Investor Presentation. June 2017

Transcription

1 Investor Presentation June

2 Table of Contents HCP Overview Development and Redevelopment Property Segment Highlights Balance Sheet Appendices I. Demand Drivers of Healthcare Real Estate and Senior Housing II. Guidance Assumptions Hyde Park Tampa, FL Briargate MOB Colorado Springs, CO 9380 Judicial Drive San Diego, CA 1

3 HCP Overview Oyster Point II South San Francisco, CA 2

4 Experienced Senior Leadership Team Michael McKee Executive Chairman Tom Herzog President and Chief Executive Officer 3 Peter Scott Chief Financial Officer Scott Brinker Chief Investment Officer effective January 2018 Troy McHenry General Counsel and Corporate Secretary Jon Bergschneider Senior Managing Director Life Science Properties Kendall Young Senior Managing Director Senior Housing Properties Tom Klaritch Senior Managing Director Medical Office Properties Senior Managing Directors Average 25 Years of Direct Property Segment Experience 3

5 Strategic Priorities and Recent Progress Priorities Improve Portfolio Quality Accretive Acquisitions in Our Core Segments Invest in Our Development and Redevelopment Pipeline Strengthen Balance Sheet Establish Core Executive Team Strategic Progress Sold 64 triple-net assets leased to Brookdale for $1.125 billion Sold a 40% interest in our RIDEA II JV generating proceeds of $480 million Divested our Four Seasons loan investments for $136 million Continue to evaluate additional capital recycling activities to further improve portfolio quality over time Our current cost of capital is competitive and allows us to go back on offense Growing pipeline of acquisition opportunities across all three property types $830 million development pipeline with expected yields above our initial underwriting $230 million land bank with entitlements to build 1.8 million rentable sq. ft. creating a shadow development pipeline in excess of $1 billion Post spin-off, repaid $3.1 billion of debt Minimal debt maturities until 2019 On-track to achieve balance sheet targets of Net Debt/EBITDA in low to mid- 6x and leverage to 43-44% by year-end Appointed Pete Scott as CFO in February 2017 Announced hiring of Scott Brinker as CIO, effective January

6 What Differentiates HCP High-quality, 95% private-pay portfolio with a balanced emphasis on Senior Housing, Medical Office, and Life Science real estate Strong and improving investment grade balance sheet with ample liquidity and no significant debt liquidity maturities and until no signif 2019 Diversified senior housing portfolio: triple-net leases are well covered and 65% independent-living in our SHOP assets Premier Life Science portfolios in San Francisco and San Diego 82% on-campus MOB portfolio with stable and consistent performance $880 million development and redevelopment pipeline with an additional 1.8 million square feet of entitlements Smaller investment base from which to grow Senior Housing - The Solana Preserve Houston, TX 5 Investment plan emphasizing prudent capital allocation and accretive growth objectives Global leader in sustainability Best-in-class disclosures and transparency East Mesa MOB Mesa, AZ 5

7 HCP in Context within the U.S. Healthcare Real Estate Market U.S. healthcare real estate market is large and fragmented with favorable demographic trends Provides HCP with a deep pipeline for future growth Estimated Market Value of U.S. Healthcare Real Estate (1) HCP s Portfolio (2) Other owners of healthcare real estate $1.1 Trillion Other public REITs HCP Medical Office 22% Other (3) 12% $23B Enterprise Value Life Science 21% SH - NNN 25% SH - SHOP 20% 6 For the next 20 years, an average of 10,000 U.S. seniors per day will reach age 65 (1) Sources: National Investment Center for Seniors Housing & Care (NIC), HCP research. (2) Enterprise value based on HCP s share price of $31.28 on 3/31/2017 and total consolidated debt and HCP s share of unconsolidated JV debt as of 3/31/17. Percentages by segment represent Cash NOI plus interest income based on HCP s guidance provided on 5/2/17. (3) Primarily consists of hospitals, U.K. real estate, and all debt investments. 6

8 Premier Portfolio in Attractive Healthcare Markets (1) Senior Housing - NNN 25% Improved lease coverage with Brookdale transactions (2) 85% located in Top 99 MSAs (3) Limited expirations weighted average remaining term of 9 years Senior Housing - SHOP 20% 65% of SHOP Cash NOI from Independent Living and CCRC assets (1) 90% located in Top 99 MSAs (3) 5-mile radius median income and 75+ net worth above the national average (4) Life Science 21% 93% located in 2 of the top 3 core markets (3) Largest owner and developer on the West Coast 87% of revenues from public or well-established private companies Medical Office 22% 82% located on-campus; 13% adjacent or anchored; 87% in Top 50 MSAs (3) 95% affiliated with 150+ hospitals and healthcare systems (3) Steady occupancy consistently above 90% (1) Percentages by segment are based on Cash NOI plus interest income based on HCP s guidance provided on 5/2/17. Excludes other non-reportable segments, which primarily consists of hospitals, U.K. real estate, and all debt investments. (2) Excluding the previously announced planned sale or transition of 25 properties and reflecting the November 2016 reallocated, annualized rents, the EBITDAR CFC for Brookdale is approximately 1.2x and total senior housing triple net increases 1-2 basis points from the as reported 1.11x on 3/31/17. (3) Percentage based on Cash NOI for senior housing and square footage for medical office and life science. Cash NOI based on HCP s guidance provided 5/2/17. (4) Demographic data provided by ESRI for

9 Where We Plan to Grow Senior Housing Medical Office Life Science The Solana Preserve Houston, TX Parker Adventist Denver, CO The Cove South San Francisco, CA Investable Universe (1) ~$250 billion ~$360 billion ~$50 billion 8 Overview Fragmented ownership - only ~15% owned by public REITs Undercapitalized operators value lower-cost REIT capital ~55% IL and 45% AL per NIC Aging population is increasing demand for healthcare services Value-based healthcare driving consolidation and efficiencies Continued shift from acute towards outpatient setting Pharma and biotech addressing patent cliff with research and development of new products Historically high investment in LS companies by VCs, public markets and established biotech/ls companies in Growth Priorities Focus on a select group of quality operating partners with high-growth potential NNN acquisition opportunities are currently limited; SHOPstructures offer better alignment Preference for on-campus and/or assets located in elite clusters with a critical mass of primary care doctors, specialists and diagnostic testing Investment focus on nationallyrecognized top-tier research clusters Shortened decision making window of LS companies supports selective speculative activity (1) Sources: NIC and HCP research. 8

10 Development and Redevelopment The Cove at Oyster Point 9 South San Francisco, CA

11 Value Creation from Development Pipeline (1) $834M of Committed Ground-up Developments Phases I & II of The Cove development are a combined 100% leased; recently commenced Phase III representing ~336,000 sq. ft. Medical Office 18% Life Science 82% Medical Office developments are 69% leased and affiliated with / anchored by strong health systems (Memorial Hermann and HCA) Development program targets basis point spread between development yield and market cap rates; current pipeline expected yield is above the high-end of this range ($ millions) Represents a driver of accretive NAV and earnings growth upon stabilization, supplementing internal growth $361M of remaining spend to be funded with retained cash flow and non-core asset sales (1) Reflects committed ground-up development projects as of 3/31/17. Driver to Increase NAV and Earnings Over Time $834 $361 remaining spend $143 placed in service Pipeline Expected to Stabilize in Phases over Next Three Years $473 funded to date $191 2H 2017 $311 $59 $ H H 1H 2019 $211 2H 10

12 The Cove at Oyster Point Development Premier $720M, ~1M sq. ft. Class A Life Science development project at the gateway to South San Francisco Can we get an in process pic? $620 million delivered or in-process; 164,000 sq. ft. of remaining entitlements Phase I & II: 478,000 sq. ft.; 100% leased Commencing Phase III; 336,000 sq. ft. in two buildings; anticipated delivery 4Q 2018 LEED Silver campus with rich amenity profile, including food service, fitness, meeting space, hotel & retail 11

13 Sierra Point Life Science Development Site Overview Premier 23 acre waterfront development site with entitlements to develop approximately 600,000 sq. ft. over time in a flexible, highly-amenitized design (1) Targeting a Phase I start in mid- 18 with returns ~150 to 200 basis points above market cap rates Sierra Point SF Bay The Cove San Francisco Bay (1) Estimated square footage for Sierra Point will range between 540, ,

14 Redevelopment Opportunity and Entitlements Medical Office Redevelopment Capitol Medical Center, Sacramento, California Our on-campus Medical Office portfolio has significant embedded redevelopment potential We expect to increase the size of our current Medical Office redevelopment pipeline to target $ million of projects per year over the next several years with target cash-on-cost returns of 9-12% Capitol Medical Center Redevelopment Case Study Outpatient clinic with licensed endoscopy suite 15-year, full-building lease to UC Davis Health System $21 million project costs with a mid-teen IRR Before Before After 13 Land Held for Development and Entitlements Project MSA Segment Sq. ft. (1) Book Value($M) Sierra Point S. San Fran LS 540 $92 Forbes Research S. San Fran LS The Cove - Phase IV S. San Fran LS Modular Labs III S. San Fran LS Total San Francisco 1,135 $162 Poway II Poway LS 465 $43 Torrey Pines Torrey Pines LS Directors Place Sorrento Mesa LS 80 6 Total San Diego 640 $60 Remaining (2) Various Various na 10 Total Land 1,775 $ million sq. ft. of entitlements on parcels we own and control Majority of land is located in key west coast life science markets of San Francisco and San Diego Creates a shadow development pipeline inexcess of $1 billion (1) Estimated rentable square feet in 000s. (2) Includes HCP s share of unconsolidated JV land held for development. 13

15 Property Segment Highlights Soledad Life Science San Diego, CA 14

16 Diversified Senior Housing Portfolio Balanced mix of well-covered triple-net lease (55% of NOI) (1) and SHOP assets (45%) 5-mile median income and net worth above the national average (2) 290 Properties 46,000 Units 87% NOI from the Top-99 MSAs NNN assets SHOP assets (1) Represents Cash NOI based on HCP s guidance provided on 5/2/17. (2) Demographic data provided by ESRI for

17 Triple-Net Leases Anchor Recurring Internal Growth 2% to 3% average annual escalators Brookdale property EBITDAR-to-rent coverage improves to 1.2x and HCP s triple-net senior housing portfolio coverage improves to ~1.13x (1) Limited expirations weighted average remaining term of 9 years Independent Living Assisted Living Senior Housing Oakmont of Roseville Roseville, CA Memory Care Senior Housing The Fairfax Ft. Belvoir, VA (1) After giving effect to the announced Brookdale transactions. 16

18 SHOP Portfolio is Well-Positioned High mix of independent living, which has been less impacted by new supply in our markets 12 years average affordability (1) SHOP Portfolio Mix by Cash NOI (2) Annual Inventory Growth (3) 6% Assisted Living Independent Living (4) 65% 4% Assisted Living 35% 2% Independent Living (4) 0% E 2018E 65% of supply growth over next 12 months is Assisted Living - HCP s portfolio is 65% Independent Living (1) Affordability represents the number of years an individual can support the cost of residing in a senior housing facility. Affordability is calculated using the median net worth for individuals ages 75 and older, divided by the annualized revenue per occupied room (REVPOR) less the median income for individuals ages 75 and older. Markets with median income in excess of REVPOR reflect an Affordability metric of greater than (>) 15 years. (2) Represents Cash NOI based on HCP s guidance provided on 5/2/17. (3) Supply data from NIC. (4) Includes CCRC. 17

19 Irreplaceable Life Science Portfolio Deep concentration in 2 of the top 3 life science cluster markets 97% Average occupancy over the past 2 years 87% Revenues from public or well-established private companies 20+ Years as premier life science owner and developer with 1.8M sq. ft. of entitled land Annualized Base Rent by Tenant Type Deep Industry Relationships University, Government, Research, 4% Office and R&D, 14% Private Biotech/Medic al Device, 17% Public Biotech/Medic al Device, 46% Pharma, 19% 18

20 Life Science Portfolio Overview HCP is a prominent owner and developer with over 7M sq. ft. spread between four markets San Francisco and San Diego account for 95% of annual base rent SAN FRANCISCO, CA 4.7M sq. ft. Submarkets: South San Francisco Redwood City Mountain View Hayward SALT LAKE CITY, UT 0.4M sq. ft. at University of Utah Research Park DURHAM, NC SAN DIEGO, CA 2.1M sq. ft. Submarkets: Torrey Pines University Towne Center Sorrento Mesa Poway 0.2M sq. ft. leased to Duke University Note: ABR and sq. ft. at 100% share. 19

21 HCP Market Snapshot San Francisco Bay Area HCP owns 83 properties across four sub-markets encompassing 4.7 million sq. ft. (1) UCSF South San Francisco 43 assets; 2.7M sq. ft. UC Berkeley Hayward 13 assets; 531K sq. ft. Over 1,600 companies and 67,000 employees accommodated in over 19M sq. ft. (2) Proximity to prestigious research universities: Stanford University, University of California at Berkeley and University of California at San Francisco Venture Capital investments and research alliances create self-sustaining life science ecosystems; total VC and NIH funding of $2.4 billion in 2016 (2) Redwood City 15 assets; 642K sq. ft. Stanford Mountain View 12 assets; 795K sq. ft. The Peninsula life science market has seen six consecutive years of positive growth with vacancy below 2%, rents at all-time highs, and active demand of over 2 million sq. ft. (3) Ability to opportunistically reposition assets to take advantage of tenant demand in our markets (1) HCP asset count and sq. ft. at 100% share. (2) JLL Life Science Outlook (3) CBRE Life Science Quarterly. 20

22 Life Science Market in Focus South San Francisco HCP Existing Properties HCP Developments & Entitlements HCP Existing Properties Genentech Corporate Campus HCP Developments 2 S. San Francisco submarket ~9M sq. ft. Direct lab vacancy: 3.4% Total lab availability: 3.6% 2016 net absorption: 800,000 sq. ft. The Cove HCP controls ~30% of the cluster market 2.7 million sq. ft. $148 million of Q annualized base rent The Cove at Oyster Point $720 million total project cost across four phases $620 million delivered or in-process 114,000 sq. ft. delivered, 700,000 sq. ft. inprocess and 164,000 sq. ft. of remaining entitlements 1.1 million sq. ft. of S. San Francisco entitlements Sierra Point: ~540,000 sq. ft. (see pg 12) Forbes Research Center: 326,000 sq. ft. The Cove: 164,000 sq. ft. Modular Labs III: 106,000 sq. ft. 21

23 HCP Market Snapshot San Diego HCP owns 29 properties across four sub-markets encompassing 2.1 million sq. ft. (1) Torrey Pines 14 assets; 983K sq. ft. Scripps Institute Poway (20 miles east) 3 assets; 397K sq. ft. Sorrento Mesa 7 assets; 521K sq. ft. Over 1,400 life science companies and 65,000 jobs accommodated in 12M sq. ft. (2) Proximity to 80 research institutes and universities including: Scripps, Sanford Burnham, University of California at San Diego, Salk, and University of San Diego Burnham Institute UCSD Salk Institute J. Craig Venter UTC 3 assets; 155K sq. ft. Venture Capital and NIH investments in life sciences totaled more than $1.2 billion in 2016 (2) Incubator operators such as BioLabs and JLabs have increasingly helped fund start-ups, generating tenant demand for 5-15k sq. ft. life science space Proven ability to opportunistically buy and re-position assets to take advantage of market fundamentals (1) HCP asset count and sq. ft. at 100% share. (2) JLL Life Science Outlook

24 Markets in Focus Torrey Pines and Sorrento Mesa HCP Existing Properties HCP Developments & Entitlements Pending Acquisition HCP has strategically focused on owning highly-concentrated real estate in both high-barrier of entry submarkets. > Torrey Pines sits at the heart of San Diego s life science cluster market and commands the region s highest rental rates. > Sorrento Mesa houses a diverse mix of medical device and technology companies and acts as an economical alternative to Torrey Pines. Torrey Pines Sorrento Mesa Pending Acquisition: Scripps Wateridge 124,000 sq. ft. value-add office campus $26M with a year-one cap rate of ~6% Planned reposition of current 50,000 sq. ft. vacancy to life science using a similar strategy to the repositioning and lease-up of Directors Place located one mile to the south. 175,000 sq. ft. of entitlements in Torrey and Sorrento Mesa, in addition to several potential redevelopment opportunities to be harvested over time. 23

25 Medical Office: Industry-Leading On-Campus Portfolio 239 properties encompassing 18 million sq. ft. ~80% Average retention rate last five years 82% On-Campus 90%+ Consistently Occupied National Portfolio is 95% Affiliated with Top Hospitals and Healthcare Systems Market Density (sq. ft.) 500K+ 250K- 500K 100K 250K under 100K SF 24

26 Medical Office Internal Growth: Strong, Steady, Stable Strong Retention Steady Occupancy 80% 100% 70% 90% 60% 80% 50% % Stable Same Property Cash NOI Growth Consistent Leader in Tenant Satisfaction (1) 4% 3% 2% 1% % HCP Kingsley Index (1) Kingsley Associates tenant survey measuring tenant satisfaction with medical office landlords on a 0 to 5 scale, with 5 representing the highest level of tenant satisfaction.. 25

27 Example of On-Campus Strategy: Centennial Medical Center HCP s Nashville portfolio is anchored by the 100% leased, seven-building, 615,000 sq. ft. oncampus cluster on HCA s Centennial Medical Center Centennial campus is made up of three hospitals with ~650 beds and ~30,000 admissions/yr Strategically Located Portfolio in Nashville CBD Driving Above-Market Fundamentals A: Physician s Park B: Parkview C: Atrium D: Medical Plaza GLA: 197,500 sq. ft. Occupancy: 100% GLA: 188,800 sq. ft. Occupancy: 100% GLA: 95,500 sq. ft. Occupancy: 100% GLA: 95,800 sq. ft. Occupancy: 100% HCP owned MOBs not pictured: E: 2222 State, 18,300 sq. ft., occupancy 100%; F: Building C, 8,700 sq. ft., occupancy 100%; G:Tace 10,000 sq. ft., occupancy 100%. Occupancy data as of 3/31/17. 26

28 Hospital and International Portfolio Hospital International 6.2x 71% coverage (1) EBITDAR lease Cash NOI from acutecare hospitals 1.3x 93% coverage (1) EBITDAR lease Occupancy $531M investment dollars, 14 properties and 2,100 beds NNN leases with 1.5%-2.5% average annual rent escalators Key relationships: HCA, Hoag, HealthSouth $493M debt investments dollars (2) and $374M real estate investment dollars, 61 properties and 3,200 beds NNN leases with 1.5%-2.5% average annual rent escalators Deep partnerships with top U.K. operators HC-One and Maria Mallaband 27 Fresno Surgical Hospital Fresno, CA HC- One - Greenfield Park Glasgow, Scotland (1) EBITDAR lease coverage is for the trailing 12-months ended December 31, (2) Includes $138 million bridge loan to Maria Mallaband which HCP has the option to convert to fee ownership through the exercise of a call option in mid

29 Balance Sheet Aurora Medical Office 28 Aurora, CO

30 Committed to a Strong Balance Sheet Current credit ratings of Baa2 from Moody s, BBB from S&P, and BBB from Fitch Ample liquidity with $2 billion revolver and large unencumbered asset base Low secured debt ratio (1.7% as of Q1-17) provides financing flexibility 95% of income from private-pay revenue sources YE Targets (1) End of 2019 General Targets Net Debt / EBITDA 6.2x (2) Low to mid-6x 5.5x-6.0x 29 Financial Leverage 48.6% 43%-44% <40% Fixed Charge Coverage 3.6x (2) 3.6x-3.8x >3.5x Top 3 Tenant Concentration (3) 44% 35%-40% 30-35% Closing of the Brookdale 64 transaction moved us close to our 2017 Targets (1) Represents year-end 2017 targets. (2) Calculated based on 4Q16 annualized income. (3) Concentration is based on Cash NOI plus interest income. 29

31 Debt Maturity Schedule (1) ($ in millions) $2,000 $1,600 $7.5 billion of total debt 4.2% weighted average interest rate 6.4 years weighted average maturity $1,371 $1,200 $1,251 $1,153 $918 $800 $745 $815 $ $400 No meaningful near-term debt maturities $404 $0 $36 $ Thereafter $3 Senior Unsecured Notes Secured Debt (incl/ pro rata JV) Unsecured Term Loan (natural hedge for UK investments) Substantially all debt maturities through the end of 2018 already addressed (1) As of 3/31/17, excluding revolving credit facility and other debt, and pro forma for $250 million May 17 bond paid off at maturity. 30

32 Well-Managed Debt Profile (1) 7.0% Weighted Weighted Average Average Interest Rate Interest Rate 7.0 Weighted Weighted Average Average Maturity Maturity 6.0% yrs. 5.0% 4.0% 4.1% % Q1' Q1'17 Percentage of Fixed Rate Debt 100% 95% 90% 85% 95% Weighted average interest rate is 210 bps lower since 2010 Weighted average maturity increased to 6.2 years Limited exposure to floating rate debt 80% Q1'17 (1) Q1 17 is pro forma for $250 million May 17 bond paid off at maturity and $131 million revolver pay down in early April. 31

33 Appendix I: Demand Drivers of Healthcare Real Estate and Senior Housing Hoag Hospital Irvine, CA 32

34 Approaching Senior Demographic Tsunami The first wave of Baby Boomers start to reach age 75 in From , the 75+ population is expect to grow by 11 million people, representing a 50% increase in this segment of the population. 12% Percent of U.S. Population Age % Last Decade This Decade % of U.S. Population 8% 6% 4% 2% 0% E 2030E 2040E 2050E Source: US Census Bureau. 33

35 Healthcare Spending Increases with Age On average, annual healthcare spending by seniors age 65+ is over 4x the annual spending by the under 64 population. Average Annual Healthcare Expenditures by Age Group $35 $30 Thousands $25 $20 $15 $10 $5 $ Source: CMS - National Health Expenditure. 34

36 Healthcare Expenditures Expected to Grow Healthcare spending as a percentage of U.S. GDP is expected to increase to roughly 20% in the coming decade. CMS projects a $2 trillion increase in spending during this period which will likely provide abundant opportunities in our three core segments. 21% 20% Healthcare Expenditures as a Percentage of U.S. GDP $5.5 Trillion Percent of GDP 19% 18% 17% $3.2 Trillion 16% 15% Projection Source: CMS. 35

37 MOBs Benefit from Increased Outpatient Visits Acute services moving from hospitals to lower-cost outpatient settings continues to be a tailwind for medical office real estate fundamentals. Over the coming years, demographic trends will likely drive additional demand as, on average, seniors make over 2x the number of annual physician visits compared to the under 65 population. Inpatient Days and Outpatient Visits (in millions) Inpatient Outpatient Sources: American Hospital Association, US Census Bureau, US Centers for Disease Control and Prevention. 36

38 Senior Housing is a Relatively Small Industry The entire U.S. senior housing market is comprised of only 1.5 million units, a relatively small base given the aging U.S. population. United States Housing Stock Breakdown Property Type Units Owner-Occupied Single-Family Homes 65,500,000 Apartments Units (2+ units) 29,000,000 Single-Family Rental Homes 15,000,000 Mobile Homes/other 6,700,000 Senior Housing Units 1,500,000 Small Base of Senior Housing Need for Growth to Meet Coming Demand Source: 2015 American Community Survey 1-Year Estimates (US Census), NIC. 37

39 Population Growth Should Lead to Increased Demand Demand for additional senior housing in the NIC top-99 markets is expected to grow by more than 600,000 units over the next 15 years. This demand represents an ~70% increase over the current senior housing inventory of ~900,000 units in NIC top-99 markets. 60 Actual Projected Top NIC 99 Markets Units (000s) Estimated Annual Senior Housing Demand Growth Demand estimate based on current senior housing penetration rate of 7% and forecasted population growth. 38

40 Life Science Funding in Our Markets Remains Strong Venture Capital (VC) funding for life sciences in San Francisco and San Diego saw a nearly 50% increase from 2014 to Funding from the National Institutes of Health (NIH) continues to support early stage companies and research. Overall industry funding is led by pharmaceutical companies looking to invest in life science via M&A, research funding, collaborations, and licensing to help backfill lost revenue as major drugs come off patent. Our strategy is to own real estate in cluster locations where the funding is flowing. San Francisco and San Diego Life Science Funding By Source Top Drugs Coming Off Patent in 2017 (in millions) $3, US Product Company Sales ($m) $3,028 Copazone Teva $3,500 $1,672 Cialis Eli Lilly 1,500 Viagra Pfizer 1,100 $1,659 Velcade Takeda 1,100 Sustiva Bristol-Myers 900 Sandostatin Novartis 850 $1,370 SimpleXx Novo Nordisk 650 $2,004 Viread Gilead 600 Pristiq Pfizer 575 Strattera Eli Lilly NIH Funding VC Funding Sources: JLL Life Science Outlook 2016, FiercePharma, EvaluatePharma. 39

41 Appendix II: Guidance Assumptions Oakmont of Chino Hills Chino Hills, CA 40

42 2017 Cash NOI Same Property Performance Guidance (1) 4.4% 3.0% 2.5% 2.5% 3.0% 1.3% SH NNN Life Science Medical Office SHOP Other Total HCP Senior Housing triple-net performance is primarily driven by contractual rent increases and Brookdale lease restructure Life Science performance driven by contractual rent escalators and leasing activity Steady Medical Office performance benefits from high tenant retention and on-campus locations SHOP performance is primarily driven by higher rates, occupancy and growth from capital investments partially offset by expense growth Our diversified portfolio is projected to generate same-property cash NOI growth in 2017 between 2.5% to 3.5% (1) Represents mid-point of 2017 SPP Cash NOI growth guidance range provided on 5/2/17. 41

43 Assumptions for 2017 Guidance 2017 Guidance YoY Cash NOI SPP Growth 2.5%-3.5% YoY NOI SPP Growth 1.2%-2.2% G&A Expense Interest Expense $83M-$87M $310M-$320M Net Dispositions (1) 7.8% Recurring CapEx / 2nd Generation (2) $108M-$115M 1 st Gen TIs/ICE and Revenue Enhancing (2) $112M-$127M Re/Development Spend (2) $345M-$400M Diluted FFO as Adjusted per Share $1.89-$1.95 Dividend per Share $1.48 Fully Diluted FFO as Adj. Wtd. Avg. Share Count 476M (1) Includes $1.125 billion related to Brookdale 64 and $480 million related to the sale of a 40% interest in and refinancing of the RIDEA II JV that occurred in Q1 2017; proceeds were used to pay down debt. (2) Includes HCP s share of unconsolidated joint ventures. 42

44 Disclaimer This presentation is being presented solely for your information, is subject to change and speaks only as of the date hereof. This presentation and comments made by management do not constitute an offer to sell or the solicitation of an offer to buy any securities of HCP or any investment interest in any business ventures of HCP. This presentation is not complete and is only a summary of the more detailed information included elsewhere, including in HCP s Securities and Exchange Commission filings. No representation or warranty, expressed or implied is made and no reliance should be placed on the accuracy, fairness or completeness of the information presented. HCP, its affiliates, advisers and representatives accept no liability whatsoever for any losses arising from any information contained in this presentation. FORWARD-LOOKING STATEMENTS Statements in this presentation, as well as statements made by management, that are not historical factual statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, our statements regarding demographic, industry, market and segment forecasts, our planned or pending transactions, our developments, our planned or pending transactions, our future business strategies, our financing plans, our prospects, and our economic guidance, outlook and expectations. All forward-looking statements are made as of the date hereof, are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors many of which are out of our and our management's control and difficult to forecast that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our reliance on a concentration of a small number of tenants and operators for a significant percentage of our revenues, with our concentration in Brookdale increasing as a result of the consummation of the spin-off of QCP on October 31, 2016; the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants' and operators' leases and borrowers' loans; the ability of our existing and future tenants, operators and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations; competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases; our concentration in the healthcare property sector, particularly in life sciences, medical office buildings and hospitals, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; availability of suitable properties to acquire at favorable prices, the competition for the acquisition and financing of those properties, and the costs of associated property development; our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to foreclose on loan collateral or replace an existing tenant or operator upon default; the risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners' financial condition and continued cooperation; our ability to achieve the benefits of acquisitions and other investments within expected time frames or at all, or within expected cost projections; operational risks associated with third party management contracts, including the additional regulation and liabilities of our RIDEA lease structures; the potential impact on us and our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments; the effect on our tenants and operators of legislation, executive orders and other legal requirements, including the Affordable Care Act and licensure, certification and inspection requirements, as well as laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements; changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations, of our tenants and operators; volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions; changes in global, national and local economic or other conditions, including currency exchange rates; our ability to manage our indebtedness level and changes in the terms of such indebtedness; competition for skilled management and other key personnel; the ability to maintain our qualification as a real estate investment trust; and other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission. We caution investors not to place undue reliance on any forward-looking statements. We assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law. MARKET AND INDUSTRY DATA This presentation also includes market and industry data that HCP has obtained from market research, publicly available information and industry publications. The accuracy and completeness of such information are not guaranteed. Such data is often based on industry surveys and preparers experience in the industry. Similarly, although HCP believes that the surveys and market research that others have performed are reliable, HCP has not independently verified this information. NON-GAAP FINANCIAL MEASURES This presentation contains certain supplemental non-gaap financial measures. While HCP believes that non-gaap financial measures are helpful in evaluating its operating performance, the use of non-gaap financial measures in this presentation should not be considered in isolation from, or as an alternative for, a measure of financial or operating performance as defined by GAAP. You are cautioned that there are inherent limitations associated with the use of each of these supplemental non-gaap financial measures as an analytical tool. Additionally, HCP s computation of non-gaap financial measures may not be comparable to those reported by other REITs. Reconciliations of the non GAAP financial measures to the most directly comparable GAAP financial measures are found in the 1Q 2017 Discussion and Reconciliation of Non-GAAP Financial Measures which can be found on the Investor Relations session of HCP s website at