Mark Ordan

HCP Inc. will spin off HCR ManorCare, its skilled nursing and assisted living portfolio, into an independent real estate investment trust, the company announced Monday.

The new REIT, SpinCo, is slated to have a portfolio of more than 320 properties from HCR ManorCare and other HCP skilled nursing assets, and net an annual rent of $485 million. Mark Ordan, former chief executive officer for Sunrise Senior Living, will lead SpinCo as CEO once the spin-off is completed.  The company expects the deal to be finalized in the second half of 2016.

The spin-off will allow HCP to focus on its “stable, private-pay” portfolio of senior housing, life science properties and medical offices that aren’t as dependent on government reimbursements as skilled nursing assets, HCP President and CEO Lauralee Martin said in a press release.  HCP will have a portfolio of more than 860 properties with an annual income of roughly $1.4 billion post-spinoff.

SpinCo also will be tailored to address ongoing changes across the skilled nursing and post-acute care industry, and help “unlock value in the HCR ManorCare portfolio,” Ordan noted.

HCP purchased HCR ManorCare’s real estate assets from private-equity firm The Carlyle Group in 2010 for $6.1 billion.

The decision to spin off ManorCare follows a lawsuit filed against the provider by the U.S. Department of Justice last April, claiming the company “knowingly and routinely submitted” false claims for therapy services. The portfolio also suffered from declining admissions, according to reports.

ManorCare “has been a terrible drag on [HCP] for years,” Bloomberg Intelligence analyst Jeffrey Langbaum told Bloomberg.  Pressure on HCP “to do something” about ManorCare increased last April after Ventas announced it would be spinning off its skilled nursing facilities into an independent, publicly traded REIT called Care Capital Properties Inc., Langbaum added. That spin-off was completed in August.