HCP will pay $510 million to purchase Brookdale's 51% JV interest in 12 CCRCs consisting of 5,641 units. The remaining three properties in the existing JV will be jointly marketed for third-party sale, which is anticipated to close over the next 12 to 18 months.
Further, both parties have agreed to end management agreements on the 12 CCRCs, and HCP will pay $100 million (equivalent to nearly five times annual management fees) as termination fees to Brookdale.
Management of these campuses will be transitioned to Life Care Services (LCS) under a highly incentivized contract, resulting in yearly savings of roughly $7 million.
Subject to customary closing norms, the transaction and operator transition is expected to close in first-quarter 2020.
Triple-Net Transactions Details
HCP will sell 18 triple-net leased properties to Brookdale for $405 million. This represents 7.4% lease yield on the trailing 12-month rent and 0.86x rent coverage (after management fee) as of the end of the second quarter. Subject to customary closing norms, this transaction is projected to close in first-quarter 2020.
The company has reconfigured the remaining 24 Brookdale triple-net leased properties into a single master lease, carrying 2.4% annual escalators. This lease will mature on Dec 31, 2027
Moreover, in a bid to strengthen the remaining Brookdale triple-net portfolio, HCP will offer up to $35 million in capital investment, over a time span of five years. It will receive 7% initial return on this invested capital.
Other Sale and Operator Transition Deals
HCP will also terminate agreements related to one Brookdale triple-net leased property. The property will be converted to a senior housing operating portfolio and its management will be transitioned to LCS. Furthermore, another SHOP property will be available for sale to third parties.
In a separate press release, the company announced it has received corporate credit rating upgrades by Fitch Ratings. Specifically, Fitch upgraded HCP's corporate credit rating to BBB+ from BBB, with a stable outlook. Reduced leverage levels, easy access to capital markets, improved portfolio quality and strategic investment moves were key rating drivers.
While the transaction with Brookdale will be slightly accretive to HCP’s earnings, the rating upgrade improves its credit worthiness.
Source Zacks.com
P/E ratio 17.77
Yield 4.09%
Short interest 5.08%
Company profile
HCP, Inc. is a real estate investment trust which invests primarily in real estate serving the healthcare industry in the United States. It acquires, develops, leases, sells, and manages healthcare real estate and provides mortgage and other financing to healthcare providers. It operates through the following business segments: Senior Housing Triple-Net, Senior Housing Operating Portfolio, Life Science, and Medical Office. The Senior Housing Triple-Net and Operating Portfolio segments manage senior housing facilities, which include independent living, assisted living and memory care facilities, care homes, and continuing care retirement communities by utilizing triple-net leases and RIDEA structures. The Life Science segment contains laboratory and office space primarily for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies, and other organizations involved in the life science industry. The Medical Office segment includes pharmacies, hospital ancillary service space, and outpatient services such as diagnostic centers, rehabilitation clinics, and day-surgery operating rooms. The company was founded in March 1985 and is headquartered in Long Beach, CA.
Further, both parties have agreed to end management agreements on the 12 CCRCs, and HCP will pay $100 million (equivalent to nearly five times annual management fees) as termination fees to Brookdale.
Management of these campuses will be transitioned to Life Care Services (LCS) under a highly incentivized contract, resulting in yearly savings of roughly $7 million.
Subject to customary closing norms, the transaction and operator transition is expected to close in first-quarter 2020.
Triple-Net Transactions Details
HCP will sell 18 triple-net leased properties to Brookdale for $405 million. This represents 7.4% lease yield on the trailing 12-month rent and 0.86x rent coverage (after management fee) as of the end of the second quarter. Subject to customary closing norms, this transaction is projected to close in first-quarter 2020.
The company has reconfigured the remaining 24 Brookdale triple-net leased properties into a single master lease, carrying 2.4% annual escalators. This lease will mature on Dec 31, 2027
Moreover, in a bid to strengthen the remaining Brookdale triple-net portfolio, HCP will offer up to $35 million in capital investment, over a time span of five years. It will receive 7% initial return on this invested capital.
Other Sale and Operator Transition Deals
HCP will also terminate agreements related to one Brookdale triple-net leased property. The property will be converted to a senior housing operating portfolio and its management will be transitioned to LCS. Furthermore, another SHOP property will be available for sale to third parties.
In a separate press release, the company announced it has received corporate credit rating upgrades by Fitch Ratings. Specifically, Fitch upgraded HCP's corporate credit rating to BBB+ from BBB, with a stable outlook. Reduced leverage levels, easy access to capital markets, improved portfolio quality and strategic investment moves were key rating drivers.
While the transaction with Brookdale will be slightly accretive to HCP’s earnings, the rating upgrade improves its credit worthiness.
Source Zacks.com
P/E ratio 17.77
Yield 4.09%
Short interest 5.08%
Company profile
HCP, Inc. is a real estate investment trust which invests primarily in real estate serving the healthcare industry in the United States. It acquires, develops, leases, sells, and manages healthcare real estate and provides mortgage and other financing to healthcare providers. It operates through the following business segments: Senior Housing Triple-Net, Senior Housing Operating Portfolio, Life Science, and Medical Office. The Senior Housing Triple-Net and Operating Portfolio segments manage senior housing facilities, which include independent living, assisted living and memory care facilities, care homes, and continuing care retirement communities by utilizing triple-net leases and RIDEA structures. The Life Science segment contains laboratory and office space primarily for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies, and other organizations involved in the life science industry. The Medical Office segment includes pharmacies, hospital ancillary service space, and outpatient services such as diagnostic centers, rehabilitation clinics, and day-surgery operating rooms. The company was founded in March 1985 and is headquartered in Long Beach, CA.