10-QPeriod: Q1 FY2003

WELLTOWER INC. Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 7, 2003For Securities:WELL

Summary

Health Care REIT, Inc. (WELL) reported its first-quarter financial results for the period ending March 31, 2003. The company saw a significant increase in rental income, up 42% year-over-year, driven by property acquisitions. This growth was partially offset by a decrease in interest income as mortgage loans were repaid. Overall, total revenues increased by 28% compared to the prior year's first quarter. Despite rising interest expenses and depreciation, the company's net income available to common stockholders grew to $16.5 million, or $0.41 per diluted share, from $12.5 million, or $0.37 per diluted share, in the same period last year. This improvement reflects strong operational performance and a reduction in preferred stock dividends due to the conversion of preferred shares to common stock. The company also maintained a healthy debt-to-capitalization ratio of 0.45:1, supported by a recently expanded credit facility and a shelf registration for future capital needs.

Key Highlights

  • 1Rental income surged by 42% to $40.8 million for the quarter, indicating successful property acquisitions and portfolio expansion.
  • 2Net income available to common stockholders increased by 31.5% to $16.45 million, with diluted EPS rising to $0.41 from $0.37 year-over-year.
  • 3Total assets grew to $1.64 billion as of March 31, 2003, up from $1.59 billion at the end of 2002, primarily due to increases in real estate investments.
  • 4The company secured $100 million in new unsecured senior notes in March 2003, adding to its existing debt facilities and strengthening its liquidity.
  • 5Borrowings under unsecured lines of credit decreased to $74.1 million from $109.5 million, reflecting successful refinancing efforts.
  • 6The company reported contingent liabilities related to industrial revenue bonds and project financing, totaling approximately $7.8 million.
  • 7Significant events include the sale of one assisted living facility for a gain of $34,000 and ongoing proceedings with Alterra Healthcare Corporation, a major tenant, which filed for Chapter 11 but plans to assume its master lease.

Frequently Asked Questions

The primary driver of revenue growth is the significant increase in rental income, which rose by 42% year-over-year to $40.8 million. This growth is attributed to the acquisition of new healthcare-related properties.

The company issued $100 million in new senior unsecured notes in March 2003 and has an expanded unsecured revolving line of credit. As of March 31, 2003, total debt was $740.8 million, resulting in a debt-to-total capitalization ratio of 0.45:1. The company also has an effective shelf registration of $285.6 million for future capital needs, indicating sufficient liquidity for operations, debt service, dividends, and future investments.

The company disclosed contingent liabilities of approximately $7.8 million related to guarantees of industrial revenue bonds and project financing. Additionally, it faces potential risks from the bankruptcy filings of major tenants like Doctors Community Health Care Corporation and Alterra Healthcare Corporation, although Alterra has indicated its intention to assume its master lease.

Profitability improved significantly. Net income available to common stockholders increased by 31.5% to $16.45 million, and diluted earnings per share rose to $0.41 from $0.37 in the prior year's first quarter. This was driven by higher revenues and a reduction in preferred stock dividends.