Earnings season brings more than just earnings to the surface for some companies.
What can I say? It has been quite a week, and we are only at Wednesday. On Monday subscribers received my initial take on HCP’s announcement about spinning out its HCR ManorCare portfolio into a new REIT. Maybe management thought it was necessary, but I really think we are going to be hearing some negative news in the future, and if so, it will make HCP’s decision look better. Just look at the performance of Genesis Health in the first quarter, which sent its share price plummeting by 20% yesterday. One problem is that with the HCR portfolio representing more than 25% of HCP’s revenues, with it gone, Brookdale Senior Living was going to replace it as the dominant tenant, jumping to more than 25% of HCP’s revenues. This resulted in HCP agreeing to sell off a 40% interest in one of its Brookdale RIDEA joint ventures to a “friendly” investor. This year is certainly going to be a transitional year, both in the M&A market as players try to figure out the direction of values, as well as corporate balance sheets, as REITs and providers make decisions on what they want to keep for the future. If you want to hear Jerry Doctrow’s take on it, join me next Tuesday for our Members’ Breakfast in New York City.