IRVINE, Calif., Nov. 1, 2016 /PRNewswire/ -- HCP (NYSE:HCP) today
announced that it has entered into definitive agreements to sell a
portfolio of 64 properties leased to Brookdale Senior Living, Inc.
("Brookdale") for an aggregate
sales price of $1.125 billion to
affiliates of Blackstone Real Estate Partners VIII L.P.
(collectively, "Blackstone"). HCP intends to use the proceeds
primarily to pay down debt and for general corporate purposes.
In addition, HCP and Brookdale have agreed to complete several
other transactions, as outlined below. Combined, these
transactions will advance our strategic priorities to reduce
Brookdale concentration, improve
lease coverage, diversify our operator relationships and strengthen
our balance sheet and credit profile.
Overview of the Brookdale Transactions:
- Sell a portfolio of 64 triple-net assets comprising 5,967 units
for $1.125 billion, or $189,000 per unit, representing a trailing twelve
month lease yield of 8.0%, inclusive of a portion of the rent
re-allocation as described below. Occupancy for the portfolio
was 85.2% during the third quarter 2016, and EBITDAR-to-rent
coverage was 0.81x for the trailing twelve months ended
September 30, 2016. HCP's
estimated gain on sale of the 64 properties of approximately
$160 million will be recorded at
closing, which is expected to occur by the end of the first quarter
of 2017. We intend to use the proceeds primarily to pay down
debt and for general corporate purposes.
- Terminate leases within the next twelve months on 25 properties
operated by Brookdale representing
2,031 units. HCP plans to sell the majority of the properties
that are non-strategic, and transition select assets to other
operators. The in-place annual rent on the 25 properties
total $20.3 million, of which
$9.8 million will be re-allocated as
follows: $6.3 million to the retained
78 triple-net properties retained by HCP, and $3.5 million to the 64 properties being
sold. The remaining $10.5
million of the in-place rent represents a low-6% cap rate on
the estimated value of the 25 properties. Occupancy for these
25 properties was 79.9% during the third quarter 2016 and
EBITDAR-to-rent coverage was 0.52x for the trailing twelve months
through September 30, 2016.
- Transfer eight expiring Brookdale leases to RIDEA structures: i)
convert four Texas communities
comprising 527 units from a triple-net lease to a 90/10 RIDEA joint
venture structure with Brookdale
acquiring a 10% interest in the real estate and the operations for
$11.7 million, and ii) transition
four Florida communities
comprising 340 units to a regional operator. These
transactions are expected to close during the fourth quarter of
2016.
- The previously announced RIDEA II transaction remains on track
to be completed during the fourth quarter of 2016.
Mike McKee, Chairman of the
Board, President and Chief Executive Officer of HCP, stated, "We
are pleased to announce these transactions related to our
Brookdale portfolio, as a key
component of our plan to launch HCP 3.0 as outlined earlier in the
year. These initiatives enable us to address several
important strategic priorities for HCP, including reducing our
Brookdale concentration, improving
the lease coverage of our triple-net senior housing portfolio and
diversifying our operator relationships. We are delighted to
have reached a positive outcome on these high priority initiatives
and look forward to continuing to strengthen our partnership with
Brookdale, the largest senior
housing operator in the country."
Strategic Benefits (upon completing the Brookdale transactions ("Transactions")
outlined above):
- Reduce Brookdale Concentration, which is expected to
improve from 35% of HCP's cash NOI plus interest income immediately
post spin-off of Quality Care Properties, Inc. to 27%. Following
the completion of the Transactions, Brookdale will operate 204 communities for HCP
generating approximately $350 million
of expected annualized cash NOI, of which one third will be under
triple-net leases and two thirds in RIDEA joint ventures.
- Improve Lease Coverage for our Brookdale triple-net portfolio by 19 basis
points to 1.21x on a trailing twelve month basis.
- Improve Portfolio Occupancy and Demographics of our
Brookdale triple-net portfolio
significantly, with occupancy increasing by 260 basis points to
89.1%. The retained Brookdale
portfolio is located in stronger markets with better overall
demographic profiles.
- Diversify Relationships by gaining 2-3 new operator
relationships in conjunction with transitioning communities from
Brookdale.
The closing of the Transactions is expected to occur in various
stages by the end of 2017, but remain subject to regulatory
approvals and the satisfaction of other customary closing
conditions, and may not close on the anticipated timeline or at
all.
About HCP
HCP, Inc. is a fully integrated real estate investment trust
(REIT) that invests primarily in real estate serving the healthcare
industry in the United States. HCP
owns a large-scale portfolio diversified across multiple sectors,
led by senior housing, life science and medical office. Recognized
as a global leader in sustainability, HCP has been a
publicly-traded company since 1985 and was the first healthcare
REIT selected to the S&P 500 index. For more information
regarding HCP, visit www.hcpi.com.
Forward-Looking Statements
Statements in this release that are not historical factual
statements are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements include, among other things, statements regarding our
pending sale of communities leased to Brookdale and our use of the resulting
proceeds, our other strategic initiatives discussed in this
release, the anticipated closing or completion timeframes of the
transactions, and the anticipated benefits and results of the
transactions. All forward-looking statements are made as of the
date hereof, are not guarantees of future performance and are
subject to known and unknown risks, uncertainties, assumptions and
other factors — many of which are out of our and our management's
control and difficult to forecast — that could cause actual results
to differ materially from those set forth in or implied by such
forward-looking statements. These risks and uncertainties include
but are not limited to: our ability to complete the transactions,
or any of them, on the currently proposed terms or at all,
including in respect of the satisfaction of closing conditions, the
risk that any regulatory or other approvals required for the
transactions are not obtained or are subject to unanticipated
conditions, uncertainties as to the timing of the transactions; the
risk that we may not be able to achieve the benefits of the
transactions, or any of them, within expected time-frames or at
all, or within expected cost projections; and other risks and
uncertainties described from time to time in our Securities and
Exchange Commission filings. We caution investors not to place
undue reliance on any forward-looking statements. We assume no, and
hereby disclaim any, obligation to update any forward-looking
statements as a result of new information or new or future
developments, except as otherwise required by law.
Contact
Thomas M. Herzog
Executive Vice President and Chief Financial Officer
(949) 407-0400
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SOURCE HCP