UPDATE:HCP:Sunrise Results Not Indicative Of Senior Housing Market

Health care real estate investment trust HCP Inc. (HCP) said the aging population remains a compelling reason to invest in senior housing and its results from operator Sunrise Senior Living aren't a good barometer of the sector.

"We think this is going to be a very, very good time to deploy capital in the senior housing space," said Chief Executive James Flaherty III, on the company's second-quarter conference call. Flaherty said aging boomers coupled with projected year-over-year demand of 1.5% to 2% will help fuel growth in the space.

HCP, which reported Tuesday that its second-quarter funds from operations rose 10%, beating Wall Street's expectations, said the performance of the Sunrise Senior Living Inc. (SRZ) portion of its portfolio isn't indicative of the economic fundamentals for senior housing as a whole. That said, the company said its non-Sunrise portfolio same-property performance increased 1.3% in the quarter, while same-property performance including Sunrise fell 3.3%.

Some analysts say HCP is attempting to extricate its self from lower-margin deals with Sunrise. To that end, in June, HCP said it aims to terminate management contracts on 64 properties, alleging breach of contract.

HCP, one of the most diverse health-care REITs whose investments include senior housing, medical office and skilled nursing properties, also raised its 2009 FFO and earnings view.

Before the market opened, the Long Beach, Calif., company said funds from operations increased to $146.1 million from $119.1 million, a year earlier. FFO per share rose to 55 cents from 50 cents.

Analysts, on average, expected FFO, a key industry figure of performance, of 51 cents a share, according to Thomson Reuters.

Still, profit fell to $91.8 million, or 35 cents a share, from $225.9 million, or 96 cents a share. The year-ago period was boosted in part by a gain on the sale of real estate of $190.5 million. Revenue rose to $267.3 million from $248.8 million.

The REIT now forecasts 2009 FFO of $2.13 to $2.19 a share and FFO before impairments of $2.15 to $2.21 a share. In May, HCP had predicted 2009 FFO of $2.10 to $2.16 a share. In addition, HCP expects 2009 earnings of 98 cents to $1.04 a share.

-By Veronica Dagher, Dow Jones Newswires; 212-416-2261; [e-mail]