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HCP To Acquire Senior Housing Portfolio For $1.73 Billion

“Partnering with HCP on this exciting transaction will allow us to monetize our economic and promoted interests in the joint venture, immediately resulting in excess of $140 million of proceeds to Emeritus,” said Granger Cobb, Emeritus' Chief Executive Officer. “In addition, it secures our continued management of these communities on a long-term basis and positions us to capture future upside in the operations as we continue to deploy capital expenditures to maximize local strategic market opportunities.”

Based on current operating performance, the 133 communities consist of 99 that are stabilized and 34 currently in lease–up, which are summarized as follows:
Portfolio     Proper- ties     Units    

2012 YTD Occ. %
   

Purchase Price ($M)
   

Price/ Unit ($’000s)
   

EBITDAR Cap Rate
   

Lease Escalator % (in yrs. 2–4)
   

Fair Mkt. Rent Reset in
Stabilized 99 7,566 91.5% $1,326 $175 6.8% 4.4, 3.8, 3.6 15 years
Lease-up 34 2,784 74.0% 402 144 5.7% 4.4, 3.8, 3.6 5 & 15 years
Total 133 10,350 86.8% $1,728 $167 6.6%
 

In connection with the transaction, Emeritus will enter into a new triple-net, master lease for 129 properties (the “Master Lease”) and four individual leases, all guaranteed by the credit of Emeritus (together, the “Leases”). The Leases provide total contractual rent in the first year of $105.5 million, representing a 6.1% lease yield. The contractual rent will increase annually by the greater of 3.7% on average or CPI over the initial five years, and thereafter by the greater of 3.0% or CPI for the remaining initial term. At the beginning of the sixth lease year, rent on the 34 lease–up properties will be increased to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent, allowing HCP to capture potential upside from these non–stabilized assets.

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