HCP, Inc. (NYSE: HCP) announced Monday that it is the lead investor in the financing for Formation Capital and Safanad Limited’s pending acquisition of NHP, which owns 273 nursing and residential care homes representing more than 12,500 beds in the United Kingdom.
HCP will provide a loan facility totaling £394.5 million (approximately US$630 million), secured by substantially all of NHP’s assets with a five-year term. The loan facility includes £362.5 million (US$453.2 million) funded at closing, representing a portion of the £477 million (US$596.3 million) acquisition consideration; in addition, HCP will make available up to £32 million (US$40 million) to fund future capital improvements in properties operated by HC-One.
“HCP has been a great partner for us and has been helpful with this transaction from the beginning,” Formation Capital CEO Brian Beckwith tells SHN.
The closing of the acquisition and funding of the loan facility is expected to occur in November 2014, subject to customary closing conditions.
Previous reports this year indicated that HCP was getting ready to back Formation Capital in the deal, which was rumored to top $900 million in value.
“We are pleased to partner with Formation Capital and Safanad to finance its acquisition of NHP,” said Lauralee Martin, President and CEO of HCP, in a statement. “Formation has been a valuable partner to HCP, having collaborated on past transactions including our Genesis and Tandem debt investments, as well as several senior housing development projects. Further, this accretive transaction allows us to expand our UK investments to approximately $1 billion and provides a new relationship with a premier national operator in the UK led by Dr. Chai Patel [chairman of HC-One] and his talented management team.”
Including fees received at closing, the loan facility is projected to achieve a blended 8.2% yield-to-maturity, representing an immediately accretive investment that increases HCP’s annualized funds from operations (FFO) and funds available for distribution FAD run-rate by $0.03 per share.
The NHP portfolio is anchored by 226 care homes, the majority of which are purpose-built, primarily located in England and Scotland. These facilities are operated by HC-One, an NHP subsidiary launched in November 2011 to assume the operations transitioned from Southern Cross Healthcare.
HC-One is the UK’s third-largest nursing and residential care provider, which cares for more than 10,000 residents through services including dementia, nursing, residential and specialist care.
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The remaining NHP facilities are leased to third-party operators including Four Seasons Health Care and Care Management Group. Currently NHP’s portfolio has an occupancy rate of more than 88%.
Since 1999, Formation Capital and its investors have invested more than $5.5 billion of capital across the continuum of care in the senior housing sector. As part of this history, Safanad and Formation Capital have acquired more than $3 billion in senior care assets since its partnership in 2009.
Written by Emily Study