THREE DECADES STRONG THREE DECADES STRONG STRATEGY. EXECUTION. RESULTS. INVESTOR DAY MAY 11, 2015 o 3 YEARS 0 STRONG
TODAY’S agenda HCP’s Strategy and Industry Overview 2 Strategy Lauralee Martin, President and CEO HCP’s Investment Approach 13 Paul Gallagher, Chief Investment Officer Execution HCP’s Sector Overviews 19 Line of Business Leaders HCP’s Financial Results and Balance Sheet 67 Results Tim Schoen, Chief Financial Officer Conclusion Concluding Remarks and Q&A 77 30 YEARS 1 STRONG
s veteran senior leadership HCP’ Lauralee Martin Paul Gallagher Jim Mercer Tim Schoen General Counsel President & CEO Chief Investment Officer Chief Financial Officer (2/38)* (12/30) (4/43) (9/21) Line of Business Leaders Kendall Young Darren Kowalske John Stasinos Tom Klaritch Jon Bergschneider Senior Housing Post-Acute/Hospital International Medical Office Life Science (5/31) (1/25) (12/12) (16/32) (15/18) * Tenure (HCP/Industry). 30 YEARS 2 STRONG
BUILDING UPON 30 years of success $24B (1) Size: $90M 1985 1999 2003 2006 2007 2011 2015 1985: HCP went public with 24 skilled nursing facilities and hospitals 2011: Completed $6.1B 1999: Completed $1B acquisition of HCR merger with American ManorCare portfolio Health Properties 2003: Acquired MedCap Properties from HCA, 2015: Expanded establishing our MOB platform International platform to over $1B 2006: Acquired CNL Retirement Properties for $5.3B, expanding into senior housing 2007: Acquired Slough Estates for $2.9B, establishing a 5 million sq. ft. Life Science platform in San Francisco and San Diego (1) Based on Investment Portfolio as of 3/31/15, and reflecting pro forma adjustments for significant transactions including HCR lease amendment, sale of 50 HCR non-strategic assets and pending acquisitions. See Appendix for details regarding these pro forma adjustments. 30 YEARS Strategy & Industry Overview 3 STRONG
Creating value for HCP and our operating partners HCR ManorCare Brookdale Amended master lease Growth platforms: CCRC and RIDEA Improved coverage Economic trades Upgraded credit on triple-net leases Increased financial flexibility for Sold 9 non-strategic assets HCR to grow Marketing 50 non-strategic Eliminated all purchase options assets on $1.3B of private-pay senior housing assets Strengthen the Operator Partnership for Growth 30 YEARS Strategy & Industry Overview 4 STRONG
HCP IS continuing to grow Source New Investments Empower Expand Sector Leaders Relationships Maximize Organic Growth 30 YEARS Strategy & Industry Overview 5 STRONG
SIGNIFICANT investment growth Accretive Investments Since 2014 $3.4 Billion Investments (1) $1 Billion International Platform Grew U.K. investments 4X to 65% Existing Relationships >$1 Billion and… 35% New Relationships Opened London office …at an attractive 7.4% Blended going-in cash yield Accretive to FAD per Share Diversified Geographically (1) Reflects acquisitions and developments since January 2014, inclusive of the $1.5B in 2015 YTD as discussed on HCP’s earnings call on 5/5/15. 30 YEARS Strategy & Industry Overview 6 STRONG
Building new relationships Senior Housing/Care MOB/Hospital Systems Academic Institutions Life Science and Venture Capital 30 YEARS Strategy & Industry Overview 7 STRONG
THCARE EXPENDITURES large and growing U.S. HEAL National Health Expenditures as % of GDP 20% +200 bps projected to increase to $5 Trillion 19% 18% 17% 16% 2013 2015 2017 2019 2021 2023 Source: CMS. Favorable Fundamentals? OR, an Unsustainable Trajectory? 30 YEARS Strategy & Industry Overview 8 STRONG
continuum OF healthcare real estate OPPORTUNITIES 30 YEARS Strategy & Industry Overview 9 STRONG
recent consolidation INVOLVING HCP’S PARTNERS Business Combination Affiliation Collaboration Consolidation results in increased Scale , operating Synergies and expanded Services 30 YEARS Strategy & Industry Overview 10 STRONG
THCARE REAL ESTATE still very fragmented U.S. HEAL 14% owned by other public REITs $1 3% HCP Trillion Source: Company estimates. We are only in the beginning stages of consolidation for this enormous industry 30 YEARS Strategy & Industry Overview 11 STRONG
HCP’ s diverse AND growing PORTFOLIO (1) By Investment Type By Sector Debt Investment Hospital Development International 5% 4% 3% 5% RIDEA JV 13% MOB Senior 14% $1.9B Housing 50% $24B 38% Triple-Net Leased Investment Portfolio Life Portfolio Income Science Office 14% Platform 30% Post- Acute/Skilled 24% (1) Based on Investment Portfolio as of 3/31/15 (by investment type) and annualized Q1 2015 Portfolio Income (by sector), each adjusted to reflect pro forma impact from significant transactions including HCR lease amendment, sale of 50 HCR non-strategic assets and pending acquisitions. See Appendix for details regarding these pro forma adjustments. 30 YEARS Strategy & Industry Overview 12 STRONG
INVESTMENT APPROACH PAUL GALLAGHER HCP | Furze Hill Lodge Operated by Maria Mallaband Kingswood, UK
Simple strategy: achieve Attractive Risk-adjusted Returns Buy Right and Structure Matters Senior Housing CCRCs Acute-Care / Specialty Hospitals Medical Office Post-Acute/Skilled Life Science Office UK Care Homes 14 Potential Risk & HIGHER LOWER Reward Triple-Net SH RIDEA Mezzanine Debt (master) Lease and (optionality) Re/Development 30 YEARS Investment Approach 14 STRONG
: Converting Debt to Real Estate OPTIONALITY » American Retirement Corp. (ARC) converted mezz debt to Entrance Fee CCRCs Senior » Formation Development Housing converted 2 development loans to fee ownership of brand new communities » Formation/Safanad acquisition of HC-One, and UK Care » add-on HC-One acquisition of Meridian 15 Homes converted one-third of total acquisition financing to triple-net leased real estate » HCR ManorCare CMBS mezz tranche, and Post-Acute/ » add-on secured CMBS debt investment Skilled converted to real estate as part of larger sale/leaseback Executed since 2014 30 YEARS Investment Approach 15 STRONG
s Acquisition Platform is not easy to replicate HCP’ 5 Diversified Lines of Robust Business Deal Pipeline 30 Years of Relationship Consistent Building mid-size opportunities Expanded Acquisition and Teams Larger, strategic portfolio Expanded transactions Relationships 30 YEARS Investment Approach 16 STRONG
s opportunistic & disciplined capital allocation (1) HCP’ By Sector By Investment Type Life Science 6% Debt Triple-net Investment MOB Leased 21% 15% 24% 7.4% $3.4B 17 Senior Development Accretive Blended Housing 10% Acquisitions Going-in 52% Since 2014 Cash Yield International 27% RIDEA JV 45% (1) Reflects acquisitions and developments since January 2014, inclusive of the $1.5B in 2015 YTD as discussed on HCP’s earnings call on 5/5/15. 30 YEARS Investment Approach 17 STRONG
Video in Progress: Andy Smith, CEO Brookdale Senior Living 18 30 YEARS 18 STRONG
SENIOR HOUSING Senior Housing 38% KENDALL YOUNG HCP | The Solana Germantown o Operated by Brookdale 3 YEARS 19 Germantown, TN STRONG
SENIOR HOUSING organization Kendall Young Darrin Smith Larry Mohr Senior Vice President Senior Vice President Acquisitions Asset Management 4 4 Acquisitions Asset Management Professionals Professionals Lease Administration and Capital Asset Management 30 YEARS Senior Housing 20 STRONG
current Industry Environment HCP’s Top 3 RIDEA Markets: » Macro: more new capacity Q1 2015 Occupancy & YoY change needed to meet demand 94.1% growth in top 99 NIC markets Favorable 90.9% 89.5% » Micro: submarket story Fundamentals 87.9% 86.6% 83.8% » HCP performance in-line with, 2.4% or outperforming, market 0.2% 1.3% 1.1% 2.0% 2.3% » Ancillary service offerings Houston Chicago Miami Continuum of help attract residents and HCP RIDEA Portfolio NIC Market Data Care increase length of stay Source: NIC MAP » Despite a competitive acquisition market, HCP has been Robust active in executing accretive senior housing investments – Acquisitions aggregating $1.8 billion since 2014 Aligned with premier operators, HCP is well positioned to grow in Senior Housing 30 YEARS Senior Housing 21 STRONG
substantial accretive external growth momentum Executed $1.8B of acquisitions & developments since 2014 at a blended yield of 7.3%, accretively growing our Senior Housing portfolio by 20% $88M Add-on $588M CCRC JV Sale/Leaseback Portfolio Acquisition Acquisition ($1.2B total asset value) 22 $63M MBK Venture $849M Chartwell Portfolio Acquisition ($126M total asset value) $80M Ground-up $108M new real Developments estate via converting debt investments 30 YEARS Senior Housing 22 STRONG
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