HCP, Brookdale Hammer Out Changes to Master Lease

HCP Inc. (NYSE: HCP) has taken another step in its ongoing efforts to reduce the number of Brookdale Senior Living (NYSE: BKD) properties in its portfolio.

Three new amendments to its master triple-net lease with Brookdale will enable HCP to move forward with previously announced plans to terminate leases on 25 Brookdale communities and sell 64 others. Brentwood, Tennessee-based Brookdale is the largest senior living provider in the nation, and Irvine, California-based HCP is one of the “Big 3” senior housing real estate investment trusts (REITs).

One amendment will shorten the term of the master lease for 19 communities involved in the termination transactions. Now, the leases for those communities will end as of Oct. 31, 2017 or on the date when the properties are sold or the operations are transferred to a new third-party entity, whichever is earlier.


Under another amendment, 57 Brookdale communities are being removed from the master lease to facilitate the sale transaction with private equity firm Blackstone Real Estate Partners. These communities now are under a separate lease, which will terminate when the acquisition is complete. That is expected to take place by the end of the first quarter of 2017, HCP previously has stated.

A third amendment extends by one year the period during which Brookdale is allowed to undertake capital projects that would be reimbursed by HCP.

The amendments were effective as of Nov. 1, according to a Securities and Exchange Commission document filed by Brookdale on Nov. 23.


HCP recently completed the spin-off of its troubled skilled nursing facility assets into a separate REIT. Brookdale was the single largest tenant remaining in its portfolio after the spin, accounting for 35% of HCP’s cash net operating income (NOI). The REIT has taken prompt action to reduce its Brookdale exposure—part of a larger strategy to turn around the REIT that has seen its share price erode compared to peers Ventas Inc. (NYSE: VTR) and Welltower (NYSE: HCN). 

Another component of HCP’s plan is bringing in new leadership, and the REIT named a new CEO and president earlier this month. 

Written by Tim Mullaney

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