Kai Hsiao to Exit HCP, Raising Questions About Executive Retention

HCP Inc. (NYSE: HCP) is on the hunt, once again, for new executives.

Last year, the Irvine, California-based health care real estate investment trust (REIT) had planned to launch ‘HCP 3.0’ with a series of promising new hires—but achieving that has involved HCP going “3 or 4 steps forward, 1 step back,” Executive Chairman Mike McKee said Tuesday on an earnings call with analysts.

That’s because a slice of HCP’s “new generation of leadership” is leaving the company.


In April, HCP President Justin Hutchens, who joined HCP in August 2015, announced his plans to leave the REIT to become CEO of UK-based care home operator HC-One. Kai Hsaio, the company’s Executive Vice President-Senior Housing Properties, is departing as well, HCP announced during the company’s first-quarter 2017 earnings call on May 2. Hsaio joined HCP in May 2016.

“[Hutchens and Hsaio] both had a desire to get back toward their operating roots, and we’re in full support of Kai,” HCP CEO Thomas Herzog said on the call. “He’s made us aware of his plans for a while.”

The two departures are “completely unrelated,” Herzog noted.


Hutchen’s and Hsaio’s skill sets are in high demand, McKee added.

“These are two of the best known operators at scale that are living today,” he said. “They have been quite attractively approached for a number of months now.”

Hsaio has “many offers” and HCP does not yet know where he will end up, McKee added. The company does expect to continue to work with both Hutchens and Hsaio in their new roles moving forward, however.

“It’s highly likely given the personal relationship we’ve built with these folks,” McKee said.

Addressing this ‘failure’

With the future of company leadership up in the air, there are plenty of questions that remain unanswered.

Citi Research Analyst Michael Bilerman, for instance, questioned the REIT’s ability to hold on to high-end talent and asked why it “failed” in retaining Hutchens and Hsaio, specifically.

That didn’t sit well with HCP.

“I don’t feel that we have failed at all,” McKee said. He declined to comment on the matter further with Senior Housing News.

Still, McKee admitted the process of turning HCP around following the departure of former CEO Lauralee Martin and the spin-off of the company’s skilled nursing assets into a new REIT has been more difficult than anticipated.

“The recovery of this company, the turnaround of this company, the respositioning of this company is well-known and well-documented,” McKee said. “We are building a new team. You don’t build a world champion in just six months, or three decisions.”

McKee did stress that HCP has accomplished plenty so far, though.

“We have gone through a hell of a lot,” McKee said.

‘Short-term’ supply pressures

HCP is currently experiencing some supply pressure on the senior housing side, but more so in assisted living than in independent living, Senior Managing Director-Senior Housing Properties Kendall Young noted during the earnings call.

In fact, 17 of HCP’s assisted living communities are currently exposed to new supply, and four of them are in top 10 markets. The REIT has a plan to fight back against new competition, though.

“We are proactively investing CapEx into effected properties,” Young explained.

Wage pressure is also on the minds of HCP executives, though both new supply and wage pressure aren’t causing them too much fear.

“We believe some of these headwinds to be short-term,” Herzog said.

All the while, HCP expects “softness” in the senior housing fundamentals into mid-2018 as new completions are absorbed, Young said.

The company’s first-quarter 2017 FFO of 51 cents beat analysts’ expectations by 3 cents; the company’s first-quarter revenue of $492.17 million missed analysts’ expectations by $32.2 million.

By the time the market closed on Tuesday, the price of HCP’s stock had fallen 19 cents to $31.26.

Written by Mary Kate Nelson

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