Bloomberg News reported HCP Inc., the biggest U.S. health- care real estate investment trust by market value, agreed to buy 338 properties from Carlyle Group’s HCR ManorCare Inc. for $6.1 billion. Carlyle spent $6.3 billion to purchase Manor Care, which at the time was publicly traded and operated nursing homes through its HCR Manor Care unit. Carlyle has kept Manor Care’s management team in place. See Wall Street Journal article here and L.A. Times here. HCP will add to the company’s existing 670 properties in 42 states. The additional homes, comprising post-acute, nursing and assisted- living facilities, will generate rent of $472.5 million in the first year. The U.S. has the highest per capita health-care spending among 11 industrialized nations surveyed by the New York-based Commonwealth Fund. Health care is the single-largest industry in the U.S. based on gross domestic product, HCP said on its website. There were 167 acquisitions announced in the U.S. medical nursing home industry in the past 10 years; The average deal size was $320 million.
HCR is controlled by private-equity firm and politically connected Carlyle Group. HCR will lease back the real estate, pay rent, and manage the facilities. (EBITDA) Earnings before interest, taxes, debt and appreciation are up 31% since Carlyle bought the company three years ago.
The sale is one of the largest private-equity deals this year, as well as one of the biggest real-estate transactions in 2010. The transaction will "generate" enough cash to help HCR eliminate nearly all of its debt. HCR, which will continue to run its operating company after the transaction, also will make Carlyle and its investors an undisclosed cash payment as part of the deal.
Nursing homes have become targets of Wall Street in recent years. They’re especially popular among free-wheeling private-equity funds, which are seeking ways to cash in on the aging of the American population. In the last five years, there have been 46 buyouts of nursing home companies totaling $20 billion, according to research firm Dealogic.
Aside from the demographic trends, nursing homes and other senior living facilities are generally considered to be financially stable during troubled economies. In an indication that firms are growing more upbeat about the economy, there have been 536 private-equity buyouts this year totaling $86 billion, a 73% increase from a year earlier, according to Dealogic.
More important for the industry, private-equity firms have sold 246 companies for almost $90 billion, a 338% jump from 2009.