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TEXT-Fitch comments on HCP Inc
2012年10月18日 / 下午5点10分 / 5 年前

TEXT-Fitch comments on HCP Inc

Oct 18 - HCP, Inc.'s (NYSE: HCP) agreement to acquire 133 
senior housing communities for $1.73 billion is a credit neutral event, 
according to Fitch Ratings. The acquisition has a minimal impact on HCP's credit
metrics, has largely been prefunded through an underwritten equity offering and 
is consistent with the company's long-term strategy. HCP's Issuer Default Rating
(IDR) is currently 'BBB+', and the Rating Outlook is Stable. 

HCP will acquire the communities from a joint venture between Emeritus 
Corporation (Emeritus) and an affiliate of The Blackstone Group. Emeritus will 
operate the communities under a new long-term triple-net master lease with a 
first year lease yield of 6.1% and contractual rental increases at the greater 
of 3.7% on average or CPI over the initial five years. The portfolio consists of
99 stabilized properties (91.5% occupied) and 34 lease-up properties (74% 
occupied) and has no RIDEA exposure. 

In conjunction with the acquisition, HCP announced an underwritten public 
offering of 22 million shares ($1 billion in gross proceeds based on Oct. 16, 
2012 closing price). Fitch views the size and timing of the equity offering as a
credit positive and consistent with management's conservatism. Fitch expects HCP
will fund the debt portion of the acquisition through an unsecured senior note 
offering. 

HCP's credit metrics, pro forma for the acquisition, equity offering and other 
events subsequent to 2Q'12 (pro forma) remain appropriate for the rating. Fixed 
charge coverage pro forma was 3.0 times (x) for the trailing 12 months ended 
June 30, 2012 (TTM) in line with the 2.8x TTM and 2.9x for the year ended Dec. 
31, 2011. Pro forma leverage is unchanged at 5.3x as compared to 5.3x for both 
the 12 months ended June 30, 2012 and Dec. 31, 2011, respectively. 

Fitch currently rates HCP as follows: 

--IDR 'BBB+';
--Unsecured bank credit facility 'BBB+';
--Senior unsecured notes 'BBB+'.
The Rating Outlook is Stable. 

The ratings reflect HCP's credit strengths, namely steady cash flows from a 
large portfolio of high-quality properties across the health care real estate 
spectrum, maintenance of leverage and fixed charge coverage metrics appropriate 
for the rating category, manageable lease expiration and debt maturity schedules
and financial flexibility stemming from a large unencumbered pool to support 
unsecured borrowings. Credit concerns include operator and geographic 
concentration. 

HCP's portfolio includes assets across the health care property spectrum by both
type and structure, including senior housing, post-acute and skilled nursing, 
medical office, life science, and hospitals. The diversified portfolio reduces 
exposure to individual demand drivers. HCP's cash flows have significant 
embedded stability, with long-term leases in place in conjunction with annual 
rent escalators. 

Same-property net operating income (NOI) increased 3.1% for the second quarter 
of 2012 (2Q'12), behind the 4.7% and 4% growth during 1Q'12 and 2011, 
respectively and as compared to trough growth of 1.6% in 2008 during the 
financial crisis. The strong fundamentals result from the lease structures 
(generally triple-net with contractual increases) as well as HCP's active 
management. Fitch estimates same-property NOI growth to remain within the 
historical 2%-4% range through 2014 despite the regulatory-based headwinds some 
operators are facing. 

HCP's pro forma fixed charge coverage was 3.0x TTM as compared to 2.8x for the 
TTM ended June 30, 2012 and 2.9x for the year ended Dec. 31, 2011. Fitch 
projects fixed charge coverage to remain at or above 3.0x beginning in 2013. 
Fitch defines fixed charge coverage as recurring operating EBITDA less recurring
capital expenditures less straight-line rent adjustments and direct financing 
lease accretion, divided by interest expense, capitalized interest and preferred
dividends. 

HCP's pro forma leverage was 5.3x as of June 30, 2012 and is within a range that
is appropriate for a 'BBB+' IDR. Leverage was 5.3x for both the TTM ended June 
30, 2012 and the year ended Dec. 31, 2011. Fitch projects HCP's leverage to 
remain around 5.0x through 2014. Fitch defines leverage as net debt divided by 
recurring operating EBITDA. 

HCP's liquidity position is temporarily weakened by the acquisition with a pro 
forma liquidity coverage ratio of 0.9x for the period July 1, 2012 to Dec. 31, 
2014. The terming out of the to be funded portion of the acquisition through an 
unsecured note issuance will alleviate the pressures and improve the coverage 
ratio to 1.2x. Fitch notes HCP has demonstrated strong access to a wide variety 
of capital sources over the past two years, mitigating refinance risk. Further, 
the company's debt maturity schedule is well-laddered, with no more than 12% of 
debt maturing on an annual basis through 2015. Fitch defines liquidity coverage 
as sources of liquidity (unrestricted cash, availability under the company's 
unsecured revolving credit facility, expected retained cash flows from operating
activities after dividends and distributions) divided by uses of liquidity 
(remaining funding obligations, pro rata debt maturities and estimated recurring
capital expenditures). 

HCP maintains solid financial flexibility stemming mainly from its large 
unencumbered property pool, which serves as a source of contingent liquidity. 
Using a blended, stressed cap rate of 8.6%, HCP's pro forma unencumbered asset 
coverage of unsecured debt was approximately 2.2x, which is solid for the 'BBB+'
IDR. 

Credit concerns include operator and geographic concentration. HCR ManorCare 
represents 30% of HCP's revenues (pro forma) and increases HCP's exposure to 
government reimbursement risk. Partially offsetting this concentration is the 
master lease structure and covenants to provide protection to HCP at the 
guarantor level. 

Further, HCP's portfolio has been and remains geographically concentrated, 
despite the company maintaining a diversified investment platform. As of June 
30, 2012, approximately 32% of HCP's consolidated net operating income from 
wholly owned assets was generated from properties located in California and 
Texas (though this is down from 47% as of Dec. 31, 2010). 

The following factors may result in positive momentum in the rating and/or 
Outlook:

 

--Reduced tenant concentration;

--Fixed charge coverage sustaining above 3.0x for several consecutive quarters 
(coverage was 3.0x for the pro forma TTM ended June 30, 2012);

--Net debt to recurring operating EBITDA sustaining below 4.5x (pro forma TTM 
leverage was 5.3x as of June 30, 2012). 

The following factors may result in negative momentum in the rating and/or 
Outlook: 

--Fixed-charge coverage sustaining below 2.5x;

--Leverage sustaining above 6.0x;

--A liquidity shortfall.

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