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HCP Vends Tandem Mezzanine Loan Investment for $112M

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HCP Inc. HCP announced that it sold a mezzanine loan that was secured by interests in its skilled nursing and long-term healthcare portfolio, Tandem, to Fundamental Advisors LP, for $112 million.

Fundamental Advisors is an alternative asset manager focused on public purpose assets. The company targets investments that can be controlled and are stressed. It also focuses on buying securities from the secondary market that are undervalued.

Recently, HCP also resorted to shift in the management on its 24 senior-living communities from Brookdale Senior Living to Atria Senior Living. The transition, which still awaits a few regulatory approvals, is scheduled to start from this month and is likely to be accomplished by September 2018.

HCP has been continually trying to reduce its exposure to Brookdale. This is because, Brookdale, which is one of the largest senior living providers in the nation, has been facing operational and financial challenges for past few years.

This was the last mezzanine loan investment of the company and Scott Brinker, Chief Investment Officer of HCP, feels that the recent announcements are in sync with their 2018 objectives.

Once the transition of management from Brookdale to Atria is completed, the dealings will benefit the company in a number of ways. It will considerably decrease Brookdale’s concentration, increase lease coverage of their remaining triple-net assets leased to Brookdale, improve the diversification of tenants in the portfolio and enhance the credit profile and the balance sheet.

Nevertheless, shares of HCP have underperformed its industry in the past three months. During this time, the stock declined 14.9% compared with industry’s decline of 9.2%.

HCP currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

A few better-ranked stocks from the same industry include Arbor Realty Trust ABR, Extra Space Storage Inc. EXR and Sotherly Hotels Inc. SOHO. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has been revised 2.3% upward to 90 cents over the past month. Its share price has risen 10.3% in six months’ time.

Extra Space Storage’s FFO per share estimates for the current year have moved up 1.8% to $4.46 in a month’s time. Its shares have gained 8.6% over the past six months.

Sotherly Hotels’ FFO per share estimates for 2018 have been revised approximately 1.9% upward to $1.05 over the past month. The stock has gained 5.1% during the past six months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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