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HCP sells Tandem Health Care mezzanine loan to Fundamental Advisors

HCP Inc. sold a mezzanine loan secured by interests in Tandem Health Care LLC to alternative asset manager Fundamental Advisors LP for $112 million.

HCP, a real estate investment trust that owns healthcare properties, agreed in 2012 to lend up to $205 million to Tandem, an owner and operator of skilled nursing and post-acute care facilities, as part of a portfolio recapitalization. From 2012 to 2015, the company lent an aggregate $257 million to Tandem affiliates under a collateralized mezzanine loan facility.

Tandem operator Consulate Health Care LLC, facing operational and financial challenges, failed to fully pay its contractual rent to Tandem beginning in April 2017, and in July 2017, HCP entered into an agreement that gave Tandem an option to repay the mezzanine loan at a discounted value of $197 million. Tandem did not repay the loan, and in November 2017 HCP declared an event of default.

In January, HCP engaged Brookfield Financial as an adviser to evaluate its options.

In a news release, HCP Chief Investment Officer Scott Brinker said the company was "pleased" to close on the disposition of the loan. Brinker added that, along with the transition of management of 24 seniors housing facilities from Brookdale Senior Living Inc. to Atria, the transaction represented progress toward HCP's key 2018 objectives.

HCP said it intends to use the proceeds from the disposition to repay debt and for general corporate purposes.

Fundamental Advisors said the transaction will allow it to expand its partnership with Senior Care Development LLC. The Tandem portfolio consists of 41 senior care facilities in Florida, Pennsylvania and Virginia.

Sidley Austin LLP served as legal counsel to Fundamental Advisors in the transaction.