HCP Inc., a publicly traded real estate investment trust focused on health care, has agreed to acquire the real estate assets of privately owned HCR ManorCare Inc. for $6.1 billion in a cash and stock deal. The transaction is expected to close in the first quarter of 2011.

Based in Long Beach, Calif., HCP (NYSE: HCP) will acquire 338 post-acute, skilled nursing and assisted living facilities from HCR ManorCare. The highest concentrations of properties are in Ohio, Pennsylvania, Florida, Illinois and Michigan. The facilities are located in strong markets with high barriers to entry.

HCR ManorCare, based in Toledo, Ohio, is a provider of short-term, post-hospital rehabilitation, complex medical services and long-term care. The company is owned privately by management and equity funds managed by The Carlyle Group.

The terms of the deal call for HCP to pay $3.5 billion in cash. In addition, $852 million in HCP common stock will be issued directly to the shareholders of HCR ManorCare, and $1.72 billion will be reinvested from the payoff of HCP’s existing debt investments in HCR ManorCare.

HCR ManorCare and its affiliates will continue to operate the assets pursuant to a long-term triple-net master lease. In addition, HCR ManorCare will grant HCP an option to acquire a 9.9% interest in HCR ManorCare for an additional purchase price of $95 million.

The triple-net lease with HCR ManorCare will provide for rent in the first year of $472.5 million, an amount representing a 1.5x EBITDAR (earnings before interest, taxes, depreciation amortization and rent) coverage ratio. The rent will increase by 3.5% per year after each of the first five years and by 3% for the remaining portion of the fixed term.

“This transaction reinvests our substantial debt investment in a secure long-term, growing income stream that will be highly accretive to HCP’s funds from operations and funds available for distribution,” stated Jay Flaherty, HCP's chairman and CEO, in a press release.

As of Sept. 30, 2010, HCP’s portfolio of investments — including real estate assets owned by its unconsolidated joint ventures — consisted of interests in 670 properties. Among the assets are 250 senior housing facilities, 102 life science properties, 252 medical office facilities, 45 skilled nursing and 21 hospital facilities, as well as $2 billion of mezzanine and other secured loans.

HCP has obtained a commitment for a bridge loan in an amount up to $3.3 billion that will be available to complete the HCR ManorCare acquisition.

The share price of HCP stock closed at $34.74 on Dec. 17, up from $30.82 a year earlier.