Online Calculator | HCP To Acquire Real Estate Assets Of HCR ManorCare

HCP To Acquire Real Estate Assets Of HCR ManorCare

InfoGrok, a leading contruction industry news and company benchmarking website is reporting that real estate investment trust HCP has signed a definitive agreement to acquire substantially all of the real estate assets of HCR ManorCare for a purchase price of $6.1 billion.

The consideration for the purchase will consist of just over $3.5 billion in cash, $1.72 billion reinvested from the payoff of HCP’s existing debt investments in HCR ManorCare (original cash investment of $1.49 billion) and $852m in HCP common stock issued directly to the shareholders of HCR ManorCare (a fixed 25.7m shares, or, at HCP’s option, a cash equivalent to the currently agreed value of those shares).

HCP will acquire from HCR ManorCare 338 post-acute, skilled nursing and assisted living facilities located in strong markets with high barriers to entry. The facilities are located in 30 states, with the highest concentrations in Ohio, Pennsylvania, Florida, Illinois and Michigan.

HCR ManorCare and its affiliates will continue to operate the assets pursuant to a long-term triple-net master lease supported by a guaranty from HCR ManorCare. In addition to this, HCR ManorCare will grant HCP an option to acquire a 9.9 percent interest in HCR ManorCare for an additional purchase price of $95m.

The triple-net lease with HCR ManorCare will provide for rent in the first year of $472.5 million, an amount representing a 1.5x EBITDAR coverage ratio. The rent will increase by 3.5% per year after each of the first 5 years and by 3 for the remaining portion of the fixed term.

The construction news website goes on to state that the properties will be grouped into four pools, and HCR ManorCare will have a one-time extension option for each pool with rent increased for the first year of the extension option to the greater of fair market rent or a percent increase over the rent for the prior year.

The pools will have initial terms ranging from 13 – 17 years and if the extension terms are undertaken then the total available term of the lease will range among pools from 23 – 35 years.

Jay Flaherty, the Chairman and CEO of HCP, said “The acquisition is consistent with our ‘5 x 5’ business model and an important milestone for our company. Pro forma for this transaction, HCP will have $19 billion in assets comprised of a well-balanced portfolio of 1,000 properties.”

Paul Ormond, President and CEO of HCR ManorCare said, “We at HCR are delighted to have the opportunity to help secure the future of HCR ManorCare’s operations by partnering with HCP.”

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