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HCP To Acquire Senior Housing Portfolio For $1.73 Billion

The properties will be grouped into three comparable pools with initial terms of 14 to 16 years. Emeritus has two extension options, which, if exercised, bring total available lease terms to 30 to 35 years.

The closing of this transaction is subject to obtaining regulatory approvals and third party consents, and other customary closing conditions. HCP expects the acquisition of real estate to close in phases beginning mid to late November 2012, although there can be no assurance that the transaction will close or, if it does, when the closing will occur.

$52 MILLION ACQUISITION FINANCING FOR EMERITUS’ PURCHASE OF NINE PROPERTIES

In conjunction with Emeritus’ acquisition of nine senior housing communities from the Blackstone JV, HCP has agreed to provide debt financing to Emeritus of $52 million (the “Loan”) with a four–year term. The Loan is secured by the underlying real estate and prepayable at Emeritus’ option. The interest rate on the Loan will mirror the 6.1% lease yield, including the annual increases through maturity.

ABOUT EMERITUS

Emeritus Senior Living is the nation’s largest memory care and assisted living provider, with ability to serve nearly 50,000 residents. More than 28,000 employees support more than 470 communities throughout 44 states coast to coast. Emeritus offers the spectrum of senior residential choices, care options and life enrichment programs that fulfill individual needs and promote purposeful living throughout the aging process.

UPDATED FULL–YEAR 2012 GUIDANCE

In connection with the transaction described above and other recent events, we are updating our full–year 2012 guidance to reflect the combined effect of the following:

  • a negative impact of ($0.04) per share from merger–related items that consist of: (i) direct transaction costs; and (ii) estimated negative carry to prefund the transaction prior to its anticipated close;
  • a ($0.02) per share non–cash impairment charge in the third quarter of 2012 related to a pending sale of land in Poway, CA. During the third quarter, we executed a 396,000 sq. ft. expansion of our relationship with General Atomics in Poway, CA, consisting of: (i) a lease extension on 281,000 sq. ft. through June 2024, and (ii) a new 10–year lease (expected to commence mid–2014) for a 115,000 sq. ft. build–to–suit development. As part of this transaction, General Atomics agreed to purchase a 19–acre land parcel from HCP for $19 million, resulting in the aforementioned impairment; and
  • a $0.01 per share benefit driven by the transaction expected to close in the fourth quarter, and improved performance from our same–property portfolio.

As a result, we are updating our full year 2012 guidance as follows: we are raising our Cash NOI Same Property Performance to a range between 3.75% and 4.75%. We are lowering our FFO applicable to common shares by $0.05 per share to range between $2.65 and $2.71 per share. Excluding the merger-related items and the impairment described above, we are raising FFO as adjusted applicable to common shares guidance by $0.01 to range between $2.74 and $2.80 per share; and we are raising our FAD applicable to common shares guidance by $0.01 to range between $2.19 and $2.25 per share. See the “Projected Future Operations” section of this release for additional information regarding these estimates.

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