Nationwide Health Properties
Stock Name: Nationwide Health Stock Symbol: NHP
Industry: Healthcare Facilities First & Last Name: Tripp Norton
Sector: REIT Position: Executive Secretary
03/04/10: $33.09 Presentation Date: March 4th,
Recommendation: Buy 2% of a Initial/ Final Recommendation:
Healthcare Facilities REIT Initial
• Invests in senior housing facilities, long-term care facilities, and medical office buildings
throughout the United States.
• NHP generally acquires real estate and then leases the assets under long-term triple-
net master leases to senior housing and long-term care operators and various types of
leases to multiple tenants in the case of medical office buildings.
• NHP employs a conservative, long-term approach to real estate investments.
• 4.5 Billion in healthcare real estate
• 576 properties in 43 states
• 279 Assisted and independent Living
• 197 Skilled Nursing
• 11 Continuing care retirement communities
• 82 Medical Office Buildings
• 7 specialty hospitals
• Over 78 multi-facility operators
Types of Facilities
• Senior Housing/Assisted and Independent Living Facilities
– Offer studio, one bedroom and two bedroom apartments on a month-to-month
basis primarily to elderly individuals, including those with Alzheimer’s or related
dementia, with various levels of assistance requirements
• Medical Office Buildings
– Typically on or near an acute care hospital campus. They usually house several
different unrelated medical practices, although they can be associated with a large
single-specialty or multi-specialty group.
• Long-Term Care/Skilled Nursing Facilities
– Provide rehabilitative, restorative, skilled nursing and medical treatment for patients
and residents who do not require the high-technology, care-intensive, high-cost
setting of an acute care or rehabilitative hospital.
• Continuing Care Retirement Communities
– Communities provide a continuum of care. At the most basic level, independent
living residents might receive meal service, maid service or other services as part of
their monthly rent.
• Specialty Hospitals
– Rehabilitation hospitals provide inpatient and outpatient medical care to patients
requiring high intensity physical, respiratory, neurological, and orthopedic or other
treatment protocols and for intermediate periods in their recovery.
Asset Type (Based on Investment) Pay Source Medicaid
Other (6%) Pay
Living (49%) (73%)
Locations (Based on Revenue) Tenant/ Operator (Based on
(6%) Top 5 = 39%
Top 10= 55%
Top 15= 63%
Percentage of Net Operating Income
Assisted and Independent
11.00% Skilled Nursing Facilities
2.00% Continuing Care Retirement
48.00% Specialty Hospitals
Triple-net Medical Office
Multi-tenant Medical Office
• Over the past year Nationwide Health Properties financial situation has
started to return to the pre-real-estate crash levels.
• Income from continuing operations is only slightly off from its pre crash
levels and up $20 million YOY.
• Primary source of debt financing are unsecured medium-term notes
(MTNs) with varying maturities and interest rates (See attachment) and its
unsecured revolving credit facility.
– Current credit ratings are: S&P - BBB, Moody’s – Baa2 and Fitch - BBB-
• Increased their cash position in order to leverage several struggling
• The majority of their leases are also triple net leases which make the
tenants responsible for the maintenance as well as the insurance and
0% 1% 0%
2011 1% 6% 7%
2014 22% 25%
• March 3rd: Nationwide Health Properties, Inc. Acquires Five Additional On Campus
Pacific Medical Buildings
– Announced the acquisition of five additional medical office buildings, all located on the campuses
of A-rated healthcare systems, from Pacific Medical Buildings LLC. Transaction valued at $211
• February 17th : Nationwide Health Properties, Inc. Reports 2009 Fourth Quarter and
Full Year Results
– Completed $90 Million Transaction and Amended and Restated Development Pipeline Agreement
– Issued $76 Million of Equity in the Fourth Quarter-
– Cash Balance of $382 Million at Year End
– FAD Payout Ratio of 83% Supports $0.44 per Share Cash Dividend
– Balance Sheet and Liquidity Position Strong
• February 11th: Forbes REIT ReportCard
– Ranks NHP as the only REIT with an A+ in both performance grade and value grade.
• February 5th: Nationwide Health Properties Inc. (NHP) Announces Closing Acquisition
Of Two PMB Buildings
– Acquisition of two medical office buildings under an amendment to the original agreement with
Pacific Medical Buildings for $74 million
- Unlike other REITS the Healthcare Facility industry has
their investments in commercial real estate which has not
been heavily affected by the current financial crisis.
- There will always be doctors needing offices, patients
needing hospitals, and old people needing assisted living
- If President Obama has his way and implements universal
health care then there is going to be a greater demand for
health services which need facilities.
- The percentage of people 65+ is growing and will continue
to grow till 2030.
- The percentage of the GDP that health care takes is also
Industry Growth Chart
Health Care Ventas Inc.
Health Properties HCP, Inc. (HCP)
REIT Inc.(HCN) (VTR)
Market Cap(B) 3.9 8.5 5.3 7
EPS 1.13 0.35 1.21 7.05
FFO per share 2.27 1.06 3.13 2.68
FFO Payout Ratio 79% 85% 87% 73%
P/E 28.66 84.82 34.76 36.51
P/S 10.15 7.35 9.31 7.26
P/B 2.03 1.55 1.49 2.89
Dividend 1.76 1.84 2.7 2.05
Dividend Yield 5.25 6.43 6.52 4.73
Current Ratio 3.019 6.52 6.55 1.748
Debt/Equity 84.71 97.85 89.17 146.51
Gross Margin 92.64% 82.00% 91.19% 66.52
Net Profit Margin 29.14% 9.19% 27.28% 19.84%
Operating Margin 28.09% 34.20% 27.52% 18.13%
ROA 3.27 0.88 2.64 3.21
ROE 6.56 1.33 5.09 9.15
10.85 5.8 9.8 6.5
1 Year Chart
5 Year Chart
• Best Case
– Obama gets his healthcare package passed and the demand for health
care increases thus the need for facilities also increases.
– People continue to get older and need to have assisted living homes,
long term care homes and retirement communities.
– The company continues to grow as the market increases in demand.
• Worst Case
– National health care limits growth of the healthcare industry
– People don’t move into retirement communities but continue to live in
– People get healthier
– Interest rates rise and NHP will have to refinance at higher rates,
which, in the case of fixed rate debt, will create higher interest
payments over the life of the loans.
• Recommendation is to buy 2% of portfolio of a Healthcare
facilities REIT, whether it is NHP or a competitor.
• Healthcare REIT’s
– Relative rescission resilient with their always being the need for
– The baby boomers getting older and needing more health services
– REIT structure provides opportunity to invest directly in real estate
and indirectly in healthcare industry
– Long-term triple-net master leases with quality operators
– NHP is one of the few healthcare REITs with investment grade
ratings by Moody’s, Standard & Poors and Fitch.
– Offers potential of growth as a company
– Cheaper than competitors