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HCP to spin off skilled nursing, assisted living assets into REIT

The board of directors of HCPInc. unanimously agreed to spin off the company's HCR ManorCare portfolioof skilled nursing and assisted living assets into an independent publicly tradedREIT.

Simultaneously, HCP named Mark Ordan senior adviser to focuson the HCR ManorCare investment and lead the new REIT, which will be led by an independentmanagement team, as its CEO upon completion of the spinoff. Ordan was previouslyCEO of Washington Prime Group and before that, he was the CEO of Sunrise SeniorLiving.

Ordan currently serves on VEREIT Inc.'s board as an independent director and is alsoa member of both the audit and compensation committees. He is also the nonexecutivechairman of WP Glimcher Inc.'sboard of directors.

The spunoff REIT will also include other skilled nursing assets.The entity will have a flexible capital structure and will singularly focus on skillednursing and assisted living assets.

Completion should occur in the second half, following which,HCP's diversified portfolio will comprise more than 860 properties and generateabout $1.4 billion in annual portfolio income.

HCP expects the spinoff to improve the company's portfolio qualityand boost its focus on core growth businesses, namely senior housing, life scienceand medical office. The new entity will have a real estate portfolio of more than320 properties. The assets, led by facilities operated by HCR ManorCare, will generateroughly $485 million in annual rent.

Upon completion, HCP shareholders will receive shares of thenew entity via a pro rata special distribution, which will, however, not changethe number of HCP shares held by each shareholder.

HCP President and CEO Lauralee Martin said: "We believethis transaction gives HCP the ability to re-confirm itself as a blue-chip, innovativeand relationship-oriented health care REIT. Post-spin, HCP will own a stable, private-payportfolio that has a track record of delivering consistent, attractive returns.

"HCP will be able to sharpen its focus on high-growth healthcare sectors and, with a cost of capital benefiting from the stability and growthprofile of these strong sectors, we will be positioned to achieve accretive newinvestment growth. The transaction also gives our shareholders ownership of a separatecompany structured with the tools and flexibility to maximize the value of its assets."

The new entity is likely to file its initial Form 10 registrationstatement with the SEC in the next 30 days.

The spinoff is subject to certain conditions, including the effectivenessof its Form 10 registration statement and final approval and declaration of thedistribution by HCP's board of directors. The new REIT plans to apply to have itscommon stock authorized for listing on the New York Stock Exchange.

Barclays and Morgan Stanley & Co. LLC are acting as financialadvisers to HCP. Paul Weiss Rifkind Wharton & Garrison LLP and Skadden ArpsSlate Meagher & Flom LLP are serving as legal counsel.