Building Healthy Partnerships Senior Housing Life Science Medical - PowerPoint PPT Presentation

Building Healthy Partnerships Senior Housing Life Science Medical Office NAREIT June 7-8, 2016

Expanded Senior Leadership Team Mark Ordan Michael McKee Senior Advisor to HCP Executive Chairman Named CEO of SpinCo Lauralee Martin President and Chief Executive Officer 1 Tom Herzog Justin Hutchens Troy McHenry Chief Financial Officer Chief Investment Officer General Counsel and (effective June 2016) Corporate Secretary Kendall Young Jon Bergschneider EVP – Investments EVP – Life Science Estates 6 years at HCP 16 years at HCP Senior Office Housing Platform Kai Hsiao Tom Klaritch EVP – Asset Management EVP – Medical Office (former CEO of 17 years at HCP Holiday Retirement) LEADERSHIP

Overview of Spin-off Transaction » HCP announced the intention to spin off its HCR ManorCare (HCRMC) real estate portfolio in a new, publicly-traded REIT (SpinCo) Transaction » Pro rata distribution to HCP shareholders; expected to close during the second half of 2016 » Comprised of HCRMC post-acute and senior housing portfolio and certain other assets SpinCo » One immediate mission: unlock / maximize the value embedded in HCRMC assets |  Best Vehicle Flexibility to deploy a wider array of strategies than would generally be suitable for HCP to Maximize » Dedicated, experienced and motivated management team 2 the Value of Our HCRMC  Mark Ordan to join as CEO of SpinCo Real Estate  Strong alignment with shareholders and incentive to deliver best returns » Improves HCP’s portfolio quality and growth profile » Premier portfolio: Pro Forma  94% portfolio in growth sectors across Senior Housing, Life Science & Medical Office HCP  | 95% sector-leading private-pay reinforces stability of income stream Blue-Chip » Financing plan supports a strong, investment-grade balance sheet Healthcare  Plan reflects mid-6x pro forma leverage with manageable asset sales REIT  Stable private-pay income stream enhances credit quality » Expanded executive leadership team with strong sector expertise TRANSACTION SUMMARY

Transaction Rationale and Benefits Maximize Total Value To HCP Shareholders HCP SpinCo Maximize Value Diversified, Stable, Embedded in Growing Cash Flow HCRMC Portfolio 3 » Diversified healthcare real estate platform » Best vehicle to maximize value of HCRMC with high quality portfolio portfolio » Sector-leading private-pay revenue sources » Flexibility to deploy a wider array of strategies reinforce stability than would generally be suitable for HCP » Cost of capital to benefit from increased » Dedicated focus of experienced and aligned stability and growth, positioning HCP for management team accretive external growth opportunities » Expanded leadership team with significant operating expertise » Focus on “Building Healthy Partnerships” strategy to generate off-market investments RATIONALE FOR TRANSACTION

SpinCo – Poised and Enabled to Maximize Value » SpinCo to own HCRMC assets (1) and other SNFs currently owned by HCP  Exact asset list to be determined at time of spin » Singular goal: maximize value over a reasonable period of time » Poised and enabled to achieve best solution for shareholders Overview  Structured as a REIT initially  Flexible capital structure  Able to deploy a wide range of strategies  Separately–traded vehicle permits shareholders to choose their level of exposure 4 » Mark Ordan will join as CEO Aligned,  Led turnaround of Sunrise and Mills; healthcare, REIT and spin-off expertise Experienced Management » Compensation tied to creating value for shareholders Flexible » Plan to capitalize SpinCo to provide significant flexibility on executing strategy to Capital maximize the value of HCRMC real estate Structure Limited » Frees both HCP and SpinCo to act independently in own best interests Relationships » Potential for accretive seller financing at market terms for a limited period of time With HCP (1) The deferred rent obligation under the HCRMC master lease (March 2015 lease amendment) and approximately 9% equity ownership in HCRMC operating company will also be transferred to SpinCo. Proceeds from the pending sales of the 17 non-strategic assets will be distributed to HCP. SPINCO OVERVIEW

Transforming HCP’s High Quality Portfolio Current Pro Forma (1) Hospital Senior 6% Senior Housing Housing Post- 54% MOB Triple-net 40% Acute/Skilled 19% 26% Portfolio 26% Triple-net 37% Transformation Hospital Operating 5% Life Science 14% 21% MOB Operating 5 14% Life Science 17% 15% Properties 1,200 862 Annualized Portfolio Income $1.9Bn $1.4Bn Real Estate Average Age 24 years 21 years Post-Acute / Skilled 26% N/M Private Pay Sources 80% 95% Located in Top 31 MSAs 66% 70% (1) Pro forma for the planned spin-off transaction and the announced sale of half of our equity interest in RIDEA II senior housing joint venture. See Appendix for additional information regarding these pro forma adjustments. HCP POST SPIN-OFF

Premier Portfolio in Attractive Healthcare Markets  $735 million in portfolio income Senior Housing  57% located in Top 31 NIC MSAs 54%  Diversified care mix – independent living, assisted living, memory care and CCRC  Largest partner is Brookdale, the largest senior living operator in the US; plus a network of quality regional operators  $290 million in portfolio income (7.4M sq. ft.) Amgen Life Science  High quality tenant base including Amgen, 21% Genentech and Takeda 6  Located in 2 of the Top 3 Life Science markets: largest portfolio and development pipeline on the West Coast  Strong occupancy at an all-time high of 98%  $260 million in portfolio income (17.2M sq. ft.) Medical Office  83% located on-campus; 95% affiliated with 200+ 19% healthcare systems  Quality operators including HCA, Memorial Hermann  Strong medical office occupancy of 91% Represents recently sourced new relationships Note: Portfolio income is pro forma for the planned spin-off transaction and the announced sale of half of our equity interest in RIDEA II senior housing joint venture. See Appendix for additional information regarding these pro forma adjustments. Excludes Hospitals, representing $90 million, or 6%, of portfolio income. HCP POST SPIN-OFF

HCP Financing Plan – Committed to a Strong Balance Sheet » Sector-leading private-pay portfolio led by Senior Housing, Life Science and Medical Office  High-quality, diversified cash flows, not dependent on government reimbursement  Complementary triple-net leases and operating business platforms » Conservative capital structure and strong liquidity  Financing plan addresses all scheduled maturities through end of 2018 (extending average remaining maturity by 24% to 6.5 years) Financing Plan Reinforces Strong Credit Profile 7 » Targeting to raise +/- $2.75B of total proceeds » Proceeds to repay high coupon debt: from the following:  Up to $2.6B of bond and mortgage maturities  Cash to HCP from planned new financing through end of 2018 raised by SpinCo  6.4% blended interest rate  Pending RIDEA II senior housing joint venture and financing (see May 9 th earnings release)  Additional asset sales and JVs to accelerate de-leveraging efforts Plan targets Plan targets Plan targets Net Debt / EBITDA Top 3 Tenants Fixed Charge Coverage Mid 6x Level ~40% Concentration ~3.75x HCP POST SPIN-OFF

̶ ̶ ̶ ̶ ̶ ̶ HCP’s Compelling Investment Thesis  High quality healthcare real estate platform  Premier portfolio weighted towards private-pay, higher growth sectors 94% from Senior Housing, Life Science and Medical Office  Attractive same-store growth from diversified portfolio Averaging 3.8% since 2010 (excluding HCRMC portfolio) 8  Strong portfolio and investment-grade balance sheet support low cost of capital  Expanded leadership team to focus on core business with clear strategy: Differentiate with operator expertise Reinforce investment discipline Diversify relationships Sustain cost of capital advantage to drive accretive external growth Building Healthy Partnerships with a competitive cost of capital results in accretive investment growth HCP POST SPIN-OFF

Next Steps Announced plan to spin off HCRMC portfolio into SpinCo Concurrently: File Form 10 with Obtain new Execute HCP SEC and respond to financing for SpinCo Financing Plan comments (proceeds distributed to (including RIDEA II JV & 9 HCP at closing) financing and additional non-core asset sales) Form 10 becomes effective Distribution of SpinCo shares to shareholders; trading begins for SpinCo Transaction expected to close in the second half of 2016 NEXT STEPS

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