NASHVILLE, Tenn., Nov. 2, 2017 /PRNewswire/ -- Brookdale Senior
Living Inc. (NYSE: BKD) today announced that it has entered into a
definitive agreement with HCP, Inc. (NYSE: HCP) for a multi-part
transaction that will include the following components:
- Lease Terminations – Triple-net leases on 34
communities (3,170 units) will be terminated. Brookdale will
acquire two of such communities (208 units). Brookdale's remaining
triple-net lease portfolio with HCP will be consolidated into one
master lease.
- RIDEA Restructurings – HCP will acquire
Brookdale's 10% equity ownership in two existing RIDEA joint
ventures with HCP, for which Brookdale provides management services
to 59 communities (9,585 units). Brookdale will acquire four
of such communities (787 units), will retain management of 18 of
such communities (3,276 units) with extension of the term to 2030,
and will terminate management of 37 of such communities (5,522
units).
Andy Smith, Brookdale's President
and CEO, said, "We are pleased to have built on our strong
relationship with HCP to create a set of win-win transactions that
allow us to simplify and streamline our portfolio, reduce lease
liability, increase ownership of our communities and build
long-term, durable cash flow. In addition, as a result of
these transactions, we will have increased flexibility and
certainty when evaluating and engaging in transactions to realize
the value of our portfolio. We expect the positive impact to
our consolidated results of operations and cash flow from these
transactions to be roughly equivalent to the reduction in our
proportionate share of the economics of the joint
ventures."
Smith continued, "This announcement is a by-product of both our
ongoing strategic review process and our portfolio optimization
initiative. We continue to explore actively the full range of
options and alternatives to simplify our business, optimize our
portfolio and create and enhance shareholder value."
Benefits of Transactions
Completion of the transactions outlined above is expected to
have several significant benefits for Brookdale:
- Increases Brookdale's flexibility to pursue
alternative strategic pathways – The master lease, which
became effective on November 1st, for
Brookdale's remaining triple-net lease portfolio with HCP will
allow Brookdale to engage in certain change in control and other
transactions without the need to obtain HCP's consent.
- Rationalizes portfolio and reduces lease
liability – The transactions will eliminate leases with a
weighted average remaining lease term of approximately 11 years on
a portfolio of 34 communities, many of which have underperformed
and/or are underwater.
- Improves community ownership –
Brookdale will obtain the opportunity to participate in upside
performance on the six communities it is acquiring, most of which
have historically performed well.
- Simplifies the operating platform –
The transactions will reduce the Company's total number of
communities, improve geographic concentration and increase
reporting transparency by reconsolidating certain communities.
- Improves lease coverage on remaining HCP
triple-net leased portfolio – Following completion of the
transactions, Brookdale's lease coverage ratio on the remaining HCP
leased portfolio is expected to increase significantly.
Additional Transaction Details
Brookdale will acquire the six communities for $275 million, plus transaction costs. The sources
of funds for the transaction will include Brookdale's approximately
$99 million of proceeds from the sale
of its minority ownership interest in the two RIDEA joint ventures
with HCP, cash on hand and non-recourse mortgage financing on the
assets to be acquired.
Brookdale expects the disposition of its ownership interest in
the two joint ventures and its acquisition of the six communities
to occur in the next three to six months, and expects the
terminations of triple-net leases and management agreements on 69
communities to occur in stages throughout 2018.
The closings of the various transactions referenced above are
subject to the satisfaction of various closing conditions,
including (where applicable) the receipt of regulatory approvals.
However, there can be no assurance that the transactions will close
or, if they do, when the actual closings will occur.
An investor presentation regarding the transactions can be found
on the Company's website under the Presentations tab of the
Investor Relations section at www.brookdale.com.
Ongoing Review Process
As previously announced, Brookdale's Board and management team
are working with legal and financial advisors in a process of
exploring options and alternatives to create and enhance
stockholder value. That process remains ongoing.
About Brookdale Senior Living
Brookdale Senior Living Inc. is the leading operator of senior
living communities throughout the United States. The Company
is committed to providing senior living solutions primarily within
properties that are designed, purpose-built and operated to provide
the highest-quality service, care and living accommodations for
residents. Brookdale operates independent living, assisted
living, and dementia-care communities and continuing care
retirement centers, with approximately 1,031 communities in 46
states and the ability to serve approximately 101,000 residents as
of September 30, 2017. Through its ancillary services
program, the Company also offers a range of outpatient therapy,
home health and hospice services. Brookdale's stock is traded
on the New York Stock Exchange under the ticker symbol BKD.
Safe Harbor
Certain statements in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to various risks and uncertainties and
include all statements that are not historical statements of fact
and those regarding our intent, belief or expectations, including,
but not limited to, statements relating to the pending transactions
with HCP, Inc. and the timing and expected benefits thereof, the
creation and enhancement of stockholder value, the evaluation of
options and alternatives to create and enhance stockholder value,
our strategy, our operational initiatives, our portfolio
optimization initiative and our expectations regarding their effect
on our operating results and cash flow. Forward-looking statements
are generally identifiable by use of forward-looking terminology
such as "may," "will," "should," "could," "would," "potential,"
"intend," "expect," "endeavor," "seek," "anticipate," "estimate,"
"overestimate," "underestimate," "believe," "project," "predict,"
"continue," "plan," "target" or other similar words or expressions.
These forward-looking statements are based on certain assumptions
and expectations, and our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain.
Although we believe that expectations reflected in any
forward-looking statements are based on reasonable assumptions, we
can give no assurance that our expectations will be attained and
actual results and performance could differ materially from those
projected. Factors which could have a material adverse effect on
our operations and future prospects or which could cause events or
circumstances to differ from the forward-looking statements
include, but are not limited to, the risk associated with the
current global economic situation and its impact upon capital
markets and liquidity; changes in governmental reimbursement
programs; the risk of overbuilding and new supply; our inability to
extend (or refinance) debt (including our credit and letter of
credit facilities and our outstanding convertible notes) as it
matures; the risk that we may not be able to satisfy the conditions
precedent to exercising the extension options associated with
certain of our debt agreements; events which adversely affect the
ability of seniors to afford our monthly resident fees or entrance
fees; the conditions of housing markets in certain geographic
areas; our ability to generate sufficient cash flow to cover
required interest and long-term lease payments; the effect of our
indebtedness and long-term leases on our liquidity; the risk of
loss of property pursuant to our mortgage debt and long-term lease
obligations; the possibilities that changes in the capital markets,
including changes in interest rates and/or credit spreads, or other
factors could make financing more expensive or unavailable to us;
our determination from time to time to purchase any shares under
our share repurchase program; our ability to fund any repurchases;
our ability to effectively manage our growth; our ability to
maintain consistent quality control; delays in obtaining regulatory
approvals; the risk that we may not be able to expand, redevelop
and reposition our communities in accordance with our plans; our
ability to complete acquisition, disposition, lease restructuring,
financing, re-financing and venture transactions (including assets
currently held for sale and the pending transactions with HCP,
Inc.) on agreed upon terms or at all, including in respect of the
satisfaction of closing conditions, the risk that regulatory
approvals are not obtained or are subject to unanticipated
conditions, and uncertainties as to the timing of closing; our
ability to successfully integrate acquisitions; competition for the
acquisition of assets; our ability to obtain additional capital on
terms acceptable to us; a decrease in the overall demand for senior
housing; our vulnerability to economic downturns; acts of nature in
certain geographic areas; terminations of our resident agreements
and vacancies in the living spaces we lease; early terminations or
non-renewal of management agreements; increased competition for
skilled personnel; increased wage pressure and union activity;
departure of our key officers; increases in market interest rates;
environmental contamination at any of our communities; failure to
comply with existing environmental laws; an adverse determination
or resolution of complaints filed against us; the cost and
difficulty of complying with increasing and evolving regulation; as
well as other risks detailed from time to time in our filings with
the Securities and Exchange Commission, including our Annual Report
on Form 10-K and Quarterly Reports on Form 10-Q. When considering
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in such SEC filings.
Readers are cautioned not to place undue reliance on any of these
forward-looking statements, which reflect our management's views as
of the date of this press release. We cannot guarantee future
results, levels of activity, performance or achievements, and we
expressly disclaim any obligation to release publicly any updates
or revisions to any of these forward-looking statements to reflect
any change in our expectations with regard thereto or change in
events, conditions or circumstances on which any statement is
based.
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SOURCE Brookdale Senior Living Inc.