HCP Ends Senior Housing Deals

HCP Terminates Agreements in 15 Sunrise Senior Housing Communities

HCP, Inc. (HCP - Analyst Report), a self-administered real estate investment trust (REIT), recently announced that it would terminate the management agreements on 15 communities operated by Sunrise Senior Living, Inc.

These facilities would be transitioned to new operators during the second half of 2009, reducing the Sunrise-managed properties in HCP's portfolio to 75 communities from the original 101 communities.

The termination of the management contracts, effective from October 1, 2009, was due to Sunrise's failure to achieve certain performance thresholds. HCP had earlier transitioned 11 former Sunrise communities in December 2008 based on similar reasons. However, in both the cases, neither HCP nor its tenant was required to pay any termination fee.

HCP is already into negotiations with various new senior housing operators for the 15 communities, and expects to enter into new agreements very shortly. Jay Flaherty, Chairman and Chief Executive Officer of the company, observed, "This transaction highlights the most recent example of HCP's active approach to asset management as we continue to find ways in this challenging environment to unlock value in our portfolio."

We like the steps taken by the company, and continue our Buy rating. We think HCP is a good defensive stock as it is somewhat insulated from the short-term market fluctuations due to its long-term leases which usually exceed 10 years.