HCP Completes HCR ManorCare Acquisition, CEO Expects FAD To Grow ~6% 2012-2014

Citigroup has published a research report on HCP, Inc. HCP after the company completed its HCR ManorCare acquisition. In the report, Citigroup writes "Fundamentals across HCP's assets continue to perform well, and portfolio guidance for 2011 looks good. With the substantial (and highly accretive) $6.1bn HCR ManorCare acquisition factored into the asset base, and HCP shares trading at a ~6% implied cap rate (pro-forma), shares seem priced for continued deal flow. While we are confident HCP can continue to execute, competition for portfolios seems to be impacting pricing, hence accretion from the HCR ManorCare deal might be hard to repeat. CEO Jay Flaherty commented that between 2012 and 2014, FAD could grow ~6%, assuming mid 3% SSNOI growth, 40% leverage, and assuming no external acquisitions. Longer term growth under these assumptions requires some stability on interest rates given that HCP has about 1/3 of their total debt rolling between '12-'14 inclusive. The company also plans to continue making accretive acquisitions to grow earnings externally and completed $99m of acquisitions YTD ($67m life science and $32m MOB)." Citigroup maintains its Hold rating and $36 price target. HCP closed yesterday at $37.52.