10/17/2012 | by
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In a deal that would grow its assets by close to 10 percent, HCP Inc. (NYSE: HCP) announced on Oct. 16 that it had acquired 133 senior housing communities for a total of $1.73 billion.

HCP purchased the portfolio from a joint venture between one of the nation's largest assisted living and memory care operators, Emeritus Corp., and Blackstone Real Estate Partners VI, an affiliate of The Blackstone Group. The portfolio spans across 29 states and includes 10,350 units representing a diversified care mix: 61 percent of the newly added units are for assisted living, 25 percent are for independent living, 13 percent are dedicated to memory care and the remaining 1 percent are for skilled nursing.

The deal was designed as a triple-net lease structure. Emeritus will continue operating the portfolio of health care facilities and pledged to invest an additional $30 million to continue improving the real estate and operating performance of the portfolio.

"The transaction further demonstrates our thesis of unlocking significant value for our operating partners through real estate driven transactions while providing our shareholders with attractive risk adjusted returns," said Jay Flaherty, HCP's chairman and CEO.

Jeff Theiler, analyst with Green Street Advisors, said one of the primary benefits of a triple net lease structure is that the operator is responsible for capital expenditures.

HCP agreed to sell 22 million shares of common stock to Goldman, Sachs & Co. to finance a portion of the acquisition purchase price.

Joseph Coco, partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, which is representing HCP and Emeritus in the transaction, said the three large REITs in the health care space, including HCP, Health Care REIT Inc. (NYSE:  HCN) and Ventas REIT Inc. (NYSE:  VTR), will continue to be as active in the transactions market as they have been in recent years.

"We see that trend aided by the cost of borrowing, which has gone down over the last couple of years," said Coco, noting that cost of capital provides a "tremendous advantage" for REITs in the current marketplace.