HCP Closes $1.5B Public Offering

The healthcare property REIT will use a portion of the proceeds to help finance the acquisition of HCR ManorCare Inc.'s 338-property portfolio of real estate assets in a $6.1 billion deal.

December 21, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user AMagill

HCP Inc. was able to get its hands on $1.472 billion in one fell swoop with the completion of a public offering involving 46 million shares of common stock. The healthcare property REIT will use a portion of the proceeds to help finance the acquisition of HCR ManorCare Inc.’s 338-property portfolio of real estate assets in a $6.1 billion deal announced on December 13.

HCP sold the shares at $32 each in a transaction that included 6 million shares bought by underwriters exercising their option to acquire additional shares. Upon announcing plans to buy the majority of HCR ManorCare’s assets, HCP revealed it would fund the purchase with approximately $3.5 billion in cash, including funds from a $3.3 billion bridge loan; $1.7 billion reinvested from the payoff of its existing debt investments in HCR ManorCare; and $852 million in HCP common stock issued directly to HCR ManorCare shareholders.

Jay Flaherty, HCP’s Chairman & CEO, noted that the transaction reinvests a substantial debt investment in a secure long-term, growing income stream. He added that the acquisition is consistent with the company’s business model and is considered an important milestone.

The ManorCare portfolio consists of post-acute, skilled nursing and assisted living properties in core markets with high barriers to entry across 30 states. Most of the facilities are concentrated in Ohio, Pennsylvania, Florida, Illinois and Michigan. HCR ManorCare, owned by private equity funds managed by The Carlyle Group, will maintain its presence at the communities as operator under a long-term, triple-net master lease agreement. Terms of the transaction also give HCP the right to purchase a 9.9 percent interest in HCR ManorCare for $95 million.

The acquisition transaction is on track to close in the latter part of the first quarter of next year.