HCP Acquires Scottsdale MOBs for $81M

HCP Inc., a publicly traded real estate investment trust (REIT) based in Long Beach, CA, have successfully acquired eight on-campus medical office buildings (MOBs) for $81 million from Scottsdale Healthcare. Terms of the deal have not yet been disclosed. Keith Jones, a spokesman for Scottsdale Healthcare, said the transaction was part of the nonprofit health system's ongoing strategy in a Phoenix Business Journal article. "Most hospitals do not own their own medical office buildings, and real estate management is not part of our core business," he said. The land is still owned by Scottsdale Healthcare and is being leased to HCP.

The eight on-campus MOBs located in Scottsdale, Arizona comprise approximately 398,000 rentable sq. ft. and have a current occupancy of 89% according to HCP's Q2 earnings call information. The properties are spread over three Scottsdale campuses: Scottsdale Healthcare Osborn Medical Center, 7400 E. Osborn Road; Scottsdale Healthcare Shea Medical Center, 9003 E. Shea Blvd., and Scottsdale Healthcare Thompson Peak Hospital, 7400 E. Thompson Peak Parkway.

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HCP Acquires $6.1B Portfolio

HCP entered into a definitive agreement this week to acquire the real estate assets of HCR ManorCare for $6.1 billion in what's become the largest deal involving a real estate investment trust in three years according to a New York Times article. HCR ManorCare, owned privately by management and equity funds managed by The Carlyle Group, is unloading 338 post-acute, skilled nursing and assisted living facilities in 30 states, with the highest concentrations in Ohio, Pennsylvania, Florida, Illinois and Michigan. The transaction is being made via $3.528 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 $852 million in HCP common stock issued directly to the shareholders of HCR ManorCare (a fixed 25.7 million shares).

HCP has obtained a commitment for a bridge loan in an amount up to $3.3 billion that will be available to complete the HCR ManorCare acquisition. HCP intends to issue debt and equity securities in lieu of any borrowings available under the bridge loan. "This transaction reinvests our substantial debt investment in a secure long-term, growing income stream that will be highly accretive to HCP's funds from operations and funds available for distribution," said Jay Flaherty, HCP's Chairman and Chief Executive Officer. "The acquisition is consistent with our '5x5' 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." CSCA Capital Advisors, LLC acted as lead financial advisor with Citi, UBS and Wells Fargo also advising. Skadden, Arps, Slate, Meagher & Flom LLP acted as HCP's legal advisor. In connection with the transaction, J.P. Morgan Securities LLC is HCR ManorCare's exclusive financial advisor and Latham & Watkins LLP is their legal advisor.

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