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HCP Closes $205 Million Mezzanine Loan Facility

Stocks in this article: HCP

HCP (NYSE:HCP) announced that on July 31, 2012, it closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. HCP funded $100 million (“First Tranche”) at closing and expects to fund an additional $105 million (“Second Tranche”) between March 2013 and August 2013. The Second Tranche will be used to repay debt senior to HCP’s loan. The loan is subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12% and 14% per annum for the First and Second Tranche, respectively. Including fees received at closing, the loan has a blended yield to maturity of approximately 13%. The facility will have a total term of up to 63 months from the initial closing.

The Tandem portfolio is comprised of 68 post-acute/skilled nursing facilities primarily located in Florida, Ohio, Pennsylvania and Virginia. The facilities are located in either Certificate of Need states or states that have placed restrictions on new post-acute/skilled nursing construction. The portfolio has an occupancy rate of 93%, a quality mix of 52%, a net operating income margin of 17% and in-place rent coverage of 1.3x. The portfolio is master leased to LaVie Care Centers, an operator of 208 post-acute/skilled nursing facilities in the United States.

About HCP

HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests primarily in real estate serving the healthcare industry in the United States. The Company's portfolio of assets is diversified among five distinct sectors: senior housing, post-acute/skilled nursing, life science, medical office and hospitals. A publicly traded company since 1985, HCP: (i) was the first healthcare REIT selected to the S&P 500 index; (ii) has increased its dividend per share for 27 consecutive years; and (iii) is the only REIT included in the S&P 500 Dividend Aristocrats index. For more information regarding HCP, visit the Company's website at www.hcpi.com.

Forward-Looking Statements

The statements contained in this release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include general economic conditions, the ability to complete the satisfaction of the conditions to the funding of the second tranche, and the receipt of payments, including repayment of principal, on the mezzanine loan facility. Some of these risks, and other risks, are described from time to time in HCP's Securities and Exchange Commission filings.

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