hcp 3 0 post spin outlook presentation

HCP 3.0 Post-Spin Outlook Presentation Senior Housing Life Science - PowerPoint PPT Presentation

HCP 3.0 Post-Spin Outlook Presentation Senior Housing Life Science Medical Office November 1, 2016 HCPs Near -T erm Strategic Priorities Completed on Oct 31, 2016 Execute the Spin-off of the HCR ManorCare Portfolio Will be reduced


  1. HCP 3.0 Post-Spin Outlook Presentation Senior Housing Life Science Medical Office November 1, 2016

  2. HCP’s Near -T erm Strategic Priorities  Completed on Oct 31, 2016 Execute the Spin-off of the HCR ManorCare Portfolio  Will be reduced from 35% Reduce and Improve Brookdale Concentration immediately post-spin to 27% via announced transactions (1)  Executing and refining financing plan announced in May 2016 (2) , resulting Improve Balance Sheet Metrics in better credit metrics than initially 1 anticipated  Revamped and enhanced Become a Leader in Transparency and Clarity Supplemental disclosures in 3Q16 Underway in completing C-Suite Establish the Next Generation of Leadership for HCP 3.0 appointments before year end Substantial Progress towards Accomplishing Our Near-Term Goals (1) Concentration is based on cash NOI plus interest income. Reflects the announced RIDEA II transaction, sale of 64 Brookdale triple-net assets, sale or transfer of 25 Brookdale triple-net assets and transfer of 4 Brookdale communities to another operator. (2) HCP’s financing plan outlined at the time of the Spin announcement in May 2016 anticipated paying down $2.6 billion of debt using proceeds from QCP financing, RIDEA II transaction and asset sales. HCP 3.0

  3. Who We Are T oday  Large, diversified healthcare REIT with high-quality cash flows from needs-based private pay sources  Complementary triple-net leases and operating business platforms across multiple healthcare sectors 43 % Senior Housing Other 87 MSAs 14% (2) Senior 94 % 800 43 States Housing NNN Properties Private Pay (3) $1.3B 24% Geographically 2 Diversified Medical Office Cash NOI 22% 39 % 6 % plus Interest Senior 79 % Housing Income (1) (vs. 4% national avg) Top 3 Tenants Operating Strong Population Concentrated Portfolio Growth over Next Diversified in Top 50 MSAs “SHOP” 5 Years Life Science Tenants 19% 21% Post-Spin, HCP has a Younger, Higher Quality Portfolio of Private Pay Assets in Top 50 MSAs with Above Average Population Growth (1) Represents HCP’s preliminary 2017 Outlook provided on 11/1/16 for cash NOI plus interest income from debt investments. (2) Other segment primarily consists of hospitals, U.K. real estate, and all debt investments. (3) Private pay is defined as out-of-pocket or commercial insurance. HCP 3.0

  4. Premier Portfolio in Attractive Healthcare Markets Senior Housing  Improved lease coverage with announced Brookdale transactions (1) 43%  Added 6 new operators, diversifying our relationships  74% located in Top 50 NIC MSAs Medical Office  83% located on-campus; 87% in Top 50 MSAs 22% 3  95% affiliated with 200+ hospitals and healthcare systems  Steady occupancy consistently above 90% Amgen  96% located in 2 of the Top 3 core markets Life Science  Largest owner and developer on the West Coast 21%  The Cove development represents a 1.0M sq. ft., LEED Silver waterfront campus in S. San Francisco  87% of revenues from public or well-established private companies Represents recently sourced new relationships (1) After giving effect to the announced Brookdale transactions, EBITDAR-to-Rent coverage for the retained 78 triple-net properties increases to 1.21x for the trailing 12 months ended 9/30/16. Note: Percentages are based on 2017 outlook for cash NOI plus interest income from debt investments. Excludes the Other segment, which primarily consists of hospitals, U.K. real estate, and all debt investments. HCP 3.0

  5. Launching HCP 3.0 with a Much Stronger Brookdale NNN Portfolio  +19 bps higher EBITDAR-to-Rent coverage at the property level of 1.21x (leases continue to benefit from BKD guaranty)  Immediately reduce tenant concentration from 16% to 10% (1)  Improved underlying operating metrics including occupancy and margins  Further improvement to our Brookdale portfolio will continue to be a focus Reconstitute and Upgrade Our Brookdale NNN Portfolio Sale / Current HCP 3.0 Sale of Transition BKD NNN BKD NNN 64 of 25 Portfolio (2) Portfolio Properties Properties # of Properties 167 78 64 25 Located in Top 99 NIC Markets 74% 5% 79% 70% 61% Contractual Rent (3) 4 $222M $121M $90M $11M % of Overall HCP 16% 6% 10% Property EBITDAR-to-Rent 1.02x 19 bps 1.21x 0.81x 0.52x Coverage (4) Occupancy 86.5% 260 bps 89.1% 85.2% 79.9% EBITDAR Margin (5) 30.2% 470 bps 34.9% 27.1% 14.0% Qualified Care Giver Population 11.6% 11.9% 11.2% 10.8% Growth (6) Senior 75+ Population Growth 17.9% 18.0% 18.4% 14.6% Median Net Worth 75+ $210K $211K $214K $191K HCP NOI Exposed to New Supply 4.0% 1.9% (1) Concentration is based on cash NOI plus interest income. Taking into account RIDEA communities managed by Brookdale, our total Brookdale exposure is reduced from 35% immediately post Spin to 27% (also reflecting the RIDEA II transaction). (2) Excludes eight properties with upcoming lease expirations in the next six months. (3) Reflects contractual rent adjusted for the rent re-allocation as part of the 25 NNN sale/transition as of September 2016, annualized. (4) EBITDAR-to-Rent Coverage for the retained 78 communities is calculated using trailing 12 months EBITDAR as of September 30, 2016 and re-allocated rents. All other coverages use rents for the trailing 12 months ended September 30, 2016 before giving effect to the rent re-allocation. (5) Based on trailing 12 months ended September 30, 2016. (6) Qualified Care Givers: Households – Age 45-64 / Income $100,000+. HCP 3.0

  6. 2016 Guidance, Pro Forma Run Rate and 2017 Outlook 2016 2016 2017 Nov 1 st Guidance Pro Forma Outlook (mid-point) Run Rate (1) (mid-point) NAREIT FFO per share $2.38 $1.58 $1.91 FFO as Adjusted per share $2.72 $1.92 $1.92 Cash NOI SPP 3.25% n/a 3.0% NOI SPP 2.2% n/a 2.0% 5 5 Assumed timing of transactions: Spin 10/31/16 1/1/16 10/31/16 RIDEA II transaction 11/30/16 1/1/16 11/30/16 Sale of 64 Brookdale triple-net properties No Impact 1/1/16 2/1/17 (1) Represents the annualized, run-rate impact from the Spin, RIDEA II transaction and the sale of 64 Brookdale triple-net properties for $1.1B as if all transactions occurred on January 1, 2016 and excluding the gains from participating debt recognized in 2016. HCP POST-SPIN OUTLOOK

  7. Bridge to 2016 “Pro Forma Run Rate” $ per share FFO as Adjusted 2016 Current Guidance (1) $ 2.72 plus: 2-month net impact from Spin transaction 0.15 2016 Guidance – “WholeCo” Basis 2.87 Gains from participating debt (0.04) 2016 WholeCo Run Rate $ 2.83 Reduced annual income contribution from Combined, these transactions NOI from assets transferred to QCP (1.03) 6 6 generate gross proceeds totaling NOI (rent) on Brookdale 64 NNN assets (0.20) $3.3B to HCP and reduce annual RIDEA II transaction (0.06) income by $600M Subtotal (1.29) Use of proceeds Repay bonds, mortgage debt, revolver and other (2) 0.38 HCP Pro Forma Run Rate (Annual RemainCo) $ 1.92 (1) Based on the mid- point of the Company’s 2016 guidance on 11/1/16. Guidance reflects the Spin completion on 10/31/16 and RIDEA II transaction on 11/30/16, and assumes the Brookdale transactions are completed in 2017. (2) Substantially all of the gross proceeds are used to repay debt at a blended interest rate of 5.2%. Remaining proceeds are used to fund transaction and prepayment costs and for reinvestment. HCP POST-SPIN OUTLOOK

  8. 2016 Run Rate to 2017 Outlook: Major Drivers Impacting FFO as Adjusted $/share ($0.02) $0.02 ($0.04) $0.05 ($0.01) $1.92 $1.92 7 2016 Run Rate 3.0% Cash SPP, Committed Drag from Add'l Tenant Purchase Other Items, net 2017 Outlook (1) FFO as Adj. less Straight Line Re/Development Re/Dev Projects Options & Other FFO as Adj. (3) (2) Rent & Other Projects Capital Recycling Organic Growth from Same-Store and Development Earn-In are Offset by Tenant Purchase Options and other Capital Recycling Activities (1) 2016 Run Rate represents the annualized, run-rate impact from the QCP Spin, sale of 64 Brookdale triple-net assets, and the RIDEA II transaction. (2) Includes straight-line & above/below market rents, accretion on DFL investments and termination fees. (3) Includes ($0.03) from tenant purchase options for Genentech ($310M in Nov’16) and Tenet ($43M in Feb’17), and ($0.01) from ot her capital recycling activities. HCP POST-SPIN OUTLOOK

  9. Combined Sources and Use of Proceeds – Spin, RIDEA II, and Portfolio Sale of Brookdale 64 properties Sources Uses $B Timing $B Rate Timing QCP gross proceeds $1.75 4Q16 HCP debt repayment RIDEA II transaction 0.47 4Q16 Unsecured bonds and mortgage debt $1.21 6.3% 4Q16 BKD 64 asset sales 1.13 1Q17 Mortgage debt 0.47 5.7% 1Q17 Unsecured bonds 0.25 5.6% 2Q17 Subtotal 1.93 6.1% Revolver draw for 2016 maturities (1 ) 0.60 6.4% 4Q16-1Q17 8 8 Revolver (other) 0.62 1.5% 4Q16-1Q17 Total debt repayment 3.15 5.2% Spin transaction costs (2) 0.20 Total $3.35 Total $3.35 (1) Revolver balance includes 2016 YTD debt maturities totaling $600 million ($200 million mortgage at 6.6% and $400 million unsecured bonds at 6.3%) at a blended 6.4%. (2) Includes QCP spin costs (approximately $155 million including financing costs) and debt prepayment penalties (approximately $50 million). HCP POST-SPIN OUTLOOK

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