Brookdale Senior Living (NYSE:BKD) and HCP (NYSE:HCP) (together,
the “Companies”) today announced an agreement to enhance and
solidify their long-term relationship by creating a new strategic
joint venture that will own and operate entry fee continuing care
retirement communities (“CCRCs”). At inception, the joint venture
will own 14 CCRC campuses valued at $1.2 billion, with Brookdale
continuing to manage these communities. In addition, the Companies
have agreed to amend leases on 202 HCP-owned senior housing
communities currently operated by Emeritus Corporation (NYSE:ESC).
The closing of these transactions is conditioned upon the closing
of the pending merger between Brookdale and Emeritus.
Andy Smith, Brookdale’s Chief Executive Officer, said, “We are
very excited about strengthening our relationship with HCP as we
partner to create an industry leading entry fee CCRC joint venture.
Combining the capital strengths of HCP with Brookdale’s operating
platform forms a compelling investment vehicle for our existing
entry fee CCRCs and provides for growth in this fragmented asset
class. The modifications to the Emeritus leases should improve upon
the previously-announced projected benefits of our pending merger.
They bring forward the future value of the imbedded purchase
options through lower rent and escalators and reduced lease
leverage in a 153-community triple-net portfolio, while creating a
49-community RIDEA joint venture. In addition to improving the
economics of our transformational merger with Emeritus, this
transaction adheres to our long-term strategy of delivering the
best, high-quality solutions for the growing population of seniors
and their families.”
“We are proud to expand our strategic relationship with
Brookdale, which upon the completion of the Emeritus merger will
become the nation’s largest senior living operator,” said Lauralee
Martin, President and CEO of HCP. “We are pleased to partner with
Brookdale and create the largest CCRC platform in the healthcare
REIT sector providing attractive future growth opportunities. The
announcement today also allows us to fully retain the real estate
value on a portfolio of 52 properties, by eliminating the
reinvestment risk related to all existing Emeritus and Brookdale
purchase options with HCP. It also reinforces our investment
philosophy of creating significant value for our operating partners
through real estate driven transactions while providing our
shareholders with attractive risk adjusted returns.”
BROOKDALE AND HCP EXPAND RELATIONSHIP TO FORM A NEW CCRC
JOINT VENTURE
The Companies have agreed to create a new strategic joint
venture (“CCRC JV”) to own and operate entry fee CCRCs. The CCRC JV
will initially be seeded with a 14-campus portfolio valued at $1.2
billion before in-place refundable entry fee obligations. Primarily
located in Florida, the portfolio encompasses approximately 7,000
units across a diversified care mix of 67% independent living, 18%
skilled nursing, 11% assisted living and 4% memory care. Brookdale
and HCP will own 51% and 49%, respectively, of the CCRC JV based on
each company’s respective contributions at closing:
- Brookdale will contribute eight of its
owned campuses, as well as its leasehold rights including purchase
options on three HCP-owned properties (comprising two
campuses).
- HCP will contribute those three
properties leased to Brookdale and $334 million of cash, which will
be used to acquire from third parties four additional entry fee
CCRCs currently managed by Brookdale.
Brookdale has a successful operating history with the CCRC
portfolio, having managed a number of these communities for many
years, and will continue to manage all properties post closing
under a long-term management agreement.
EXCHANGE OF EMERITUS’ PURCHASE OPTIONS AND RELATED LEASE
AMENDMENT
As part of this transaction, all existing Emeritus purchase
options encompassing 49 HCP properties will be cancelled at
closing; in exchange, all triple-net leases between HCP and
Emeritus covering 202 senior housing properties will be amended
contemporaneously, resulting in two portfolios:
- RIDEA Portfolio: 49 non-stabilized
properties (of which 19 will relate to cancelled purchase options)
will be converted to a RIDEA structure and contributed to a joint
venture (“RIDEA JV”), with Brookdale managing the communities and
acquiring a 20% ownership in the venture to create an alignment of
interests. This pool of unencumbered properties was selected for
its attractive future growth profile. The Companies have jointly
developed strategic plans for these communities and, upon the
closing of Brookdale’s merger with Emeritus, will immediately begin
investing significant capital improvements intended to increase
occupancy and operating performance of the portfolio.
- NNN–leased Portfolio: Brookdale will
enter into amended triple-net, master leases for the remaining 153
properties (of which 30 will relate to cancelled purchase options)
all guaranteed by the credit of Brookdale Senior Living. The leases
will have an average initial term of 15 years, plus two 10-year
extension options. The leases provide total base rent in 2014 of
$158 million, unchanged from the existing rent, but contain reduced
future rent payments and escalations compared to those currently
in-place. HCP will make available up to $100 million in capital
improvements through 2017 to upgrade the portfolio, earning
additional rent at a market yield as funding occurs.
The operating performance during 2013 for each of the two
portfolios is summarized as follows:
Portfolio Properties Units
% Located in Top 100 MSAs Occupancy
Monthly Rate/Unit NOI Margin RIDEA JV
49 5,400 78 % 80 % $ 4,978 23 % NNN-leased 153 12,800 63 % 91 % $
4,019 32 %
202 18,200
ADDITIONAL INFORMATION
All transactions described herein are contingent upon the
closing of Brookdale’s pending merger with Emeritus, anticipated to
occur in the third quarter of 2014, and are subject to customary
closing conditions including regulatory approvals and lender
consents. There can be no assurance that the transactions will
close or, if they do, when the closing will occur.
Brookdale and HCP have posted supplemental information relating
to the transactions on the Investor Relations section of each
company’s website – www.brookdale.com and www.hcpi.com. This information will also be
furnished by each company in a Form 8-K to be filed with the SEC.
The contents of each of the Brookdale and HCP websites (including
the presentations referred to herein) are not, and shall not be
deemed to be, part of this press release or any other report or
document that either Brookdale or HCP files with the SEC.
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is a leading owner and operator of
senior living communities throughout the United States. The Company
is committed to providing senior living solutions within properties
that are designed, purpose-built and operated to provide the
highest-quality service, care and living accommodations for
residents. Currently Brookdale operates independent living,
assisted living, and dementia-care communities and continuing care
retirement centers, with 648 communities in 36 states and the
ability to serve approximately 67,000 residents. Through its
ancillary services programs, the Company also offers a range of
outpatient therapy, home health, personalized living and hospice
services. After its pending merger with Emeritus Corporation,
Brookdale will operate approximately 1,161 communities in 46 states
with the capacity to serve approximately 113,000 residents.
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's portfolio of assets is
diversified among five distinct sectors: senior housing,
post-acute/skilled nursing, life science, medical office and
hospital. A publicly traded company since 1985, HCP: (i) was the
first healthcare REIT selected to the S&P 500 index; (ii) has
increased its dividend per share for 29 consecutive years; (iii) is
the only REIT included in the S&P 500 Dividend Aristocrats
index; and (iv) is a global leader in sustainability as a member of
the CDP, Dow Jones and FTSE4Good sustainability leadership indices,
and the Global and North American healthcare sector leader for
GRESB. For more information regarding HCP, visit the Company's
website at www.hcpi.com.
HCP FORWARD-LOOKING STATEMENTS
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995: The statements made by or on behalf of HCP in
this release or relating hereto which are not historical facts 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 anticipated
outcomes relating to the proposed CCRC JV and the Brookdale and
Emeritus merger transaction and the potential benefits of an
expanded relationship and joint ventures between HCP and Brookdale.
These 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 HCP’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: HCP’s ability to
complete the transactions described above on the currently proposed
terms or at all; the risk that HCP may not be able to achieve the
benefits of the investments described above within expected
time-frames or within expected cost projections; risks relating to
the merger of Brookdale and Emeritus, including in respect of the
satisfaction of closing conditions to the merger, unanticipated
difficulties relating to the merger, the risk that regulatory
approvals required for the merger are not obtained or are obtained
subject to unanticipated conditions, uncertainties as to the timing
of the merger, litigation relating to the merger, the impact of the
transaction on each party’s relationships with its residents,
employees and third parties, and the parties’ inability to obtain,
or delays in obtaining, cost savings and synergies from the merger;
changes in global, national and local economic conditions,
including a prolonged period of weak economic growth; volatility or
uncertainty in the capital markets, including changes in the
availability and cost of capital (impacted by changes in interest
rates and the value of HCP’s common stock), which may adversely
impact HCP’s ability to consummate transactions or reduce the
earnings from potential transactions; HCP’s ability to manage its
indebtedness level and changes in the terms of such indebtedness;
the effect on healthcare providers, including Brookdale and
Emeritus, of the recently enacted and pending Congressional
legislation addressing entitlement programs and related services,
including Medicare and Medicaid, which may result in future
reductions in reimbursements; the ability of operators, tenants and
borrowers, including Brookdale and Emeritus, to conduct their
respective businesses in a manner sufficient to maintain or
increase their revenues and to generate sufficient income to make
rent and loan payments to HCP and HCP’s ability to recover
investments made, if applicable, in their operations; the financial
weakness of some operators and tenants (potentially including
Brookdale and Emeritus), including potential bankruptcies and
downturns in their businesses, which results in uncertainties
regarding HCP’s ability to continue to realize the full benefit of
such operators’ and/or tenants’ leases; changes in federal, state
or local laws and regulations, including those affecting the
healthcare industry that affect HCP’s costs of compliance or
increase the costs, or otherwise affect the operations of
operators, tenants and borrowers, including Brookdale and Emeritus;
the potential impact of future litigation matters, including the
possibility of larger than expected litigation costs, adverse
results and related developments; competition for tenants and
borrowers, including with respect to new leases and mortgages and
the renewal or rollover of existing leases; HCP’s ability to
negotiate the same or better terms with new tenants or operators if
existing leases are not renewed or HCP exercises its right to
replace an existing operator or tenant upon default; availability
of suitable properties to acquire at favorable prices and the
competition for the acquisition and financing of those properties;
the financial, legal, regulatory and reputational difficulties of
significant operators of HCP’s properties, potentially including
Brookdale and Emeritus; the risk that HCP may not be able to
achieve the benefits of the investments described above, including
with respect to the CCRC JV and the Brookdale and Emeritus merger
transaction, within expected time-frames or within expected cost
projections; the ability to obtain financing necessary to
consummate acquisitions on favorable terms; risks associated with
HCP’s investments in joint ventures (including the proposed CCRC
JV) and unconsolidated entities, including its lack of sole
decision-making authority and its reliance on its joint venture
partners’ financial condition and continued cooperation; changes in
the credit ratings on U.S. government debt securities or default or
delay in payment by the United States of its obligations; and other
risks and uncertainties described from time to time in HCP’s
Securities and Exchange Commission filings, including its 2013
Annual Report on Form 10-K. HCP assumes no, and hereby disclaims
any, obligation to update any of the foregoing or any other
forward-looking statements as a result of new information or new or
future developments, except as otherwise required by law.
BROOKDALE FORWARD-LOOKING STATEMENTS
Certain items in this press release and statements made by or on
behalf of Brookdale Senior Living Inc. relating hereto (including
statements with respect to the merger of Brookdale and Emeritus,
the proposed CCRC JV and the expanded relationship and joint
venture between Brookdale and HCP) may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Those forward-looking statements are subject to
various risks and uncertainties. Forward-looking statements are
generally identifiable by use of forward-looking terminology such
as “may,” “will,” “should,” “potential,” “intend,” “expect,”
“endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,”
“underestimate,” “believe,” “could,” “would,” “project,” “predict,”
“continue,” “plan” or other similar words or expressions. Although
Brookdale believes the expectations reflected in any
forward-looking statements are based on reasonable assumptions,
Brookdale can give no assurance that its expectations will be
attained and actual results could differ materially from those
projected. Factors which could have a material adverse effect on
Brookdale’s 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; Brookdale’s inability to extend (or
refinance) debt (including credit and letter of credit facilities)
as it matures; the risk that Brookdale may not be able to satisfy
the conditions precedent to exercising the extension options
associated with certain of its debt agreements; events which
adversely affect the ability of seniors to afford Brookdale’s
monthly resident fees or entrance fees; the conditions of housing
markets in certain geographic areas; Brookdale’s ability to
generate sufficient cash flow to cover required interest and
long-term operating lease payments; the effect of Brookdale’s
indebtedness and long-term operating leases on its liquidity; the
risk of loss of property pursuant to Brookdale’s 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 Brookdale; Brookdale’s determination from time to
time to purchase any shares under the repurchase program;
Brookdale’s ability to fund any repurchases; Brookdale’s ability to
effectively manage its growth; Brookdale’s ability to maintain
consistent quality control; delays in obtaining regulatory
approvals; the risk that Brookdale may not be able to expand,
redevelop and reposition its communities in accordance with its
plans; Brookdale’s ability to complete acquisitions and integrate
them into its operations; competition for the acquisition of
assets; Brookdale’s ability to obtain additional capital on terms
acceptable to it; a decrease in the overall demand for senior
housing; Brookdale’s vulnerability to economic downturns; acts of
nature in certain geographic areas; terminations of resident
agreements and vacancies in the living spaces Brookdale leases;
early terminations or non-renewal of management agreements;
increased competition for skilled personnel; increased union
activity; departure of key officers; increases in market interest
rates; environmental contamination at any of Brookdale’s
facilities; failure to comply with existing environmental laws; an
adverse determination or resolution of complaints filed against
Brookdale; the cost and difficulty of complying with increasing and
evolving regulation; risks relating to the merger of Brookdale and
Emeritus, the proposed CCRC JV and the expanded relationship and
joint venture between Brookdale and HCP, including in respect of
the satisfaction of closing conditions to such transactions;
unanticipated difficulties and/or expenditures relating to such
transactions; the risk that regulatory approvals required for such
transactions are not obtained or are obtained subject to conditions
that are not anticipated; uncertainties as to the timing of such
transactions; litigation relating to such transactions; the impact
of such transactions on each company’s relationships with
residents, employees and third parties; and the inability to
obtain, or delays in obtaining cost savings and synergies from such
transactions; as well as other risks detailed from time to time in
Brookdale’s filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q. Brookdale expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in its expectations with
regard thereto or change in events, conditions or circumstances on
which any statement is based.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the merger, Brookdale plans to file with the
SEC a Registration Statement on Form S-4 that will include a joint
proxy statement of Brookdale and Emeritus that also constitutes a
prospectus of Brookdale, as well as other relevant documents
concerning the proposed transaction. STOCKHOLDERS ARE URGED TO READ
THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT
BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. A free copy of the
joint proxy statement/prospectus and other filings containing
information about Brookdale and Emeritus Corporation may be
obtained at the SEC’s Internet site (http://www.sec.gov). You will
also be able to obtain these documents, free of charge, from
Brookdale at www.brookdale.com under the heading “About Brookdale /
Investor Relations” or from Emeritus Corporation at
www.emeritus.com under the heading “Investors.”
Brookdale and Emeritus Corporation and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from Brookdale’s and Emeritus
Corporation’s stockholders in connection with the merger.
Information about the directors and executive officers of Brookdale
and their ownership of Brookdale common stock is set forth in the
proxy statement for Brookdale’s 2013 annual meeting of
stockholders, as filed with the SEC on Schedule 14A on April 30,
2013. Information about the directors and executive officers of
Emeritus Corporation and their ownership of Emeritus Corporation
common stock is set forth in the proxy statement for Emeritus
Corporation’s 2013 annual meeting of stockholders, as filed with
the SEC on Schedule 14A on April 9, 2013. Additional information
regarding the interests of those participants and other persons who
may be deemed participants in the merger may be obtained by reading
the joint proxy statement regarding the merger when it becomes
available. Free copies of this document may be obtained as
described in the preceding paragraph. This press release shall not
constitute an offer to sell or the solicitation of an offer to sell
or the solicitation of an offer to buy any securities, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
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Brookdale Senior Living Inc.Investors: Ross Roadman (615)
564-8104rroadman@brookdaleliving.comMedia: Julie Davis (615)
564-8225jkdavis@brookdaleliving.comorHCP, Inc.Timothy M.
SchoenExecutive Vice President & Chief Financial Officer(562)
733-5309investorrelations@hcpi.com
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