HCP Inc. and Brookdale Senior Living Inc. signed a number of agreements including HCP's acquisition of a 51% interest in Brookdale's unconsolidated 13-property continuing care retirement community venture for a gross purchase price of $510 million.
HCP will pay Brookdale a $100 million management termination fee upon completing the acquisition of the 13 communities comprising 5,641 units. The acquisition will result in HCP owning a full interest in the venture.
Both companies will jointly market for sale three other communities with 1,629 units, from which Brookdale will receive 51% of the net cash proceeds.
Additionally, HCP and Brookdale will restructure a portfolio of 43 triple-net leased communities. Under the agreement, Brookdale will acquire 18 communities from HCP for $405 million, while one property will be transitioned to a third party.
The two companies will also restructure the 24 remaining Brookdale triple-net leased properties into a single master lease with 2.4% annual escalators and a maturity date of Dec. 31, 2027, with two 10-year extension options at Brookdale's election. HCP will fund up to $35 million of capital expenditures, with an expected 7% initial yield to reposition and improve asset quality.
The sale of Brookdale's 51% stake in the unconsolidated entry fee joint venture and Brookdale's concurrent acquisition of 18 communities from HCP are expected to close in the first quarter of 2020, while asset sales to the third party are slated to complete over the next 12 to 18 months.
Brookdale is considering using a portion of the net proceeds for opportunistic share repurchases and elective debt pay downs.
The deals are expected to eliminate substantially all of Brookdale's unconsolidated venture interests, resulting in simplified financial reporting. HCP, on the other hand, will have reduced its Brookdale concentration to 8% from 16% of cash NOI on a pro forma basis as a result of the agreements.
