HCP To Spin Off HCR ManorCare Portfolio Into Independent, Publicly-Traded REIT

May 11, 2016

IRVINE, CA–HCP today announced that the Company's Board of Directors has unanimously approved a plan to spin off its HCR ManorCare ("HCRMC") portfolio of skilled nursing ("SNF") and assisted living assets, as well as other skilled nursing assets, into an independent, publicly-traded REIT ("SpinCo"). 

The spin-off transaction will enable HCP to improve its portfolio quality and increase its focus on core growth businesses – Senior Housing, Life Science and Medical Office – that consist of a diversified group of leading operators and tenants primarily within the private-pay sector.  Following the completion of the spin-off, HCP's diversified portfolio is expected to consist of more than 860 properties, generating annual portfolio income of approximately $1.4 billion. 
Lauralee Martin, President and Chief Executive Officer, stated, "We believe this transaction gives HCP the ability to re-confirm itself as a blue-chip, innovative and relationship-oriented healthcare REIT. Post spin, HCP will own a stable, private-pay portfolio that has a track record of delivering consistent, attractive returns.  HCP will be able to sharpen its focus on high-growth healthcare sectors and, with a cost of capital benefiting from the stability and growth profile of these strong sectors, we will be positioned to achieve accretive new investment growth.  The transaction also gives our shareholders ownership of a separate company structured with the tools and flexibility to maximize the value of its assets."

"Today's announcement is the result of an active and extensive process involving the Board, our executive team and our advisors to address our portfolio concentration related to HCR ManorCare in a comprehensive manner.  We firmly believe this is the best approach to realizing the highest value for our shareholders," said Michael McKee, Executive Chairman of HCP.

In conjunction with the spin-off, Mark Ordan has joined HCP as a Senior Advisor to focus on the HCRMC investment and will lead SpinCo as Chief Executive Officer upon completion of the transaction.  Mr. Ordan previously served as the Chief Executive Officer of Washington Prime Group, and prior to that, served as Chief Executive Officer of Sunrise Senior Living and led its financial and operating turnaround.

SpinCo is expected to have a real estate portfolio composed of more than 320 properties, led by facilities operated by HCRMC, with expected in-place annual rent of approximately $485 million.  With a flexible balance sheet, SpinCo will be positioned to create value through active asset management that is tailored to address the ongoing changes in the post-acute/SNF industry.  Upon completion of the spin-off, SpinCo will be led by an independent management team with deep experience in real estate and healthcare, led by Mark Ordan.

Mr. Ordan stated, "With a singular focus on SNF and assisted living assets and a flexible capital structure, we believe SpinCo will have the tools and flexibility to unlock value in the HCR ManorCare portfolio, as we own, manage, sell or transition assets as desired over time."

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