Quality Care Properties, Inc. Investor Presentation October 2016 1 - PowerPoint PPT Presentation

Quality Care Properties, Inc. Investor Presentation October 2016 1

Disclaimer / Forward-Looking Statements IMPORTANT NOTICE This investor presentation should be read in connection with the Registration Statement on Form 10 filed with the Securities and Exchange Commission by Quality Care Properties, Inc. (“QCP”) and any amendments thereto (“Form 10"), including, in particular, the “Risk Factors” included therein. The information in this investor presentation supersedes the information included in the Form 10 to the extent inconsistent therewith. FORWARD-LOOKING STATEMENTS The statements in this presentation, as well as statements made by management, include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: the anticipated timing, structure, benefits and tax treatment of QCP’s pending spin-off from HCP, Inc.; future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: the post-acute/skilled nursing properties and memory care/assisted living properties leased to HCR ManorCare, Inc. (“HCRMC”) representing substantially all of QCP’s assets, QCP’s reliance on HCRMC for substantially all of our revenues and dependency on HCRMC’s ability to meet its contractual obligations under its master lease and risks related to the impact of HCRMC’s decline in operating performance and fixed charge coverage, and risks related to the impact of the U.S. Department of Justice lawsuit against HCRMC and other legal proceedings involving HCRMC, including the possibility of larger than expected litigation costs, adverse results and related developments; the financial condition of HCRMC and our other existing and future tenants and operators, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases; ongoing trends in the healthcare industry, including a shift away from a traditional fee-for-service model and increased penetration of government reimbursement programs with lower reimbursement rates, average length of stay and average daily census, and increased competition in the industry, including for skilled management and other key personnel; the effect on our tenants and operators of legislation and other legal requirements, including licensure, certification and inspection requirements, and laws addressing entitlement programs and related services, including Medicare and Medicaid which may result in future reductions in reimbursement; the ability of HCRMC and our other existing and future tenants and operators to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent payments to us and our ability to recover investments made, if applicable, in their operations; and other risks and uncertainties described in the Form 10 and in our other SEC filings. Forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation to update any of the foregoing or any other forward looking statements as a result of new information or new or future developments or otherwise, except as required by law. NON-GAAP FINANCIAL MEASURES This presentation contains certain supplemental non-GAAP financial measures. While QCP believes these non-GAAP financial measures are meaningful to understanding our performance during the periods presented and our ongoing business, the use of non-GAAP financial measures in this presentation should not be considered in isolation from, or as an alternative for, a measure of financial or operating performance as defined by GAAP or as a measure of cash flow. You are cautioned that there are inherent limitations associated with the use of each of these supplemental non-GAAP financial measures as an analytical tool. Additionally, QCP’s computation of non-GAAP financial measures may not be comparable to those reported by other REITs or real estate companies. Reconciliations of the non-GAAP financial measures contained in this presentation to their most comparable GAAP financial measures are included in the Appendix of this presentation. TENANT INFORMATION This presentation includes information regarding HCRMC that has been provided to us by HCRMC or has been derived by us from information HCRMC provided to us. We are providing this data for informational purposes only. 2

Overview and Spin Transaction Transaction Highlights Name Quality Care Properties, Inc. NYSE: QCP (1) Exchange / Ticker 257 post-acute / skilled nursing properties, 62 memory care / assisted living properties, one Portfolio hospital and one medical office building (2) One Quality Care Properties common share for every five HCP common shares Distribution Ratio Pro Forma Shares Approximately 93.6 million shares Outstanding • Form 10 Effective: October 14, 2016 • When-Issued Trading Begins: October 20, 2016 • Record Date: October 24, 2016 Anticipated Timing • Distribution Date: October 31, 2016 • Regular-Way Trading Begins: On or about October 31, 2016 Notes: 1. Regular-Way ticker. When-Issued ticker of “QCP WI” 3 2. Excludes 17 non-strategic assets held for sale which are expected to be sold by the end of the first quarter of 2017

Origins of Quality Care Properties Continued Tenant & Take Private Real Estate Acquisition Strategic Repositioning Spin-Off Sector Declines (2007) (2011) (2015) (2016) (2015-2016) • HCP and HCRMC • • • The Carlyle Group HCP, Inc. (“HCP”) • Recent trends in the May 9, 2016: agree to modifications acquires HCRMC for acquires HCRMC’s post-acute / skilled Spin announced of original master lease $6.3 billion in take- post-acute / skilled nursing sector have • October 31, 2016: terms, as well as: private transaction nursing and memory created a challenging Expected distribution care / assisted living operating environment – Sale of 50 non- date – Largest owner facilities for $6.1 strategic assets • 2Q16 HCRMC • and operator of Rationale for spin: billion normalized EBITDAR facilities – More flexibility – HCP received $250 declined 10% for the providing post- • Enters into sale- within QCP to million DRO and quarter on a year- acute care leaseback with pursue an array of ownership of 9 over-year basis services and HCRMC featuring a strategies newer SNF assets • 2Q16 HCRMC LTM long-term care in long-term triple-net – Dedicated focus of fixed charge coverage country lease with HCP • Master lease backed by experienced and and facility coverage HCRMC corporate • HCP takes an aligned of 1.03x and guarantee approximately 9% management team 0.82x (1)(2) , equity stake in respectively, declines HCRMC from 2Q15 of 1.11x and 0.87x Note: 1. Coverage metrics based upon reported HCRMC Normalized EBITDAR, Facility EBITDAR and HCRMC Rent for the twelve months ended June 30, 2016. Reported HCRMC Normalized EBITDAR is burdened by certain legal and regulatory defense costs ($10 million) and losses on the 33 non-strategic properties sold during the period ($9 million on EBITDARM basis), 4 as well as the 17 non-strategic properties held for sale that are expected to be sold by the end of the first quarter of 2017 ($11 million on EBITDARM basis) 2. Reported Facility EBITDAR is burdened by certain legal and regulatory defense costs ($10 million) and EBITDAR losses on the 17 held for sale properties ($15 million), and excludes EBITDAR contributed from 10 assets acquired during the twelve month period reported ($22 million)