HCP Starts Final Countdown to Spin-Off

HCP Inc. (NYSE: HCP) is confident that Halloween won’t be too spooky for the spin-off of its skilled nursing assets into a new real estate investment trust (REIT). HCP’s board of directors has approved the previously announced spin-off, which now is expected to occur on or about Oct. 31. 

Shares of Quality Care Properties, Inc. (QCP) would be distributed on October 31, 2016, subject to certain conditions, with October 24 as the record date for the distribution. 

The spin-off will effectively move HCP’s assets with its tenant, HCR ManorCare, into a separate entity. The idea is that the spin will enable the REIT to refocus on its other asset classes, as well as potentially recapture shareholder value. The spin is one of several changes the REIT has announced in the last year, including the departure of its CEO Lauralee Martin in July.

“We are pleased to announce this important step toward finalizing the spin-off of our HCR ManorCare portfolio, which we believe will solidify HCP’s position as a premier health care REIT,” Mike McKee, HCP chairman of the board, president and CEO, said in a statement. “Following the spin, the substantial majority of HCP’s portfolio will be private pay, including more than 850 properties across our three core segments of senior housing, life science and medical office.”

Each HCP stockholder will receive one share of QCP common stock for every five shares of HCP in the spin-off, the company announced. QCP will list its common stock on the New York Stock Exchange.

Skilled Nursing Shifts

Other major senior living REITs have similarly taken steps to limit their exposure to skilled nursing risks.

Chicago-based Ventas Inc. (NSE: VTR) also spun off its skilled nursing assets into an independent REIT, Care Capital Properties (NYSE: CCP). Welltower Inc. (NYSE: HCN) has no plans to spin off its skilled nursing assets, though executives have said they may look for disposition opportunities in the space.

HCP has struggled with HCR ManorCare as a tenant as a result of fundamental changes across the skilled nursing space and investigations by the Department of Justice (DOJ). HCP’s exposure to HCR ManorCare in its skilled nursing portfolio has had some drag on its stock price. 

“We believe a stand-alone HCR ManorCare portfolio offers a unique opportunity to invest in one of the nation’s largest actively-managed real estate companies focused on post-acute/skilled nursing and memory care/assisted living properties,” McKee stated Thursday. “Led by seasoned real estate and healthcare veteran Mark Ordan, Quality Care Properties will have the tools and flexibility to maximize the value of its assets over time.”

The spin-off is subject to the satisfaction of certain conditions, including the effectiveness of the registration statement on Form 10, filed by QCP, according to HCP. 

HCP’s stock price was trading up by the end of day Thursday, above $36 after a decline at the start of the month.

Written by Amy Baxter