) has extended its relationship with Brookdale Senior Living (
) by creating a $1.2 billion continuing care retirement communities
(CCRC) joint venture (JV) and amending previous Emeritus leases.
The partnership offers a solid growth platform with favorable
dynamics in senior housing and good occupancy prospects.
Specifically, the $1.2 billion JV will initially own a portfolio of
14 entry fee CCRCs. On the other hand, the lease amendment involved
changes in the triple-net leases on 202 HCP-owned senior housing
communities. These properties were previously operated by Emeritus
Corporation that was purchased by Brookdale last July.
Simultaneous with the deal closure, $324 million of cash was pumped
into the CCRC joint venture by HCP. The amount was used for funding
the acquisition of 4communities out of the 14 campuses that the JV
will initially comprise. Brookdale will continue to manage the CCRC
With an increase in the elderly population and consequent
proliferation in healthcare expenses, demand for healthcare
facilities and senior housing has been on the rise. To capitalize
on this trend, strong players in the market have announced
acquisitions or extension of relationships with lease operators.
Recently, Ventas Inc. (
) completed the acquisition of 29 Canadian senior living
communities from Holiday Retirement. The company is also set to buy
its competitor, American Realty Capital Healthcare Trust Inc., in a
stock and cash deal worth $2.9 billion.
In addition, Health Care REIT, Inc. (
) unveiled a plan to acquire HealthLease Properties REIT in order
to expand its presence in the seniors housing and post-acute care
segments. The transaction was valued at around $950 million
in cash, including debt.
Going forward, we believe that improving fundamentals in the
healthcare REIT market, a well-balanced and diversified portfolio,
along with strategic acquisitions and tie-ups would place HCP on
the growth trajectory. In particular, the CCRC partnership with
Brookdale offers a solid platform for growth. Yet, cut-throat
competition and an anticipated increase in interest rate continue
to pose challenges for the company.
HCP currently carries a Zacks Rank #3 (Hold).
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