Proceeds from issuance of common stock

 

 

 

 16,100 

 

 952,417 

 

 

 

 

 

 

 

 

 

 

 

 

 

 968,517 

 Conversion of preferred stock

 

 (11,111) 

 

 233 

 

 10,878 

 

 

 

  

 

 

 

 

 

 

 

 

 

 - 

Option compensation expense

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 459 

 

 

 

 459 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (462,551) 

 

 

 

 

 

 

 

 (462,551) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (32,705) 

 

 

 

 

 

 

 

 (32,705) 

Balances at end of period

$

 1,006,250 

$

 308,355 

$

 13,524,621 

$

 (32,289) 

$

 2,484,425 

$

 (5,096,110) 

$

 (18,642) 

$

 6,159 

$

 332,121 

$

 12,514,890 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

 1,022,917 

 

 260,396 

 

 10,543,690 

 

 (17,875) 

 

 2,184,819 

 

 (3,694,579) 

 

 (11,028) 

 

 6,461 

 

 225,718 

$

 10,520,519 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 79,754 

 

 

 

 

 

 

 

 (8) 

 

 79,746 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 (38,146) 

 

 

 

 (4,454) 

 

 (42,600) 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 37,146 

Net change in noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 198,739 

 

 198,739 

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

 1,689 

 

 112,601 

 

 (3,373) 

 

 

 

 

 

 

 

 (1,353) 

 

 

 

 109,564 

Proceeds from issuance of common stock

 

 

 

 23,000 

 

 1,607,636 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,630,636 

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 570 

 

 

 

 570 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (399,815) 

 

 

 

 

 

 

 

 (399,815) 

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 (33,203) 

 

 

 

 

 

 

 

 (33,203) 

Balances at end of period

$

 1,022,917 

$

 285,085 

$

 12,263,927 

$

 (21,248) 

$

 2,264,573 

$

 (4,127,597) 

$

 (49,174) 

$

 5,678 

$

 419,995 

$

 12,064,156 

 

See notes to unaudited consolidated financial statements

 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

 

Six Months Ended

 

 

 

  

June 30,

 

 

 

  

2014

 

2013

Operating activities:  

 

 

 

 

 

Net income  

$

 153,054 

 

$

 78,980 

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

 447,766 

 

 

 387,599 

 

 

Other amortization expenses  

 

 3,065 

 

 

 6,543 

 

 

Stock-based compensation expense  

 

 21,837 

 

 

 12,694 

 

 

Loss (gain) on derivatives, net  

 

 351 

 

 

 (407) 

 

 

Loss (gain) on extinguishment of debt, net  

 

 383 

 

 

 (308) 

 

 

Loss (income) from unconsolidated entities

 

 17,073 

 

 

 3,198 

 

 

Rental income in excess of cash received  

 

 (26,414) 

 

 

 (18,463) 

 

 

Amortization related to above (below) market leases, net  

 

 365 

 

 

 245 

 

 

Loss (gain) on sales of properties, net  

 

 (13,079) 

 

 

 (52,495) 

 

 

Distributions by unconsolidated entities

 

 7,155 

 

 

 - 

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

 5,433 

 

 

 25,507 

 

 

Decrease (increase) in receivables and other assets  

 

 (21,455) 

 

 

 (36,356) 

Net cash provided from (used in) operating activities  

 

 595,534 

 

 

 406,737 

 

 

 

  

 

 

 

 

 

Investing activities:  

 

 

 

 

 

 

Cash disbursed for acquisitions  

 

 (488,066) 

 

 

 (2,432,376) 

 

Cash disbursed for capital improvements to existing properties

 

 (54,688) 

 

 

 (48,480) 

 

Cash disbursed for construction in progress

 

 (95,201) 

 

 

 (119,333) 

 

Capitalized interest  

 

 (3,305) 

 

 

 (2,992) 

 

Investment in real estate loans receivable  

 

 (54,877) 

 

 

 (53,072) 

 

Other investments, net of payments  

 

 (47,858) 

 

 

 8,051 

 

Principal collected on real estate loans receivable  

 

 20,941 

 

 

 55,547 

 

Contributions to unconsolidated entities  

 

 (246,794) 

 

 

 (361,107) 

 

Distributions by unconsolidated entities  

 

 22,925 

 

 

 14,786 

 

Proceeds from (payments on) derivatives  

 

 - 

 

 

 (2,604) 

 

Decrease (increase) in restricted cash  

 

 7,682 

 

 

 (82,292) 

 

Proceeds from sales of real property  

 

 140,819 

 

 

 321,303 

Net cash provided from (used in) investing activities  

 

 (798,422) 

 

 

 (2,702,569) 

 

 

 

  

 

 

 

 

 

Financing activities:  

 

 

 

 

 

 

Net increase (decrease) under unsecured lines of credit arrangements  

 

 (130,000) 

 

 

 - 

 

Proceeds from issuance of senior unsecured notes  

 

 - 

 

 

 497,862 

 

Payments to extinguish senior unsecured notes  

 

 (1) 

 

 

 (3) 

 

Net proceeds from the issuance of secured debt  

 

 10,690 

 

 

 71,340 

 

Payments on secured debt  

 

 (219,980) 

 

 

 (73,557) 

 

Net proceeds from the issuance of common stock  

 

 1,101,969 

 

 

 1,730,235 

 

Decrease (increase) in deferred loan expenses  

 

 (3,395) 

 

 

 (10,790) 

 

Contributions by noncontrolling interests(1)

 

 4,485 

 

 

 3,730 

 

Distributions to noncontrolling interests(1)

 

 (14,208) 

 

 

 (9,860) 

 

Acquisitions of noncontrolling interests

 

 (1,175) 

 

 

 - 

 

Cash distributions to stockholders  

 

 (495,256) 

 

 

 (433,018) 

 

Other financing activities

 

 (608) 

 

 

 (2,072) 

Net cash provided from (used in) financing activities  

 

 252,521 

 

 

 1,773,867 

Effect of foreign currency translation on cash and cash equivalents

 

 (1,059) 

 

 

 673 

Increase (decrease) in cash and cash equivalents  

 

 48,574 

 

 

 (521,292) 

Cash and cash equivalents at beginning of period  

 

 158,780 

 

 

 1,033,764 

Cash and cash equivalents at end of period  

$

 207,354 

 

$

 512,472 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

 224,544 

 

$

 196,980 

 

Income taxes paid

 

 11,955 

 

 

 2,625 

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

See notes to unaudited consolidated financial statements

 

7


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. 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 seniors housing and health care real estate. Our full service platform offers property management and development services to our customers. As of June 30, 2014, our diversified portfolio consisted of 1,224 properties in 46 states, the United Kingdom, and Canada.  Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities.

  

2. Accounting Policies and Related Matters

     Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2014 are not necessarily an indication of the results that may be expected for the year ending December 31, 2014. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.

     New Accounting Standards     

     In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”), which amends U.S. GAAP to require reporting of discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This pronouncement will be effective for the first annual reporting period beginning after December 15, 2014 with early adoption permitted. We adopted ASU 2014-08 on January 1, 2014 on a prospective basis.  The adoption of this guidance did not have a material impact on our consolidated financial position or results of operations.

     In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.

  

3. Real Property Acquisitions and Development

 

     The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their respective fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments.  Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs.

 

 

 

8


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

     Seniors Housing Triple-net Activity

 

 

Six Months Ended

 

(In thousands)

June 30, 2014(1)

June 30, 2013

 

Land and land improvements

 

$

 18,530 

 

$

 8,533 

 

Buildings and improvements

 

 

 230,126 

 

 

 47,993 

 

 

Total assets acquired

 

 

 248,656 

 

 

 56,526 

 

Non-cash acquisition related activity

 

 

 (1,839) 

 

 

 - 

 

 

Cash disbursed for acquisitions

 

 

 246,817 

 

 

 56,526 

 

Construction in progress additions

 

 

 55,535 

 

 

 58,799 

 

Less:

Capitalized interest

 

 

 (2,332) 

 

 

 (2,208) 

 

 

Foreign currency translation

 

 

 (116) 

 

 

 - 

 

Cash disbursed for construction in progress

 

 

 53,087 

 

  

 56,591 

 

Capital improvements to existing properties

 

 

 9,863 

 

 

 18,302 

 

 

Total cash invested in real property, net of cash acquired

 

$

 309,767 

 

$

 131,419 

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $116,134,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

 

 

 

 

 

 

 

 

     Seniors Housing Operating Activity

     Acquisitions of seniors housing operating properties are structured under RIDEA, which is described in Note 18.  This structure results in the inclusion of all resident revenues and related property operating expenses from the operation of these qualified health care properties in our Consolidated Statements of Comprehensive Income.  Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for information regarding our foreign currency policies.

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

(In thousands)

June 30, 2014(1)

June 30, 2013

 

Land and land improvements

 

$

 3,546 

 

$

 337,066 

 

Building and improvements

 

 

 37,274 

 

 

 3,069,192 

 

Acquired lease intangibles

 

 

 5,569 

 

 

 263,740 

 

Restricted cash

 

 

 - 

 

 

 22,863 

 

Receivables and other assets

 

 

 33 

 

 

 76,286 

 

  

Total assets acquired(2)

 

 

 46,422 

 

 

 3,769,147 

 

Secured debt

 

 

 (12,846) 

 

 

 (556,413) 

 

Accrued expenses and other liabilities  

 

 

 (853) 

 

 

 (51,356) 

 

 

Total liabilities assumed

 

 

 (13,699) 

 

 

 (607,769) 

 

Noncontrolling interests

 

 

 - 

 

 

 (229,966) 

 

Non-cash acquisition related activity(3)

 

 

 - 

 

 

 (555,562) 

 

 

Cash disbursed for acquisitions

 

 

 32,723 

 

 

 2,375,850 

 

Construction in progress additions

 

 

 2,348 

 

 

 472 

 

Less:

Capitalized interest

 

 

 (75) 

 

 

 (6) 

 

Cash disbursed for construction in progress

 

 

 2,273 

 

  

 466 

 

Capital improvements to existing properties

 

 

 32,171 

 

 

 21,474 

 

 

Total cash invested in real property, net of cash acquired

 

$

 67,167 

 

$

 2,397,790 

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $23,922,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

(2) Excludes $245,000 and $60,590,000 of cash acquired during the six months ended June 30, 2014 and 2013, respectively.

(3) Represents Sunrise loan and noncontrolling interests acquisitions.

 

 

 

 

 

 

 

 

 

 

9


HEALTH CARE REIT, INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

     Medical Facilities Activity

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

(In thousands)

June 30, 2014 (1)

 

June 30, 2013

 

Land and land improvements

 

$

 1,655 

 

$

 - 

 

Buildings and improvements

 

 

 212,572 

 

 

 - 

 

Acquired lease intangibles

 

 

 1,525 

 

 

 - 

 

Receivables and other assets

 

 

 249 

 

 

 - 

 

  

Total assets acquired

 

 

 216,001 

 

  

 - 

 

Accrued expenses and other liabilities

 

 

 (7,475) 

 

 

 -