HCP Might Sell Senior Housing Assets to Apollo for $428M

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HCP Inc.HCP is rumored to be selling the company's 22 Brookdale-managed senior housing properties for $428 million to New York firm - Apollo Global Management LLC APO - per a Bloomberg news . Earlier this June, the company announced that it has entered into definitive deals for selling those 22 properties, having 2,781 units, to an institutional investor.

This healthcare REIT has been selling several of its senior housing assets in a bid to improve the quality of the company's senior housing portfolio, strengthen balance sheet and lower the Brookdale Senior Living Inc. operator concentration.  

Particularly, HCP has reaped $332 million of proceeds through completion of the disposition of its residual investment in the RIDEA II senior housing joint venture (JV) to an investor group led by Columbia Pacific Advisors, LLC. Notably, this JV owned 49 communities and 46 of those were managed by Brookdale. Moreover, HCP completed the sale of six assets to Brookdale for $275 million. This was done through disposition of one asset in January and five in April. Last year, HCP also accomplished the sale of a portfolio of 64 triple-net assets leased to Brookdale to affiliates of Blackstone Real Estate Partners VIII L.P., for $1.125 billion.

Further, this March, the company announced the transition of management of a portfolio of 24 HCP-owned senior housing communities from Brookdale to Atria Senior Living, Inc., and has already transitioned 18 of those.

These efforts are expected to benefit HCP's senior housing portfolio in a number of ways. Specifically, the operator diversification of the portfolio will improve and the revamped portfolio will have stronger demographics, while the company's balance sheet is likely to strengthen with the sale proceeds.

On the other hand, HCP is focused on making opportunistic acquisitions to enhance its overall portfolio mix. The company acquired Hayden Research Campus in the Boston life-science market in December 2017 and is experiencing strong leasing velocity. Moreover, in March 2018, the company acquired development rights at Hayden for $21 million and its planned 214,000-square-foot Class A development is expected to improve the company's scale in this leading life-science market.

Also, the company started the Phase I of Sierra Point, which marks its next key life-science development in the South San Francisco market. In fact, increasing longevity of the aging U.S. population, along with biopharma drug development growth opportunities, has promoted life science and medical-market fundamentals, and this trend will likely continue in the upcoming years, giving significant impetus for growth to HCP.

Over time, with the diligent measures, the company aims at having more than half of its business comprising specialty office segments of medical office and life science, and lower senior housing concentration to around 40%.

HCP currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

The company's shares have appreciated 7.4% in the past three months compared with its industry 's growth of 8.6%.

Stocks Worth a Look

A few better-ranked stocks from the same space are Extra Space Storage Inc. EXR , Lamar Advertising Company LAMR and Prologis, Inc. PLD . All three stocks carry a Zacks Rank of 2 (Buy).

Extra Space Storage's Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has inched up 0.7% to $4.62 in two months' time.

Lamar's FFO per share estimates for the current year increased 1.1% in the past month to $5.40.

Prologis' FFO per share estimates for 2018 have moved up 0.7% to $2.98 over the past two months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: LAMR , APO , HCP , PLD , EXR

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