HCP to Sell Portfolio of Brookdale Communities for $1B

By IvyLee Rosario

Irvine, Calif.—HCP, a fully integrated real estate investment trust, announced it has entered into agreements to sell a portfolio of 64 properties leased to Brookdale Senior Living Inc. for a sale price of $1.1 billion to affiliates of Blackstone Real Estate Partners VIII LP.

The portfolio will consist of 64 triple-net assets comprising of 5,967 units, costing $189,000 per unit. HCP plans to use the proceeds to pay down debt and for general corporate purposes. Combined, these transactions will advance HCP’s strategic priorities to reduce Brookdale concentration, improve lease coverage, diversify their operator relationships and strengthen their balance sheet and credit profile.

Michael McKee

“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,” said Mike McKee, chairman, president & CEO of HCP.

“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.”

HCP is looking to terminate leases within the next 12 months on 25 properties operated by Brookdale representing 2,031 units. The in-house annual rent on the 25 properties total $20.3 million, of which $9.8 million will be re-allocated with $6.3 million going into the retained triple-net properties by HCP, $3.5 million to the 64 properties being sold and the remaining $10.5 million representing a 6 percent cap rate on the estimated value of the 25 properties.

Amongst this deal is also the transferring of eight expiring Brookdale leases to RIDEA structures, converting four Texas communities comprising 527 units from a triple-net lease to a 90/10 RIDEA joint venture structure for $11.7 million and transitioning four Florida communities comprising of 340 units to a regional operator.

The estimated gain on the sale of the 64 properties is $160 million, which will be reported at closing, expected to occur by the end of the first quarter of 2017.

Image Courtesy of HCP