EX-99.1 5 a2229899zex-99_1.htm EX-99.1

Table of Contents

Exhibit 99.1

Preliminary and Subject to Completion, dated October 12, 2016

LOGO

                    , 2016

Dear Stockholder of HCP, Inc.:

        We are pleased to inform you that the board of directors of HCP, Inc. ("HCP") has unanimously approved a plan to spin off HCP's HCR ManorCare, Inc. ("HCRMC") portfolio and certain other properties, through a distribution of its interests in Quality Care Properties, Inc. ("QCP"). We have decided to pursue this transaction to create two separate companies because we believe HCP and QCP each will be better positioned to grow and create stockholder value as independent companies.

        HCP's board of directors believes that the spin-off will improve HCP's portfolio quality and growth profile across our senior housing, life science and medical office segments, which will provide us with sector-leading private-pay revenue sources and increase the stability and growth profile of HCP's portfolio income. Once the spin-off is completed, we intend to accelerate our focus on accretive investment growth by capitalizing on existing partnerships and expanding into new relationships, as we expect to have a lower cost of capital due to improved quality and tenant diversification across our real estate portfolio. Following completion of the spin-off, our diversified portfolio is expected to consist of more than 850 properties.

        Following completion of the transaction, QCP is expected to be an independent, publicly-traded, self-managed and self-administered company and one of the nation's largest actively-managed real estate companies focused on post-acute/skilled nursing and memory care/assisted living properties. QCP will be led by an independent management team with deep experience in real estate and healthcare, and it expects to qualify as a real estate investment trust. QCP's primary tenant will be a subsidiary of HCRMC, one of the nation's largest providers of post-acute, memory care and hospice services.

        The spin-off will be completed through a pro rata distribution of substantially all of the outstanding shares of QCP common stock to HCP stockholders of record as of the close of business on                    , 2016, the record date for the spin-off. Each HCP stockholder will receive one share of QCP common stock for every five shares of HCP common stock held on the record date. The number of HCP shares you own will not change as a result of the spin-off. QCP has been approved to list its common stock on the New York Stock Exchange under the symbol "QCP." HCP common stock will continue to be listed and traded on the New York Stock Exchange under the symbol "HCP."

        As more specifically described in the enclosed information statement, the distribution of QCP common stock will not qualify as a tax-free spin-off. Nevertheless, for stockholders with sufficient tax basis in their HCP common stock and that hold their HCP common stock for the entire taxable year of HCP in which the spin-off occurs, the net effect of the spin-off is that the distribution is expected to be treated as a return of capital not subject to tax.

        No vote of HCP's stockholders is required in connection with the spin-off. You do not need to make any payment, surrender or exchange your shares of HCP common stock or take any other action to receive your shares of QCP common stock.

        The enclosed information statement, which is being made available to all HCP stockholders, describes the spin-off in detail and contains important information about QCP and its business. We urge you to read the information statement in its entirety.

        We want to thank you for your continued support of HCP, and we look forward to your support of QCP in the future.

    Sincerely,

 

 

Michael D. McKee
Chairman of the Board, President and Chief Executive Officer

Table of Contents

LOGO

                    , 2016

Dear Future Stockholder of Quality Care Properties:

        It is our pleasure to welcome you as a future stockholder of our company, Quality Care Properties, Inc. ("QCP"). Following the distribution of substantially all of the outstanding shares of QCP common stock owned by HCP, Inc. ("HCP") to its stockholders, QCP will be an independent, publicly-traded, self-managed and self-administered company. QCP will also be one of the nation's largest actively-managed real estate companies focused on post-acute/skilled nursing and memory care/assisted living properties. QCP will elect to be treated as a real estate investment trust.

        Following the spin-off, QCP's portfolio will be composed of geographically diverse properties, with a private-pay component. It will be operated primarily by a subsidiary of HCR ManorCare, Inc. ("HCRMC"), one of the nation's largest providers of post-acute, memory care and hospice services, and will represent substantially all of the real estate operated by HCRMC.

        QCP will have a capital structure and flexible long-term business model that we believe will allow the company to deploy a wider array of strategies than generally would have been suitable for HCP. We've recruited dedicated and experienced executives to help run the new company and strongly believe that QCP will be well-positioned to actively manage its large-scale, geographically diverse portfolio through the ongoing healthcare industry headwinds and take advantage of favorable long-term industry trends, with the goal to create attractive risk-adjusted returns and maximize value for our stockholders over time.

        QCP's portfolio will initially be composed of, as of June 30, 2016, 274 post-acute/skilled nursing properties, 62 memory care/assisted living properties and a surgical hospital, collectively comprising approximately 39,700 available beds/units, and an 88,000 square foot medical office building, across 30 states. The portfolio includes 249 post-acute/skilled nursing properties and 61 memory care/assisted living properties that will continue to be operated by the subsidiary of HCRMC under its existing triple-net, single master lease guaranteed by HCRMC.

        The consummation of the Spin-Off itself will not result in any changes to the HCRMC master lease. QCP will have the right to receive payment of the $257.5 million deferred rent obligation due from the lessee under the master lease as of June 30, 2016, and will own HCP's approximately 9% equity interest in HCRMC. QCP's remaining 28 properties are, and are expected to continue to be, leased, on a triple-net basis, to other national and regional operators and other tenants unaffiliated with HCRMC.

        We invite you to learn more about QCP and its business by reviewing the enclosed information statement in its entirety. We are excited by our future prospects, and look forward to your support as a holder of our common stock.

    Sincerely,

 

 

Mark Ordan
Chief Executive Officer

Table of Contents

Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Preliminary and Subject to Completion, dated October 12, 2016

INFORMATION STATEMENT

Quality Care Properties, Inc.

Common Stock
(Par Value $0.01 Per Share)



         This information statement is being furnished in connection with a pro rata distribution (the "Spin-Off") by HCP, Inc. ("HCP") to its stockholders of substantially all of the outstanding shares of common stock of Quality Care Properties, Inc. ("QCP") (formerly HCP SpinCo, Inc.). At the completion of the Spin-Off, QCP will own, through certain of its subsidiaries, as of June 30, 2016, 274 post-acute/skilled nursing properties, 62 memory care/assisted living properties, a surgical hospital and a medical office building, including 17 non-strategic properties held for sale and an additional property that, subsequent to June 30, 2016, has been proposed to be sold (collectively, the "Properties"). HCP leases 249 of QCP's post-acute/skilled nursing properties and 61 of QCP's memory care/assisted living properties (collectively, the "HCRMC Properties") on a triple-net basis to, and the HCRMC Properties are operated by, HCR ManorCare, Inc. ("HCRMC") through its wholly-owned subsidiary, HCR III Healthcare, LLC ("HCR III"), under a master lease and security agreement (as amended and supplemented from time to time, the "Master Lease"). The consummation of the Spin-Off itself will not result in any changes to the Master Lease. All of HCR III's obligations under the Master Lease are guaranteed by HCRMC. QCP will also have the right to receive payment of the deferred rent obligation due from HCRMC under the Master Lease and will own HCP's approximately 9% equity interest in HCRMC. QCP's remaining 28 properties are, and are expected to continue to be, leased, on a triple-net basis, to other national and regional operators and other tenants unaffiliated with HCRMC.

         You will receive one share of QCP common stock for every five shares of HCP common stock held of record by you as of the close of business on                    , 2016 (the "record date"). You will receive cash in lieu of any fractional shares of QCP common stock which you would have otherwise received. The date on which the shares of QCP common stock will be distributed to you (the "distribution date") is expected to be                    , 2016. After the Spin-Off is completed, QCP will be an independent, publicly-traded, self-managed and self-administered company.

         No vote of HCP's stockholders is required in connection with the Spin-Off. Therefore, you are not being asked for a proxy, and you are requested not to send us a proxy. You will not be required to make any payment, surrender or exchange your shares of HCP common stock or take any other action to receive your shares of QCP common stock.

         There is no current trading market for QCP common stock. We anticipate that a limited market, commonly known as a "when-distributed" trading market, will develop at some point following the record date and prior to the distribution date, and that "regular-way" trading in shares of QCP common stock will begin on the first trading day following the distribution date. If trading begins on a "when-distributed" basis, you may purchase or sell QCP common stock up to and including the distribution date, but your transaction will not settle until after the distribution date. We have been approved to list QCP's common stock on the New York Stock Exchange ("NYSE") under the symbol "QCP." As discussed under "The Spin-Off—Listing and Trading of Our Shares," if you sell your HCP common stock in the "due-bills" market after the record date and before the distribution date, you will also be selling your right to receive shares of QCP common stock in connection with the Spin-Off. However, if you sell your HCP common stock in the "ex-distribution" market after the record date and before the distribution date, you will still receive shares of QCP common stock in the Spin-Off.

         QCP will elect to be subject to tax as a real estate investment trust ("REIT") for U.S. federal income tax purposes commencing with its initial taxable year ending December 31, 2016. To assist QCP in qualifying as a REIT, among other purposes, QCP's charter will contain certain restrictions relating to the ownership and transfer of its stock, including a provision generally restricting stockholders from owning more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of QCP's common stock or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of QCP stock, without the prior consent of QCP's board of directors. See "Description of Our Capital Stock—Restrictions on Transfer and Ownership of QCP Stock."

         QCP is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and, as such, is allowed to provide in this information statement more limited disclosures than an issuer that would not so qualify. In addition, for so long as we remain an emerging growth company, we may also take advantage of certain limited exceptions from investor protection laws such as the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the Investor Protection and Securities Reform Act of 2010 for limited periods. See "Summary—Emerging Growth Company Status."



         In reviewing this information statement, you should carefully consider the matters described under "Risk Factors" beginning on page 25.

         Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

         This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

         HCP, Inc. will mail this information statement to its stockholders beginning on or about                    , 2016.



The date of this information statement is                    , 2016.


TABLE OF CONTENTS

 
  Page  

SUMMARY

    1  

RISK FACTORS

    25  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    52  

THE SPIN-OFF

    54  

DIVIDEND POLICY

    67  

DESCRIPTION OF FINANCING AND MATERIAL INDEBTEDNESS

    68  

CAPITALIZATION

    73  

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

    76  

SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

    85  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    87  

BUSINESS AND PROPERTIES

    117  

MANAGEMENT

    135  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    147  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

    149  

OUR RELATIONSHIP WITH HCP FOLLOWING THE SPIN-OFF

    150  

DESCRIPTION OF OUR CAPITAL STOCK

    153  

U.S. FEDERAL INCOME TAX CONSIDERATIONS

    166  

WHERE YOU CAN FIND MORE INFORMATION

    187  

INDEX TO FINANCIAL STATEMENTS

    F-1  

i


Table of Contents



SUMMARY

        The following is a summary of material information included in this information statement. This summary may not contain all of the details concerning the Spin-Off or other information that may be important to you. To better understand the Spin-Off and QCP's business, you should carefully review this entire information statement.

        Unless the context otherwise requires, any references in this information statement to "we," "our," "us," the "Company" and "QCP" refer to Quality Care Properties, Inc. and its consolidated subsidiaries. References in this information statement to (i) "HCP" generally refer to HCP, Inc. and its consolidated subsidiaries (other than QCP and its consolidated subsidiaries after the Spin-Off), (ii) "United States" or "U.S." refers to the United States of America, and (iii) our "charter" refers to our amended and restated charter that will govern the rights of holders of our common stock upon the consummation of the Spin-Off, in each case unless otherwise indicated or the context otherwise requires.

        This information statement has been prepared on a prospective basis on the assumption that, among other things, the Spin-Off and the related transactions contemplated to occur prior to or contemporaneously with the Spin-Off will be consummated as contemplated by this information statement. There can be no assurance, however, that any or all of such transactions will occur or will occur as so contemplated.

        You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations as required by applicable law. In particular, a number of matters contained in this information statement relate to agreements or arrangements that have not yet been finalized and expectations of what may occur. Prior to the Spin-Off, it is possible that these agreements, arrangements and expectations may change.

Our Company

        On May 9, 2016, the board of directors of HCP announced its plan to spin off (the "Spin-Off") HCP's HCRMC portfolio and certain other properties into an independent, publicly-traded company that will elect to be treated as a real estate investment trust ("REIT"). QCP will be a self-managed and self-administered REIT and one of the nation's largest actively-managed real estate companies focused on post-acute/skilled nursing and memory care/assisted living properties. As of June 30, 2016, QCP's portfolio included 274 post-acute/skilled nursing properties, 62 memory care/assisted living properties, a surgical hospital and a medical office building ("MOB"), including 17 non-strategic properties held for sale and an additional property that, subsequent to June 30, 2016, has been proposed to be sold (collectively, the "Properties"). We believe that our focused management team, capital structure and flexible business model will position us to address the ongoing challenges in the post-acute/skilled nursing industry, with the goal to create attractive risk-adjusted returns and maximize stockholder value over time.

        Our primary tenant is HCRMC, one of the nation's largest providers of post-acute, memory care and hospice services. As of June 30, 2016, 249 of our post-acute/skilled nursing properties and 61 of our memory care/assisted living properties (collectively, the "HCRMC Properties"), are leased to HCR III Healthcare, LLC ("HCR III"), a wholly-owned subsidiary of HCRMC, under a master lease and security agreement (as amended and supplemented from time to time, the "Master Lease"). The HCRMC Properties account for nearly all of QCP's real estate portfolio and substantially all of the properties where HCRMC delivers its facility-based services. See "Risk Factors—Risks Related to Our Business" for a description of risks related to our dependence on HCRMC.

        The Master Lease is structured as a triple-net lease, in which HCR III, either directly or through its affiliates and sublessees, currently operates and manages, and after the Spin-Off is expected to

1


Table of Contents

continue to operate and manage, the HCRMC Properties. All obligations under the Master Lease are, and following the Spin-Off will continue to be, guaranteed by HCRMC, and the Master Lease will not be amended or modified as a result of the Spin-Off. See "—HCRMC Overview" for a discussion of HCRMC's business. The HCRMC Properties include 17 non-strategic properties that are in the process of being divested. We will receive all of the proceeds from the divestitures. As of the date of this information statement, contracts have been entered into with third party purchasers with respect to the sale of 10 of the 17 non-strategic properties. We expect seven of the 17 non-strategic properties to be sold by the end of 2016 and the remaining 10 to be sold in the first quarter of 2017. The HCRMC Properties also include one additional property that, subsequent to June 30, 2016, has been proposed to be sold. If the property is sold, which we anticipate may occur by the end of 2016 or in the first quarter of 2017, we will receive the net sale proceeds. QCP's remaining 28 properties (the "non-HCRMC Properties") are, and following the Spin-Off are expected to continue to be, leased on a triple-net basis to other national and regional operators and other tenants unaffiliated with HCRMC (together with the Master Lease, collectively, the "Leases").

        We will be led by a dedicated management team with a collective track record of active management of large-scale healthcare operations and real estate portfolio management, large company workouts in both healthcare and REIT environments, and successfully launching and managing a public spin-off. Mark Ordan, a healthcare and real estate industry veteran, and currently a consultant to HCP, will be QCP's Chief Executive Officer; Greg Neeb will be QCP's President and Chief Investment Officer; and C. Marc Richards will be QCP's Chief Financial Officer. These three executives have worked together previously in various management capacities, including at Sunrise Senior Living and The Mills Corporation. Most recently, Messrs. Ordan and Richards worked together at Washington Prime Group Inc., while Messrs. Ordan, Neeb and Richards worked together at Sunrise Senior Living and The Mills Corporation. In addition, HCP will provide certain interim transitional support to QCP via a Transition Services Agreement (as defined below) after completion of the Spin-Off.

        Our revenues will be derived primarily from the Master Lease. As of June 30, 2016, under the terms of the Master Lease, HCRMC is obligated to pay us annualized cash rent of $466 million, after giving effect to the 3% annual fixed escalator that began in April 2016, and before giving effect to the full impact from the pending non-strategic property sales. Of the $466 million annualized cash rent, $396 million is associated with post-acute/skilled nursing properties and $70 million is associated with memory care/assisted living properties. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—HCRMC Transaction Overview" and "Business and Properties—Properties—Master Lease with HCRMC" for additional details regarding the Master Lease. See "Risk Factors—Risks Related to Our Business" for a description of risks relating to the Master Lease. We also will have the right to receive payment of the deferred rent obligation due from HCRMC under the Master Lease, which totaled $257.5 million as of June 30, 2016 (the "Deferred Rent Obligation" or "DRO"), and we will own HCP's approximately 9% equity interest in HCRMC. As of June 30, 2016, our annualized rental and related revenues (excluding tenant recoveries) from the non-HCRMC Properties totaled $27 million.

        We will elect to be treated as a REIT commencing with our initial taxable year ending December 31, 2016. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income. See "U.S. Federal Income Tax Considerations."

HCRMC Overview

        HCRMC, collectively with its subsidiaries, is a leading national healthcare services provider, with over 50,000 employees, that owns and operates skilled nursing and rehabilitation centers, assisted living facilities, memory care facilities, hospice and home health agencies, and outpatient rehabilitation clinics. As of December 31, 2015, its long-term care business operated in 324 centers in 26 states, including 28

2


Table of Contents

non-strategic properties held for sale, with 66% located in Pennsylvania, Ohio, Michigan, Florida, and Illinois. As of December 31, 2015, HCRMC offered hospice and home health services through 108 offices located in 23 states, and offered rehabilitation therapy services in 49 outpatient therapy clinics and a variety of other settings, including skilled nursing centers, schools, and hospitals. HCRMC has invested over $370 million in capital expenditures during the four year period ended December 31, 2015.

        For the year ended December 31, 2015, HCRMC generated $4.1 billion in total revenues consisting of 85% from long-term care, including its post-acute/skilled nursing and memory care/assisted living businesses, and 15% from hospice, home health and rehabilitation services.

        HCRMC's two primary business segments, as of December 31, 2015, were as follows:

    Long-Term Care

        HCRMC's long-term care segment includes the operation of post-acute/skilled nursing centers, memory care facilities and assisted living facilities. HCRMC focuses on providing high-quality post-acute care to patients. Post-acute care patients often require intensive rehabilitation therapy in order to maximize their recoveries. Services rendered to them are typically reimbursed by Medicare, managed care or other insurance, which generally provide higher reimbursement rates than Medicaid. As a result of HCRMC's focus on high acuity patients, for the twelve months ended June 30, 2016, HCRMC's post-acute/skilled nursing portfolio had a skilled mix of 51.3% (consisting of 32.6% related to Medicare and 18.7% related to managed care, based on revenues), and a quality mix (representing total non-Medicaid revenues) of 61.6%.

        As of June 30, 2016, the 249 HCRMC post-acute/skilled nursing properties to be owned by QCP, including 17 non-strategic properties held for sale and an additional property that, subsequent to June 30, 2016, has been proposed to be sold, were located across 25 states, and approximately 67% of the properties were located in Pennsylvania, Ohio, Michigan, Florida and Illinois. HCRMC operates its post-acute/skilled nursing businesses under the Heartland and ManorCare Health Services brands.

        HCRMC primarily operates its memory care/assisted living properties as stand-alone properties, as well as separate units within some of the post-acute/skilled nursing properties. These business lines are dedicated to providing residents with personal care services and assistance with activities of daily living as well as, if applicable, dementia care.

        As of June 30, 2016, the 61 HCRMC memory care/assisted living properties to be owned by QCP were located across 12 states. Approximately 85% of these properties were stand-alone memory care/assisted living properties, operated under the Arden Courts brand, providing care focused on residents who are suffering from Alzheimer's disease and other forms of dementia. The remaining facilities provide assisted and independent living services.

    Hospice and Home Health

        As of December 31, 2015, HCRMC provided hospice and home health services in 108 offices in 23 states, covering many of the markets served by HCRMC's post-acute/skilled nursing properties. From 2012 to 2015, the revenues and operating margin from this segment have grown, on a compound annual basis, by 3.2% and 3.7%, respectively.

        For a description of risks relating to HCRMC, including those related to long-term care and hospice and home health, that could have a material adverse effect on our business, financial condition and results of operations, see "Risk Factors—Risks Related to Our Business" and "—Impact of Industry Trends on HCRMC and Recent Events Specific to HCRMC" below.

3


Table of Contents

Impact of Industry Trends on HCRMC and Recent Events Specific to HCRMC

        HCRMC, along with other post-acute/skilled nursing operators, has been and continues to be adversely impacted by a challenging operating environment in the post-acute/skilled nursing sector, which has put downward pressure on revenues and operating income. Ongoing trends in the post-acute/skilled nursing sector include, but are not limited to the following:

    A shift away from a traditional fee-for-service model towards new managed care models, which base reimbursement on patient outcome measures;

    Increased penetration of Medicare Advantage plans (i.e., managed Medicare), which has reduced reimbursement rates, average length of stay and average daily census, particularly for higher acuity patients;

    Increased competition from alternative healthcare services such as home health agencies, life care at home, community-based service programs, senior housing, retirement communities and convalescent centers; and

    Increased regulatory scrutiny on government reimbursements.

        In addition to the industry trends, HCRMC's recent performance has been impacted by the following:

    HCRMC's exit from 50 non-strategic properties, of which 33 have been completed since July 2015; and

    In April 2015, the U.S. Department of Justice ("DOJ") filed a civil complaint against HCRMC for alleged false claims related to Medicare reimbursement. HCRMC continues to defend against the complaint and is incurring associated legal and regulatory defense costs, which in 2015 were $9 million.

        Due to the headwinds facing the broader post-acute/skilled nursing industry and HCRMC, including the continued reduction in revenues per admission and shorter length of patient stays, HCRMC's performance continued to deteriorate in 2015. The decline accelerated during the second half of the year, driven, in part, by disruptions from exiting the non-strategic properties. As a result, despite revised Master Lease obligations from the lease amendment effective April 2015 reducing annual rent from $541 million to $473 million, and non-strategic property sales, HCRMC's normalized fixed charge coverage stood at 1.03x for the 12-month period ended June 30, 2016, compared to 1.11x for the 12-month period ended June 30, 2015. HCRMC's facility EBITDAR (defined as earnings before interest, taxes, depreciation and amortization, and rent) cash flow coverage ratio was 0.82x and 0.87x for the trailing 12 months ended June 30, 2016, and June 30, 2015, respectively. We believe market rents for post-acute/skilled nursing facilities typically allow for EBITDAR cash flow coverage ratios of 1.25x to 1.35x and for memory care/assisted living facilities of 1.05x to 1.15x. For additional information regarding HCRMC's exit from the 50 non-strategic properties, the Master Lease amendment effective April 2015 and HCRMC's recent performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—HCRMC Transaction Overview" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—HCRMC Recent Developments." For a more detailed description of risks we are subject to due to our dependence on HCRMC, including adverse business and financial conditions and developments, see "Risk Factors—Risks Related to Our Business."

        While we expect the post-acute/skilled nursing operating environment to remain challenging in the near-term, we believe that healthcare service providers, such as HCRMC, and healthcare real estate owners, such as QCP, that are able to successfully navigate through the current challenges will benefit from the long-term positive fundamentals of the post-acute/skilled nursing sector, including: (i) an aging population, (ii) expected increases in aggregate skilled nursing expenditures and (iii) supply constraints in the skilled nursing sector due to certificate of need requirements and other barriers to entry.

4


Table of Contents

HCRMC also benefits from operating in the memory care/assisted living and hospice and home health sectors, which we believe have favorable near- and long-term fundamentals, due in part to growing demand for Alzheimer's and other dementia care services. See "Business and Properties—Post-Acute/Skilled Nursing Industry Overview" and "Business and Properties—Memory Care/Assisted Living Industry Overview" for a discussion of healthcare trends in the post-acute/skilled nursing and memory care/assisted living sectors.

Overview of the Spin-Off

        On May 9, 2016, the board of directors of HCP announced its plan to separate HCP's business into two separate and independent publicly-traded companies:

    HCP, which will increase its focus on its existing core growth businesses of senior housing, life science and medical office properties; and

    QCP, which will own and lease, on a triple-net basis, properties in the post-acute/skilled nursing and assisted living sectors and potentially other sectors in the healthcare industry. The consummation of the Spin-Off itself will not result in any changes to the Master Lease.

        HCP will accomplish the separation by transferring to us the equity of entities that own 274 post-acute/skilled nursing properties; 62 memory care/assisted living properties; a surgical hospital; an 88,000 square foot medical office building; the Deferred Rent Obligation and HCP's approximately 9% equity interest in HCRMC. Most of these properties (249 post-acute/skilled nursing properties and 61 memory care/assisted living properties) will continue to be operated by a subsidiary of HCRMC under the Master Lease. The remaining 28 properties are, and are expected to continue to be, leased, on a triple-net basis, to other national and regional operators and other tenants unaffiliated with HCRMC. We will assume all liabilities and obligations related to these properties, including the Leases. In consideration for these assets, we will (i) pay HCP $1.68 billion in cash, which HCP will use to fund the repayment of a portion of its outstanding debt; and (ii) transfer to HCP shares of QCP common stock that HCP will distribute to its stockholders on a pro rata basis. HCP will retain all of its other assets and liabilities.

        Effective immediately upon the Spin-Off, we will enter into agreements with HCP that set forth the relationship between us and HCP, principally relating to transition, tax and other matters resulting from the Spin-Off. HCP will be the sole lender under our unsecured revolving credit facility. HCP will also be the obligee under the Promissory Notes. Other than as provided in those agreements, we do not anticipate having any substantive continuing relationship with HCP following the Spin-Off. See "Our Relationship with HCP Following the Spin-Off."

        HCP will effect the Spin-Off by distributing to its stockholders one share of our common stock for every five shares of HCP common stock held at the close of business on                    , 2016, the record date for the Spin-Off. HCP's stockholders will receive cash in lieu of any fractional shares of our common stock which they would have otherwise received. We expect the shares of our common stock to be distributed by HCP on or about                    , 2016.

        The Spin-Off is subject to the satisfaction or waiver by HCP of a number of conditions. See "The Spin-Off—Conditions to the Spin-Off." In addition, HCP's board of directors has reserved the right, in its sole discretion, to amend, modify or abandon the Spin-Off or any related transaction at any time prior to the distribution date.

5


Table of Contents

Internal Restructuring

        We and HCP will accomplish the separation by effecting certain internal transactions prior to HCP's transfer to us of equity of entities that hold the Properties, the Deferred Rent Obligation and an approximately 9% equity interest in HCRMC. The internal restructuring includes the following steps:

    Prior to the Spin-Off, we will issue to HCP 2,000 shares of our Class A Preferred Stock, with an aggregate liquidation preference of $2 million, that are expected to be sold by HCP to one or more institutional investors following the Spin-Off. For a description of our Class A Preferred Stock, see "Description Of Our Capital Stock—Preferred Stock—Class A Preferred Stock."

    Prior to the transfer to QCP of the equity of entities that hold the Properties, certain of those entities will issue senior unsecured promissory notes with an aggregate outstanding principal amount of $60 million (collectively, the "Promissory Notes"), and distribute the Promissory Notes to HCP and certain of its subsidiaries such that after the Spin-Off, the Promissory Notes will be obligations of QCP payable to HCP. The terms of the Promissory Notes are further described in "Our Relationship with HCP Following the Spin-Off—Promissory Notes."

    We will contribute to certain of our subsidiaries shares of our common stock to be used as part of the consideration for the transfer by HCP to us of the equity of entities that hold both the Properties, the Deferred Rent Obligation and the approximately 9% equity interest in HCRMC.

Organizational Structure

        The following chart depicts a simplified graphical representation of the relevant portion of HCP's corporate structure, including QCP, prior to the internal restructuring and QCP's corporate structure after the Spin-Off:

GRAPHIC

Reasons for the Spin-Off

        Since HCP's acquisition of the HCRMC real estate portfolio in 2011, HCRMC has remained HCP's largest tenant, representing approximately 23% of HCP's portfolio income for the six month period ended June 30, 2016. HCRMC's operating performance has been negatively affected by the challenging operating environment in the post-acute/skilled nursing industry and, as a result, has continued to deteriorate, resulting in declining coverage under the Master Lease, as summarized in "—Impact of Industry Trends on HCRMC and Recent Events Specific to HCRMC" and

6


Table of Contents

"Management's Discussion and Analysis of Financial Condition and Results of Operations—HCRMC Recent Developments." The ongoing reimbursement model changes that have impacted HCRMC's performance are expected to continue in the near-term, which, combined with HCP's outstanding tenant concentration in HCRMC, likely will continue to weigh on HCP's portfolio performance, cost of capital and ability to grow. While HCP believes that the post-acute/skilled nursing sector in which HCRMC operates will remain an integral part of the continuum of care, HCP also recognizes that additional time and flexibility are warranted to best resolve these near-term challenges. As a result, HCP's board of directors believes that separating the QCP business and assets from the remainder of HCP's businesses and assets is in the best interests of HCP and its stockholders for a number of reasons, including the following:

    Creates two separate companies which better focuses the inherent strengths of each company.  As two independent companies, HCP and QCP will be able to focus on their respective inherent strengths and will have an enhanced ability to maximize value for their respective stockholders. HCP's portfolio quality and growth profile will improve significantly with 94% of its annualized pro forma portfolio income diversified across senior housing, life science and medical office properties. These sectors provide HCP with private-pay revenue sources and enhance the stability and growth characteristics of HCP's portfolio income. QCP's assets will be composed of the HCRMC Properties, the Deferred Rent Obligation and an approximately 9% equity interest in HCRMC, as well as the non-HCRMC Properties. QCP's mission is to maximize the value embedded in its assets.

    Enables HCP to accelerate its focus on accretive investment growth.  We believe HCP's cost of capital will benefit from its improved portfolio quality discussed above and reduced tenant concentration, allowing HCP to focus on generating accretive investment growth with existing and new operating partners.

    Better positions QCP to realize the long-term value creation potential of the HCRMC Properties in a manner that would not be consistent with HCP's business model.  The HCRMC Properties represent a large-scale, geographically diversified portfolio of post-acute/skilled nursing and memory care/assisted living properties that QCP will be able to actively manage to create value for its stockholders. With a more narrowly focused portfolio of assets, QCP will have the flexibility to deploy a wider array of strategies than would generally be suitable for HCP and, as a result, will be positioned to address the ongoing challenges in the post-acute/skilled nursing industry.

    Provides QCP with a dedicated management team with relevant experience and incentives aligned with stockholders.  QCP will have a management team, led by Mark Ordan, whose focus will be solely on the QCP assets. The management team has a collective track record of active management of large-scale healthcare operations and real estate portfolio management, large company workouts in both healthcare and REIT environments, and successfully launching and managing a public spin-off.

Our Relationship with HCP

        After the Spin-Off, QCP will be a separate and independent publicly-traded, self-managed and self-administered company and will elect to be treated as a REIT for its initial taxable year ending December 31, 2016. HCP intends to maintain its REIT status as a separate and independent publicly-traded company, and will continue to invest in a diverse portfolio of properties serving the healthcare industry.

        To set forth our relationship from and after the Spin-Off, we and HCP will enter into, among other arrangements: (1) a separation and distribution agreement setting forth the mechanics of the Spin-Off and certain organizational matters (the "Separation and Distribution Agreement"), (2) an agreement relating to tax matters (the "Tax Matters Agreement") and (3) an agreement pursuant to

7


Table of Contents

which HCP will provide certain administrative and support services to us on a transitional basis (the "Transition Services Agreement"). HCP will be the sole lender under our unsecured revolving credit facility. HCP will also be the obligee under the Promissory Notes. See "Our Relationship with HCP Following the Spin-Off."

Strengths

        QCP will own one of the largest post-acute/skilled nursing and memory care/assisted living real estate portfolios in the United States and we expect to have the necessary structure, management and strategy to create stockholder value.

    Dedicated management team with relevant experience.  QCP's management team will include Mark Ordan, Chief Executive Officer, Greg Neeb, President and Chief Investment Officer, and C. Marc Richards, Chief Financial Officer, whose focus will be solely on the QCP assets. The management team has a collective track record of active management of large-scale healthcare operations and real estate portfolio management, large company workouts in both healthcare and REIT environments, and successfully launching and managing a public spin-off.

    Diverse real estate portfolio.  QCP's real estate portfolio, with properties in 30 states, provides significant geographic diversification and reduces QCP's risk exposure associated with any single state. QCP's properties are strategically clustered, creating regional critical mass and operational efficiency. Furthermore, 61 of the HCRMC Properties, as of June 30, 2016, were predominately private-pay memory care properties, representing approximately 15% of annualized cash rent under the Master Lease. These properties provide payor mix diversity and reduce exposure of the overall portfolio to government reimbursement.

    Our largest tenant, HCRMC, is an established healthcare operator.  HCRMC is one of the largest providers in the United States of short-term post-acute/skilled nursing services, as well as dedicated memory care and hospice and home health services. HCRMC delivers quality care across more than 2,000 hospital systems and over 250 managed care organizations. HCRMC has a diversified business mix across its primary business segments: (i) long-term care (including post-acute/skilled nursing and memory care/assisted living); and (ii) hospice and home health.

    Master lease with credit support.  The Master Lease with HCRMC represents substantially all of HCRMC's post-acute/skilled nursing and memory care/assisted living properties, and provides a full corporate guarantee, which provides QCP with additional credit support from HCRMC's hospice and home health business.

    More flexible business model than HCP.  While QCP intends to qualify as a REIT, it will have the flexibility to change its business model and/or corporate structure to suit the optimal long-term solution for the HCRMC Properties. HCRMC represented approximately 94% of QCP's total revenues for the six months ended June 30, 2016, and we believe engaging with one major tenant provides us greater flexibility to reposition our real estate portfolio or shift our business model.

    Favorable long-term healthcare industry opportunities.  While we expect the post-acute/skilled nursing operating environment to remain challenging in the near-term, we believe that healthcare service providers, such as HCRMC, and healthcare real estate owners, such as QCP, that are able to successfully navigate through the current challenges will benefit from the long-term positive healthcare industry fundamentals, including: (i) an aging population; (ii) expected increases in aggregate skilled nursing expenditures; (iii) supply constraints in the skilled nursing sector due to certificate of need requirements and other barriers to entry; and (iv) growing demand for Alzheimer's and other dementia care services.

8


Table of Contents

Strategy

        QCP will seek to maximize stockholder value through:

    Proactive asset management.  We intend to proactively engage with HCRMC and our other tenants to enhance the value of our assets. Our management team's sole focus will be on maximizing the value of our assets by collecting contractual rent, establishing a more secure income stream, if appropriate, and using other available tools to maximize value. Such tools may include a combination of the following: increased equity participation in the operator, new rent payment streams, new master lease terms, asset sales, increased landlord rights, controls and performance-based provisions, and implementation of a RIDEA structure which is permitted by the Housing and Economic Recovery Act of 2008 (commonly referred to as "RIDEA") for select assets.

    Sufficient liquidity to support our business model.  We believe that we will have sufficient liquidity to execute our business model. We expect that our senior secured revolving credit facility, unsecured revolving credit facility and our cash flow from operations will provide us with sufficient financial capacity to execute our strategy.

    Flexible long-term business model.  We believe our flexible business model will enable us to pursue, as appropriate, various outcomes as a result of our proactive engagement with HCRMC. Furthermore, we believe the post-acute/skilled nursing industry, which remains highly fragmented, has significant long-term opportunities for well-capitalized and well-managed service providers and real estate owners. We believe the combination of our focused strategy, experienced management team, large real estate portfolio and sufficient liquidity will position us to take advantage of the industry trends and create value for our stockholders over time.

Financing

        We expect to implement and maintain a capital structure that is adequate to pursue our business plan and a cost of capital that allows us to provide attractive returns to our stockholders and compete for investment opportunities. Expected financing arrangements over time may include one or more credit facilities or other bank debt, bonds and mortgage financing. In connection with the Spin-Off, we anticipate that we will incur approximately $1.81 billion aggregate principal amount of new indebtedness pursuant to a senior secured term loan, senior secured notes and the Promissory Notes, in addition to having $100 million available under a senior secured revolving credit facility and $100 million available under an unsecured revolving credit facility (which amounts may only be drawn subject to certain limitations, including the unavailability of borrowings under the senior secured revolving credit facility).

        Based on our review of the current credit markets and through consultation with our advisors, we have determined that the incurrence of approximately $1.8 billion in debt will afford us sufficient flexibility to support our business and operating plan. We expect that approximately $1.68 billion in cash from the proceeds of our new debt will be transferred to HCP together with shares of our common stock, in connection with the transfer of assets to us by HCP, and will be used to fund the repayment of a portion of HCP's outstanding debt. Any remaining proceeds will be available to us for general corporate purposes, including funding working capital.

        HCP will also be the obligee under the Promissory Notes and the sole lender under the unsecured revolving credit facility. For additional information concerning our financing arrangements and the Promissory Notes, see "Description of Financing and Material Indebtedness" and "Our Relationship with HCP Following the Spin-Off—Promissory Notes."

9


Table of Contents

Restrictions on Ownership and Transfer of Our Common Stock

        To assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended (the "Code"), among other purposes, our charter will provide for restrictions on ownership and transfer of our shares of stock, including, subject to certain exceptions, prohibitions on any person beneficially or constructively owning more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock, or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of our stock. A person holding less than 9.8% of our outstanding stock may become subject to our charter restrictions if repurchases by us cause such person's holdings to exceed 9.8% of our outstanding stock. For purposes of our ownership limit, a person includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Under certain circumstances, our board of directors may waive these ownership limits. Our charter will provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on such shares or be entitled to vote such shares or receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares of our capital stock in violation of the ownership limit will be void ab initio under certain circumstances. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders. See "Description of Our Capital Stock—Restrictions on Transfer and Ownership of QCP Stock."

Our Tax Status

        We will elect to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our initial taxable year ending December 31, 2016. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels to our stockholders and the concentration of ownership of our capital stock. We believe that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT. In connection with the Spin-Off, we will receive an opinion of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"), counsel to us and HCP, to the effect that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT. In the future, our board of directors may determine that maintaining REIT status would no longer be in the best interest of us or our stockholders, which may result from, for example, other business opportunities that we may wish to pursue, and we may elect to discontinue our REIT status. If such determination is made, our election to discontinue our REIT status would not require stockholder approval.

Emerging Growth Company Status

        We are currently an "emerging growth company" as defined in the JOBS Act. For as long as we remain an emerging growth company, we may take advantage of certain limited exemptions from various requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

    Not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for up to five years;

10


Table of Contents

    Providing less than five years of selected financial data in this information statement;

    Reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

    Exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

        In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to take advantage of this extended transition period, and our election is irrevocable pursuant to Section 107(b) of the JOBS Act.

        We will remain an emerging growth company until the earliest of (1) the last day of the first fiscal year in which our total annual gross revenues first exceed $1 billion, (2) the date on which we are deemed to be a "large accelerated filer," as defined in Rule 12b-2 under the Exchange Act or any successor statute, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period and (4) the end of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the "Securities Act").

        We expect to take advantage of these exemptions in this information statement and in any other periodic reports, proxy statements and registration statements that pre-date the date on which we cease to be an emerging growth company. We cannot predict if investors will find our common stock less attractive due to the permitted reduced disclosure in this information statement and in any such other periodic reports, proxy statements and registration statements. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and adversely affected.

Risks Related to QCP's Business and the Spin-Off

        QCP's business and the Spin-Off and the related transactions pose a number of risks, including:

    The HCRMC Properties represent substantially all of our assets and we will rely on HCRMC for substantially all of our revenues and will be dependent on HCRMC's ability to meet its contractual obligations under the Master Lease and, since substantially all of our real estate portfolio is leased to HCRMC, risks to HCRMC would be more significant to us than such risks may have been to HCP, which has a more diversified portfolio, including risks related to:

    the inability or other failure of HCR III or HCRMC under the Master Lease (or the guaranty thereof) to meet its obligations to us would materially reduce our liquidity, cash flow, net operating income and results of operations;

    any failure by HCRMC to effectively conduct their operations or to maintain and improve our properties would likely have a material adverse effect on our business, results of operations and financial condition;

    an increasingly competitive labor market for HCRMC for skilled management personnel and nurses could cause their operating costs to increase, negatively affecting its ability to meet its obligations to us;

11


Table of Contents

      potentially insufficient assets, income, access to financing and/or insurance coverage to meet their indemnification obligations to us; and

      the ultimate outcome of the DOJ, securities-related and other litigation and claims against HCRMC, including the time and costs of defending such actions and any substantial monetary component of any potential settlement terms that could have a material adverse effect on HCRMC's liquidity and financial condition that makes it difficult or not possible for HCRMC to meet its obligations to us;

    The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory and operational developments in HCRMC's business and financial condition have had, and continue to have, an adverse effect on us;

    Adverse changes in the financial condition as well as the bankruptcy or insolvency of any of our tenants, and particularly HCRMC, could lead to amendments to or defaults under the Master Lease that further reduce the revenues we earn from the HCRMC Properties, reduce the value of the HCRMC Properties under the Master Lease, or result in, among other adverse events, acceleration of HCRMC's indebtedness, impairment of its continued access to capital, the enforcement of default remedies by us or other of its counterparties, or the commencement of insolvency proceedings by or against it under the U.S. Bankruptcy Code, and would materially adversely affect our business, results of operations and financial condition;

    We and our tenants and operators may from time to time face litigation and may experience rising liability and insurance costs;

    Certain of our tenants and operators, including HCRMC, are subject to government regulations, and changes in current or future laws or regulations, including governmental reimbursement programs such as Medicare or Medicaid, could negatively affect the ability of our tenants and operators to meet their financial or other contractual obligations to us;

    Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms, if at all;

    Covenants in our debt agreements will limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations and the value of an investment in us;

    We do not have an investment grade rating;

    Our tenants and operators face challenging ongoing trends in the healthcare industry, including a shift away from a traditional fee-for-service reimbursement model and increased penetration of government reimbursement programs with lower reimbursement rates and length of stay, and increased competition;

    We may be affected by negative economic conditions in our geographies of operation;

    The historical and pro forma financial information included in this information statement may not be a reliable indicator of future results;

    We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off;

    The Spin-Off could give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operation;

12


Table of Contents

    Our agreements with HCP may not reflect terms that would have resulted from arm's-length negotiations with unaffiliated third parties;

    If we were to fail to qualify as a REIT, including as a result of HCP or certain of its subsidiaries failing to qualify as a REIT, in any taxable year for which the statute of limitations remains open, or elect not to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates and could face a substantial corporate tax liability, which would reduce the amount of cash available to repay our indebtedness and for distribution to our stockholders; and

    Complying with the REIT requirements may cause us to forgo otherwise attractive acquisition and business opportunities or liquidate otherwise attractive investments.

        These and other risks related to the Spin-Off and our business are discussed in greater detail under the heading "Risk Factors" in this information statement. You should read and consider all of these risks carefully.

Our Corporate Information

        We are a Maryland corporation. Our principal executive offices will be located at 7315 Wisconsin Avenue, Suite 250-W, Bethesda, Maryland 20814, and our telephone number is (949) 407-0700. We will maintain a website at www.qcpcorp.com. Information contained on or connected to our website does not and will not constitute part of this information statement or the registration statement on Form 10 of which this information statement is a part.

13


Table of Contents



Questions and Answers about QCP and the Spin-Off

What is QCP and how will the separation of the Properties from HCP benefit the two companies and their stockholders?

  QCP is currently a newly formed direct, wholly-owned subsidiary of HCP with no assets or liabilities. Prior to the Spin-Off, HCP will transfer to QCP the equity of entities that hold the Properties, the Deferred Rent Obligation and HCP's approximately 9% equity interest in HCRMC, in exchange for cash of approximately $1.68 billion and shares of QCP's common stock. The separation of QCP from HCP and the distribution of QCP's common stock are intended to provide you with equity investments in two separate companies.

 

We have decided to pursue this transaction to create two separate companies because we believe HCP and QCP each will be better positioned to grow and create stockholder value as independent companies.

 

We believe the Spin-Off will improve HCP's portfolio quality and growth profile across HCP's senior housing, life science and medical office segments, which will provide HCP with sector-leading private-pay revenue sources and reinforce stable, predictable and growing cash flows. Once the Spin-Off is completed, HCP intends to accelerate its focus on accretive investment growth by capitalizing on existing partnerships and expanding into new relationships, and HCP expects to have a lower cost of capital due to improved quality and tenant diversification across its real estate portfolio.

 

The Spin-Off will also allow HCP to retire approximately $1.68 billion in debt at the completion of the Spin-Off.

 

Following the Spin-Off, QCP's portfolio will be composed of geographically diverse properties with a private-pay component. It will be operated primarily by HCRMC, one of the nation's largest providers of post-acute, memory care and hospice services, and will represent substantially all of the real estate operated by HCRMC.

 

QCP will have a capital structure and flexible long-term business model that will allow the company to deploy a wider array of strategies than would generally be suitable for HCP and, as a result, will be positioned to address the ongoing challenges in the post-acute/skilled nursing industry.

Why am I receiving this document?

 

HCP is delivering this document to you because you are a holder of HCP common stock as of the close of business on                    , 2016, the record date for the Spin-Off. Each HCP stockholder will receive one share of QCP common stock for every five shares of HCP common stock held on the record date. The number of HCP shares you own will not change as a result of the Spin-Off. This document will help you understand how the separation will affect your post-separation ownership in HCP and QCP, respectively.

14


Table of Contents

What are the reasons for the Spin-Off?

 

HCP's board of directors believes that separating the QCP business and assets from the remainder of HCP's businesses and assets is in the best interests of HCP and its stockholders for a number of reasons, including the following:

 

Creates two separate companies which better focuses the inherent strengths of each company;

 

Enables HCP to accelerate its focus on accretive investment growth;

 

Better positions QCP to realize the long-term value creation potential of the HCRMC Properties in a manner that would not be consistent with HCP's business model; and

 

Provides QCP with a dedicated management team with relevant experience and incentives aligned with stockholders.

What will QCP's initial portfolio consist of?

 

At the completion of the Spin-Off, QCP, through certain of its subsidiaries, will own the Properties, as of June 30, 2016, composed of 336 post-acute/skilled nursing and memory care/assisted living properties, a surgical hospital, and a MOB, including 17 non-strategic properties held for sale and an additional property that, subsequent to June 30, 2016, has been proposed to be sold, all of which are currently owned by HCP or certain of its subsidiaries. As of June 30, 2016, 249 of our post-acute/skilled nursing properties and 61 of our memory care/assisted living properties, which are principally located in Pennsylvania, Ohio, Michigan, Florida and Illinois, are currently leased to HCR III under the Master Lease. HCR III's obligations under the Master Lease are guaranteed by HCRMC, and the consummation of the Spin-Off itself will not result in any changes to the Master Lease.

 

QCP's remaining 28 properties represent substantially all of HCP's non-HCRMC post-acute/skilled nursing portfolio, and three additional properties, which are currently subject to tax deferred exchange holding periods. All of the remaining properties are, and following the Spin-Off are expected to continue to be, leased, on a triple-net basis, to other national and regional operators and other tenants unaffiliated with HCRMC.

 

Certain of our subsidiaries will be the sole owners of the Properties under the Leases, and the existing lessees are expected to remain the lessees thereunder and to operate and manage (either directly or through their affiliates and sublessees) the Properties and will remain responsible for all operating costs associated with the Properties.

Why is QCP referred to as a REIT, and what is a REIT?

 

QCP will elect to be subject to tax as a REIT for U.S. federal income tax purposes commencing with its initial taxable year ending December 31, 2016.

15


Table of Contents

 

A REIT is a company that derives most of its income from real property or real estate mortgages and has elected to be subject to tax as a REIT. If a corporation elects to be subject to tax as a REIT and qualifies as a REIT, it will generally not be subject to U.S. federal corporate income taxes on income that it currently distributes to its stockholders. A company's qualification as a REIT depends on its ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its distribution levels to its stockholders and the concentration of ownership of its capital stock.

 

In the future, our board of directors may determine that maintaining REIT status would no longer be in the best interest of us or our stockholders, which may result from, for example, other business opportunities that we may wish to pursue, and we may elect to discontinue our REIT status. If such determination is made, our election to discontinue our REIT status would not require stockholder approval.

Why is the separation of QCP structured as a distribution?

 

HCP believes that a spin-off, or distribution, of QCP common stock to its stockholders is an efficient way to separate our assets from the rest of HCP's portfolio and that the Spin-Off will create benefits and value for us and HCP and our respective stockholders.

How will the separation of QCP work?

 

Prior to the Spin-Off, HCP will transfer to us the equity of entities that hold the Properties, the Deferred Rent Obligation and HCP's approximately 9% equity interest in HCRMC, in exchange for cash of approximately $1.68 billion and shares of our common stock. For additional information on the anticipated internal restructuring that will occur prior to the Spin-Off, see "Summary—Internal Restructuring."

 

Immediately thereafter, HCP will distribute QCP common stock to HCP's stockholders on a pro rata basis, with each HCP stockholder receiving one share of QCP common stock for every five shares of HCP common stock held on the record date. Holders of HCP common stock will receive cash in lieu of any fractional shares of QCP common stock which they would have otherwise received.

What is the record date for the Spin-Off?

 

The record date for determining the holders of HCP common stock who will receive shares of QCP common stock in the Spin-Off is the close of business on                    , 2016.

When will the Spin-Off occur?

 

The Spin-Off is expected to occur on or about                    , 2016, subject to certain conditions described under "The Spin-Off—Conditions to the Spin-Off."

16


Table of Contents

What do stockholders need to do to participate in the Spin-Off?

 

No action is required on the part of stockholders. Stockholders who hold HCP common stock as of the record date will not be required to take any action in order to receive shares of QCP common stock in the Spin-Off. No stockholder approval of the Spin-Off is required or sought. We are not asking you for a proxy, and you are requested not to send us a proxy.

If I sell my shares of HCP common stock prior to the Spin-Off, will I still be entitled to receive shares of QCP in the Spin-Off?

 

If you hold shares of HCP common stock as of the record date and decide to sell the shares prior to the distribution date, you may choose to sell such shares with or without your entitlement to receive shares of QCP common stock. If you sell your HCP common stock in the "due-bills" market after the record date and prior to the distribution date, you will also be selling your right to receive shares of QCP common stock in connection with the Spin-Off. However, if you sell your HCP common stock in the "ex-distribution" market after the record date and prior to the distribution date, you will still receive shares of QCP common stock in the Spin-Off.

 

If you sell your HCP common stock after the record date and prior to the distribution date, you should make sure your bank or broker understands whether you want to sell your HCP common stock with shares of QCP common stock you will receive in the Spin-Off or without such QCP shares. You should consult your financial advisors, such as your bank, broker or tax advisor, to discuss your options and alternatives. See "The Spin-Off—Listing and Trading of Our Shares" for additional details.

How will fractional shares be treated in the Spin-Off?

 

No fractional shares will be distributed in connection with the Spin-Off. Instead, holders of HCP common stock will receive a cash payment equal to the value of such shares in lieu of fractional shares. See "The Spin-Off—Treatment of Fractional Shares."

What are the U.S. federal income tax consequences of the Spin-Off?

 

As a REIT, HCP distributes to its stockholders all or substantially all of its earnings and profits each year. Consequently, as more specifically described in the sections referenced below, for stockholders with sufficient tax basis in their HCP common stock and that hold their HCP common stock for the entire taxable year of HCP in which the Spin-Off occurs, the net effect of the Spin-Off is that the distribution is expected to be treated as a return of capital not subject to tax. An amount equal to the fair market value of the QCP common stock you receive on the distribution date (plus any cash in lieu of fractional QCP shares) will be treated as a taxable dividend to the extent of your ratable share of any current or accumulated earnings and profits of HCP. The excess will be treated as a non-taxable return of capital to the extent of your tax basis in HCP common stock and any remaining excess will be treated as capital gain.

17


Table of Contents

 

Your tax basis in shares of HCP held at the time of the distribution will be reduced (but not below zero) if the fair market value of our shares distributed by HCP in the distribution (plus any cash in lieu of fractional QCP shares) exceeds HCP's available current and accumulated earnings and profits. Your holding period for such HCP shares will not be affected by the distribution. HCP will not be able to advise stockholders of the amount of earnings and profits of HCP until after the end of the 2016 calendar year.

 

Your tax basis in the shares of QCP common stock received will equal the fair market value of such shares on the distribution date. The fair market value of QCP's common stock reported by HCP to you on IRS Form 1099-DIV may differ from the trading price of QCP's common stock on the distribution date. Your holding period for such shares will begin the day after the distribution date.

 

The tax consequences to you of the Spin-Off depend on your individual situation. You are urged to consult with your tax advisor as to the particular tax consequences of the Spin-Off to you, including the applicability of any U.S. federal, state, local and non-U.S. tax laws. For additional details, see "The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off" and "U.S. Federal Income Tax Considerations."

Can HCP decide to terminate the Spin-Off even if all the conditions have been satisfied?

 

Yes. The Spin-Off is subject to the satisfaction or waiver by HCP of certain conditions. Until the Spin-Off has occurred, HCP has the right to terminate the transaction, even if all of the conditions have been satisfied, if the board of directors of HCP determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of HCP and its stockholders or that market conditions or other circumstances are such that the Spin-Off is no longer advisable at that time.

What are the conditions to the Spin-Off?

 

The Spin-Off is subject to the satisfaction or waiver by HCP of a number of conditions, including, among others:

 

each of the Separation and Distribution Agreement, the Tax Matters Agreement and the Transition Services Agreement shall have been duly executed and delivered by the parties thereto;

 

certain restructuring steps shall have been completed in accordance with the plan of restructuring contemplated in the Separation and Distribution Agreement (the "Restructuring");

 

HCP shall have received such solvency opinions, each in such form and substance, as it shall deem necessary, appropriate or advisable in connection with the consummation of the Spin-Off;

18


Table of Contents

 

the SEC shall have declared effective QCP's registration statement on Form 10, of which this information statement is a part, under the Exchange Act, and no stop order relating to the registration statement shall be in effect, and no proceedings for such purpose shall be pending before, or threatened by, the SEC, and this information statement shall have been mailed to holders of HCP's common stock as of the record date;

 

all actions and filings necessary or appropriate under applicable federal, state or foreign securities or "blue sky" laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;

 

the QCP common stock to be distributed in the Spin-Off shall have been accepted for listing on the NYSE, subject to compliance with applicable listing requirements;

 

no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off or the Restructuring, shall be threatened, pending or in effect;

 

all required governmental and third-party approvals shall have been obtained and be in full force and effect;

 

QCP shall have entered into the financing transactions described in this information statement and contemplated to occur on or prior to the Spin-Off, and HCP shall have entered into the financing transactions and credit agreement amendments to be entered into in connection with the Restructuring and the respective amendments thereunder shall have become effective and financings thereunder shall have been consummated and shall be in full force and effect;

 

HCP and QCP shall each have taken all necessary actions that may be required to provide for the adoption by QCP of its amended and restated charter and bylaws, and QCP shall have filed its related Articles of Amendment and Restatement with the Maryland State Department of Assessments and Taxation; and

 

no event or development shall have occurred or exist that, in the judgment of the board of directors of HCP, in its sole discretion, makes it inadvisable to effect the Spin-Off.

 

We cannot assure you that all of the conditions will be satisfied or waived. See "The Spin-Off—Conditions to the Spin-Off" for additional details.

19


Table of Contents

Does QCP intend to pay cash dividends?

 

Following the Spin-Off, QCP intends to make regular dividend payments of at least 90% of its REIT taxable income to holders of its common stock out of assets legally available for this purpose. Dividends will be authorized by QCP's board of directors and declared by QCP based on a number of factors including actual results of operations, dividend restrictions under Maryland law or applicable debt covenants, its liquidity and financial condition, its taxable income, the annual distribution requirements under the REIT provisions of the Code, its operating expenses and other factors its directors deem relevant. To help create additional liquidity and flexibility to execute our strategy, and in light of our high tenant concentration in one operator, HCRMC, and the ongoing headwinds facing HCRMC and the broader post-acute/skilled nursing industry, we anticipate initially instituting a conservative distribution policy. Our board of directors will regularly evaluate, determine and, if it deems appropriate, adjust our distribution levels. For more information, see "Dividend Policy."

What will happen to HCP equity awards in connection with the separation?

 

It is expected that any equity awards relating to shares of HCP common stock will be equitably adjusted to reflect the impact of the Spin-Off. The actual method of adjustment has not yet been determined.

What will be the relationship between HCP and QCP following the Spin-Off?

 

After the Spin-off, QCP will be a publicly-traded, self-managed and self-administered company independent from HCP. QCP and HCP will enter into the Separation and Distribution Agreement, the Tax Matters Agreement and the Transition Services Agreement, among others. Such agreements will govern our relationship with HCP from and after the Spin-Off, including certain transition services, allocations of assets and liabilities and obligations attributable to periods prior to the Spin-Off, and our rights and obligations, including indemnification arrangements for certain liabilities after the Spin-Off. HCP will be the sole lender under our unsecured revolving credit facility. HCP will also be the obligee under the Promissory Notes. See "Our Relationship with HCP Following the Spin-Off."

Will I receive physical certificates representing shares of QCP common stock following the Spin-Off?

 

No. Following the Spin-Off, neither HCP nor QCP will be issuing physical certificates representing shares of QCP common stock. Instead, HCP, with the assistance of Wells Fargo Shareowner Services, the distribution agent, will electronically issue shares of QCP common stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. The distribution agent will mail you a book-entry account statement that reflects your shares of QCP common stock, or your bank or brokerage firm will credit your account for the shares. A benefit of issuing stock electronically in book-entry form is that there will be none of the physical handling and safekeeping responsibilities that are inherent in owning physical stock certificates. See "The Spin-Off—Manner of Effecting the Spin-Off."

20


Table of Contents

What will the price be for my shares of QCP common stock and when will I be able to trade such shares?

 

There is no current trading market for QCP common stock. QCP has applied to have its common stock approved for listing on the NYSE under the symbol "QCP" subject to official notice of issuance. We anticipate that a limited market, commonly known as a "when-distributed" trading market, will develop at some point following the record date, and that "regular-way" trading in shares of QCP common stock will begin on the first trading day following the distribution date. If trading begins on a "when-distributed" basis, you may purchase or sell QCP common stock up to and including the distribution date, but your transaction will not settle until after the distribution date. We cannot predict the trading prices for QCP common stock before, on or after the distribution date.

Will the number of shares of HCP common stock that I own change as a result of the Spin-Off?

 

No. The number of shares of HCP common stock you own will not change as a result of the Spin-Off.

Will my shares of HCP common stock continue to trade after the Spin-Off?

 

Yes. HCP common stock will continue to be listed and traded on the NYSE under the symbol "HCP." See "The Spin-Off—Listing and Trading of Our Shares" for additional details.

Are there risks associated with owning QCP common stock?

 

Yes. QCP's business is subject to both general and specific risks and uncertainties relating to its business, including risks specific to its ownership of real estate and the healthcare industries in which it operates, its leverage, its relationship with HCP and its status as an independent, publicly-traded, self-managed and self-administered company. Its business is also subject to risks relating to the Spin-Off. These risks are described in the "Summary—Risks Associated with QCP's Business and the Spin-Off" section in this information statement, and are described in more detail in the "Risk Factors" section of this information statement. We encourage you to read those sections carefully.

Do I have appraisal rights in connection with the Spin-Off?

 

No. HCP stockholders will not have any appraisal rights in connection with the Spin-Off.

Who is the transfer agent for QCP shares?

 

The transfer agent for our common stock is: Wells Fargo Shareowner Services.

Where can I get more information?

 

If you have any questions relating to the Spin-Off, our common stock or HCP common stock, you should contact HCP at:

 

HCP, Inc.
Investor Relations
1920 Main Street, Suite 1200
Irvine, California 92614

 

Phone: (949) 407-0400
Email: investorrelations@hcpi.com

21


Table of Contents



Summary Historical Combined Consolidated and
Unaudited Pro Forma Combined Consolidated Financial Data

        The following tables set forth the summary historical combined consolidated financial data of QCP's predecessors (collectively, "QCP's Predecessor") and our summary unaudited pro forma combined consolidated financial data as of the dates and for the periods presented. We have not presented historical information of QCP because it has not had any operating activity since its formation on June 9, 2016, other than the issuance of 1,000 shares of its common stock as part of its initial capitalization. The summary historical combined consolidated financial data as of June 30, 2016 and for the six months ended June 30, 2016 and 2015 as set forth below, was derived from QCP's Predecessor's unaudited combined consolidated financial statements, which are included elsewhere in this information statement. The summary historical combined consolidated financial data as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, 2014 and 2013 as set forth below, was derived from QCP's Predecessor's audited combined consolidated financial statements, which are included elsewhere in this information statement. In management's opinion, the unaudited combined consolidated financial statements have been prepared on the same basis as the audited combined consolidated financial statements and include all adjustments, consisting of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented. These historical combined consolidated financial statements have been revised to reflect the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases, Accounting Standards Codification Topic 842 ("ASU 2016-02").

        The accompanying historical combined consolidated financial data of QCP's Predecessor does not represent the financial position and results of operations of one legal entity, but rather a combination of entities under common control that have been "carved out" from HCP's consolidated financial statements. The combined consolidated financial statements include expense allocation related to certain HCP corporate functions, including executive oversight, treasury, finance, human resources, tax planning, internal audit, financial reporting, information technology and investor relations. These allocations may not be indicative of the actual expense that would have been incurred had QCP's Predecessor operated as an independent, publicly-traded company for the periods presented. Management believes that the assumptions and estimates used in preparation of the underlying combined consolidated financial statements are reasonable. However, the combined consolidated financial statements herein do not necessarily reflect what QCP's Predecessor's financial position, results of operations or cash flows would have been if it had been a standalone company during the periods presented, nor are they necessarily indicative of its future results of operations, financial position or cash flows.

        Our unaudited pro forma combined consolidated balance sheet as of June 30, 2016 assumes the Spin-Off and the related transactions occurred on June 30, 2016. Our unaudited pro forma combined consolidated statements of income for the six months ended June 30, 2016 and for the year ended December 31, 2015 assume the Spin-Off and the related transactions occurred on January 1, 2015. The following unaudited pro forma combined consolidated financial data gives effect to the Spin-Off and the related transactions, including: (i) our entry into the senior secured term loan, the senior secured revolving credit facility, the unsecured revolving credit facility, issuance of senior secured notes and the Promissory Notes, and the anticipated interest expense related thereto, (ii) the transfer to HCP of approximately $1.68 billion of proceeds from our borrowings (not reflective of the cash retained by QCP equal to a pro rata share of rent for the month during Spin-Off), (iii) the elimination of the net parent investment in QCP's Predecessor and the creation of invested capital in QCP upon the contribution of the equity of the entities that hold the Properties, the Deferred Rent Obligation and HCP's approximately 9% equity investment in HCRMC, (iv) the sale of shares of QCP Class A Preferred Stock to HCP and (v) the transfer of approximately 93.6 million shares of QCP common stock to HCP which HCP will distribute to HCP stockholders, based on the distribution ratio of one

22


Table of Contents

share of QCP common stock for every five shares of HCP common stock. See "Capitalization" for the expected effects of the Spin-Off and the related transactions on our capitalization.

        Our unaudited pro forma combined consolidated financial data is not necessarily indicative of what our actual financial position and results of operations would have been if the Spin-Off and related transactions occurred on the date or at the beginning of the periods indicated, nor does it purport to represent our future financial position or results of operations. The unaudited pro forma adjustments are based on information and assumptions that we consider reasonable and factually supportable.

        Since the information presented below is only a summary and does not provide all of the information contained in the historical combined consolidated financial statements of QCP's Predecessor or our unaudited pro forma combined consolidated financial statements, including the related notes, you should read the "Management's Discussion and Analysis of Financial Condition and Results of Operations," QCP's Predecessor's historical combined consolidated financial statements and notes thereto and our unaudited pro forma combined consolidated financial statements included elsewhere in this information statement.

 
  Six Months Ended June 30,   Year Ended December 31,  
(in millions, except per share data)
  Pro Forma
2016
  2016   2015   Pro Forma
2015
  2015   2014   2013  

Income statement data:

                                           

Total revenues

  $ 243.9   $ 243.9   $ 288.0   $ 575.8   $ 575.8   $ 569.4   $ 565.6  

Depreciation and amortization

    (94.0 )   (94.0 )   (124.1 )   (244.6 )   (244.6 )   (247.9 )   (247.6 )

Operating expenses

    (2.0 )   (2.0 )   (1.9 )   (3.7 )   (3.7 )   (3.2 )   (2.7 )

General and administrative

    (9.2 )   (9.2 )   (15.5 )   (23.9 )   (23.9 )   (20.7 )   (29.1 )

Impairments, net

            (47.1 )   (227.4 )   (227.4 )        

Interest

    69.0             138.2              

Total costs and expenses

    (174.2 )   (105.2 )   (188.7 )   (637.9 )   (499.6 )   (271.9 )   (279.4 )

Gain (loss) on sales of real estate

    6.5     6.5         39.1     39.1     (1.9 )    

Income tax expense

    (12.8 )   (12.8 )   (0.4 )   (0.8 )   (0.8 )   (0.8 )   (0.7 )

Income from equity method investment

            27.9     34.5     34.5     60.5     63.0  

Impairments of equity method investment

                (35.9 )   (35.9 )   (63.3 )   (15.6 )

Net income (loss)

    63.4     132.4     126.9     (25.0 )   113.2     293.0     333.1  

Net income (loss) per common share:

                                           

Basic and diluted

  $ 0.68           $ (0.27 )            

 

 
  June 30,   December 31,  
(in millions)
  Pro Forma
2016
  2016   2015   2014  

Balance sheet data:

                         

Net real estate

  $ 4,636.2   $ 4,636.2   $ 4,618.3   $ 4,967.6  

Total assets

    4,948.7     4,940.8     5,093.6     5,663.8  

Total debt

    1,748.2              

Total liabilities

    1,768.0     18.9     6.1     5.9  

Total equity

    3,178.6     4,921.9     5,087.5     5,657.9  


 
  Six Months Ended June 30,   Year Ended December 31,  
(in millions)
  2016   2015   2015   2014   2013  

Cash flow data:

                               

Net cash provided by operating activities

  $ 324.4   $ 245.9   $ 667.0   $ 524.7   $ 494.9  

Net cash (used in) provided by investing activities

    (29.8 )   (0.0 )   20.8     (20.0 )   (3.1 )

Net cash used in financing activities

    (298.0 )   (245.3 )   (683.6 )   (505.4 )   (490.2 )

23


Table of Contents


 
  Six Months Ended June 30,   Year Ended December 31,  
(in millions)
  2016   2015   2015   2014   2013  

Other data:

                               

Funds from operations ("FFO")(1)

  $ 232.3   $ 298.1   $ 365.8   $ 542.9   $ 580.7  

FFO as adjusted(1)

    232.3     304.0     587.9     606.1     604.7  

Funds available for distribution ("FAD")(1)

    232.5     257.7     473.1     531.8     519.8  

Net operating income ("NOI")(1)

    241.9     286.1     572.1     566.2     562.9  

Adjusted NOI(1)

    242.1     261.4     508.0     543.5     523.5  

EBITDA(1)

    239.2     251.4     358.6     541.7     581.3  

Adjusted EBITDA(1)

    232.7     304.4     588.7     606.9     605.3  

(1)
FFO, FFO as adjusted, FAD, NOI, Adjusted NOI, earnings before interest, taxes, depreciation, and amortization ("EBITDA")and Adjusted EBITDA are non-GAAP financial measures. Since these non-GAAP financial measures are not measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), they should not be considered in isolation of, or as a substitute for, our results reported under GAAP as indicators of our operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies. We present these non-GAAP measures because management believes that they are meaningful to understanding our performance during the periods presented and its ongoing business. Non-GAAP measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These non-GAAP measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Results of Operations—Non-GAAP Financial Measures" for definitions of FFO, FFO as adjusted, FAD, NOI, Adjusted NOI, EBITDA and Adjusted EBITDA and an important discussion of their uses, inherent limitations, and reconciliations to their most directly comparable GAAP financial measure.

24


Table of Contents


RISK FACTORS

        You should carefully consider the following risks and other information in this information statement in evaluating us and our common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition or results of operations, and could, in turn, impact the trading price of our common stock.

RISKS RELATED TO OUR BUSINESS

We will depend on a single tenant and operator for substantially all of our revenues.

        After completion of the Spin-Off, substantially all of our properties, consisting of 249 post-acute/skilled nursing properties and 61 memory care/assisted living properties as of June 30, 2016, are expected to continue to be operated by HCRMC through HCR III (either directly or indirectly through its affiliates and sublessees) pursuant to the terms of the Master Lease. Thus, we will depend on a single tenant and operator for substantially all of our revenues. HCRMC accounted for 94% of our total revenues during the six months ended June 30, 2016. HCRMC is one of the largest providers of post-acute, memory care and hospice services in the United States and relies heavily on government reimbursement programs such as Medicare and Medicaid.

        The inability or other failure of HCR III or HCRMC under the Master Lease (or the guaranty thereof) to meet its obligations to us, whether or not HCRMC's results of operations improve, would materially reduce our liquidity, cash flow, net operating income and results of operations, which would in turn reduce the amount of dividends we pay to our stockholders, cause our stock price to decline and have other materially adverse effects on our business, results of operations and financial condition.

        In addition, any failure by HCRMC to effectively conduct its operations or to maintain and improve our properties could adversely affect its business reputation and its ability to attract and retain patients and residents in our properties, which could have a materially adverse effect on our business, results of operations and financial condition. Furthermore, HCRMC faces an increasingly competitive labor market for skilled management personnel and nurses, which can cause operating costs to increase. While HCR III is generally obligated to indemnify, defend and hold the lessor under the Master Lease (which will be certain of our subsidiaries) after the Spin-Off harmless from and against various claims, litigation and liabilities arising in connection with the operation, repair and maintenance of the HCRMC Properties (which obligation is guaranteed by HCRMC), HCR III and HCRMC may have insufficient assets, income, access to financing and/or insurance coverage to enable them to satisfy their indemnification obligations.

        Since substantially all of our real estate portfolio is leased to a single tenant, the risks described herein and in "—The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory, operational and litigation developments in HCRMC's business and financial condition have had, and continue to have, an adverse effect on us" and "—Adverse changes in the financial condition as well as the bankruptcy or insolvency of any of our tenants, and particularly HCRMC, would materially adversely affect our business, results of operations and financial condition" below would be more significant to us than such risks may be to other companies with more diversified portfolios. These risks could have a material adverse effect on our business, liquidity, results of operations and financial condition and would likely limit our ability to meet our obligations under our financing arrangements and other contractual obligations and therefore result in, among other adverse events, acceleration of our indebtedness, impairment of our access to capital, the enforcement of default remedies by our counterparties, or the commencement of insolvency proceedings by or against us under the U.S. Bankruptcy Code.

25


Table of Contents

The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory, operational and litigation developments in HCRMC's business and financial condition have had, and continue to have, an adverse effect on us.

        HCRMC, one of the nation's largest providers of post-acute, memory care and hospice services, is expected to be obligated under the Master Lease, through HCR III (either directly or indirectly through its affiliates and sublessees), to operate and manage substantially all of our properties. These properties represented 97% of our total assets as of December 31, 2015 and June 30, 2016. All of HCR III's obligations under the Master Lease are guaranteed by HCRMC.

        While HCRMC's operating performance was essentially in line with expectations during the first half of 2015, performance declined during the second half of 2015. HCRMC's normalized fixed charge coverage ratio for the twelve-month period ended December 31, 2015 was 1.07x, trending from 1.17x for the six-month period ended June 30, 2015, to 0.97x for the six-month period ended December 31, 2015. The decline in operating performance began in the third quarter 2015, with further deterioration in the fourth quarter 2015. As part of HCP's fourth quarter 2015 review process, it assessed the collectability of all contractual rent payments under the Master Lease. HCP's evaluation included, but was not limited to, consideration of: (i) the continued decline in HCRMC's operating performance and fixed charge coverage ratio during the second half of 2015, with the most significant deterioration occurring during the fourth quarter, (ii) the reduced growth outlook for the post-acute/skilled nursing business and (iii) HCRMC's 2015 audited financial statements. HCP determined that the timing and amounts owed under the Master Lease were no longer reasonably assured as of December 31, 2015. As a result, HCP placed the Master Lease on nonaccrual status and utilizes a cash basis method of accounting in accordance with its policy. As a result of placing the Master Lease on nonaccrual status, HCP further evaluated the carrying amount of its straight-line rent receivables as of December 31, 2015. Due to the significant decline in HCRMC's fixed charge coverage ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post-acute/skilled nursing business, HCP determined that it was probable that its straight-line rent receivables were impaired as of December 31, 2015, and recorded an impairment charge of $180.3 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Revenue Recognition and Allowance for Doubtful Accounts."

        On April 20, 2015, the DOJ unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The DOJ's complaint in intervention is captioned United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)). The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not entitled to Medicare reimbursement. The DOJ is seeking treble damages (in an unspecified amount); civil penalties (in an unspecified amount); compensation for alleged unjust enrichment; recovery of certain payments the government made to HCRMC; and costs, pre-judgment interest, and expenses. In June 2016, the court approved the parties' joint discovery plan, which provides for discovery to be completed by February 2017. The court has not yet issued a scheduling order setting forth dates for summary judgment motions, other pre-trial motions or a trial date. While this litigation is at an early stage and HCRMC has indicated that it believes the claims are unjust and it will vigorously defend against them, the ultimate outcome is uncertain and could, among other things, cause HCRMC to: (i) incur substantial additional time and costs to respond to and defend HCRMC's actions in the litigation with the DOJ and any other third-party payors; (ii) refund or adjust amounts previously paid for services under governmental programs and to change business operations going forward in a

26


Table of Contents

manner that negatively impacts future revenue; (iii) pay substantial fines and penalties and incur other administrative sanctions, including having to conduct future business operations pursuant to a corporate integrity agreement, which may be with the Office of Inspector General of the Department of Health and Human Services; (iv) lose the right to participate in the Medicare or Medicaid programs; and (v) suffer damage to HCRMC's reputation. In addition, any settlement in the DOJ litigation, with or without an admission of wrongdoing, may include a substantial monetary component resulting in a materially adverse effect on HCRMC's liquidity and financial condition that makes it difficult or not possible for HCRMC to meet its obligations under the Master Lease.

        Continued deterioration or the failure of HCRMC to improve its operating performance, business or financial condition, or adverse regulatory developments, would likely lead to amendments to or defaults under the Master Lease that further reduce the revenues we earn from the HCRMC Properties, reduce the value of the HCRMC Properties under the Master Lease, or result in, among other adverse events, acceleration of HCRMC's indebtedness, impairment of its continued access to capital, the enforcement of default remedies by us or other of its counterparties, or the commencement of insolvency proceedings by or against it under the U.S. Bankruptcy Code, any one or a combination of which would have a materially adverse effect on our results of operations and financial condition.

        In light of the headwinds facing the broader post-acute/skilled nursing industry and HCRMC and the resulting deterioration in HCRMC's operating performance and declining rent coverage ratios, we have conducted a hypothetical illustrative analysis of the impact to our capital structure and certain of our credit metrics assuming the annualized amount of rental income generated by the HCRMC Properties as of June 30, 2016 was consistent with typical Facility EBITDAR cash flow coverage ratios for these post-acute/skilled nursing and memory care/assisted living facilities. Under this construct we estimate that the average typical Facility EBITDAR cash flow coverages for the HRCMC Properties would be approximately 1.25x. Based upon this hypothetical illustrative rent analysis, our annualized Adjusted EBITDA for the six months ended June 30, 2016 would have been $349 million, as compared to our actual annualized Adjusted EBITDA of $465 million for such period.

        We have no current plans to amend the Master Lease with respect to rent or otherwise, and have not entered into any negotiations with HCRMC, that would result in any reductions to rental income from the HCRMC Properties. Additionally, our hypothetical illustrative analysis should not be considered indicative of any future events. Any actual reduction in rental income from the HCRMC Properties may materially exceed the amounts reflected in the hypothetical illustrative rent analysis above.

Adverse changes in the financial condition as well as the bankruptcy or insolvency of any of our tenants, and particularly HCRMC, and rejection of the Leases, would materially adversely affect our business, results of operations and financial condition.

        After completion of the Spin-Off we will depend on the rent payable by our tenants pursuant to the Leases, and particularly on the rent payable by HCRMC pursuant to the Master Lease, which accounted for 94% of our total revenues for the six months ended June 30, 2016. Although the Leases, including the Master Lease, generally provide us with the right under specified circumstances to terminate the lease, evict the tenant or operator, or demand immediate repayment of certain obligations to us, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization that may render certain of these remedies unenforceable, or, at the least, delay our ability to pursue such remedies and realize any recoveries in connection therewith. Such delays could result in our failure to comply with covenants governing the senior secured credit facilities, resulting in an event of default that, if not cured or waived, would result in the acceleration of substantially all of our indebtedness. For example, we cannot evict a tenant or operator solely because of its bankruptcy filing. A debtor has the right to assume, or to assume and assign to a third party, or to reject its executory contracts and unexpired leases in a bankruptcy proceeding. If a debtor were to

27


Table of Contents

reject its leases with us, and in particular, if HCRMC were to reject the Master Lease or any portion thereof to the extent permitted, obligations under such rejected leases would cease and the claim against the rejecting debtor would be an unsecured claim, which would be limited by the statutory cap set forth in the U.S. Bankruptcy Code, which would be substantially less than the remaining rent actually owed under the lease. In addition, debtors have also asserted in bankruptcy proceedings that leases should be re-characterized as financing arrangements, in which case a lender's rights and remedies, as compared to a landlord's, would be materially different.

        Furthermore, if a debtor-manager seeks bankruptcy protection, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing our remedies against the manager unless relief is first obtained from the court having jurisdiction over the bankruptcy case. In any of these events, we would likely be required to fund certain expenses and obligations (e.g., real estate taxes, insurance, debt costs and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new tenant, operator or manager. Additionally, since many of our properties are used by our tenants to provide long-term custodial care to the elderly, evicting such operator for failure to pay rent while the property is occupied may involve specific regulatory requirements and may not be successful. Because HCRMC accounts for substantially all of our portfolio, the impact of these risks to us would be magnified in the event of an HCRMC bankruptcy and would have a material adverse effect on our business and results of operations including but not limited to possibly causing us to fail to comply with covenants governing the senior secured credit facilities, resulting in an event of default that, if not cured or waived, would result in the acceleration of substantially all of our indebtedness.

We and our tenants and operators may from time to time face litigation and are likely to experience rising liability and insurance costs, which could have a material adverse effect on our financial condition.

        In some states, advocacy groups have been created to monitor the quality of care at healthcare facilities, and these groups have brought litigation against the operators of such facilities. Also, in several instances, private litigation by patients has resulted in large damage awards for alleged abuses. The effect of such litigation and other potential litigation may materially increase the costs incurred by HCRMC and our other existing and future tenants and operators for monitoring and reporting quality of care compliance. In addition, their cost of liability and medical malpractice insurance can be significant and may increase or not be available at a reasonable cost so long as the present healthcare litigation environment continues. Cost increases could cause HCRMC and our other existing and future tenants and operators to be unable to purchase the appropriate liability and malpractice insurance, potentially decreasing our revenues and increasing our collection and litigation costs. In addition, as a result of our ownership of healthcare properties, we may be named as a defendant in lawsuits arising from the alleged actions of HCRMC or our other existing or future tenants or operators, for which claims we expect to be indemnified, but which may require unanticipated expenditures on our part. See "—We will depend on a single tenant and operator for substantially all of our revenues" and "—The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory, operational and litigation developments in HCRMC's business and financial condition have had, and could continue to have, an adverse effect on us."

        In addition, from time to time, we or our tenants may be involved in certain other legal proceedings, lawsuits and other claims. For example, on May 9, 2016, a purported stockholder of HCP filed a putative class action complaint, Boynton Beach Firefighters' Pension Fund v. HCP, Inc., et al., Case No. 3:16-cv-01106-JJH, in the U.S. District Court for the Northern District of Ohio against HCP, certain of its officers, HCRMC, and certain of its officers, asserting violations of the federal securities laws. The suit asserts claims under section 10(b) and 20(a) of the Exchange Act and alleges that HCP made certain false or misleading statements relating to the value of and risks concerning its investment in HCRMC by allegedly failing to disclose that HCRMC had engaged in billing fraud, as alleged by the

28


Table of Contents

DOJ in a pending suit against HCRMC arising from the False Claims Act. The plaintiff in the suit demands compensatory damages (in an unspecified amount), costs and expenses (including attorneys' fees and expert fees), and equitable, injunctive, or other relief as the Court deems just and proper. The DOJ lawsuit against HCRMC is described in greater detail in "Business and Properties—Legal Proceedings—HCRMC." On June 16, 2016 and July 5, 2016, purported stockholders of HCP filed two derivative actions, respectively Subodh v. HCR ManorCare Inc., et al., Case No. 30-2016-00858497-CU-PT-CXC and Stearns v. HCR ManorCare, Inc., et al., Case No. 30-2016-00861646-CU-MC-CJC, in the Superior Court of California, County of Orange, against certain of HCP's current and former directors and officers and HCRMC. HCP is named as a nominal defendant. Both derivative actions allege that the defendants engaged in various acts of wrongdoing, including, among other things, breaching fiduciary duties by publicly making false or misleading statements of fact regarding HCRMC's finances and prospects, and failing to maintain adequate internal controls. The plaintiffs demand damages (in an unspecified amount), pre-judgment and post-judgment interest, a directive that HCP and the individual defendants improve HCP's corporate governance and internal procedures (including putting resolutions to amend the bylaws or charter to a stockholder vote), restitution from the individual defendants, costs (including attorneys' fees, experts' fees, costs, and expenses), and further relief as the Court deems just and proper. As the Boynton Beach, Subodh and Stearns actions are in their early stages, the defendants are in the process of evaluating the suits and have not yet responded to the complaints. In addition, on June 9, 2016, and on August 25, 2016, HCP received letters from a private law firm, acting on behalf of its clients, purported stockholders of HCP, each asserting substantially the same allegations made in the Subodh and Stearns matters discussed above. Each letter demands that HCP's board of directors take action to assert HCP's rights. HCP's board of directors is in the process of evaluating the demand letters.

        An unfavorable resolution of any such litigation could have a material adverse effect on HCP's business, financial position or results of operations, which, in turn, could have a materially adverse effect on our business, results of operations and financial condition if HCP is unable to meet its indemnification obligations. See "—We and our tenants and operators may from time to time face litigation and are likely to experience rising liability and insurance costs, which could have a material adverse effect on our financial condition." Regardless of the outcome, litigation or other legal proceedings would likely result in substantial costs, disruption of our normal business operations and the diversion of management attention. We may be unable to prevail in, or achieve a favorable settlement of, any pending or future legal action against us.

The requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid may adversely affect our tenants' and operators' ability to meet their financial and other contractual obligations to us.

        HCRMC and certain of our other existing and future tenants and operators are or will be affected, directly or indirectly, by an extremely complex set of federal, state and local laws and regulations pertaining to governmental reimbursement programs. Such laws and regulations are subject to frequent and substantial changes that are sometimes applied retroactively. See "Business and Properties—Government Regulation, Licensing and Enforcement." For the twelve months ended June 30, 2016, our tenants and operators generated approximately 66% of their revenues from governmental payors, primarily Medicare and Medicaid. Tenants and operators that generate revenues from governmental payors are generally subject to, among other things:

    statutory and regulatory changes;

    retroactive rate adjustments;

    recovery of program overpayments or set-offs;

    court decisions;

29


Table of Contents

    administrative rulings;

    policy interpretations;

    payment or other delays by fiscal intermediaries or carriers;

    government funding restrictions (at a program level or with respect to specific facilities); and

    interruption or delays in payments due to any ongoing governmental investigations and audits at such properties.

        If our tenants or operators directly or indirectly fail to comply with the extensive laws, regulations and other requirements applicable to their business and the operation of our properties, they could become ineligible to receive reimbursement from governmental reimbursement programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant changes to their operations. These laws and regulations are enforced by a variety of federal, state and local agencies and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or "whistleblower" actions. Our tenants and operators would be adversely affected by the resources required to respond to an investigation or other enforcement action. See "—The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory, operational and litigation developments in HCRMC's business and financial condition have had, and continue to have, an adverse effect on us." In such event, the results of operations and financial condition of our tenants and operators, including HCRMC, and the results of operations of our properties operated by those entities could be materially adversely affected, resulting, in turn, in a materially adverse effect on us. We are unable to predict future federal, state and local regulations and legislation, including the Medicare and Medicaid statutes and regulations, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory framework could have a materially adverse effect on our tenants and operators, which, in turn, would have a materially adverse effect on us.

        Sometimes governmental payors freeze or reduce payments to healthcare providers, or provide annual reimbursement rate increases that are smaller than expected, due to budgetary and other pressures. Healthcare reimbursement will likely continue to be of significant importance to federal and state authorities. We cannot make any assessment as to the ultimate timing or the effect that any future legislative reforms may have on our tenants' and operators' costs of doing business and on the amount of reimbursement by government and other third-party payors. The failure of any of our tenants or operators to comply with these laws and regulations, and significant limits on the scope of services reimbursed and on reimbursement rates and fees, could materially adversely affect their ability to meet their financial and contractual obligations to us.

Legislation to address federal government operations and administration decisions affecting the Centers for Medicare and Medicaid Services could have a materially adverse effect on our tenants' and operators' liquidity, financial condition or results of operations.

        Congressional consideration of legislation pertaining to the federal debt ceiling, the Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), tax reform and entitlement programs, including reimbursement rates for physicians, could have a materially adverse effect on HCRMC's and our other existing and future tenants' and operators' liquidity, financial condition or results of operations. In particular, reduced funding for entitlement programs such as Medicare and Medicaid may result in increased costs and fees for programs such as Medicare Advantage plans and additional reductions in reimbursements to providers. Additionally, amendments to the Affordable Care Act, implementation of the Affordable Care Act and decisions by the Centers for Medicare and Medicaid Services could impact the delivery of services and benefits under Medicare, Medicaid or Medicare Advantage plans

30


Table of Contents

and could affect our tenants and operators and the manner in which they are reimbursed by such programs. Such changes could have a materially adverse effect on our tenants' and operators' liquidity, financial condition or results of operations, which could adversely affect their ability to satisfy their obligations to us and could have a materially adverse effect on us.

        Furthermore, the U.S. Supreme Court's decision upholding the constitutionality of the individual healthcare mandate while striking down the provisions linking federal funding of state Medicaid programs with a federally mandated expansion of those programs has contributed to the uncertainty regarding the impact that the law will have on healthcare delivery systems over the next decade. We can expect that federal authorities will continue to implement the law, but because of the U.S. Supreme Court's mixed ruling, the implementation will take longer than originally expected, with a commensurate increase in the period of uncertainty regarding the long-term financial impact on the delivery of and payment for healthcare.

Tenants and operators that fail to comply with federal, state and local laws and regulations, including licensure, certification and inspection requirements, may cease to operate or be unable to meet their financial and other contractual obligations to us.

        HCRMC and our other existing tenants and operators are, and our future tenants and operators will be, subject to or impacted by extensive, frequently changing federal, state and local laws and regulations. These laws and regulations include, among others: laws protecting consumers against deceptive practices; laws relating to the operation of our properties and how our tenants and operators conduct their business, such as fire, health and safety and privacy laws; federal and state laws affecting hospitals, clinics and other healthcare communities that participate in both Medicare and Medicaid that mandate allowable costs, pricing, reimbursement procedures and limitations, quality of services and care, food service and physical plants; resident rights laws (including abuse and neglect laws) and fraud laws; anti-kickback and physician referral laws; the Americans with Disabilities Act of 1990, as amended (the "ADA"), and similar state and local laws; and safety and health standards set by the Occupational Safety and Health Administration or similar state and local agencies. Certain of our properties may also require a license, registration and/or certificate of need to operate. See "—We will depend on a single tenant and operator for substantially all of our revenues" and "—The real estate portfolio that is expected to continue to be leased to HCR III immediately following the Spin-Off accounts for substantially all of our assets and revenues. Adverse regulatory, operational and litigation developments in HCRMC's business and financial condition have had, and continue to have, an adverse effect on us."

        Our tenants' and operators' failure to comply with any of these laws, regulations or requirements could result in loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from government healthcare programs, loss of license or closure of the facility and/or the incurrence of considerable costs arising from an investigation or regulatory action, which would have an adverse effect on properties owned by us, and therefore would materially adversely impact us. See "Business and Properties—Government Regulation, Licensing and Enforcement."

If we must replace any of our tenants or operators, we might be unable to reposition the properties on as favorable terms, or at all, and required regulatory approvals can delay or prohibit transfers of our healthcare properties.

        Substantially all of our properties following the Spin-Off, consisting of 249 of our post-acute/skilled nursing properties and 61 of our memory care/assisted living properties as of June 30, 2016, will continue to be leased to HCRMC and expire over time in accordance with the terms of the lease applicable to each property. The consummation of the Spin-Off itself will not result in any changes to the Master Lease. We cannot predict whether HCRMC or our other existing tenants will renew existing leases beyond their current terms. However, we believe that HCRMC's lease payment will continue to

31


Table of Contents

be in excess of its post-acute/skilled nursing business' operating performance and, consequently, HCRMC will be incentivized to forego renewal of its lease with us. Following expiration of a lease term or if we exercise our right to replace a tenant or operator in default, rental payments on the related properties would likely decline or cease altogether while we reposition the properties with a suitable replacement tenant or operator. A replacement tenant or operator may require different features in a property, depending on that tenant's or operator's particular business. We may incur substantial expenditures to modify a property before we are able to secure a replacement tenant or operator or to accommodate multiple tenants or operators. In addition, transfers of healthcare properties to replacement tenants or operators are generally subject to regulatory approvals or ratifications, including, but not limited to, change of ownership approvals under certificate of need laws and Medicare and Medicaid provider arrangements that are not required for transfers of other types of commercial operations and other types of real estate. The replacement of any tenant or operator could be delayed by the regulatory approval process of any federal, state or local government agency necessary for the transfer of the property or the replacement of the operator licensed to manage the property. If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a property, which would expose us to successor liability, require us to indemnify subsequent operators to whom we might transfer the operating rights and licenses, or require us to spend substantial time and funds to preserve the value of the property and adapt the property to other uses, all of which would likely materially adversely affect our business, results of operations and financial condition. In addition, delays or inability in finding a suitable replacement tenant or operator could result in our failure to comply with covenants governing the senior secured credit facilities, resulting in an event of default that, if not cured or waived, would result in the acceleration of substantially all of our indebtedness.

We rely on external sources of capital to fund future capital needs, and if access to such capital is unavailable on acceptable terms or at all, it would have a materially adverse effect on our ability to meet commitments as they become due or make future investments necessary to grow our business.

        While we expect to have $100 million available for borrowing under the senior secured revolving credit facility at the closing of the Spin-Off and, under certain circumstances, we will have $100 million available for borrowing under the unsecured revolving credit facility, we may not be able to fund all of our capital needs from such availability and cash retained from operations. If we are unable to generate enough internal capital or obtain borrowings under the senior secured revolving credit facility and the unsecured revolving credit facility, we may need to rely on external sources of capital (including debt and equity financing) to fulfill our capital requirements.

        Our access to capital depends upon a number of factors, some of which we have little or no control over, including but not limited to:

    general availability of capital, including less favorable terms, rising interest rates and increased borrowing costs;

    the market price of the shares of our equity securities and the credit ratings of our debt and any preferred securities we may issue;

    the market's perception of our growth potential and our current and potential future earnings and cash distributions;

    our degree of financial leverage and operational flexibility;

    the financial integrity of our lenders, which might impair their ability to meet their commitments to us or their willingness to make additional loans to us, and our inability to replace the financing commitment of any such lender on favorable terms, or at all;

    the stability of the market value of our properties;

32


Table of Contents

    the financial performance and general market perception of our tenants and operators;

    changes in the credit ratings on U.S. government debt securities or default or delay in payment by the United States of its obligations;

    issues facing the healthcare industry, including, but not limited to, healthcare reform and changes in government reimbursement policies; and

    the performance of the national and global economies generally.

        Under the terms of the Master Lease, we are required through April 1, 2019 to, upon HCR III's request, provide HCR III an amount to fund Capital Addition Costs (as defined in the Master Lease) approved by us, in our reasonable discretion, with such amount not to exceed $100 million in the aggregate, but we are not obligated to advance more than $50 million in any single lease year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Expenditures."

        If access to capital is unavailable on acceptable terms or at all, it would materially and adversely impact our ability to fund operations, repay or refinance our debt obligations, fund dividend payments, acquire properties and make the investments needed to grow our business.

Our substantial indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms.

        After giving pro forma effect to the Spin-Off and related transactions, we will be a highly levered company. As of June 30, 2016, on a pro forma basis after giving effect to the Spin-Off and related transactions, we would have had approximately $1.81 billion principal amount of outstanding indebtedness, including the Promissory Notes, in addition to having $100 million available under a senior secured revolving credit facility and $100 million available under an unsecured revolving credit facility (which amounts may only be drawn subject to certain limitations, including the unavailability of borrowings under the senior secured revolving credit facility). Although the related debt agreements will restrict the aggregate amount of our indebtedness, we may incur additional indebtedness in the future to refinance our existing indebtedness, to finance newly-acquired properties or for other purposes. Our governing documents do not contain any limitations on the amount of debt we may incur, and we do not have a formal policy limiting the amount of debt we may incur in the future. Subject to the restrictions set forth in our debt agreements, our board of directors may establish and change our leverage policy at any time without stockholder approval. Any significant additional indebtedness could negatively affect the credit ratings of our debt and could require a substantial portion of our cash flow to make interest and principal payments due on our indebtedness, thereby reducing funds available to us for other purposes. Our substantial indebtedness could have important consequences, including: reduce funds available to us to pay dividends and for our working capital, capital expenditures, debt service requirements, strategic initiatives and other purposes. Our substantial indebtedness can also limit our flexibility in planning for, or reacting to, changes in our operations or business, make us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage, make us more vulnerable to downturns in our business, the post-acute/skilled nursing sector or the economy, restrict us from making strategic acquisitions, engaging in development activities, expanding our properties or exploiting business opportunities, cause us to make non-strategic divestitures, and expose us to the risk of increased interest rates, as certain of our borrowings, including borrowings under the senior secured credit facilities, will be at variable rates of interest.

        Moreover, our ability to satisfy our financial obligations under our indebtedness outstanding from time to time will depend upon our future financial and operating performance, which is subject to then prevailing economic, industry, competitive and credit market conditions, including interest rate levels

33


Table of Contents

and the availability of credit generally, and financial, business, legislative, regulatory and other factors, many of which are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that we will be able to draw under the senior secured revolving credit facility or the unsecured revolving credit facility or otherwise, in an amount sufficient to fund our future liquidity needs.

        If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under our indebtedness outstanding from time to time (if any). Among other things, the absence of an investment grade credit rating or any credit rating downgrade or a worsening of credit market conditions could increase our financing costs and could limit our access to financing sources. If financing is not available when needed, or is available on unfavorable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could materially and adversely affect our business, financial condition and results of operations.

Covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations.

        The debt agreements we and our subsidiaries expect to enter into in connection with the Spin-Off will contain customary covenants that, among other things, restrict, subject to certain exceptions, our ability to sell assets, pay dividends and make other distributions, redeem or repurchase our capital stock, incur additional debt and issue capital stock, create liens, consolidate, merge or sell substantially all of our assets, enter into certain transactions with our affiliates, make loans, investments or advances, repay subordinated indebtedness or undergo a change in control. The debt agreements will also have a financial covenant requiring QCP to comply with certain levels of debt service coverage. The debt agreements will also contain customary events of default. Breaches of certain covenants may result in defaults and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee.

        As a result of these covenants, we will be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. A failure to comply with these covenants or the covenants under any of our other future indebtedness could result in an event of default, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. A default could also cause cross defaults under our other indebtedness. If we were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral granted to them to secure that indebtedness. We will pledge substantially all of our assets as collateral under the senior secured credit facilities and the senior secured notes. If any of our outstanding indebtedness under the senior secured credit facilities, senior secured notes or our other indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full. We do not have sufficient working capital to satisfy our debt obligations in the event of an acceleration of all or a significant part of our outstanding indebtedness.

34


Table of Contents

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and could adversely affect our stock price.

        Borrowings under the senior secured credit facilities, the unsecured revolving credit facility and the Promissory Notes are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. A 0.125% change to the assumed annual interest rate of the variable debt, including the senior secured term loan and the Promissory Notes and excluding the undrawn senior secured revolving credit facility and unsecured revolving credit facility, would change pro forma interest expense by approximately $0.7 million for the six months ended June 30, 2016 and $1.3 million for the year ended December 31, 2015. We may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk, may prove disadvantageous or may create additional risks.

        If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations we expect to incur in connection with the Spin-Off. This increased cost could make future financing by us more costly, as well as lower our current period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. In addition, an increase in interest rates would decrease the access third parties have to credit, thereby decreasing the amount they are willing to pay to lease our properties and consequently limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.

        In addition, an increase in interest rates could decrease the access third parties have to credit, thereby decreasing the amount they are willing to pay to lease our properties and consequently limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions. Further, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock.

We will not have an investment grade rating immediately following the Spin-Off, which will negatively affect our ability to access capital and increase the cost of any new debt compared to companies with an investment grade rating.

        Credit ratings assigned to our business and financial obligations will have a significant impact on our cost of capital. We will not have an investment grade rating immediately following the Spin-Off, which will negatively affect our ability to access new debt at acceptable interest rates or at all. In addition, there can be no assurance that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency, if, in that rating agency's judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. A lowering or withdrawal of a rating may further increase our borrowing costs and reduce our access to capital.

Volatility, disruption or uncertainty in the financial markets may impair our ability to raise capital, obtain new financing or refinance existing obligations.

        The global financial markets have experienced and may continue to undergo periods of significant volatility, disruption and uncertainty. While economic conditions have improved since the economic downturn in 2008 and 2009, economic growth has at times been slow and uneven and the strength and

35


Table of Contents

sustainability of an economic recovery is challenging and uncertain. Increased or prolonged market disruption, volatility or uncertainty could materially adversely impact our ability to raise capital, obtain new financing or refinance our existing obligations as they mature.

        Market volatility could also lead to significant uncertainty in the valuation of our investments, which may result in a substantial decrease in the value of our properties. As a result, we may be unable to recover the carrying amount of such investments and the associated goodwill, if any, which may require us to recognize impairment charges in earnings.

Ongoing trends in the healthcare industry, including a shift away from a traditional fee-for-service model and increased penetration of government reimbursement programs with lower reimbursement rates and length of stay, and increased competition in the industry may result in lower revenues and may affect the ability of our tenants/operators to meet their financial and other contractual obligations to us.

        Post-acute/skilled nursing operators, including HCRMC, have been and continue to be impacted by a challenging operating environment, which has put downward pressure on revenues and operating income. Ongoing trends in the post-acute/skilled nursing sector that are causing operators to adjust their business models include, but are not limited to, (i) a shift away from a traditional fee-for-service model towards new managed care models, which base reimbursement on patient outcome measures; (ii) increased penetration of Medicare Advantage plans (i.e., managed Medicare), which has reduced reimbursement rates, average length of stay and average daily census, particularly for higher acuity patients; (iii) increased competition from alternative healthcare services such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers; and (iv) increased regulatory scrutiny on government reimbursements.

        We are unable at this time to predict how these trends will affect the revenues and profitability of our existing or future tenants and operators; however, if these trends continue, they may reduce the profitability of our tenants and operators, which in turn could negatively affect their ability and willingness to comply with the terms of their leases with us and/or renew those leases upon expiration, which would materially and adversely affect our business, results of operations and financial condition.

        The healthcare industry in which we expect to operate post-Spin-Off is also highly competitive. The occupancy levels at, and fee income from, our properties are dependent on our ability and the ability of HCRMC and any of our other existing and future tenants or operators to compete with other tenants and operators on a number of different levels, including the quality of care provided, reputation, the physical appearance of a property, price, the range of services offered, family preference, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location, and the size and demographics of the population in the surrounding area. In addition, HCRMC and our other existing tenants and operators face, and our future tenants or operators will face, an increasingly competitive labor market for skilled management personnel and nurses. An inability to attract and retain skilled management personnel and nurses and other trained personnel could negatively impact the ability of HCRMC or any of our other existing or future tenants or operators to meet their obligations to us. A shortage of nurses or other trained personnel or general inflationary pressures on wages may force HCRMC and any of our other existing or future tenants or operators to enhance pay and benefits packages to compete effectively for skilled personnel, or to use more expensive contract personnel, but they may be unable to offset these added costs by increasing the rates charged to residents. Any increase in labor costs and other property operating expenses or any failure by HCRMC or any of our other existing or future tenants or operators to attract and retain qualified personnel would likely adversely affect our cash flow and have a materially adverse effect on our business, results of operations and financial condition.

        HCRMC and our other existing and future tenants or operators will also compete with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life

36


Table of Contents

care at home, community-based service programs, senior housing, retirement communities and convalescent centers. We cannot be certain that HCRMC and our other existing or future tenants or operators will be able to achieve occupancy and rate levels, and to manage their expenses, in a way that will enable them to meet all of their obligations to us. Further, many competing companies may have resources and attributes that are superior to those of HCRMC and our other existing and future tenants or operators. HCRMC and our other existing and future tenants or operators may encounter increased competition that would limit their ability to maintain or attract residents or expand their businesses or to manage their expenses, either of which could materially adversely affect their ability to meet their financial and other contractual obligations to us, potentially decreasing our revenues and impairing our assets and/or increasing collection and dispute costs.

Economic and other conditions that negatively affect geographic areas from which a greater percentage of our revenues is recognized could materially adversely affect our business, results of operations and financial condition.

        For the year ended December 31, 2015 and six months ended June 30, 2016, 64% and 63% of our revenues, respectively, were derived from the properties located in Pennsylvania, Ohio, Michigan, Florida and Illinois. We may continue to be subject to increased exposure to adverse conditions affecting these regions, including downturns in the local economies or changes in local real estate conditions, increased competition or decreased demand, changes in state-specific legislation and local climate events and natural disasters (such as earthquakes, wildfires and hurricanes), which could adversely affect our business and results of operations.

Our properties may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expense.

        Following the Spin-Off, HCRMC and our other tenants subject to triple-net leases will continue to be required to provide various types of insurance covering the properties they lease from us, including, but not limited to, liability and property, including business interruption, coverage. Additionally, we expect to obtain a corporate general liability insurance program to extend coverage for all of our properties. We expect that properties that are not subject to a triple-net lease (if any) will be protected under a comprehensive insurance program. However, many of our properties are located in areas exposed to earthquake, hurricane, windstorm, flood and other natural disasters and may be subject to other losses. While we expect our tenants and operators will purchase insurance coverage for earthquake, hurricane, windstorm, flood and other natural disasters that they believe is adequate in light of current industry practice, and we will have, under our leases, the right to request that lessees provide additional insurance against such other hazards commonly insured against by similar property in the region, such insurance may not fully cover such losses. These losses can result in decreased anticipated revenues from a property and the loss of all or a portion of our investment in a property. Following these events, we may remain liable for any other financial obligations related to the property. The insurance market for such exposures can be very volatile, and our tenants and operators may be unable to purchase the limits and terms we desire on a commercially reasonable basis in the future. In addition, there are certain exposures for which we and our tenants and operators do not purchase insurance because we and they do not believe it is economically feasible to do so or where there is no viable insurance market.

        The Properties are located in 30 states, and if one of our properties experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose our investment in the damaged property as well as the anticipated future cash flows from such property. If the damaged property is subject to recourse indebtedness, we could continue to be liable for the indebtedness even if the property is irreparably damaged.

        In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty event may result in loss of revenues for us. Any business interruption insurance may not fully compensate them or us for such loss of revenue.

37


Table of Contents

Loss of our key personnel could temporarily disrupt our operations and adversely affect us.

        We are dependent on the efforts of our executive officers, and competition for these individuals is intense. Although we have entered into an employment agreement with our Chief Executive Officer, and expect to enter into similar employment agreements with our President and Chief Investment Officer, and Chief Financial Officer, we cannot assure you that they will remain employed with us. The loss or limited availability of the services of any of our executive officers, or our inability to recruit and retain qualified personnel in the future, could, at least temporarily, have a materially adverse effect on our business, results of operations and financial condition and the value of our common stock.

Environmental compliance costs and liabilities associated with our real estate may be substantial and may have a materially adverse effect on our business, financial condition or results of operations.

        Federal, state and local laws, ordinances and regulations may require us, as a current owner of real estate following the Spin-Off, to investigate and clean up certain hazardous or toxic substances or petroleum released at a property. We may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by the third parties in connection with the contamination. The costs of cleanup and remediation could be substantial. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination.

        With regard to the Master Lease with HCRMC and our other Leases with other tenants, environmental insurance is only required for certain specified HCRMC Properties. The Master Lease and certain other Leases do, however, require HCRMC and certain of our other tenants to indemnify us for environmental liabilities they cause. While we have indemnity rights from HCRMC and certain of our other tenants with respect to environmental liabilities they cause, such liabilities could exceed the coverage limits of the applicable tenant's insurance, if any, or the financial ability of the tenant to indemnify us under the applicable leases. As the owner of a site, we may also be held liable to third parties for damages and injuries resulting from environmental contamination emanating from the site, including the release of asbestos-containing materials into the air. We may also experience environmental liabilities arising from conditions not known to us. The cost of defending against these claims, complying with environmental regulatory requirements, conducting remediation of any contaminated property or paying personal injury or other claims or fines could be substantial and could have a materially adverse effect on our business, results of operations and financial condition.

        In addition, the presence of contamination or the failure to remediate contamination may materially adversely affect our ability to use, sell or lease the property or to borrow using the property as collateral.

Our charter will restrict the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.

        We will elect to be treated as a REIT commencing with our initial taxable year ending December 31, 2016. In order for us to qualify as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year after the first year for which we elect to be subject to tax and qualify as a REIT. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year (other than the first taxable year for which we elect to be subject to tax and qualify as a REIT). Our charter, with certain exceptions, will authorize our board of directors to take such actions as are necessary or advisable to preserve our qualification as a REIT. Our charter will also provide that, unless exempted by the board of directors, no person may own more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of our

38


Table of Contents

stock. For purposes of our ownership limit, a person includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act. See "Description of Our Capital Stock—Restrictions on Transfer and Ownership of QCP Stock" and "U.S. Federal Income Tax Considerations." The constructive ownership rules are complex and may cause shares of stock owned directly or constructively by a group of related individuals or entities to be constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction or a change in control of us that might involve a premium price for shares of our stock or otherwise be in the best interests of our stockholders. The acquisition of less than 9.8% of our outstanding stock by an individual or entity could cause that individual or entity to own constructively in excess of 9.8% in value of our outstanding stock, and thus violate our charter's ownership limit. Our charter will also prohibit any person from owning shares of our stock that would result in our being "closely held" under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT. In addition, our charter will provide that (i) no person shall beneficially own shares of stock to the extent such beneficial ownership of stock would result in us failing to qualify as a "domestically controlled qualified investment entity" within the meaning of Section 897 (h) of the Code, and (ii) no person shall beneficially or constructively own shares of stock to the extent such beneficial or constructive ownership would cause us to own, beneficially or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in a tenant of our real property. Any attempt to own or transfer shares of our stock in violation of these restrictions may result in the transfer being automatically void. Our charter will also provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a charitable beneficiary that we designate, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on the shares or be entitled to vote the shares or receive any proceeds from the subsequent sale of the shares in excess of the lesser of the market price on the day the shares were transferred to the trust or the amount realized from the sale. We or our designee will have the right to purchase the shares from the trustee at this calculated price as well. A transfer of shares of our capital stock in violation of the limit may be void under certain circumstances. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.

Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock.

        The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities with an "interested stockholder" or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10% or more of the voting power of the outstanding voting stock of a Maryland corporation. Unless our board of directors takes action to exempt us, generally or with respect to certain transactions, from this statute in the future, the Maryland Business Combination Act will be applicable to business combinations between us and other persons.

        In addition to the restriction on business combinations contained in the Maryland Business Combination Act, our charter and bylaws will contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover. For example, our board of directors will have the exclusive power to adopt, alter or repeal any provisions of our bylaws or make new bylaws. In addition, our directors may be removed only for cause by the affirmative vote of holders of two-thirds of the outstanding shares of our voting stock. Our charter will also require the vote of

39


Table of Contents

two-thirds of the shares entitled to vote on the matter to amend the provisions of our charter related to the removal of directors.

        Our bylaws will require, subject to certain proxy access rules, advance notice for director nominations and proposals of new business to be considered at a stockholder meeting and that stockholders may only call a special meeting upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast on the business proposed to be transacted at such meeting. Our bylaws will also provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, shall be the sole and exclusive forum for derivative actions brought on behalf of us and certain claims and other actions against us and our directors, officers and employees.

        The restrictions on business combinations provided under Maryland law and contained in our charter may delay, defer or prevent a change of control or other transaction even if such transaction involves a premium price for our common stock or our stockholders believe that such transaction is otherwise in their best interests. For more information about these restrictions, see "Description of Our Capital Stock—Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws."

We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business.

        We will rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of business processes, including financial transactions and records and maintaining personal identifying information and tenant and lease data. We purchase some of our information technology from vendors, on whom our systems depend. We will rely on commercially available systems, software, tools and monitoring to provide security for the processing, transmission and storage of confidential tenant and customer data, including individually identifiable information relating to financial accounts. Although we expect to take steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems' improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. The risk of security breaches has generally increased as the number, intensity and sophistication of attacks have increased. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a materially adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO OUR SPIN-OFF FROM HCP

The HCP board of directors has reserved the right, in its sole discretion, to amend, modify or abandon the Spin-Off and the related transactions at any time prior to the distribution date.

        Until the Spin-Off occurs, HCP's board of directors will have the sole discretion to amend, modify or abandon the Spin-Off and the related transactions at any time prior to the distribution date. This means HCP may cancel or delay the planned distribution of common stock of QCP if at any time the board of directors of HCP determines, in its sole and absolute discretion, that the distribution of such common stock or the terms thereof are not in the best interests of HCP and its stockholders or that market conditions or other circumstances are such that the Spin-Off is no longer advisable at that time. If HCP's board of directors determines to terminate the Spin-Off, stockholders of HCP will not receive

40


Table of Contents

any distribution of QCP common stock, and HCP will be under no obligation whatsoever to its stockholders to distribute such shares. In addition, the Spin-Off and related transactions are subject to the satisfaction or waiver (by HCP in its sole discretion) of a number of conditions. See "The Spin-Off—Conditions to the Spin-Off."

The historical and pro forma financial information included in this information statement may not be a reliable indicator of future results.

        Our combined historical financial data and our pro forma combined financial data included in this information statement may not reflect our business, financial position or results of operations had we been an independent, publicly-traded company during the periods presented, or what our business, financial position or results of operations will be in the future when we are an independent, publicly-traded company. Prior to the Spin-Off, our business will have been operated by HCP as part of one corporate organization and not operated as a stand-alone company.

        The pro forma financial data included in this information statement includes adjustments based upon available information that our management believes to be reasonable to reflect these factors. However, the assumptions may change or may be incorrect, and actual results may differ, perhaps significantly. For these reasons, our cost structure may be higher, and our future performance may be worse, than the performance implied by the pro forma financial data presented in this information statement. For additional information about the basis of presentation of our combined historical financial data and our pro forma combined financial data included in this information statement, see "Description of Financing and Material Indebtedness," "Capitalization," "Summary—Summary Historical Combined Consolidated and Unaudited Pro Forma Combined Consolidated Financial Data," "Unaudited Pro Forma Combined Consolidated Financial Statements," "Selected Historical Combined Consolidated Financial Data," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this information statement.

We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.

        Following the Spin-Off, we will be a publicly-traded, self-managed and self-administered company, independent from HCP. However, we may not be able to achieve some or all of the benefits that we expect to achieve as a company independent from HCP in the time we expect, if at all. For instance, it may take longer than anticipated for us to, or we may never, succeed in growing our revenues through our active management strategies or successfully take advantage of positive long-term healthcare industry trends.

The Spin-Off could give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.

        The Spin-Off may lead to increased operating and other expenses, of both a nonrecurring and a recurring nature, and to changes to certain operations, which expenses or changes could arise pursuant to arrangements made between HCP and us or could trigger contractual rights of, and obligations to, third parties. Disputes with third parties could also arise out of these transactions, and we could experience unfavorable reactions to the Spin-Off from employees, lenders, ratings agencies, regulators or other interested parties. These increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our business, financial position or results of operations. In addition, following the completion of the Spin-Off, disputes with HCP could arise in connection with the Separation and Distribution Agreement, the Tax Matters Agreement and the Transition Services Agreement or other agreements.

41


Table of Contents

Potential indemnification obligations to HCP pursuant to the separation and distribution agreement may subject us to substantial liabilities.

        The Separation and Distribution Agreement with HCP provides for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the separation and distribution, and provisions governing our relationship with HCP with respect to and following the Spin-Off. Among other things, the Separation and Distribution Agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the Spin-Off, as well as those obligations of HCP that we will assume pursuant to the Separation and Distribution Agreement. If we are required to indemnify HCP or its related parties under the circumstances set forth in this agreement, we may be subject to substantial liabilities. For a description of this agreement, see "Our Relationship with HCP Following the Spin-Off—Separation and Distribution Agreement."

The Spin-Off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws.

        A court could deem the Spin-Off of QCP common stock or certain internal restructuring transactions undertaken by HCP in connection therewith to be a fraudulent conveyance or transfer. Fraudulent conveyances or transfers are defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor-transferor was insolvent, or that rendered the debtor-transferor insolvent, inadequately capitalized or unable to pay its debts as they become due.

        If a court were to find that the Spin-Off was a fraudulent transfer or conveyance, a court could void the Spin-Off or impose substantial liabilities upon us, which could adversely affect our financial condition and our results of operations. Among other things, the court could require us to fund liabilities of other companies involved in the restructuring transactions for the benefit of creditors, or require stockholders to return any dividends previously paid by QCP. Moreover, a court could void certain elements of the Spin-Off or QCP could be awarded monetary damages for the difference between the consideration received by HCP or its stockholders and the fair market value of the transferred property at the time of the Spin-Off. Whether a transaction is a fraudulent conveyance or transfer will vary depending upon the jurisdiction whose law is being applied.

Our agreements with HCP may not reflect terms that would have resulted from arm's-length negotiations with unaffiliated third parties.

        The agreements related to the Spin-Off, including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement and the agreement governing our unsecured revolving credit facility and the Promissory Notes will have been entered into in the context of the Spin-Off while we are still controlled by HCP. As a result, they may not reflect terms that would have resulted from arm's-length negotiations between unaffiliated third parties. The terms of the agreements being entered into in the context of the Spin-Off concern, among other things, transition services, allocation of assets and liabilities attributable to periods prior to the Spin-Off and the rights and obligations, including certain indemnification obligations, of HCP and us after the Spin-Off. In addition, as the sole lender under our unsecured revolving credit facility, HCP or one of its subsidiaries will have certain rights with respect to our ability to incur additional indebtedness and amend the terms of the documents governing our outstanding indebtedness. For a more detailed description, see "Our Relationship with HCP Following the Spin-Off" and "Description of Financing and Material Indebtedness."

42


Table of Contents

After the Spin-Off, we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent, publicly-traded, self-managed and self-administered company primarily focused on real property utilized in the healthcare industry.

        We have no significant historical operations as an independent company and may not, at the completion of the Spin-Off, have the infrastructure and personnel necessary to operate as an independent, publicly-traded, self-managed and self-administered company without relying on HCP to provide certain services on a transitional basis. Upon the completion of the Spin-Off, HCP will be obligated to provide such transition services pursuant to the terms of the Transition Services Agreement that we will enter into with HCP, to allow us the time, if necessary, to build the infrastructure and retain the personnel necessary to operate as a separate publicly-traded company without relying on such services. Following the expiration of the Transition Services Agreement, HCP will be under no obligation to provide further assistance to QCP. As a separate public entity, we will be subject to, and responsible for, regulatory compliance, including periodic public filings with the SEC and compliance with NYSE continued listing requirements as well as compliance with generally applicable tax and accounting rules. Because QCP's business has not been operated as an independent, publicly-traded, self-managed and self-administered company, we cannot assure you that it will be able to successfully implement the infrastructure or retain the personnel necessary to operate as an independent, publicly-traded, self-managed and self-administered company or that QCP will not incur costs in excess of anticipated costs to establish such infrastructure and retain such personnel.

The distribution of our common stock will not qualify for tax-free treatment and may be taxable to you as a dividend.

        The distribution of our common stock will not qualify for tax-free treatment. An amount equal to the fair market value of our common stock received by you on the distribution date (plus any cash received in lieu of fractional shares) will be treated as a taxable dividend to the extent of your ratable share of any current or accumulated earnings and profits of HCP, with the excess treated first as a non-taxable return of capital to the extent of your tax basis in HCP common stock and then as capital gain. The fair market value of QCP's common stock reported by HCP to you on IRS Form 1099-DIV may differ from the trading price of QCP's common stock on the distribution date. In addition, HCP or other applicable withholding agents may be required or permitted to withhold at the applicable rate on all or a portion of the distribution payable to non-U.S. stockholders, and any such withholding would be satisfied by HCP or such agent withholding and selling a portion of the QCP common stock otherwise distributable to non-U.S. stockholders or by withholding from other property held in the non-U.S. stockholder's account with the withholding agent. Your tax basis in shares of HCP held at the time of the distribution will be reduced (but not below zero) if the fair market value of our shares distributed by HCP to you in the distribution (plus any cash received in lieu of fractional shares) exceeds your ratable share of HCP's available current and accumulated earnings and profits. Your holding period for such HCP shares will not be affected by the distribution. HCP will not be able to advise stockholders of the amount of earnings and profits of HCP until after the end of the 2016 calendar year.

        Additionally, HCP's current earnings and profits are measured as of the end of the tax year and are generally allocated to all distributions made during such tax year on a pro rata basis. As a result, a proportionate part of HCP's current earnings and profits for the entire taxable year of the Spin-Off will be allocated to the Spin-Off distribution. That proportionate part will be treated as dividend income to you even if you have not held HCP stock for the entire taxable year of HCP in which the Spin-Off occurs. Thus, if you did not hold your HCP common stock for the entire taxable year of HCP in which the Spin-Off occurs, you may be allocated a disproportionate amount of ordinary income attributable to HCP's current earnings and profits as a result of the Spin-Off distribution.

43


Table of Contents

        Although HCP will be ascribing a value to our shares in the distribution for tax purposes, this valuation is not binding on the Internal Revenue Service (the "IRS") or any other tax authority. These taxing authorities could ascribe a higher valuation to our shares, particularly if our stock trades at prices significantly above the value ascribed to our shares by HCP in the period following the distribution. Such a higher valuation may cause a larger reduction in the tax basis of your HCP shares or may cause you to recognize additional dividend or capital gain income. You should consult your own tax advisor as to the particular tax consequences of the distribution to you.

RISKS RELATED TO THE STATUS OF QCP AS A REIT

Our failure to qualify as, or election to not continue to be, a REIT would result in higher taxes and reduced cash available for distribution to our stockholders. HCP's failure to qualify as a REIT could cause us to lose our REIT status.

        We intend to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with our initial taxable year ending December 31, 2016. Our compliance with the REIT income and quarterly asset requirements depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Moreover, the proper classification of one or more of our investments may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. In addition, we intend to hold substantially all of our assets through certain subsidiary REITs, and any failure of such a subsidiary to qualify as a REIT could cause us to fail to satisfy the REIT requirements. Accordingly, there can be no assurance that the IRS will not contend that our investments violate the REIT requirements. In addition, in the future, our board of directors may determine that maintaining our REIT status would no longer be in the best interest of us or our stockholders, which may result from, for example, other business opportunities that we may wish to pursue, and we may elect to discontinue our REIT status.

        We expect that we will receive an opinion of Skadden, Arps (the "REIT Tax Opinion"), counsel to us and HCP, with respect to our qualification to be subject to tax as a REIT in connection with the Spin-Off. Investors should be aware, however, that opinions of counsel are not binding on the IRS or any court. The REIT Tax Opinion will represent only the view of Skadden, Arps, based on its review and analysis of existing law and on certain representations as to factual matters and covenants made by HCP and us, including representations relating to the values of our assets and the sources of our income. The opinion will be expressed as of the date issued. Skadden, Arps will have no obligation to advise HCP, us or the holders of our common stock of any subsequent change in the matters stated, represented or assumed or of any subsequent change in applicable law. Furthermore, both the validity of the REIT Tax Opinion and our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis, the results of which will not be monitored by Skadden, Arps. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.

        If we were to fail to qualify as a REIT in any taxable year for which the statute of limitations remains open, or elect not to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and trading price for, our stock. Unless entitled to relief under certain provisions of the Code, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we initially ceased to qualify as a REIT.

44


Table of Contents

        The rule against re-electing REIT status following a loss of such status could also apply to us or to REIT subsidiaries of ours if it were determined that HCP or certain REIT subsidiaries of HCP failed to qualify as REITs for certain taxable years and we or one of our REIT subsidiaries were treated as a successor to any such entity for U.S. federal income tax purposes. Although HCP, in the Tax Matters Agreement, will covenant to use its reasonable best efforts to maintain the REIT status of HCP and its REIT subsidiaries for each taxable year ending on or before December 31, 2016 (unless HCP obtains an opinion from a nationally recognized tax counsel or a private letter ruling from the IRS to the effect that such failure to maintain REIT status will not cause us to fail to qualify as a REIT under the successor REIT rule referred to above), no assurance can be given that such covenant would prevent us from failing to qualify as a REIT. Although, in the event of a breach, we may be able to seek damages from HCP, there can be no assurance that such damages, if any, would appropriately compensate us. In addition, if HCP or any of the relevant subsidiaries were to fail to qualify as a REIT despite its reasonable best efforts, we would have no claim against HCP. If we fail to qualify as a REIT due to a predecessor's failure to qualify as a REIT, we would be subject to corporate income tax as described in the preceding paragraph.

Qualifying as a REIT involves highly technical and complex provisions of the Code.

        Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership, and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT may depend in part on the actions of third parties over which we have no control or only limited influence.

We could fail to qualify as a REIT if income we receive from our tenants is not treated as qualifying income.

        Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements, including requirements relating to the sources of our gross income. Rents received or accrued by us from any of our tenants will not be treated as qualifying rent for purposes of these requirements if the applicable Lease is not respected as a true lease for U.S. federal income tax purposes and is instead treated as a service contract, joint venture or some other type of arrangement. If any of the Leases are not respected as true leases for U.S. federal income tax purposes, we may fail to qualify as a REIT.

        In addition, subject to certain exceptions, rents received or accrued by us from any of our tenants will not be treated as qualifying rent for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of such tenant's stock entitled to vote or 10% or more of the total value of all classes of such tenant's stock. Our charter will provide for restrictions on ownership and transfer of our shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from our tenants to be treated as non-qualifying rent for purposes of the REIT gross income requirements. The provisions of our charter that will restrict the ownership and transfer of our stock are described in "Description of Our Capital Stock—Restrictions on Transfer and Ownership of QCP Stock." Nevertheless, these restrictions may be ineffective at ensuring that rents received or accrued by us from our tenants will be treated as qualifying rent for purposes of REIT qualification requirements.

45


Table of Contents

REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.

        We generally must distribute annually at least 90% of our REIT taxable income in order for us to qualify as a REIT (assuming that certain other requirements are also satisfied) so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. Moreover, if a REIT distributes less than 85% of its taxable income to its stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then it is required to pay an excise tax on 4% of any shortfall between the required 85% and the amount that was actually distributed. We intend to make distributions to our stockholders to comply with the REIT requirements of the Code.

        Initially our taxable income will be generated primarily by rents paid under the Leases. From time to time, we may generate taxable income greater than our cash flows as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices or distribute amounts that would otherwise be invested to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity or adversely impact our ability to raise short- and long-term debt. Furthermore, the REIT distribution requirements may increase the financing needed to fund capital expenditures, further growth and expansion initiatives, which would increase our total leverage. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

        Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state, and local taxes on our income and assets, including taxes on any undistributed income and state or local income, property and transfer taxes. For example, we may hold some of our assets or conduct certain of our activities through one or more "taxable REIT subsidiaries" ("TRSs") or other subsidiary corporations that will be subject to U.S. federal, state, and local corporate-level income taxes as regular C corporations. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm's-length basis. Any of these taxes would decrease cash available for distribution to our stockholders.

Complying with the REIT requirements may cause us to forgo otherwise attractive acquisition and business opportunities or liquidate otherwise attractive investments.

        To qualify as a REIT for U.S. federal income tax purposes, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and "real estate assets" (as defined in the Code). The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 25% (or, for 2018 and subsequent taxable years, 20%) of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain

46


Table of Contents

statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

        In addition to the asset tests set forth above, to qualify as a REIT we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

        Dividends payable to domestic stockholders that are individuals, trusts and estates are generally taxed at reduced tax rates. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Complying with the REIT requirements may limit our ability to hedge effectively.

        The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from certain hedging transactions that we may enter into to, including transactions to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets, does not constitute "gross income" for purposes of the 75% or 95% gross income tests that apply to REITs; provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because the TRS may be subject to tax on gains or expose us to greater risks associated with changes in interest rates that we would otherwise want to bear. In addition, losses in the TRS will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against past or future taxable income in the TRS.

The tax on prohibited transactions will limit our ability to engage in certain transactions which would be treated as prohibited transactions for U.S. federal income tax purposes.

        Net income that we derive from a prohibited transaction is subject to a 100% tax. The term "prohibited transaction" generally includes a sale or other disposition of property that is held primarily for sale to customers in the ordinary course of our trade or business. We might be subject to this tax if we were to dispose of our property in a manner that was treated as a prohibited transaction for U.S. federal income tax purposes.

        We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. As a result, we may choose not to engage in certain sales at the REIT level, even though the sales might otherwise be beneficial to us. In addition, whether property is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances. No assurance can be given that any

47


Table of Contents

property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Code that would prevent such treatment. The 100% prohibited transaction tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to prevent prohibited transaction characterization.

Legislative or other actions affecting REITs could have a negative effect on us.

        The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury (the "Treasury"). Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. The IRS and the Treasury, for example, published temporary and proposed regulations on June 7, 2016 affecting certain tax-free REIT spin-offs, and extending the period (from five to ten years) during which federal built-in gains tax applies to those C corporations electing REIT status after August 7, 2016. The new regulations do not apply to the distribution of QCP common stock, which will not qualify as a tax-free spin-off. Moreover, because QCP's assets have been owned by a REIT for more than five years, the extension of the built-in gains period is not expected to apply to QCP's assets held at the time of the Spin-Off. However, we cannot predict how changes in the tax laws might affect our investors or us. New legislation, Treasury regulations promulgated under the Code ("Treasury Regulations"), administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification.

Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.

        To qualify as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

REIT ownership limitations may restrict or prevent you from engaging in certain transfers of our common stock.

        In order to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our outstanding shares of stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after our first taxable year. As described above, subject to certain exceptions, rents received or accrued by us from our tenants will not be treated as qualifying rent for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of such tenant's stock entitled to vote or 10% or more of the total value of all classes of such tenant's stock. To assist us in satisfying the REIT requirements, our charter will contain certain ownership and transfer restrictions on our stock. More specifically, our charter will provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on such shares or be entitled to vote such shares or receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares of our capital stock in violation of the ownership limit will be void ab initio under certain circumstances. Under applicable constructive ownership rules, any shares

48


Table of Contents

of stock owned by certain affiliated owners generally would be added together for purposes of the common stock ownership limits, and any shares of a given class or series of preferred stock owned by certain affiliated owners generally would be added together for purposes of the ownership limit on such class or series. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders. See "—Risks Related to Our Business—Our charter will restrict the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company."

RISKS RELATED TO OUR COMMON STOCK

There is no existing market for our common stock, and a trading market that will provide you with adequate liquidity may not develop for our common stock. In addition, once our common stock begins trading, the market price and trading volume of our common stock may fluctuate widely.

        There is no current trading market for our common stock. Our common stock issued in the Spin-Off will be trading publicly for the first time. We anticipate that a limited market, commonly known as a "when-distributed" trading market, will develop at some point following the record date, and that "regular-way" trading in shares of our common stock will begin on the first trading day following the distribution date. However, an active trading market for our common stock may not develop as a result of the Spin-Off or be sustained in the future. The lack of an active trading market may make it more difficult for you to sell your shares and could lead to our share price being depressed or more volatile.

        For many reasons, including the risks identified in this information statement, the market price of our common stock following the Spin-Off may be more volatile than the market price of HCP common stock before the Spin-Off. These factors may result in short-term or long-term negative pressure on the value of our common stock.

        We cannot predict the prices at which our common stock may trade after the Spin-Off. The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to:

    an actual or potential event of default under our substantial indebtedness;

    a shift in our investor base;

    our quarterly or annual earnings, or those of comparable companies;

    actual or anticipated fluctuations in our operating results;

    our ability to obtain financing as needed;

    changes in laws and regulations affecting our business;

    changes in accounting standards, policies, guidance, interpretations or principles;

    announcements by us or our competitors of significant investments, acquisitions or dispositions;

    the failure of securities analysts to cover our common stock after the Spin-Off;

    changes in earnings estimates by securities analysts or our ability to meet those estimates;

    the operating performance and stock price of comparable companies;

    overall market fluctuations;

    a decline in the real estate markets; and

49


Table of Contents

    general economic conditions and other external factors.

        Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

Our shares of common stock will rank junior to all of our consolidated liabilities.

        In the event of a bankruptcy, liquidation, dissolution or winding up, our assets will be available to pay obligations on the common stock only after all of our consolidated liabilities have been paid. In the event of a bankruptcy, liquidation, dissolution or winding up, there may not be sufficient assets remaining, after paying our and our subsidiaries' liabilities, to pay any amounts with respect to the common stock then outstanding. Additionally, no distribution of our assets may be made to holders of our common stock until we have paid to holders of our Class A Preferred Stock a liquidation preference. We also have a significant amount of indebtedness, including the Promissory Notes, which would have amounted to $1.81 billion as of June 30, 2016, pro forma for the Spin-Off and the related transactions, and also would have access to a $100 million senior secured revolving credit facility and $100 million unsecured revolving credit facility. We may also take on additional long-term debt and working capital lines of credit to meet future financing needs, subject to certain restrictions under the terms of our existing indebtedness.

Future sales or distributions of our common stock could depress the market price for shares of our common stock.

        Our common stock that HCP intends to distribute to its stockholders in the Spin-Off generally may be sold immediately in the public market. Although we have no actual knowledge of any plan or intention on the part of any holder of HCP common stock to sell our common stock on or after the record date, it is possible that some HCP stockholders will decide to sell some or all of the shares of our common stock that they receive in the Spin-Off.

        In addition, some of the holders of HCP common stock are index funds tied to stock or investment indices or are institutional investors bound by various investment guidelines. Companies are generally selected for investment indices, and in some cases selected by institutional investors, based on factors such as market capitalization, industry, trading liquidity and financial condition. As an independent company, we expect to initially have a lower market capitalization than HCP has today, and our business will differ from the business of HCP prior to the Spin-Off. As a result, our common stock may not qualify for those investment indices. In addition, our common stock may not meet the investment guidelines of some institutional investors. Consequently, these index funds and institutional investors may have to sell some or all of our common stock they receive in the Spin-Off, which may result in a decline in the price of our common stock.

        Any disposition by a significant stockholder of our common stock, or the perception in the market that such dispositions could occur, may cause the price of our common stock to fall. Any such decline could impair our ability to raise capital through future sales of our common stock. Further, our common stock may not qualify for other investment indices, including indices specific to REITs, and any such failure may discourage new investors from investing in our common stock.

The combined post-Spin-Off value of HCP common stock and our common stock may not equal or exceed the pre-Spin-Off value of HCP common stock.

        We cannot assure you that the combined trading prices of HCP common stock and our common stock after the Spin-Off will be equal to or greater than the trading price of HCP common stock prior to the Spin-Off. Until the market has fully evaluated the business of HCP without the Properties, the price at which HCP common stock trades may fluctuate more significantly than might otherwise be

50


Table of Contents

typical. Similarly, until the market has fully evaluated the stand-alone business of our company, the price at which shares of our common stock trades may fluctuate more significantly than might otherwise be typical, including volatility caused by general market conditions.

We may be unable to pay dividends.

        To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income. Our ability to pay dividends may be adversely affected by a number of factors, including the risk factors described in this information statement. Dividends will be authorized by our board of directors and declared by us based upon a number of factors, including actual results of operations, restrictions under Maryland law or applicable debt covenants, our financial condition, our taxable income, the annual distribution requirements under the REIT provisions of the Code, our operating expenses and other factors our directors deem relevant. We may fail to achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends. In addition, no dividends may be declared or paid on our common stock unless dividends have been paid or set aside for payment on all outstanding shares of preferred stock that have a preference on distributions, including the Class A Preferred Stock.

        Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described above under "—Risks Related to the Status of QCP as a REIT—REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan"), we may elect not to maintain our REIT status, in which case we would no longer be required to pay such dividends. Moreover, even if we do elect to maintain our REIT status, after completing various procedural steps, we may elect to comply with the applicable distribution requirements by distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively affect our business and financial condition as well as the market price of our common stock. We cannot assure you that we will pay any dividends on shares of our common stock.

We may choose to pay dividends in our own stock, in which case you could be required to pay income taxes in excess of the cash dividends you receive.

        We may in the future distribute taxable dividends that are payable in cash and shares of our common stock where up to only 20% of such a dividend is made in cash. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. holder sells the stock that it receives as a dividend in order to pay this tax, the sale proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. holders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock.

        It is unclear whether and to what extent we will be able to pay taxable dividends in cash and stock in future years. Moreover, various aspects of such a taxable cash/stock dividend are uncertain and have not yet been addressed by the IRS. The IRS may impose additional requirements with respect to taxable cash/stock dividends, including on a retroactive basis, or assert that the requirements for such taxable cash/stock dividends have not been met.

51


Table of Contents


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This information statement includes forward-looking statements, including the sections entitled "Summary," "Risk Factors," "The Spin-Off," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business and Properties." Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: the anticipated timing, structure, benefits and tax treatment of the Spin-Off; future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.

        Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

    the HCRMC Properties representing substantially all of our assets and our reliance on HCRMC for substantially all of our revenues and dependency on HCRMC's ability to meet its contractual obligations under the Master Lease and subject to the risks related to the impact of HCRMC's decline in operating performance and fixed charge coverage and the DOJ lawsuit against HCRMC and other legal proceedings involving HCRMC, including the possibility of larger than expected litigation costs, adverse results and related developments;

    the financial condition of HCRMC and our other existing and future tenants and operators, 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;

    ongoing trends in the healthcare industry, including a shift away from a traditional fee-for-service model and increased penetration of government reimbursement programs with lower reimbursement rates, average length of stay and average daily census, and increased competition in the industry, including for skilled management and other key personnel;

    the effect on our tenants and operators of legislation and other legal requirements, including licensure, certification and inspection requirements, and laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements;

    the ability of HCRMC and our other existing and future tenants and operators to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent payments to us and our ability to recover investments made, if applicable, in their operations;

    the potential impact on us, our tenants and operators from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments;

    competition for, and our ability to negotiate the same or better terms with and obtain regulatory approvals for, new tenants or operators if our existing Leases are not renewed or we exercise our right to replace HCRMC or other tenants upon default;

52


Table of Contents

    negative economic conditions in our geographies of operation;

    uninsured or underinsured losses that our properties may experience and other unanticipated expenses, including environmental compliance costs and liabilities;

    the ability of HCP and QCP to complete financings related to the Spin-Off on acceptable terms on the currently contemplated timeline or at all;

    our non-investment grade rating from credit rating agencies;

    our ability to manage our indebtedness level, changes in the terms of such indebtedness and changes in market interest rates;

    covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations;

    our ability to pay dividends and the tax treatment of such dividends for our stockholders;

    loss of key personnel;

    our ability to qualify or maintain our status as a REIT;

    the ability of HCP and QCP to satisfy any necessary conditions to complete the Spin-Off;

    the ability to achieve some or all the benefits that we expect to achieve from the Spin-Off or to successfully operate as an independent, publicly-traded company following the Spin-Off;

    the ability and willingness of HCP to meet and/or perform its obligations under any contractual arrangements that are entered into with us in connection with the Spin-Off and any of its obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

    unexpected liabilities, disputes or other potential unfavorable effects related to the Spin-Off; and

    additional factors discussed in the sections entitled "Business and Properties," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this information statement.

        Forward-looking statements speak only as of the date of this information statement. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.

53


Table of Contents


THE SPIN-OFF

Overview of the Spin-Off

        On May 9, 2016, the board of directors of HCP announced its plan to separate HCP's business into two separate and independent publicly-traded companies:

    HCP, which will increase its focus on its existing core growth businesses of senior housing, life science and medical office properties; and

    QCP, which will own and lease, on a triple-net basis, properties in the post-acute/skilled nursing and assisted living sectors and potentially other sectors in the healthcare industry. The consummation of the Spin-Off itself will not result in any changes to the Master Lease.

        HCP will accomplish the separation by transferring to us the equity of entities that own 274 post-acute/skilled nursing properties; 62 memory care/assisted living properties; a surgical hospital; an 88,000 square foot medical office building; the Deferred Rent Obligation and HCP's approximately 9% equity interest in HCRMC. Most of these properties (249 postacute/skilled nursing properties and 61 memory care/assisted living properties) will continue to be operated by a subsidiary of HCRMC under the Master Lease. The remaining 28 properties are, and are expected to continue to be, leased, on a triple-net basis, to other national and regional operators and other tenants unaffiliated with HCRMC. We will assume all liabilities and obligations related to these properties, including the Leases. In consideration for these assets, we will (i) pay HCP $1.68 billion in cash, which HCP will use to fund the repayment of a portion of its outstanding debt; and (ii) transfer to HCP shares of QCP common stock that HCP will distribute to its stockholders on a pro rata basis. HCP will retain all of its other assets and liabilities.

        We anticipate that approximately $65.0 million in financing fees, inclusive of $20.0 million in original issue discount, will be incurred and paid by QCP and will reduce the amount of cash proceeds transferred to HCP in the Spin-Off. We also anticipate that approximately $48.0 million and $20.0 million in financial advisory fees and legal and other expenses, respectively, will be incurred in connection with the Spin-Off, all of which will be paid by HCP.

        Upon the satisfaction or waiver by HCP of the conditions to the Spin-Off, which are described in more detail in "—Conditions to the Spin-Off" below, HCP will effect the Spin-Off by distributing to its stockholders one share of QCP common stock for every five shares of HCP common stock held at the close of business on                        , 2016, the record date for the Spin-Off. We expect the shares of QCP common stock to be distributed by HCP on or about                        , 2016.

        You will not be required to make any payment, surrender or exchange your shares of HCP common stock or take any other action to receive your shares of our common stock.

        In connection with the Spin-Off, we will enter into agreements with HCP that set forth the relationship between us and HCP following the Spin-Off. HCP will be the sole lender under our unsecured revolving credit facility. HCP will also be the obligee under the Promissory Notes. See "Our Relationship with HCP Following the Spin-Off."

        Until the Spin-Off has occurred, HCP has the right to terminate the transaction, even if all of the conditions have been satisfied, if the board of directors of HCP determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of HCP and its stockholders or that market conditions or other circumstances are such that the Spin-Off is no longer advisable at that time. We cannot provide any assurances that the Spin-Off will be completed. For a more detailed description of these conditions, see "—Conditions to the Spin-Off."

54


Table of Contents

Reasons for the Spin-Off

        Since HCP's acquisition of the HCRMC real estate portfolio in 2011, HCRMC has remained HCP's largest tenant, representing approximately 23% of HCP's portfolio income for the six month period ended June 30, 2016. HCRMC's operating performance has been negatively affected by the challenging operating environment in the post-acute/skilled nursing industry and, as a result, has continued to deteriorate, resulting in declining coverage under the Master Lease, as summarized in "Business and Properties—Impact of Industry Trends on HCRMC and Recent Events Specific to HCRMC." The ongoing reimbursement model changes that have impacted HCRMC's performance are expected to continue in the near-term, which, combined with HCP's outstanding tenant concentration in HCRMC, likely will continue to weigh on HCP's portfolio performance, cost of capital and ability to grow. While HCP believes that the post-acute/skilled nursing sector in which HCRMC operates will remain an integral part of the continuum of care, HCP also recognizes that additional time and flexibility are warranted to best resolve these near-term challenges. As a result, HCP's board of directors believes that separating the QCP business and assets from the remainder of HCP's businesses and assets is in the best interests of HCP and its stockholders for a number of reasons, including the following:

    Creates two separate companies which better focuses the inherent strengths of each company.  As two independent companies, HCP and QCP will be able to focus on their respective inherent strengths and will have an enhanced ability to maximize value for their respective stockholders. HCP's portfolio quality and growth profile will improve significantly with 94% of its annualized pro forma portfolio income diversified across senior housing, life science and medical office properties. These sectors provide HCP with private-pay revenue sources and enhance the stability and growth characteristics of HCP's portfolio income. QCP's assets will be composed of the HCRMC Properties, the Deferred Rent Obligation and an approximately 9% equity interest in HCRMC, as well as the non-HCRMC Properties. QCP's mission is to maximize the value embedded in its assets.

    Enables HCP to accelerate its focus on accretive investment growth. We believe HCP's cost of capital will benefit from its improved portfolio quality discussed above and reduced tenant concentration, allowing HCP to focus on generating accretive investment growth with existing and new operating partners.

    Better positions QCP to realize the long-term value creation potential of the HCRMC Properties in a manner that would not be consistent with HCP's business model. The HCRMC Properties represent a large-scale, geographically diversified portfolio of post-acute/skilled nursing and memory care/assisted living properties that QCP will be able to actively manage to create value for its stockholders. With a more narrowly focused portfolio of assets, QCP will have the flexibility to deploy a wider array of strategies than would generally be suitable for HCP and, as a result, will be positioned to address the ongoing challenges in the post-acute/skilled nursing industry.

    Provides QCP with a dedicated management team with relevant experience and incentives aligned with stockholders. QCP will have a management team, led by Mark Ordan, whose focus will be solely on the QCP assets. The management team has a collective track record of active management of large-scale healthcare operations and real estate portfolio management, large company workouts in both healthcare and REIT environments, and successfully launching and managing a public spin-off.

Manner of Effecting the Spin-Off

        The general terms and conditions relating to the Spin-Off will be set forth in the Separation and Distribution Agreement between us and HCP. Under the Separation and Distribution Agreement, the Spin-Off is anticipated to be effective from and after                        , 2016.

55


Table of Contents

        You will receive one share of QCP common stock for every five shares of HCP common stock that you owned at the close of business on                        , 2016, the record date. The actual total number of shares of our common stock to be distributed will depend on the number of shares of HCP common stock outstanding on the record date. The shares of our common stock to be distributed will constitute substantially all of the outstanding shares of our common stock immediately after the Spin-Off.

        Neither we nor HCP will be issuing physical certificates representing shares of our common stock. Instead, if you own HCP common stock as of the close of business on the record date, the shares of our common stock that you are entitled to receive in the Spin-Off will be issued electronically, as of the distribution date, to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. A benefit of issuing stock electronically in book-entry form is that there will be none of the physical handling and safekeeping responsibilities that are inherent in owning physical stock certificates.

        If you hold physical stock certificates that represent your shares of HCP common stock and you are the registered holder of the HCP shares represented by those certificates, the distribution agent will mail you an account statement that reflects the number of shares of our common stock that have been registered in book-entry form in your name. If you have any questions concerning the mechanics of having shares of common stock registered in book-entry form, you are encouraged to contact HCP Investor Relations by mail at 1920 Main Street, Suite 1200, Irvine, California 92614, by phone at (949) 407-0400 or by email at investorrelations@hcpi.com.

        Most HCP stockholders hold their shares of HCP common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in "street name" and ownership would be recorded on the bank or brokerage firm's books. If you hold your HCP common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of our common stock that you are entitled to receive in the Spin-Off. If you have any questions concerning the mechanics of having shares of our common stock held in "street name," you are encouraged to contact your bank or brokerage firm.

Results of the Spin-Off

        After the Spin-Off, we will be an independent, publicly-traded, self-managed and self-administered company. Immediately following the Spin-Off, we expect to have approximately 10,000 registered stockholders, based on the number of registered stockholders of HCP common stock on September 29, 2016. Immediately following the Spin-Off, we expect to have approximately 93,564,036 shares of our common stock outstanding on a fully diluted basis, based on the number of shares of HCP common stock outstanding on a fully diluted basis as of September 29, 2016. The actual number of shares to be distributed will be determined on the record date and will reflect any changes in the number of shares of HCP common stock between September 29, 2016 and the record date. The Spin-Off will not affect the number of outstanding shares of HCP common stock or any rights of HCP stockholders.

        Effective immediately upon the Spin-Off, we and HCP will enter into a number of other agreements to set forth our relationship following the Spin-Off concerning, among other things, transition services, allocations of assets and liabilities attributable to periods prior to the Spin-Off and the rights and obligations, including certain indemnification obligations of HCP and us after the Spin-Off. HCP will be the sole lender under our unsecured revolving credit facility. HCP will also be the obligee under the Promissory Notes. For a more detailed description of these agreements, see "Our Relationship with HCP Following the Spin-Off" and "Description of Financing and Material Indebtedness."

56


Table of Contents

Treatment of Fractional Shares

        The distribution agent will not distribute any fractional shares of our common stock in connection with the Spin-Off. Instead, the distribution agent will aggregate all fractional shares of our common stock into whole shares and sell them on the open market at the prevailing market prices on behalf of those registered holders who otherwise would be entitled to receive a fractional share. We anticipate that these sales will occur as soon as practicable after the distribution date. The distribution agent will then distribute to such registered holders the aggregate cash proceeds of such sale, in an amount equal to their pro rata share of the total proceeds of those sales. Any applicable expenses, including brokerage fees, will be paid by us. We do not expect the amount of any such fees to be material to us.

        If you hold physical stock certificates that represent your shares of HCP common stock and you are the registered holder of the HCP shares represented by those certificates, your check for any cash that you may be entitled to receive instead of fractional shares of our common stock will be mailed to you separately. If you hold your shares of HCP common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds from the sales and will electronically credit your account for your share of such proceeds.

        None of us, HCP or the distribution agent will guarantee any minimum sale price for the fractional shares of our common stock. Neither we nor HCP will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient stockholders. Each stockholder entitled to receive cash proceeds from these fractional shares should consult his, her or its own tax advisor as to the stockholder's particular circumstances. See "—U.S. Federal Income Tax Consequences of the Spin-Off."

Listing and Trading of Our Shares

        There is no current trading market for QCP common stock. A condition to the Spin-Off is the listing of our common stock on the NYSE. We have been approved to list our common stock on the NYSE under the symbol "QCP" subject to official notice of issuance.

        At some point following the record date and continuing up to and including the distribution date, we expect that there will be two markets in HCP common stock: a "due-bills" market and an "ex-distribution" market. Shares of HCP common stock that trade on the "due-bills" market will trade with an entitlement to shares of our common stock distributed pursuant to the Spin-Off. Shares of HCP common stock that trade on the "ex-distribution" market will trade without an entitlement to shares of our common stock distributed pursuant to the Spin-Off. Therefore, if you sell shares of HCP common stock in the "due-bills" market after the record date and before the distribution date, you will be selling your right to receive shares of our common stock in connection with the Spin-Off. If you own shares of HCP common stock at the close of business on the record date and sell those shares on the "ex-distribution" market before the distribution date, you will still receive the shares of our common stock that you would be entitled to receive pursuant to your ownership of the shares of HCP common stock on the record date.

        Furthermore, at some point following the record date and continuing up to and including the distribution date, we expect that a limited market, commonly known as a "when-distributed" trading market, will develop in our common stock. "When-distributed" trading refers to a sale or purchase made conditionally because the security has been authorized but not yet distributed. The "when-distributed" trading market will be a market for shares of our common stock that will be distributed pro rata to HCP stockholders on the distribution date. If you owned shares of HCP common stock at the close of business on the record date, you would be entitled to shares of our common stock distributed pursuant to the Spin-Off. You may trade this entitlement to shares of our common stock, without trading the shares of HCP common stock you own, on the "when-distributed"

57


Table of Contents

market. On the first trading day following the distribution date, "when-distributed" trading with respect to our common stock will end and "regular-way" trading in our common stock will begin.

Treatment of HCP Equity Awards

        It is expected that any equity awards relating to shares of HCP common stock will be equitably adjusted to reflect the impact of the Spin-Off. The actual method of adjustment has not yet been determined.

U.S. Federal Income Tax Consequences of the Spin-Off

        The following is a summary of U.S. federal income tax consequences generally applicable to our spin-off from HCP, and in particular the distribution by HCP of our common stock to stockholders of HCP. For purposes of this section under the heading "—U.S. Federal Income Tax Consequences of the Spin-Off": (i) any references to the "spin-off" shall mean only the distribution of shares of our common stock by HCP to stockholders of HCP; (ii) references to "QCP," "we," "our" and "us" mean only QCP and not its subsidiaries or other lower-tier entities, except as otherwise indicated; and (iii) references to HCP refer to HCP, Inc.

        The information in this summary is based on:

    the Code;

    current, temporary and proposed Treasury Regulations;

    the legislative history of the Code;

    current administrative interpretations and practices of the IRS; and

    court decisions;

all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. The summary is also based upon the assumption that HCP, QCP and their respective subsidiaries and affiliated entities will operate in accordance with their applicable organizational documents or partnership agreements and the agreements and other documents applicable to our spin-off from HCP. This summary is for general information only and is not legal or tax advice. The Code provisions applicable to the spin-off are highly technical and complex, and this summary is qualified in its entirety by the express language of applicable Code provisions, Treasury Regulations, and administrative and judicial interpretations thereof. Moreover, this summary does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, such as:

    financial institutions;

    insurance companies;

    broker-dealers;

    regulated investment companies;

    partnerships and trusts;

    persons who hold our stock on behalf of another person as a nominee;

    persons who receive our stock through the exercise of employee stock options or otherwise as compensation;

58


Table of Contents

    persons holding our stock as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment;

and, except to the extent discussed below:

    tax-exempt organizations; and

    foreign investors.

        This summary assumes that investors will hold their HCP and QCP common stock as a capital asset, which generally means as property held for investment. This summary also assumes that investors will hold their HCP common stock at all times from the record date through the distribution date. Special rules may apply to determine the tax consequences to an investor that purchases or sells HCP common stock between the record date and the distribution date. You are urged to consult your tax advisor regarding the consequences to you of any such sale.

        For purposes of this discussion under the heading "—U.S. Federal Income Tax Consequences of the Spin-Off," a U.S. holder is a stockholder of HCP that is for U.S. federal income tax purposes:

    a citizen or resident of the United States;

    a corporation created or organized in the United States or under the laws of the United States, or of any state thereof, or the District of Columbia;

    an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or

    a trust if a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust.

        A "non-U.S. holder" is a stockholder of HCP that is neither a U.S. holder nor a partnership (or other entity treated as a partnership) for U.S. federal income tax purposes. If a partnership, including for this purpose any entity that is treated as a partnership for U.S. federal income tax purposes, holds HCP stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the spin-off.

        THE U.S. FEDERAL INCOME TAX TREATMENT OF THE SPIN-OFF OF QCP COMMON STOCK TO STOCKHOLDERS OF HCP DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. IN ADDITION, THE TAX CONSEQUENCES OF THE SPIN-OFF TO ANY PARTICULAR STOCKHOLDER OF HCP WILL DEPEND ON THE STOCKHOLDER'S PARTICULAR TAX CIRCUMSTANCES. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES TO YOU OF THE SPIN-OFF IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES.

Tax Classification of the Spin-off in General

        For U.S. federal income tax purposes, the spin-off will not be eligible for treatment as a tax-free distribution by HCP with respect to its stock. Accordingly, the spin-off will be treated as if HCP had distributed to each HCP stockholder an amount equal to the fair market value of the QCP common stock received by such stockholder (plus any cash received in lieu of fractional QCP shares), determined as of the date of the spin-off (such amount, the "spin-off distribution amount"). The tax

59


Table of Contents

consequences of the spin-off on HCP's stockholders are thus generally the same as the tax consequences of HCP's cash distributions. The discussion below describes the U.S. federal income tax consequences to a U.S. holder, a non-U.S. holder, and a tax-exempt holder of HCP stock upon the receipt of QCP common stock in the spin-off.

        As a REIT, HCP distributes to its stockholders all or substantially all of its earnings and profits each year. Consequently, as more specifically described below, for stockholders with sufficient tax basis in their HCP common stock and that hold their HCP common stock for the entire taxable year of HCP in which the spin-off occurs, the net effect of the spin-off is that the distribution is expected to be treated as a return of capital not subject to tax.

        Although HCP will ascribe a value to the QCP shares distributed in the spin-off, this valuation is not binding on the IRS or any other tax authority. These taxing authorities could ascribe a higher valuation to the distributed QCP shares, particularly if, following the spin-off, those shares trade at prices significantly above the value ascribed to those shares by HCP. Such a higher valuation may affect the distribution amount and thus the tax consequences of the spin-off to HCP's stockholders.

        HCP will be required to recognize any gain, but will not be permitted to recognize any loss, upon distribution of the QCP shares in the spin-off. HCP does not expect to recognize any taxable income as a result of the spin-off.

Tax Basis and Holding Period of QCP Shares Received by Holders of HCP Stock

        An HCP stockholder's tax basis in shares of QCP common stock received in the spin-off generally will equal the fair market value of such shares on the date of the spin-off, and the holding period for such shares will begin the day after the date of the spin-off.

Tax Treatment of the Spin-Off to U.S. Holders

        The following discussion describes the U.S. federal income tax consequences to a U.S. holder of HCP stock upon the receipt of QCP common stock in the spin-off.

        Ordinary Dividends.    The portion of the spin-off distribution amount received by a U.S. holder that is payable out of HCP's current or accumulated earnings and profits and that is not designated by HCP as a capital gain dividend will generally be taken into account by such U.S. holder as ordinary income and will not be eligible for the dividends received deduction for corporations. With limited exceptions, dividends paid by HCP are not eligible for taxation at the preferential income tax rates for qualified dividends received by U.S. holders that are individuals, trusts and estates from taxable C corporations. Such U.S. holders, however, are taxed at the preferential rates on dividends designated by and received from a REIT such as HCP to the extent that the dividends are attributable to:

    income retained by the REIT in the prior taxable year on which the REIT was subject to corporate level income tax (less the amount of tax);

    dividends received by the REIT from TRSs or other taxable C corporations; or

    income in the prior taxable year from the sales of "built-in gain" property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income).

        HCP's current earnings and profits are measured as of the end of the tax year and are generally allocated to all distributions made during such tax year on a pro rata basis. As a result, a proportionate part of HCP's current earnings and profits for the entire taxable year of HCP in which the spin-off occurs will be allocated to the spin-off distribution. That proportionate part will be treated as dividend income even for a stockholder of record that has not held its HCP stock for the entire taxable year of HCP in which the spin-off occurs. Thus, a stockholder that does not hold its HCP common stock for

60


Table of Contents

the entire taxable year of HCP in which the spin-off occurs may be allocated a disproportionate amount of ordinary income attributable to HCP's current earnings and profits as a result of the spin-off distribution.

        Non-Dividend Distributions.    A distribution to HCP's U.S. holders in excess of HCP's current and accumulated earnings and profits will generally represent a return of capital and will not be taxable to a stockholder to the extent that the amount of such distribution does not exceed the adjusted basis of the holder's HCP shares in respect of which the distribution was made. Rather, the distribution will reduce the adjusted basis of the holder's shares in HCP. To the extent that such distribution exceeds the adjusted basis of a U.S. holder's HCP shares, the holder generally must include such distribution in income as long-term capital gain, or short-term capital gain if the holder's HCP shares have been held for one year or less.

        Capital Gain Dividends.    A distribution that HCP designates as a capital gain dividend will generally be taxed to U.S. holders as long-term capital gain, to the extent that such distribution does not exceed HCP's actual net capital gain for the taxable year, without regard to the period for which the holder that receives such distribution has held its HCP stock. Corporate U.S. holders may be required to treat up to 20% of some capital gain dividends as ordinary income. Long-term capital gains are generally taxable at reduced maximum federal rates in the case of U.S. holders that are individuals, trusts and estates, and ordinary income rates in the case of stockholders that are corporations.

Tax Treatment of the Spin-Off to Non-U.S. Holders

        The following discussion describes the U.S. federal income tax consequences to a non-U.S. holder of HCP stock upon the receipt of QCP common stock in the spin-off.

        Ordinary Dividends.    The portion of the spin-off distribution amount received by a non-U.S. holder that is (1) payable out of HCP's earnings and profits, (2) not attributable to HCP's capital gains and (3) not effectively connected with a U.S. trade or business of the non-U.S. holder, will be treated as a dividend that is subject to U.S. withholding tax at the rate of 30%, unless reduced or eliminated by treaty.

        In general, non-U.S. holders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of HCP stock. In cases where the dividend income from a non-U.S. holder's investment in HCP stock is, or is treated as, effectively connected with the non-U.S. holder's conduct of a U.S. trade or business, the non-U.S. holder generally will be subject to U.S. federal income tax at graduated rates, in the same manner as U.S. holders are taxed with respect to such dividends. Such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. holder. The income may also be subject to the 30% (or such lower rate as may be specified by an applicable income tax treaty) branch profits tax in the case of a non-U.S. holder that is a corporation.

        Non-Dividend Distributions.    Unless HCP's stock constitutes a U.S. real property interest ("USRPI"), the spin-off distribution amount, to the extent not made out of HCP's earnings and profits, will not be subject to U.S. income tax. If HCP cannot determine at the time of the spin-off whether or not the spin-off distribution amount will exceed current and accumulated earnings and profits, HCP or the applicable withholding agent is expected to withhold on the spin-off distributions at the rate applicable to ordinary dividends, as described above.

        If HCP's stock constitutes a USRPI, as described below, distributions that it makes in excess of the sum of (a) the stockholder's proportionate share of HCP's earnings and profits, plus (b) the stockholder's basis in its HCP stock, will be taxed under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") in the same manner as if the HCP stock had been sold, and the collection of the tax would be enforced by a refundable withholding tax at a rate of 15% of the amount by which

61


Table of Contents

the distribution exceeds the stockholder's share of HCP's earnings and profits. In such situations, the non-U.S. holder would be required to file a U.S. federal income tax return and would be subject to the same treatment and same tax rates as a U.S. holder with respect to such excess, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals.

        Subject to certain exceptions discussed below, HCP's stock will be treated as a USRPI if, at any time during a prescribed testing period, 50% or more of its assets consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor. We expect that 50% or more of HCP's assets will consist of USRPIs. Even if the foregoing 50% test is met, however, HCP's stock nonetheless will not constitute a USRPI if HCP is a "domestically-controlled qualified investment entity." A domestically-controlled qualified investment entity includes a REIT, less than 50% of the value of which is held directly or indirectly by non-U.S. holders at all times during a specified testing period (after applying certain presumptions regarding the ownership of HCP stock, as described in the Code). Although it is anticipated that HCP will be a domestically-controlled qualified investment entity, and that a distribution with respect to HCP's stock in excess of HCP's earnings and profits will not be subject to taxation under FIRPTA, no assurance can be given that HCP is or will remain a domestically-controlled qualified investment entity.

        In the event that HCP is not a domestically-controlled qualified investment entity, but its stock is "regularly traded," as defined by applicable Treasury Regulations, on an established securities market, a distribution to a non-U.S. holder nonetheless would not be subject to tax under FIRPTA; provided that the non-U.S. holder held 10% or less (or 5% or less prior to December 18, 2015) of HCP's stock at all times during a specified testing period. It is anticipated that HCP's stock will be regularly traded.

        Gain in respect of a non-dividend distribution that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. holder in two cases: (1) if the non-U.S. holder's investment in HCP stock is effectively connected with a U.S. trade or business conducted by such non-U.S. holder, the non-U.S. holder will be subject to the same treatment as a U.S. holder with respect to such gain, or (2) if the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other requirements are met, the nonresident alien individual will be subject to a 30% tax on the individual's capital gain.

        Capital Gain Dividends.    Under FIRPTA, a dividend that HCP makes to a non-U.S. holder, to the extent attributable to gains from dispositions of USRPIs that HCP held directly or through pass-through subsidiaries (such gains, "USRPI capital gains"), will, except as described below, be considered effectively connected with a U.S. trade or business of the non-U.S. holder and will be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations. HCP will be required to withhold tax equal to 35% of the maximum amount that could have been designated as a USRPI capital gain dividend. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a non-U.S. holder that is a corporation. A distribution is not a USRPI capital gain dividend if HCP held an interest in the underlying asset solely as a creditor.

        In addition, if a non-U.S. holder owning more than 10% of HCP's common stock disposes of such stock during the 30-day period preceding the ex-dividend date of any dividend payment by HCP, and such non-U.S. holder acquires or enters into a contract or option to acquire HCP's common stock within 61 days of the first day of such 30-day period described above, and any portion of such dividend payment would, but for the disposition, be treated as USRPI capital gain to such non-U.S. holder under FIRPTA, then such non-U.S. holder will be treated as having USRPI capital gain in an amount that, but for the disposition, would have been treated as USRPI capital gain.

        Capital gain dividends received by a non-U.S. holder that are attributable to dispositions of HCP's assets other than USRPIs are not subject to U.S. federal income tax, unless (1) the gain is effectively connected with the non-U.S. holder's U.S. trade or business, in which case the non-U.S. holder would

62


Table of Contents

be subject to the same treatment as U.S. holders with respect to such gain, or (2) the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other requirements are met, in which case the non-U.S. holder will incur a 30% tax on his capital gains.

        A dividend that would otherwise have been treated as a USRPI capital gain dividend will not be so treated or be subject to FIRPTA, and generally will not be treated as income that is effectively connected with a U.S. trade or business, but instead will be treated in the same manner as ordinary income dividends (discussed above); provided that (1) the dividend is received with respect to a class of stock that is regularly traded on an established securities market located in the United States, and (2) the recipient non-U.S. holder does not own more than 10% of that class of stock at any time during the year ending on the date on which the dividend is received. HCP anticipates that its stock will be "regularly traded" on an established securities exchange.

        Special FIRPTA Rules.    Recently enacted amendments to FIRPTA create certain exemptions from FIRPTA and otherwise modify the application of the foregoing FIRPTA rules for particular types of non-U.S. investors, including "qualified foreign pension funds" and their wholly owned foreign subsidiaries and certain widely held, publicly-traded "qualified collective investment vehicles."

        Withholding of Amounts Distributable to Non-U.S. Holders in the Spin-off.    If withholding is required on any amounts otherwise distributable to a non-U.S. holder in the spin-off, HCP or other applicable withholding agents would collect the amount required to be withheld by converting to cash for remittance to the IRS a sufficient portion of QCP common stock that such non-U.S. holder would otherwise receive or would withhold from other property held in the non-U.S. holder's account with the withholding agent, and such holder may bear brokerage or other costs for this withholding procedure. A non-U.S. holder may seek a refund from the IRS of any amounts withheld if it is subsequently determined that the amounts withheld exceeded the holder's U.S. tax liability for the year in which the spin-off occurred.

        Other Withholding Rules.    Withholding at a rate of 30% is generally required on dividends (including any portion of the spin-off distribution treated as a dividend) in respect of HCP common stock held by or through certain foreign financial institutions (including investment funds), unless such institution enters into an agreement with the Treasury to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution to the extent such interests or accounts are held by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments. Accordingly, the entity through which HCP common stock is held will affect the determination of whether such withholding is required. Similarly, dividends in respect of HCP common stock held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exemptions will generally be subject to withholding at a rate of 30%, unless such entity either (i) certifies that such entity does not have any "substantial United States owners" or (ii) provides certain information regarding the entity's "substantial United States owners," which HCP or the applicable withholding agent will in turn provide to the Secretary of the Treasury. An intergovernmental agreement with an applicable foreign country, or future Treasury Regulations or other guidance may modify these requirements. HCP will not pay any additional amounts to stockholders in respect of any amounts withheld. Non-U.S. holders are encouraged to consult their tax advisors regarding the possible implications of these rules on their receipt of QCP common stock in the spin-off.

Tax Treatment of the Spin-Off to Tax-Exempt Entities

        Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation. Such entities, however, may be subject to taxation on their unrelated business taxable income ("UBTI"). While some

63


Table of Contents

investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt holder has not held HCP stock as "debt financed property" within the meaning of the Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the tax-exempt holder), and (2) such HCP stock is not otherwise used in an unrelated trade or business, the spin-off generally should not give rise to UBTI to a tax-exempt holder.

        Tax-exempt holders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. federal income taxation under sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code are subject to different UBTI rules, which generally require such stockholders to characterize distributions that HCP makes as UBTI.

        In certain circumstances, a pension trust that owns more than 10% of HCP's stock could be required to treat a percentage of the dividends as UBTI, if HCP is a "pension-held REIT." HCP will not be a pension-held REIT unless (1) it is required to "look through" one or more of its pension stockholders in order to satisfy certain REIT requirements and (2) either (i) one pension trust owns more than 25% of the value of HCP's stock, or (ii) a group of pension trusts, each individually holding more than 10% of the value of HCP's stock, collectively owns more than 50% of HCP's stock. Certain restrictions on ownership and transfer of HCP's stock should generally prevent a tax-exempt entity from owning more than 10% of the value of HCP's stock, and should generally prevent HCP from becoming a pension-held REIT.

    Time for Determination of the Tax Impact of the Spin-Off

        The actual tax impact of the spin-off will be affected by a number of factors that are unknown at this time, including HCP's final earnings and profits for 2016 (including as a result of the gain or loss, if any, HCP recognizes in the spin-off or as a result of the internal restructuring transactions necessary to effect the Spin-Off), the fair market value of QCP's common stock on the date of the spin-off, and the extent to which HCP engages in sales of FIRPTA or other capital assets during the year of the spin-off. Thus, a definitive calculation of the U.S. federal income tax impact of the spin-off will not be possible until after the end of the 2016 calendar year. HCP will notify its stockholders of the tax attributes of the spin-off (including the spin-off distribution amount) on an IRS Form 1099-DIV. The fair market value of QCP's common stock reported by HCP to you on IRS Form 1099-DIV may differ from the trading price of QCP's common stock on the distribution date.

Conditions to the Spin-Off

        We expect that the Spin-Off will be effective on the distribution date; provided that the following conditions, among others, have been satisfied or waived by the board of directors of HCP:

    each of the Separation and Distribution Agreement, the Tax Matters Agreement and the Transition Services Agreement shall have been duly executed and delivered by the parties thereto;

    certain restructuring steps shall have been completed in accordance with the plan of restructuring contemplated in the Separation and Distribution Agreement;

    HCP shall have received such solvency opinions, each in such form and substance, as it shall deem necessary, appropriate or advisable in connection with the consummation of the Spin-Off;

    the SEC shall have declared effective QCP's registration statement on Form 10, of which this information statement is a part, under the Exchange Act, and no stop order relating to the registration statement shall be in effect, and no proceedings for such purpose shall be pending before, or threatened by, the SEC, and this information statement shall have been mailed to holders of HCP's common stock as of the record date;

64


Table of Contents

    all actions and filings necessary or appropriate under applicable federal, state or foreign securities or "blue sky" laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;

    the QCP common stock to be delivered in the Spin-Off shall have been accepted for listing on the NYSE, subject to compliance with applicable listing requirements;

    no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off or the Restructuring shall be threatened, pending or in effect;

    all required governmental and third-party approvals shall have been obtained and be in full force and effect;

    QCP shall have entered into the financing transactions described in this information statement and contemplated to occur on or prior to the Spin-Off, and HCP shall have entered into the financing transactions and credit agreement amendments to be entered into in connection with the Restructuring and the respective amendments thereunder shall have become effective and financings thereunder shall have been consummated and shall be in full force and effect;

    HCP and QCP shall each have taken all necessary action that may be required to provide for the adoption by QCP of its amended and restated charter and bylaws, and QCP shall have filed its related Articles of Amendment and Restatement with the Maryland State Department of Assessments and Taxation; and

    no event or development shall have occurred or exist that, in the judgment of the board of directors of HCP, in its sole discretion, makes it inadvisable to effect the Spin-Off.

        The fulfillment of the above conditions will not create any obligation on behalf of HCP to effect the Spin-Off. Until the Spin-Off has occurred, HCP has the right to terminate the Spin-Off, even if all the conditions have been satisfied, if the board of directors of HCP determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of HCP and its stockholders or that market conditions or other circumstances are such that the separation of QCP and HCP is no longer advisable at that time.

Solvency Opinion

        In furtherance of the related condition referenced above, prior to the Spin-Off the boards of directors of HCP and QCP expect to obtain an opinion from an independent financial advisory firm to the effect that:

    after giving effect to the consummation of the Restructuring and the Spin-Off:

    the fair value of the assets of each of HCP and QCP will exceed its debts;

    each of HCP and QCP should each be able to pay its respective debts as they become due in the usual course of business;

    neither HCP nor QCP will have an unreasonably small amount of assets (or capital) for the operation of the businesses in which each is engaged or in which management has indicated each intends to engage; and

    the fair value of the assets of each of HCP and QCP would exceed the sum of its total liabilities and total par value of its issued capital stock.

65


Table of Contents

Regulatory Approvals

        We must complete the necessary registration under U.S. federal securities laws of our common stock, as well as satisfy the applicable NYSE listing requirements for such shares. See "—Conditions to the Spin-Off."

No Appraisal Rights

        HCP stockholders will not have any appraisal rights in connection with the Spin-Off.

Accounting Treatment

        At the completion of the Spin-Off, the balance sheet of QCP will include the assets and liabilities associated with the Properties. The assets and liabilities of QCP will be recorded at their respective historical carrying values at the completion of the Spin-Off in accordance with the provisions of the Financial Accounting Standards Board's Accounting Standards Codification Topic 505-60, Spinoffs and Reverse Spinoffs.

Reasons for Furnishing this Information Statement

        We are furnishing this information statement solely to provide information to HCP stockholders who will receive shares of our common stock in the Spin-Off. You should not construe this information statement as an inducement or encouragement to buy, hold or sell any of our securities or any securities of HCP. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither we nor HCP undertake any obligation to update the information except in the normal course of HCP's business and our public disclosure obligations and practices.

66


Table of Contents


DIVIDEND POLICY

        We are a newly-formed company that has not commenced operations and, as a result, we have not paid any distributions. We intend to make distributions whereby we expect to distribute at least 90% of our REIT taxable income to our stockholders out of assets legally available therefor. To help create additional liquidity and flexibility to execute our strategy, and in light of our high tenant concentration in one operator, HCRMC, and the ongoing headwinds facing HCRMC and the broader post-acute/skilled nursing industry, we anticipate initially instituting a conservative distribution policy. Our board of directors will regularly evaluate, determine and, if it deems appropriate, adjust our distribution levels.

        To qualify as a REIT, we must distribute to our stockholders an amount at least equal to:

      (i)
      90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with GAAP); plus

      (ii)
      90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less

      (iii)
      any excess non-cash income (as determined under the Code). See "U.S. Federal Income Tax Considerations."

        Our distribution policy may change, and any estimated distributions may not be made or sustained. Distributions made by us will be authorized and determined by our board of directors, in its sole discretion, out of legally available funds, and will be dependent upon a number of factors, including restrictions under applicable law, actual and projected financial condition, liquidity, funds from operations and results of operations, the revenues we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, the annual REIT distribution requirements and such other factors as our board of directors deems relevant. For more information regarding risk factors that could materially and adversely affect our ability to make distributions, see "Risk Factors." For more information regarding our financing arrangements, see "Description of Financing and Material Indebtedness."

        Our distributions may be funded from a variety of sources. To the extent that our cash available for distribution is less than 90% of our taxable income, we may consider various means to cover any such shortfall, including borrowing under a revolving credit facility or other loans, selling certain of our assets or using a portion of the net proceeds we receive from future offerings of equity or debt securities or declaring taxable share dividends. In addition, our charter allows us to issue shares of preferred stock, including Class A Preferred Stock, that could have a preference on distributions, and if we do, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock. Accordingly, no dividends may be declared or paid on our common stock unless dividends have been paid or set aside for payment on all outstanding shares of preferred stock that have a preference on distributions, including the Class A Preferred Stock. See "Description of Our Capital Stock—Preferred Stock—Class A Capital Stock." Certain covenants in our debt agreements may also limit our ability to declare or pay dividends. See "Description of Financing and Material Indebtedness."

        In the future we may distribute taxable dividends that are payable in cash and shares of our common stock where up to only 20% of such a dividend is made in cash. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. For a discussion of the tax treatment of distributions to holders of our common shares, see "U.S. Federal Income Tax Considerations."

67


Table of Contents


DESCRIPTION OF FINANCING AND MATERIAL INDEBTEDNESS

        We and certain of our subsidiaries anticipate that we will incur up to $1.81 billion aggregate principal amount in new indebtedness pursuant to a senior secured term loan, senior secured notes and the Promissory Notes, in addition to having up to $100 million available under a senior secured revolving credit facility and $100 million available under an unsecured revolving credit facility. HCP will be the sole lender under our unsecured revolving credit facility (which amounts may only be drawn subject to certain limitations, including the unavailability of borrowings under the senior secured revolving credit facility). HCP will also be the obligee under the Promissory Notes. See "Our Relationship with HCP Following the Spin-Off."

        Proceeds of the senior secured term loan together with the proceeds of the senior secured notes, will be used to fund the Spin-Off and to pay related fees, costs and expenses. Proceeds from loans under the senior secured revolving credit facility, swingline loans and letters of credit will be used for working capital and general corporate purposes. We anticipate that no letters of credit will be outstanding under the senior secured credit facilities on the date of the consummation of the Spin-Off.

        We expect that approximately $1.68 billion in cash from the proceeds of QCP's new debt will be transferred to HCP together with QCP common stock in connection with the transfer of assets to us by HCP in connection with the Spin-Off, and will be used to fund the repayment of a portion of HCP's outstanding debt. Any remaining proceeds will be available to us for general corporate purposes, including funding working capital.

Credit Facilities

Senior Secured Credit Facilities

        QCP SNF West REIT, LLC, QCP SNF Central REIT, LLC, QCP SNF East REIT, LLC and QCP AL REIT, LLC, each a newly-formed Delaware limited liability company and subsidiaries of Parent REIT (defined below) (the "Borrowers"), will be borrowers under the senior secured term loan and the senior secured revolving credit facility (collectively, the "senior secured credit facilities").

        The senior secured credit facilities will be secured on a first lien priority basis on substantially all of the assets of QCP, QCP HoldCo REIT, LLC, a Delaware limited liability company ("Parent REIT"), the Borrowers and QCP's wholly-owned domestic subsidiaries, other than immaterial subsidiaries, unrestricted subsidiaries to be designated by QCP and certain other customarily excluded subsidiaries (the "Subsidiary Guarantors") and by a pledge of capital stock (other than the capital stock of QCP), including capital stock of the Subsidiary Guarantors and 65% of the capital stock of the first-tier foreign subsidiaries that are not Subsidiary Guarantors, in each case subject to certain exceptions. The senior secured credit facilities will be unconditionally guaranteed, jointly and severally, by QCP, Parent REIT and the Subsidiary Guarantors.

        The senior secured credit facilities will provide for senior secured financing of up to $1.1 billion, consisting of the senior secured term loan in an aggregate principal amount of $1.0 billion, with a maturity of six years and the senior secured revolving credit facility in an aggregate principal amount of up to $100 million, with a maturity of five years, including both a letter of credit sub-facility and a swingline loan sub-facility. In addition, we may request one or more incremental term loans and/or increase commitments under the senior secured revolving credit facility and/or request one or more incremental senior secured revolving credit facility tranches in an aggregate amount of up to the sum of (x) $175 million plus (y) any amounts so long as, (i) in the case of loans under additional credit facilities that rank pari passu with the liens on the collateral securing the senior secured credit facilities, our funded debt outstanding under senior secured credit facilities plus all other debt outstanding that is secured by a first priority lien (net of unrestricted cash and cash equivalents) is less than or equal to 25% of our total assets and (ii) in the case of loans under additional credit facilities that rank junior to

68


Table of Contents

the liens on the collateral securing the senior secured credit facilities, our debt outstanding that is secured by a lien (net of unrestricted cash and cash equivalents) is less than or equal to 40% of our total assets, and (z) the amount of any voluntary repayments of the senior secured term loan or reduction in the commitments in respect of the senior secured revolving credit facility, subject to certain conditions and receipt of commitments by existing or additional lenders.

        All borrowings under the senior secured revolving credit facility following the date the senior secured term loan is initially drawn will be subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties.

        Borrowings under the senior secured credit facilities will bear interest at a rate equal to, at our option, either (a) a LIBOR rate determined by reference to the London interbank offered rate for dollars for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00% floor in the case of senior secured term loans or (b) a base rate determined by reference to the highest of (i) the rate of interest publicly announced by Barclays Bank PLC as the "Prime Rate" in New York, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus an applicable margin. The initial applicable margin for borrowings is expected to be 5.25% with respect to LIBOR borrowings and 4.25% with respect to base rate borrowings under the senior secured term loan and base rate borrowings and swingline borrowings under the senior secured revolving credit facilities.

        In addition to paying interest on outstanding principal under the senior secured credit facilities, we will be required to pay a commitment fee equal to 0.50% per annum to the lenders under the senior secured revolving credit facility in respect of the unutilized commitments thereunder. We will also be required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR rate borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer's customary documentary and processing fees and charges and a fronting fee computed at a rate equal to 0.125% per annum on the daily stated amount of each letter of credit.

        The senior secured credit facilities will require scheduled quarterly payments on the senior secured term loan in annual amounts equal to 1.0% of the original principal amount of the senior secured term loan, with the balance paid at maturity. In addition, the senior secured credit facilities will require us to prepay outstanding senior secured term loan borrowings, subject to certain exceptions, with: (i) 100% of the net cash proceeds of all non-ordinary course asset sales, (excluding the sale of the 17 non-strategic properties in the process of being divested as described herein), other dispositions of property (including insurance and condemnation proceeds), in each case subject to certain exceptions and provided that we may (a) reinvest within 12 months or (b) commit to reinvest those proceeds within 12 months and so reinvest such proceeds within 18 months; and (ii) 100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the senior secured credit facilities.

        QCP may voluntarily repay outstanding loans under the senior secured credit facilities at any time, without premium or penalty, subject to the following proviso and subject to customary "breakage" costs with respect to LIBOR rate loans; provided that voluntary prepayments of the senior secured term loan, or any repricing amendments resulting in a repricing event related thereto, shall be subject to a prepayment premium or fee of (x) prior to the first anniversary of the closing date, 2.00% of the aggregate principal amount of the senior secured term loan so prepaid or with respect to which the pricing has been reduced, (y) on or after the first anniversary of the closing date and prior to the second anniversary of the closing date, 1.00% of the aggregate principal amount of the senior secured term loan so prepaid or for which the pricing has been reduced and (z) on or after the second anniversary of the closing date, no prepayment shall be payable.

69


Table of Contents

        The senior secured credit facilities will require that we, commencing with the first full fiscal quarter after the consummation of the Spin-Off comply on a quarterly basis with a debt service coverage ratio of at least 1.75 to 1.00. For purposes of calculating the debt service coverage ratio, at any time prior to an amendment of the Master Lease resulting in the reduction of the aggregate cash monthly rent payable thereunder by more than 20% (a "material amendment"), subject to certain exceptions, EBITDA shall be calculated by reference to the HCR tenant EBITDAR with respect to each property leased to HCRMC, and shall include operating income from the non-HCRMC properties. At any time following a material amendment, EBITDA shall be the consolidated EBITDA of QCP and its restricted subsidiaries.

        The senior secured credit facilities will contain certain customary affirmative covenants and events of default. The negative covenants in the senior secured credit facilities will include, among other things, limitations (none of which are absolute) on our ability to: incur additional debt or issue certain preferred shares; create liens on certain assets; make certain loans or investments (including acquisitions); pay dividends on or make distributions in respect of our capital stock or make other restricted payments; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; sell assets; enter into certain transactions with our affiliates; change our lines of business; restrict dividends from our subsidiaries or restrict liens; prepay certain junior lien debt or material unsecured debt; modify the terms of certain debt or organizational agreements; and make any amendment or waiver to, or replacement or termination of, to the Master Lease or certain other material leases (including amendments, waivers, replacements or terminations that would be materially adverse to the lenders; provided that neither dispositions and investments otherwise permitted under the credit agreement, nor any rent reductions in connection with the Master Lease, shall be considered "materially adverse" for purposes of the covenant).

        The events of default in the senior secures credit facilities will include (with customary thresholds and grace periods) non payment of principal, interest or other amounts due thereunder; violation of covenants; material inaccuracy of a representation or warranty when made or deemed made; cross-default (after the expiration of any grace period) and cross-acceleration to material recourse indebtedness; bankruptcy events with respect to QCP or any of its material subsidiaries; general inability to pay debts; certain ERISA events; unpaid, uninsured final monetary judgments or non-monetary judgements that have not been discharged; invalidity of a material portion of the guarantees or of liens on a material portion of the collateral; and a change of control.

Unsecured Revolving Credit Facility

        QCP will be the borrower under the unsecured revolving credit facility. The unsecured revolving credit facility will be guaranteed, jointly and severally, by Parent REIT, the Borrowers and the Subsidiary Guarantors. HCP will be the sole lender under the unsecured revolving credit facility.

        The unsecured revolving credit facility will provide for an aggregate principal amount of up to $100 million, maturing in 2018. Commitments under the unsecured revolving credit facility will be decreased each calendar month by an amount equal to 50% of QCP's and its restricted subsidiaries' retained cash flow for each such calendar month.

        All borrowings under the unsecured revolving credit facility following the closing date will be subject to the satisfaction of certain conditions, including (i) the senior secured revolving credit facility being unavailable to the Borrowers, (ii) the failure of HCR III to pay rent and (iii) other customary conditions, including the absence of a default and the accuracy of representations and warranties. Additionally, we may only draw on the unsecured revolving credit facility prior to the one-year anniversary of the closing of the Spin-Off.

70


Table of Contents

        Proceeds of the unsecured revolving credit facility drawn will be used for (i) general corporate and administrative costs, (ii) fees of accountants and financial and legal advisors and (iii) any scheduled debt service.

        Borrowings under the unsecured revolving credit facility will bear interest at a rate equal to a LIBOR rate determined by reference to the London interbank offered rate for dollars for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00% floor, plus an applicable margin of 6.25%. In addition to paying interest on outstanding principal under unsecured revolving credit facility, QCP will be required to pay a facility fee equal to 0.50% per annum of the maximum capacity under unsecured revolving credit facility to HCP, the lender under the unsecured revolving credit facility.

        In addition, the unsecured revolving credit facility will require QCP to prepay outstanding borrowings on a monthly basis in an amount equal to the lesser of (i) 95.0% of the retained cash flow for the prior month and (ii) the aggregate amount of loans outstanding under the unsecured revolving credit facility. QCP may voluntarily repay outstanding loans under the unsecured revolving credit facility at any time, without prepayment premium or penalty, subject to customary "breakage" costs with respect to LIBOR rate loans.

        The credit agreement governing the unsecured revolving credit facility will contain certain customary affirmative covenants, negative covenants and events of default that are substantially the same as those under the senior secured notes, except that (i) such covenants will be modified to reflect the unsecured nature of the unsecured revolving credit facility, (ii) such covenants will not permit additional indebtedness, including under any incremental facility pursuant to the senior secured credit facilities, without the consent of HCP, the lender under the unsecured revolving credit facility, (iii) we may not amend or modify the terms of any existing indebtedness in a manner that is materially adverse to HCP, the lender under the unsecured revolving credit facility, and (iv) we may not pay dividends in excess of a percentage of retained cash flow to be agreed, subject to certain limited exceptions.

Senior Secured Notes

        Prior to the consummation of the Spin-Off, we will issue, through the Borrowers, 8.125% senior secured notes due 2023 in a total aggregate principal amount of $750 million. The Notes will mature on November 1, 2023. The gross proceeds of the offering of the senior secured notes will be deposited into an escrow account until released upon consummation of the Spin-Off or, if the Spin-Off is not consummated prior to December 15, 2016, the proceeds will be used to redeem the senior secured notes at 100% of the gross proceeds of the senior secured notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

        Senior secured notes will bear interest at a rate of 8.125% per annum, payable semiannually.

        We expect that the senior secured notes will be secured on a second lien basis by the same collateral securing our senior secured credit facilities and will be guaranteed, jointly and severally, on a senior basis, by QCP and our wholly-owned domestic subsidiaries, other than immaterial subsidiaries, unrestricted subsidiaries to be designated by QCP and certain other customarily excluded subsidiaries, that are borrowers or guarantors under our senior secured credit facilities.

        On or after November 1, 2019, we will be permitted to redeem the senior secured notes at our option, in whole at any time or in part from time to time, at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem up to 35% of the aggregate principal amount of the senior secured notes on or prior to November 1, 2019 in an amount equal to the net proceeds from certain equity offerings at the redemption price set forth in the indenture. Prior to November 1, 2019, the Issuers may redeem the senior secured notes, in whole or in part, at a price equal to 100% of the principal amount thereof,

71


Table of Contents

plus accrued and unpaid interest, if any, plus the applicable "make-whole" premium set forth in the indenture. There is no sinking fund for the senior secured notes.

        Upon certain events constituting a change of control under the indenture, the noteholders will have the right to require us to offer to repurchase the senior secured notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, to, but not including, the date of purchase.

        Senior secured notes are expected to have terms customary for high yield senior notes of this type, including covenants relating to our ability to sell assets, pay dividends and make other distributions, redeem or repurchase our capital stock, incur additional debt and issue capital stock, create liens, consolidate, merge or sell substantially all of our assets, enter into certain transactions with our affiliates, make loans, investments or advances, or repay subordinated indebtedness. The indenture will also will require that we maintain a minimum debt service coverage ratio of 1.50 to 1.00, which will be tested on a quarterly basis and will include financial covenants restricting our ability to incur debt.

        The indenture will also provide for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the senior secured notes to become or to be declared due and payable. Events of default (subject in certain cases to customary grace and cure periods), will include, among others, nonpayment of principal or interest, breach of other covenants or agreements in the indenture governing the senior secured notes, failure to pay certain other indebtedness, failure to pay certain final judgments, failure of certain guarantees to be enforceable, and certain events of bankruptcy or insolvency.

        Nothing in this summary or otherwise herein shall constitute or be deemed to constitute an offer to sell or the solicitation of an offer to buy the senior secured notes. The foregoing description and the other information in this information statement regarding the potential offering of the senior secured notes is included in this information statement solely for informational purposes. Nothing in this information statement should be construed as an offer to sell, or the solicitation of an offer to buy, any such senior secured notes.

72


Table of Contents


CAPITALIZATION

        The following table sets forth QCP's Predecessor's cash and cash equivalents and capitalization as of June 30, 2016:

    on a historical basis; and

    QCP's cash and cash equivalents and capitalization as of June 30, 2016 on a pro forma basis to give effect to the Spin-Off and related transactions as if they occurred on June 30, 2016, including: (i) our entry into the senior secured term loan, the senior secured revolving credit facility, the unsecured revolving credit facility, issuance of senior secured notes and the Promissory Notes, and the anticipated interest expense related thereto, (ii) the expected transfer to HCP of approximately $1.68 billion of proceeds from our borrowings (not reflective of the cash retained by QCP equal to a pro rata share of rent for the month during Spin-Off), (iii) the elimination of the net parent investment in QCP's Predecessor and the creation of invested capital in QCP upon the transfer of the equity of the entities that hold the Properties, the Deferred Rent Obligation and HCP's approximately 9% equity investment in HCRMC, (iv) the sale of 2,000 shares of QCP Class A Preferred Stock to HCP and (v) the transfer of approximately 93.6 million shares of QCP common stock to HCP, which HCP will distribute to HCP stockholders, based on the distribution ratio of one share of QCP common stock for every five shares of HCP common stock. You should review the following table in conjunction with "Unaudited Pro Forma Combined Consolidated Financial Statements," "Selected Historical Combined Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and QCP's Predecessor's combined consolidated financial statements and notes thereto included elsewhere in this information statement.

73


Table of Contents

 
  As of June 30, 2016  
(in thousands except share and per share data)
  QCP's Predecessor
Historical
  QCP
Pro Forma
 

Cash and cash equivalents(1)

  $ 2,648   $ 6,860  

Debt:

             

Senior secured term loan, net(2)

  $   $ 958,220  

Senior secured revolving credit facility(2)

         

Unsecured revolving credit facility(3)

         

Senior secured notes, net(4)

        729,956  

Promissory Notes, net(5)

        59,978  

Total debt(6)

        1,748,154  

Class A Preferred Stock, 2,000 shares issued and outstanding (pro forma)(7)

          2,000  

Equity:

             

Preferred stock, par value $0.01 per share, no shares issued or outstanding (historical); 50,000,000 shares authorized, no shares issued and outstanding (pro forma)

         

Common stock and additional paid-in capital, par value $0.01 per share, no shares issued or outstanding (historical); 200,000,000 shares authorized, 93,564,036 shares issued and outstanding (pro forma)

        946  

Net parent investment

    4,921,893      

Invested capital

        3,177,678  

Total equity

    4,921,893     3,178,624  

Total capitalization

  $ 4,921,893   $ 4,928,778  

(1)
QCP will reduce the total amount of the payment to HCP equal to $1.3 million per day for each day remaining in the month that the Spin-Off is consummated. As the date of the Spin-Off is not yet known, the amount of cash to be retained by us is not known, and this cash is not reflected in our pro forma cash and cash equivalents balance.

(2)
Upon the closing of the Spin-Off and related transactions, we will enter into the senior secured credit facilities, which are comprised of the $100 million senior secured revolving credit facility, none of which is expected to be drawn at the closing of the Spin-Off and related transactions, and the $1.0 billion senior secured term loan, all of which will be drawn at the closing of the Spin-Off and related transactions, net of related fees, costs and expenses estimated to be $41.8 million for the senior secured term loan and $2.5 million for the senior secured revolving credit facility. We intend to use the proceeds from the senior secured term loan to fund a portion of the Spin-Off consideration. See "Description of Financing and Material Indebtedness—Senior Secured Credit Facilities" for additional details.

(3)
Upon the closing of the Spin-Off and related transactions, we will enter into the $100 million unsecured revolving credit facility, none of which is expected to be drawn at the closing of the Spin-Off and related transactions. We expect to incur $1.2 million for related fees, costs and expenses upon entering into the unsecured revolving credit facility. See "Description of Financing and Material Indebtedness—Unsecured Revolving Credit Facility" for additional details.

(4)
Represents the $750 million principal amount of the senior secured notes prior to the initial purchasers' discount to the offering price net of related fees, costs and expenses estimated to be $20.0 million. We intend to use the proceeds from the offering of the senior secured notes to fund a portion of the Spin-Off consideration. If the Spin-Off is not consummated on or prior to December 15, 2016 Date, senior secured notes will be subject to a special mandatory redemption. See "Description of Financing and Material Indebtedness—Senior Secured Notes" for additional details.

(5)
Prior to the Spin-Off and related transactions, certain of the entities that hold the Properties, the equity of which will be transferred to us, will issue the Promissory Notes, with an aggregate outstanding principal amount of approximately $60 million net of expected fees of $22,000. Such entities will distribute the Promissory Notes to HCP and certain subsidiaries that HCP will continue to own following the Spin-Off. See "Our Relationship with HCP Following the Spin-Off—Promissory Notes" for additional details.

74


Table of Contents

(6)
In connection with the financing, we expect to incur mortgage transfer fees, which will reduce the cash transferred to HCP. We estimate these fees to be approximately $2 million. Since the amount is not known, these expenses have not been reflected in the current financing fees.

(7)
Prior to the Spin-Off and related transactions, we will issue Class A Preferred Stock to HCP with an aggregate liquidation preference of $2 million, which is expected to be sold by HCP to one or more institutional investors following the Spin-Off, which may include one or more of the initial purchasers. See "Description Of Our Capital Stock—Preferred Stock—Class A Preferred Stock" for additional details.

75


Table of Contents


UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

        The accompanying unaudited pro forma combined consolidated financial statements presented below have been prepared to reflect the effect of certain pro forma adjustments to the historical financial statements of QCP and the historical combined consolidated financial statements of QCP's Predecessor. All significant pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma combined consolidated financial statements, which you should read in conjunction with such unaudited pro forma combined consolidated financial statements.

        The accompanying unaudited pro forma combined consolidated financial statements give effect to the Spin-Off and the related transactions, including:

    our entry into the senior secured term loan, the senior secured revolving credit facility, the unsecured revolving credit facility, issuance of senior secured notes and the Promissory Notes, and the anticipated interest expense related thereto;

    the expected transfer to HCP of approximately $1.68 billion of proceeds from our borrowings (not reflective of the cash retained by QCP equal to a pro rata share of rent for the month during Spin-Off);

    the elimination of net parent investment in QCP's Predecessor and the creation of invested capital in QCP upon the transfer of the equity of the entities that hold the Properties, the Deferred Rent Obligation and HCP's approximately 9% equity investment in HCRMC;

    the sale of 2,000 shares of QCP Class A Preferred Stock to HCP; and

    the transfer of approximately 93.6 million shares of QCP common stock to HCP, which HCP will distribute to HCP stockholders, based on the distribution ratio of one share of QCP common stock for every five shares of HCP common stock.

        The unaudited pro forma combined consolidated balance sheet assumes the Spin-Off and the related transactions occurred on June 30, 2016. The unaudited pro forma combined consolidated statements of income presented for the six months ended June 30, 2016 and for the year ended December 31, 2015 assume the Spin-Off and the related transactions occurred on January 1, 2015.

        These unaudited pro forma combined consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the accompanying notes. The pro forma adjustments reflect events that are (i) directly attributable to the transactions referred to above, (ii) factually supportable, and (iii) with respect to the statements of income, expected to have a continuing impact on us.

        General and administrative costs that we expect to incur, following the Spin-Off, are for items such as compensation costs (including equity-based compensation awards), professional services, office costs and other costs associated with our administrative activities. Our annual general and administrative expenses are anticipated to be approximately $21.0 million to $23.0 million in the first year after the Spin-Off. This range was estimated based on the experience of our management and our discussions with outside service providers, consultants and advisors. Expenses related to equity-based compensation awards that vest immediately upon the Spin-Off, a one-time cash completion bonus payable to our Chief Executive Officer upon the completion of the Spin Off pursuant to the terms of his employment agreement, and potential acquisition costs are not included in these amounts.

        Our historical combined consolidated financial statements reflect expense allocations, including cash and equity-based compensation costs, related to certain HCP corporate functions, including executive oversight, treasury, finance, human resources, tax planning, internal audit, financial reporting, information technology, legal and investor relations. As our historical combined consolidated financial statements already reflect general and administrative expenses that are substantially comparable to our

76


Table of Contents

anticipated general and administrative expenses in the first year after the Spin-Off, we have not adjusted the combined consolidated pro forma financial information for general and administrative expenses.

        In the opinion of QCP's management team, the unaudited pro forma combined consolidated financial statements include necessary adjustments that can be factually supported to reflect the effects of the Spin-Off and related transactions.

        The unaudited pro forma combined consolidated financial statements are presented for illustrative purposes only and do not purport to reflect the results we may achieve in future periods or the historical results that would have been obtained had the above transactions been completed on the dates indicated. The unaudited pro forma combined consolidated financial statements also do not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transactions described above.

        The unaudited pro forma combined consolidated financial statements are derived from and should be read in conjunction with the historical combined consolidated financial statements and accompanying notes included elsewhere in this information statement.

77


Table of Contents


Quality Care Properties, Inc.

UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET

JUNE 30, 2016
(In thousands except share data)

 
  QCP
Historical
  QCP's
Predecessor
Historical
  Pro Forma
Adjustments
  Notes   QCP
Pro Forma
 

Assets

                             

Real estate:

                             

Buildings and improvements

  $   $ 5,085,993   $       $ 5,085,993  

Land

        652,590             652,590  

Accumulated depreciation

        (1,102,349 )           (1,102,349 )

Net real estate

        4,636,234             4,636,234  

Real estate and related assets held for sale, net

        62,151             62,151  

Cash and cash equivalents

    10     2,648     4,202   (A), (B), (C)     6,860  

Intangible assets, net

        219,016             219,016  

Straight-line rent receivables, net

        3,553             3,553  

Other assets, net

        17,163     3,673   (A)     20,836  

Total assets

  $ 10   $ 4,940,765   $ 7,875       $ 4,948,650  

Liabilities and Equity

                             

Liabilities:

                             

Senior secured term loan, net

  $   $   $ 958,220   (A)   $ 958,220  

Senior secured revolving credit facility

                     

Unsecured revolving credit facility

                     

Senior secured notes, net

            729,956   (A)     729,956  

Promissory Notes, net

            59,978   (A), (D)     59,978  

Tenant security deposits and deferred revenue

        5,311             5,311  

Accounts payable and accrued liabilities

        1,133     1,000   (E)     2,133  

Deferred tax liability

        12,428             12,428  

Total liabilities

        18,872     1,748,154         1,768,026  

Commitments and contingencies

                             

Class A Preferred Stock, 2,000 shares issued and outstanding (pro forma)

              2,000   (C)     2,000  

Equity:

                             

Preferred stock par value $0.01 per share, no shares issued or outstanding (historical); 50,000,000 shares authorized, no shares issued and outstanding (pro forma)

                     

Common stock and additional paid-in capital, par value $0.01 per share, 1,000 shares issued and outstanding (historical); 200,000,000 shares authorized, 93,564,036 shares issued and outstanding (pro forma)

    10         936   (B)     946  

Net parent investment

        4,921,893     (4,921,893 ) (D)      

Invested capital

            3,177,678   (B), (D), (E)     3,177,678  

Total equity

    10     4,921,893     (1,743,279 )       3,178,624  

Total liabilities, redeemable preferred stock and equity

  $ 10   $ 4,940,765   $ 7,875       $ 4,948,650  

The accompanying notes are an integral part of these unaudited pro forma combined consolidated financial statements.

78


Table of Contents


Quality Care Properties, Inc.

UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME

SIX MONTHS ENDED JUNE 30, 2016
(in thousands, except share and per share data)

 
  QCP's
Predecessor
Historical
  Pro Forma
Adjustments
  Notes   QCP
Pro Forma
 

Revenues:

                       

Rental and related revenues

  $ 243,175   $       $ 243,175  

Tenant recoveries

    762             762  

Total revenues

    243,937             243,937  

Costs and expenses:

                       

Depreciation and amortization

    93,991             93,991  

Operating

    2,024             2,024  

General and administrative

    9,228             9,228  

Interest

        69,000   (A)     69,000  

Total costs and expenses

    105,243     69,000         174,243  

Other income:

                       

Gain on sales of real estate

    6,460             6,460  

Other income, net

    42             42  

Total other income, net

    6,502             6,502  

Income before income taxes

    145,196     (69,000 )       76,196  

Income tax expense

    (12,841 )           (12,841 )

Net income

    132,355     (69,000 )       63,355  

Preferred stock dividends

                 

Net income applicable to common shares

  $ 132,355   $ (69,000 )     $ 63,355  

Earnings per common share:

                       

Basic

              (B)   $ 0.68  

Diluted

              (B)   $ 0.68  

Weighted average shares used to calculate earnings per common share:

                       

Basic

              (B)     93,564,036  

Diluted

              (B)     93,564,036  

The accompanying notes are an integral part of these unaudited pro forma combined consolidated financial statements.

79


Table of Contents


Quality Care Properties, Inc.

UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2015
(in thousands, except share and per share data)

 
  QCP's
Predecessor
Historical
  Pro Forma
Adjustments
  Notes   QCP
Pro Forma
 

Revenues:

                       

Rental and related revenues

  $ 574,332   $       $ 574,332  

Tenant recoveries

    1,464             1,464  

Total revenues

    575,796             575,796  

Costs and expenses:

                       

Depreciation and amortization

    244,624             244,624  

Operating

    3,729             3,729  

General and administrative

    23,907             23,907  

Impairments, net

    227,383             227,383  

Interest

        138,207   (A)     138,207  

Total costs and expenses

    499,643     138,207         637,850  

Other income:

                       

Gain on sales of real estate

    39,140             39,140  

Other income, net

    70             70  

Total other income, net

    39,210             39,210  

Income (loss) before income taxes and income from and impairments of equity method investment

    115,363     (138,207 )       (22,844 )

Income tax expense

    (798 )           (798 )

Income from equity method investment

    34,510             34,510  

Impairments of equity method investment

    (35,882 )           (35,882 )

Net income (loss)

    113,193     (138,207 )       (25,014 )

Preferred stock dividends

                 

Net income (loss) applicable to common shares

  $ 113,193   $ (138,207 )     $ (25,014 )

Loss per common share:

                       

Basic

              (B)   $ (0.27 )

Diluted

              (B)   $ (0.27 )

Weighted average shares used to calculate earnings per common share:

                       

Basic

              (B)     93,564,036  

Diluted

              (B)     93,564,036  

The accompanying notes are an integral part of these unaudited pro forma combined consolidated financial statements.

80


Table of Contents


Quality Care Properties, Inc.

NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Pro Forma Presentation

The Spin-Off

        On May 9, 2016, HCP, Inc. ("HCP"), announced its plan to spin off its HCR ManorCare, Inc. ("HCRMC") portfolio ("HCRMC Properties"), 28 other healthcare related properties ("non-HCRMC Properties," collectively the "Properties"), a deferred rent obligation ("DRO") due from HCRMC under a master lease (the "Tranche B DRO") and an equity method investment in HCRMC (together the "QCP's Predecessor") (formerly HCP SpinCo, Inc.'s Predecessor) to be controlled by Quality Care Properties, Inc. ("QCP") (formerly known as HCP SpinCo, Inc.). QCP will be an independent, publicly-traded, self-managed and self-administered company. QCP will elect and intends to qualify as a real estate investment trust ("REIT"). The Properties consist of 274 post-acute/skilled nursing properties, 62 memory care/assisted living properties, one surgical hospital and one medical office building across 30 states, including 17 non-strategic properties held for sale, as of June 30, 2016. QCP will have the right to receive the payment of the Tranche B DRO, which totaled $257.5 million as of June 30, 2016.

        To accomplish this separation, HCP created a newly formed Maryland corporation, QCP, which was incorporated and capitalized on June 9, 2016 for $10,000 and 1,000 shares. QCP is currently a wholly-owned subsidiary of HCP. HCP will transfer to us the equity of entities that hold both the Properties and the DRO, as well as an approximately 9.0% equity interest in HCRMC. HCP will effect the Spin-Off by distributing to its stockholders one share of our common stock owned by HCP for every five shares of HCP common stock held at the close of business on the record date for the Spin-Off.

        Prior to the Spin-Off, QCP will issue 2,000 shares of its Class A Preferred Stock that are expected to be sold by HCP to one or more institutional investors following the Spin-Off. Additionally, QCP will sell shares of common stock to HCP. QCP will also issue senior unsecured promissory notes (the "Promissory Notes"), with an aggregate outstanding principal amount of $60 million, and distribute the Promissory Notes to HCP and certain of its subsidiaries such that after the Spin-Off, the Promissory Notes will be obligations of QCP payable to HCP.

        Unless otherwise indicated or except where the context otherwise requires, references to "we," "us," or "our" refer to QCP and its consolidated subsidiaries after giving effect to the transfer of the assets and liabilities from HCP.

The Financing

        In connection with the Spin-Off, we expect to incur approximately $1.81 billion aggregate face value in new debt pursuant to a senior secured term loan, senior secured notes and the Promissory Notes, in addition to having $100 million available under a senior secured revolving credit facility and $100 million available under an unsecured revolving credit facility (which amounts may only be drawn subject to certain limitations, including the unavailability of borrowings under the senior secured revolving credit facility and may only be drawn prior to the one-year anniversary of the closing of the Spin-Off and related transactions). We expect that approximately $1.68 billion in cash from the proceeds of our borrowings will be transferred to HCP together with our common stock, in connection with the transfer of the equity of entities described above. Any remaining proceeds of the debt incurrence(s) will be available to us for general corporate purposes, including funding working capital. The unsecured revolving credit facility will be available for general corporate and administrative costs, fees of accountants and financial and legal advisors and any scheduled debt service.

81


Table of Contents

Note 2.  Adjustments to Unaudited Pro Forma Combined Consolidated Balance Sheet

(A)
Reflects the incurrence of approximately $1.81 billion in aggregate principal amount of new indebtedness, including the senior secured term loan, the senior secured notes and the Promissory Notes, without giving effect to deferred financing fees of approximately $65.5 million. The new indebtedness is presented on the unaudited pro forma combined consolidated balance sheet net of $61.8 million of deferred financing fees. The senior secured revolving credit facility and the unsecured revolving credit facility are expected to be undrawn at the date the Spin-Off is consummated and $3.7 million of deferred financing fees has been capitalized within other assets, net. Proceeds from the incurrence of our new indebtedness less all financing fees and costs will total $1.68 billion, excluding the Promissory Notes. In connection with the financing, we expect to incur mortgage transfer fees, which will reduce the cash transferred to HCP. We estimate these fees to be approximately $2 million. Since the amount is not known, these costs have not been reflected in the current financing fees.

(B)
Reflects the expected transfer of cash of approximately $1.68 billion from our borrowings and the transfer of our common stock to HCP at a par value of $0.01 per share and the reduction of invested capital.

QCP will also reduce the total amount of the payment to HCP equal to $1.3 million per day for each day remaining in the month that the Spin-Off is consummated. As the date of the Spin-Off is not yet known the amount of cash to be retained by us is not known, and this cash is not reflected in our combined consolidated pro forma financial statements.

(C)
Reflects the issuance of 2,000 shares of QCP Class A Preferred Stock with an aggregate liquidation preference of $2 million. This unaudited pro forma combined consolidated financial information does not include dividends payable with respect to the Class A Preferred Stock, since the amount is not known; though it is expected to be approximately 12% per annum.

We will sell shares of our common stock to HCP. The amount of shares and price per share is currently unknown, and therefore the sale of shares is not reflected in our combined consolidated pro forma financial statements.

(D)
Reflects the elimination of the net parent investment in QCP's Predecessor net of the $60 million aggregate principal amount of the Promissory Notes, and the related increase in stockholders' equity.

(E)
Reflects the $1.0 million owed to HCP for a commitment fee related to the unsecured revolving credit facility and the reduction of invested capital.

Note 3.  Adjustments to Unaudited Pro Forma Combined Consolidated Statements of Income

(A)
Reflects total interest expense of $69.0 million and $138.2 million for the six months ended June 30, 2016 and year ended December 31, 2015, respectively, related to our entry into the senior secured credit facilities and unsecured revolving credit facility and our issuance of the senior secured notes and Promissory Notes and, in each case, the assumed interest expense related thereto. The senior secured revolving credit facility and the unsecured revolving credit facility are assumed to be undrawn at the date the Spin-Off is consummated. The assumed weighted average interest rate on the indebtedness at June 30, 2016 is 7.91% per annum. Included in the total interest expense is interest expense on the undrawn portion of the senior secured revolving credit facility of 0.50% per annum and the facility fee of 0.50% per annum on the unsecured revolving credit facility.

Interest expense was calculated assuming constant debt levels, less required principal repayments as if they occurred, throughout the periods presented. Interest expense may be higher or lower if

82


Table of Contents

    our amount of debt outstanding changes. A 0.125% change to the assumed annual interest rate of the variable indebtedness, including senior secured term loan and the Promissory Notes but excluding the undrawn senior secured revolving credit facility and the unsecured revolving credit facility, would change pro forma interest expense by approximately $0.7 million for the six months ended June 30, 2016 and $1.3 million for the year ended December 31, 2015.

(B)
Our pro forma earnings per share is based upon the transfer of substantially all of our outstanding shares of QCP common stock by HCP on the basis of one share of QCP common stock for every five shares of HCP common stock held as of the close of business on record date.

The number of our shares used to compute basic and diluted earnings per share for the six months ended June 30, 2016 and the year ended December 31, 2015 is based on the number of shares of our common stock assumed to be outstanding on the distribution date, based on the number of HCP common shares outstanding on September 29, 2016, or 467,820,181 shares before assuming a distribution ratio of one share of our common stock for every five shares of HCP common shares outstanding.

Note 4.  Funds from Operations and Funds from Operations as Adjusted

        QCP's Predecessor's historical and QCP's pro forma funds from operations ("FFO") and FFO as adjusted for the six months ended June 30, 2016 are summarized as follows (in thousands):

 
  QCP's
Predecessor
Historical
  Pro Forma
Adjustments
  Notes   QCP
Pro Forma
 

Net income

  $ 132,355   $ (69,000 )       $ 63,355  

Depreciation and amortization

    93,991                    93,991  

Gain on sales of real estate

    (6,460 )             (6,460 )

Taxes associated with real estate disposition

    12,428                    12,428  

FFO

  $ 232,314   $ (69,000 )            $ 163,314  

FFO as adjusted

  $ 232,314   $ (69,000 )            $ 163,314  

        QCP's Predecessor's historical and QCP's pro forma FFO and FFO as adjusted for the year ended December 31, 2015 are summarized as follows (in thousands):

 
  QCP's
Predecessor
Historical
  Pro Forma
Adjustments
  Notes   QCP
Pro Forma
 

Net income (loss)

  $ 113,193   $ (138,207 )       $ (25,014 )

Depreciation and amortization

    244,624               244,624  

Gain on sales of real estate

    (39,140 )             (39,140 )

Impairments of real estate

    47,135               47,135  

FFO

  $ 365,812   $ (138,207 )       $ 227,605  

Transaction costs

    4,000               4,000  

Other impairments, net

    216,130               216,130  

Severance-related charges

    1,947               1,947  

FFO as adjusted

  $ 587,889   $ (138,207 )       $ 449,682  

83


Table of Contents

        QCP's pro forma FFO and FFO as adjusted per common share, for the periods presented, are as follows:

 
  Pro Forma  
 
  For the Six Months
Ended June 30, 2016
  For the Year Ended
December 31, 2015
 

Net income (loss)

  $ 0.68   $ (0.27 )

Depreciation and amortization

    1.00     2.61  

Gain on sales of real estate

    (0.07 )   (0.42 )

Taxes associated with real estate disposition

    0.13      

Impairment of real estate

        0.50  

FFO

  $ 1.74   $ 2.42  

Transaction costs

        0.04  

Other impairments, net

        2.31  

Severance-related charges

        0.02  

FFO as adjusted

  $ 1.74   $ 4.79  

Weighted average shares used to calculate FFO and FFO as adjusted per common share

    93,564,036     93,564,036  

        See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Non-GAAP Financial Measures" for definitions of FFO and FFO as adjusted and an important discussion of their uses and inherent limitations.

84


Table of Contents


SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

        The following tables set forth the selected historical combined consolidated financial data and other data of QCP's Predecessor as of the dates and for the periods presented. We have not presented historical information of QCP because it has not had any operating activity since its formation on June 9, 2016, other than the issuance of 1,000 shares of its common stock as part of its initial capitalization. The selected historical combined consolidated financial data as of June 30, 2016 and for the six months ended June 30, 2016 and 2015 as set forth below, was derived from QCP's Predecessor's unaudited combined consolidated financial statements, which are included elsewhere in this information statement. The selected historical combined consolidated financial data as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 as set forth below, was derived from QCP's Predecessor's audited combined consolidated financial statements, which are included elsewhere in this information statement. In management's opinion, the unaudited combined consolidated financial statements have been prepared on the same basis as the audited combined consolidated financial statements and include all adjustments, consisting of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented. These historical combined consolidated financial statements have been revised to reflect the adoption of ASU 2016-02 (see Note 3 to the combined consolidated financial statements for the year ended December 31, 2015).

        The accompanying historical combined consolidated financial data of QCP's Predecessor does not represent the financial position and results of operations of one legal entity, but rather a combination of entities under common control that have been "carved out" from HCP's consolidated financial statements. The combined consolidated financial statements include expense allocation related to certain HCP corporate functions, including executive oversight, treasury, finance, human resources, tax planning, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to QCP's Predecessor based on direct usage or benefit where specifically identifiable, with the remainder allocated pro rata based on cash net operating income, property count, square footage or other measures. Management considers the expense methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had QCP's Predecessor operated as an independent, publicly-traded company for the periods presented. Management believes that the assumptions and estimates used in preparation of the underlying combined consolidated financial statements are reasonable. However, the combined consolidated financial statements herein do not necessarily reflect what QCP's Predecessor's financial position, results of operations or cash flows would have been if it had been a standalone company during the periods presented, nor are they necessarily indicative of its future results of operations, financial position or cash flows.

        Since the information presented below does not provide all of the information contained in the historical combined consolidated financial statements of QCP's Predecessor, including the related notes, you should read the "Management's Discussion and Analysis of Financial Condition and Results of

85


Table of Contents

Operations" and QCP's Predecessor's historical combined consolidated financial statements and notes thereto included elsewhere in this information statement.

 
  Six Months Ended
June 30,
  Year Ended December 31,  
(in thousands)
  2016   2015   2015   2014   2013  

Statement of income and comprehensive income data:

                               

Revenues:

                               

Rental and related revenues

  $ 243,175   $ 287,318   $ 574,332   $ 568,380   $ 565,605  

Tenant recoveries

    762     703     1,464     1,029      

Total revenues

    243,937     288,021     575,796     569,409     565,605  

Costs and expenses:

                               

Depreciation and amortization          

    93,991     124,114     244,624     247,914     247,583  

Operating

    2,024     1,892     3,729     3,247     2,689  

General and administrative

    9,228     15,519     23,907     20,690     29,098  

Impairments, net

        47,135     227,383          

Total costs and expenses

    105,243     188,660     499,643     271,851     279,370  

Other income (loss):

                               

Gain (loss) on sales of real estate

    6,460         39,140     (1,917 )    

Other income, net

    42     43     70     953     107  

Total other income (loss), net          

    6,502     43     39,210     (964 )   107  

Income before income taxes and income from and impairments of equity method investment

    145,196     99,404     115,363     296,594     286,342  

Income tax expense

    (12,841 )   (395 )   (798 )   (765 )   (654 )

Income from equity method investment          

        27,866     34,510     60,469     63,011  

Impairments of equity method investment

            (35,882 )   (63,255 )   (15,600 )

Net income and comprehensive income

  $ 132,355   $ 126,875   $ 113,193   $ 293,043   $ 333,099  

 

 
   
  December 31,  
 
  June 30,
2016
 
(in thousands)
  2015   2014  

Balance sheet data:

                   

Total assets

  $ 4,940,765   $ 5,093,634   $ 5,663,790  

Net parent investment

    4,921,893     5,087,494     5,657,927  

86


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following is a discussion and analysis of our anticipated financial condition immediately following the Spin-Off. You should read this discussion in conjunction with our unaudited pro forma combined consolidated financial data and historical combined consolidated financial information and accompanying notes, each of which is included elsewhere in this information statement. All references in this report to "QCP," the "Company," "we," "us" or "our" mean Quality Care Properties, Inc. Our historical combined consolidated financial information below has been revised to reflect the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases, (Topic 842). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted or expected in these forward-looking statements as a result of various factors, including those which are discussed below and elsewhere in this information statement, including "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." Our financial statements may not necessarily reflect our future financial condition and results of operations, or what they would have been had we been a separate, stand-alone company during the periods presented.

        On May 9, 2016, the board of directors of HCP, Inc. ("HCP"), announced its plan to spin off (the "Spin-Off") its HCR ManorCare, Inc. ("HCRMC") portfolio ("HCRMC Properties"), 28 other healthcare related properties ("non-HCRMC Properties," and, collectively with the HCRMC Properties, the "Properties"), an equity method investment in HCRMC and a deferred rent obligation ("DRO") due from HCRMC under a master lease (the "Tranche B DRO") (together the "QCP Business" or "QCP's Predecessor") to be controlled by a newly formed corporation, Quality Care Properties, Inc. ("QCP") (formerly known as HCP SpinCo, Inc.). QCP will elect and intends to qualify as a real estate investment trust ("REIT"). As of December 31, 2015, the Properties consisted of 281 post-acute/skilled nursing properties, 63 memory care/assisted living properties, one surgical hospital and one medical office building ("MOB"), including 28 non-strategic properties held for sale. The Properties are primarily operated in Pennsylvania, Illinois, Ohio, Florida and Michigan.

        As of December 31, 2015, 318 of the 346 properties to be owned by QCP were leased to HCRMC under a master lease agreement (as amended and supplemented from time to time, the "Master Lease"). The Master Lease properties are leased to, and operated by, HCRMC through its wholly-owned subsidiary, HCR III Healthcare, LLC ("HCR III" or the "Lessee"). All of HCR III's obligations under the Master Lease are guaranteed by HCRMC. The non-HCRMC Properties are leased to other national and regional operators and other tenants unaffiliated with HCRMC on a triple-net basis.

        The Master Lease is structured as a triple-net lease, in which HCRMC, either directly or through its affiliates and sublessees, is expected to continue to operate the properties and be responsible for all operating costs associated with the properties, including the payment of property taxes, insurance and repairs, and providing indemnities to us against liabilities associated with the operation of the properties. HCR III is required to expend a minimum amount during each lease year for capital projects (as defined in the Master Lease), which, as of June 30, 2016, is equal to $30 million for all of the HCRMC Properties in the aggregate. In addition, all obligations under the Master Lease are guaranteed by HCRMC. The non-HCRMC Properties are expected to continue to be leased, on a triple-net basis, to other operators and tenants unaffiliated with HCRMC.

        Following the Spin-Off, we will be a publicly-traded company primarily engaged in the ownership and leasing of post-acute/skilled nursing properties and memory care/assisted living properties. Our primary source of revenues will be rent payable under the Master Lease. We expect HCR III will generate revenues primarily from patient fees and services. We will also have the right to receive a DRO due from HCRMC under the Master Lease (the "Tranche B DRO"). See "—Liquidity and Capital Resources—Deferred Rent Obligation."

87


Table of Contents

        We will elect and intend to qualify as a REIT under the applicable provisions of the United States ("U.S.") Internal Revenue Code of 1986, as amended (the "Code"), commencing with our initial taxable year ending December 31, 2016. We will initially lack certain non-management administrative capabilities, and accordingly, we will be entering into an agreement pursuant to which HCP will provide certain administrative and support services to us on a transitional basis (the "Transition Services Agreement") which are customary for a transaction such as the Spin-Off for a limited transition period after completion of the Spin-Off.

        To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See "U.S. Federal Income Tax Considerations." These requirements are substantially the same as those requirements HCP must meet to preserve its REIT status.

        The historical combined consolidated financial statements included elsewhere in this information statement have been prepared on a stand-alone basis and are derived from HCP's consolidated financial statements and accounting records. The historical combined consolidated financial statements reflect our financial position, results of operations and cash flows as part of HCP prior to the Spin-Off, in conformity with GAAP.

        We discuss and provide our analysis in the following order:

    Components of our revenues and expenses;

    HCRMC transaction overview;

    HCRMC recent developments;

    Results of operations;

    Liquidity and capital resources;

    Dividends;

    Contractual obligations;

    Off-balance sheet arrangements;

    Inflation;

    Quantitative and qualitative disclosures about market risk;

    Critical accounting policies; and

    Recent accounting pronouncements.

COMPONENTS OF OUR REVENUES AND EXPENSES

Change in Accounting Principle

        In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASU 2016-02" or "ASC 842"). ASU 2016-02 supersedes the current accounting for leases. The new standard, while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates current real estate specific lease provisions, (iii) modifies the lease classification criteria and (iv) aligns many of the underlying lessor model principles with those in the new revenue standard (see Note 2 to the combined consolidated financial statements for the year ended December 31, 2015 (the "Annual Financial

88


Table of Contents

Statements")). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within. Early adoption is permitted. Entities are required to use a modified retrospective approach when transitioning to ASU 2016-02 for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements.

        We elected to early adopt ASU 2016-02, effective as of April 1, 2016 (the "Adoption"). The Adoption is a change in accounting principle and occurred subsequent to the issuance of the combined consolidated financial statements on June 17, 2016. The combined consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 reflect the period-specific effects of the Adoption. Accordingly, our previously issued combined consolidated balance sheets as of December 31, 2015 and 2014 and our combined consolidated statements of operations and comprehensive (loss) income, changes in parent company equity and cash flows for the years ended December 31, 2015, 2014 and 2013 have been revised to reflect the adjustments from the Adoption.

        Upon the Adoption, we elected a permitted practical expedient to use hindsight in determining the lease term under the new standard. The Adoption results in a material change to the accounting for our Master Lease entered into with HCRMC in April 2011 upon the acquisition of the HCRMC Properties. Given the decline in HCRMC's performance subsequent to the 2011 acquisition (see Notes 4 and 6 to the Annual Financial Statements), it was concluded that the lease term (as defined by ASC 842) was shorter than originally determined at (i) the lease commencement date in April 2011 and (ii) the lease classification reassessment date in March 2015 when we and HCRMC amended the Master Lease (the "HCRMC Lease Amendment") (see Note 4 to the Annual Financial Statements). When applying hindsight, the lease classification reassessment in April 2011 resulted in the Master Lease being reclassified from a direct financing lease ("DFL") to an operating lease. When applying hindsight, the lease classification reassessment in March 2015 resulted in the Master Lease continuing to be classified as an operating lease. Under the transition guidance required by ASU 2016-02, the Master Lease, which was previously accounted for as a DFL, has been accounted for as an operating lease as of the earliest comparable period presented.

        Reclassification of the Master Lease to an operating lease and application of the lessee transition provisions from the Adoption resulted in the following direct effects to the combined consolidated balance sheets: (i) recognition of real estate assets and intangible assets underlying the Master Lease, net of depreciation and amortization, (ii) derecognition of the net investment in the DFL, (iii) derecognition of the net acquired below market lease intangible assets associated with favorable terms of ground leases for which we are the lessee and the recognition of right of use assets and associated lease liabilities, net of amortization, (iv) recognition of a straight-line rent receivable in accordance with our accounting policies and (v) recognition of the resulting difference being recorded as a cumulative impact to parent company equity. In accounting for the Master Lease as an operating lease, we have recorded the following adjustments to our combined consolidated statements of income and comprehensive income: (i) derecognition of income from the DFL, (ii) recognition of rental and related revenues consistent with our accounting policies and (iii) recognition of depreciation and amortization of the real estate assets and intangible assets over their estimated useful lives in accordance with our accounting policies. In addition, the Adoption resulted in the following indirect effects to our combined consolidated financial statements: (i) recognition of real estate and related assets held for sale and real estate impairment charges, (ii) derecognition of previously recorded impairments of the DFL and recognition of an impairment charge of the straight-line rent receivable related to the Master Lease, (iii) adjustments to previously recorded impairments of the equity method investment in HCRMC, (iv) recognition of gain (loss) on sale of real estate and (v) rental and related revenues instead of income from the DFL being recharacterized to equity income for the equity method investment in HCRMC. While we are primarily a lessor, we also considered the lessee transition and application requirements under ASU 2016-02 (see Note 3 to the Annual Financial

89


Table of Contents

Statements and Note 3 to the unaudited combined consolidated financial statements for the six months ended June 30, 2016 (the "Interim Financial Statements") for more details on the impact of the Adoption).

Revenues

        Our revenues consist of rental and related revenues and tenant recoveries. For operating leases with minimum scheduled rent increases, we recognize rental and related revenue on a straight-line basis over the lease term when collectability is reasonably assured. Variable lease payments are recognized as income in the period when the changes in facts and circumstances on which the variable lease payments are based occur. Beginning January 1, 2016, we changed our accounting treatment to recognize rental and related revenues from our HCRMC Properties using a cash basis method of accounting (see Note 4 to the Annual Financial Statements). Rental and related revenues were $243.2 million and $574.3 million for the six months ended June 30, 2016 and for the year ended December 31, 2015, respectively.

        Following the Spin-Off, we expect our earnings to primarily be attributable to rental and related revenues related to the Properties, the terms of which will not be affected by the consummation of the Spin-Off itself. The Properties are triple-net leased whereby the lessees are responsible for the operating costs associated with the properties, including the payment of taxes, insurance and repairs, and providing indemnities to us against liabilities associated with the operation of the properties.

        Under the terms of the Master Lease, the Lessee is currently obligated to pay annualized fixed rent of $465.5 million as of June 30, 2016. Rent under the Master Lease escalates 3% annually effective April 1, 2016, and is estimated to decline by an aggregate of approximately $5.0 million following the completion of the remaining 17 of the 50 non-strategic property sales. Of the 17 remaining non-strategic properties, seven are expected to be sold by the end of 2016 and 10 are expected to be sold in the first quarter of 2017. Contracts have been entered into with third party purchasers with respect to the sale of 10 of the 17 non-strategic properties for an aggregate amount of $54.0 million. See "—HCRMC Transaction Overview." The HCRMC Properties also include one additional property that, subsequent to June 30, 2016, has been proposed to be sold. If the property is sold, which we anticipate may occur by the end of 2016 or in the first quarter of 2017, we will receive the net sale proceeds.

        The remaining lease terms for the non-HCRMC Properties range from one to nine years and contain rent escalation clauses. See "Business and Properties—Properties—Lease Expirations."

        In light of the headwinds facing the broader post-acute/skilled nursing industry and HCRMC and the resulting deterioration in HCRMC's operating performance and declining rent coverage ratios, we have conducted a hypothetical illustrative analysis of the impact to our capital structure and certain of our credit metrics assuming the annualized amount of rental income generated by the HCRMC Properties as of June 30, 2016 was consistent with typical Facility EBITDAR cash flow coverage ratios for these post-acute/skilled nursing and memory care/assisted living facilities. Under this construct we estimate that the average typical Facility EBITDAR cash flow coverages for the HRCMC Properties would be approximately 1.25x. Based upon this hypothetical illustrative rent analysis, our annualized Adjusted EBITDA for the six months ended June 30, 2016 would have been $349 million, as compared to our actual annualized Adjusted EBITDA of $465 million for such period.

        We have no current plans to amend the Master Lease with respect to rent or otherwise, and have not entered into any negotiations with HCRMC, that would result in any reductions to rental income from the HCRMC Properties. Additionally, our hypothetical illustrative analysis discussed above does not account for any benefits or concessions or other consideration that we might expect to receive in connection with any amendment of the Master Lease, and should not be considered indicative of any

90


Table of Contents

future events. Any actual reduction in rental income from the HCRMC Properties may materially exceed the amounts reflected in the hypothetical illustrative rent analysis above.

Depreciation and Amortization Expense

        We compute depreciation and amortization on assets using the straight-line method over the assets' estimated useful lives. Buildings and improvements are depreciated over useful lives of up to 60 years. Market and in-place lease intangibles are amortized to expense over the remaining noncancellable lease terms plus lease renewal options that are reasonably certain of being exercised, if any. Depreciation and amortization expense was $94.0 million and $244.6 million for the six months ended June 30, 2016 and for the year ended December 31, 2015, respectively. Depreciation and amortization expense is expected to be approximately $138.5 million in the first year after the Spin-Off. This amount was determined based on the estimated remaining useful lives of the assets as of June 30, 2016.

Operating Expenses

        As described above, following the Spin-Off, our business will primarily consist of properties leased to third-party operators and other tenants pursuant to triple-net leases, which obligate the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. We will incur operating expenses related to asset and capital management services and expenses attributable to our MOB that we will subsequently recover from our tenants in accordance with the terms of their leases. Operating expenses were $2.0 million and $3.7 million for the six months ended June 30, 2016 and for the year ended December 31, 2015, respectively. We expect operating expenses to be approximately $3.7 million in the first year after the Spin-Off.

General and Administrative Expenses

        The combined consolidated financial statements include expense allocations related to certain HCP corporate functions, including executive oversight, treasury, finance, human resources, tax planning, internal audit, financial reporting, information technology, legal and investor relations. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated pro rata based on cash net operating income, property count, square footage or other measures.

        General and administrative costs that we expect to incur, following the Spin-Off, are for items such as compensation costs (including equity-based compensation awards), professional services, office costs and other costs associated with our administrative activities. To the extent requested by us, HCP will provide us with certain administrative and support services on a transitional basis pursuant to the Transition Services Agreement, the costs of which will be included in general and administrate expenses.

        Our annual general and administrative expenses are anticipated to be approximately $21.0 million to $23.0 million in the first year after the Spin-Off. This range was estimated based on the experience of our management and our discussions with outside service providers and advisors. Expenses related to equity-based compensation awards that vest immediately upon the Spin-Off, a one-time cash completion bonus payable to our Chief Executive Officer ("CEO") upon the completion of the Spin-Off pursuant to the terms of his employment agreement, and potential acquisition costs are not included in these amounts.

Interest Expense

        We currently have no outstanding indebtedness. However, in connection with the Spin-Off and the related transactions, we expect to enter into the senior secured credit facilities providing for a

91


Table of Contents

$100 million senior secured revolving credit facility maturing in 2021, none of which we expect will be drawn on the date of consummation of the Spin-Off, and a $1.0 billion senior secured term loan maturing in 2022. See "Description of Financing and Material Indebtedness" for additional information regarding our senior secured credit facilities. We expect, after giving pro forma effect to the Spin-Off and related transactions, that we will have $1.81 billion face value of outstanding principal indebtedness, including the Promissory Notes, with $100 million available for borrowing under the senior secured revolving credit facility and $100 million available for borrowing under the unsecured revolving credit facility, and we will have an annual interest expense of approximately $138 million based on an assumed weighted average interest rate of 7.91% per annum. The senior secured revolving credit facility and unsecured revolving credit facility are assumed to be undrawn at the date the Spin-Off is consummated. Included in the assumed interest expense is interest expense on the undrawn portion of the senior secured revolving credit facility of 0.50% per annum and the facility fee of 0.50% per annum on the unsecured revolving credit facility. A 0.25% change to the assumed annual interest rate of the senior secured term loan, the senior secured notes and the Promissory Notes, excluding the undrawn senior secured revolving credit facility and unsecured revolving credit facility, would change pro forma interest expense by approximately $2.2 million for the six months ended June 30, 2016 and $4.5 million for the year ended December 31, 2015. See "—Liquidity and Capital Resources" and "Unaudited Pro Forma Combined Consolidated Financial Statements" for more information.

Income Tax Expense

        We compute our provision for income taxes on a separate return basis. The separate return method applies the accounting guidance for income taxes to the stand-alone combined consolidated financial statements as if we were a separate taxpayer and a stand-alone enterprise for the periods presented.

        We will elect and intend to qualify as a REIT under the applicable provisions of the Code, commencing with our initial taxable year ending December 31, 2016. Provided this structure remains intact, we will not be subject to entity level federal taxation. Certain states in which we operate impose taxes on our operations. Therefore, we expect to incur income tax expenses, which will vary based on the income we generate in those states.

        As of March 31, 2016, we determined that we may sell our HCRMC assets during the next five years. As we have not yet met the 10-year holding requirement of certain states, we recorded a deferred tax liability related to state built-in gain tax. We calculated the deferred tax liability related to the state built-in-gain tax using the separate return method and recorded a deferred tax liability of $12.4 million, representing our estimated exposure to state built-in gain tax as of June 30, 2016.

HCRMC TRANSACTION OVERVIEW

        As of January 1, 2013, the QCP Business consisted of 361 properties. We did not acquire or dispose of any properties during 2013. In July 2014, we acquired the MOB, and we disposed of one HCRMC property. At December 31, 2014, we had a total of 361 properties.

        During the quarter ended March 31, 2015, HCP and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic properties that were under the Master Lease. Pursuant to the agreement, HCRMC received an annual rent reduction under the Master Lease based on 7.75% of the net sales proceeds received by HCP.

        On March 29, 2015, HCP and HCRMC agreed to amend the Master Lease ("HCRMC Lease Amendment"). Commencing April 1, 2015, HCP provided an annual net rent reduction of $68 million, which equated to initial lease year rent of $473 million, compared to the $541 million annual rent that would have commenced April 1, 2015, prior to the HCRMC Lease Amendment. The contractual rent

92


Table of Contents

increases by 3.0% annually during the initial term, commencing April 1, 2016. In exchange, HCP received the following consideration:

    A right to acquire fee ownership in nine post-acute/skilled nursing properties valued at $275 million with a median age of four years, owned and operated by HCRMC. HCP retained a lease receivable of equal value, (the "Tranche A DRO") earning income of $19 million annually (included in the amended initial lease year rent of $473 million above), which is reduced as the property purchases are completed. Following the purchase of a property, HCRMC leases such property from HCP pursuant to the Master Lease. The nine properties contribute an aggregate of $19 million of annual rent (subject to escalation) under the Master Lease;

    The Tranche B DRO with an initial principal amount of $250 million, is payable by HCRMC upon the earlier of: (i) March 31, 2029, which is the end of the initial term of the first renewal pool under the Master Lease; or (ii) certain capital or liquidity events of HCRMC, including an initial public offering or sale. The Tranche B DRO increases each year as follows: 3.0% in April 2016 through 2018, 4.0% in 2019, 5.0% in 2020 and 6.0% in 2021 and annually thereafter until the end of the initial lease term; and

    Extension of the initial lease term by five years, to an average of 16 years.

        During the year ended December 31, 2015, 22 of the 50 non-strategic property sales were completed for $218.8 million. As of December 31, 2015, the remaining 28 properties that had not yet been sold were classified as real estate and related assets held for sale. During the year ended December 31, 2015, we recognized an impairment charge of $47.1 million related to the anticipated sale of the 50 non-strategic properties based on expected cash flows amounting to the projected sales price. During the six months ended June 30, 2016, we completed an additional 11 of the 50 non-strategic property sales, generating proceeds of $62.3 million, with the remaining 17 properties classified as real estate and related assets held for sale as of June 30, 2016. Of the 17 remaining non-strategic properties, seven are expected to be sold by the end of 2016 and 10 are expected to be sold in the first quarter of 2017. Contracts have been entered into with third party purchasers with respect to the sale of 10 of the 17 non-strategic properties for an aggregate amount of $54.0 million. We will receive all of the proceeds from the divestitures. The HCRMC Properties also include one additional property that, subsequent to June 30, 2016, has been proposed to be sold. If the property is sold, which we anticipate may occur by the end of 2016 or in the first quarter of 2017, we will receive the net sale proceeds.

        We acquired seven HCRMC properties during the year ended December 31, 2015 for $183.4 million, the proceeds of which were used to settle a portion of the Tranche A DRO. In the first quarter of 2016, we acquired two additional properties for $91.6 million. The aggregate $275 million purchase price proceeds for the nine properties were used to settle the Tranche A DRO in full. For additional information regarding the DRO, see "—Liquidity and Capital Resources—Deferred Rent Obligation."

        As of December 31, 2015, the property count was 346, including 28 non-strategic properties held for sale.

        Additionally, in February 2016, we acquired a new 64-bed memory care property in Easton, Pennsylvania for $15.0 million, which opened in January 2016 and is located adjacent to one of our existing post-acute properties. The property was developed by HCRMC and added to the Master Lease with a term of 16 years. As of June 30, 2016, the total property count was 338, including 17 non-strategic properties held for sale and an additional property that, subsequent to June 30, 2016, has been proposed to be sold.

        For the year ended December 31, 2015, we recognized an impairment charge of $180.3 million on our straight-line rent receivable net of a $17.2 million recharacterization of straight-line rent revenue

93


Table of Contents

(see Notes 4 and 6 to the Annual Financial Statements). For the years ended December 31, 2015, 2014 and 2013, we recognized impairments of $35.9 million, $63.3 million and $15.6 million, respectively, related to our equity method investment in HCRMC (see Note 6 to the Annual Financial Statements). Beginning in January 2016, we placed the Master Lease on nonaccrual status and utilize a cash basis method of accounting in accordance with our policies and equity income is recognized only if cash distributions are received from HCRMC.

HCRMC RECENT DEVELOPMENTS

        HCRMC is our principal operator and lessee. Below are highlights of HCRMC's recent financial results of operations:

HCRMC Fourth Quarter 2015

        The post-acute/skilled nursing industry and HCRMC continued to experience a challenging operating environment in 2015, due to the ongoing change in reimbursement models, resulting in reduced rates and lower census due to shorter lengths of stay. HCRMC's normalized fixed charge coverage ratio for the twelve months ended December 31, 2015 was 1.07x.

        For the fourth quarter 2015, HCRMC reported normalized EBITDAR (EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and rent) of $109.5 million, which decreased $36.3 million on a year-over-year basis compared to the fourth quarter 2014, and decreased $16.8 million compared to the third quarter 2015. The results were impacted by core operating performance weakness and unfavorable non-routine items discussed below. The level of performance was below expectations and uncharacteristic for the fourth quarter, which has historically been strong due in large part to increased census and annual Medicare rate increases on October 1.

        HCRMC ended 2015 with $125.0 million of cash and cash equivalents.

        For the year ended December 31, 2015, HCRMC reported total operating margin of approximately $669 million, EBITDAR of approximately $530, normalized EBITDAR of approximately $542 million and total fixed charges of approximately $504 million. Normalized EBITDAR is defined as EBITDAR excluding certain charges primarily relating to non-cash accrual charges for general and professional liability claims.

        Core Operating Performance.    Before the impact from non-routine items described below, HCRMC's fourth quarter EBITDAR was below its forecast, primarily due to the continued change in payor mix from traditional Medicare to Medicare Advantage plans, which reduced reimbursement rates and lowered census. As a result, HCRMC reported a decline in its core post-acute/skilled nursing operating metrics (which excludes the 50 non-strategic disposition properties), with fourth quarter census decreasing 175 basis points from the prior year to 82.6%.

        Non-Routine Items.    As previously discussed, HCRMC is in the process of selling 50 non-strategic properties, of which one sale was completed in the third quarter of 2015, 21 sales were completed in the fourth quarter of 2015 and an additional 11 sales were completed in the first quarter of 2016. As such, disruption resulting from transitioning operations to new owners and closing costs led to additional underperformance from this pool of properties.

        On April 20, 2015, the Department of Justice ("DOJ") unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. HCRMC continues to defend against the DOJ civil complaint and incurred legal and regulatory defense costs during the year ended December 31, 2015 of $9 million. The outcome of the DOJ civil complaint

94


Table of Contents

remains uncertain and HCRMC expects to incur additional legal and regulatory defense costs in 2016 (see Note 4 to the Annual Financial Statements).

HCRMC First Quarter 2016

        For the first quarter 2016, HCRMC reported normalized EBITDAR of $131.0 million, which increased $21.5 million, or 20%, from the fourth quarter of 2015, driven by a 110 basis point increase in core post-acute/skilled nursing occupancy. On a year-over-year basis, normalized EBITDAR decreased $27.1 million, or 17%, primarily due to a weaker flu season during 2016, continued pressure from payor mix shift, and shorter lengths of stay, as well as transaction costs and operational disruption from the non-strategic property sales. HCRMC's normalized fixed charge coverage ratio was 1.06x and 1.11x for the trailing twelve and three months ended March 31, 2016, respectively.

HCRMC Second Quarter 2016

        For the second quarter 2016, HCRMC reported normalized EBITDAR of $131.7 million. On a year-over-year basis, normalized EBITDAR decreased $14.6 million, or 10% for the quarter, and decreased $40.9 million or 13% year-to-date, primarily due to a weaker flu season during 2016, continued pressure from payor mix shift and shorter lengths of stay, as well as transaction costs and operational disruption from the non-strategic property sales. HCRMC's normalized fixed charge coverage ratio was 1.03x and 1.08x for the trailing twelve and three months ended June 30, 2016, respectively.

        For the twelve months ended June 30, 2016, HCRMC generated $3.9 billion in total revenues.

        HCRMC continues to defend against the DOJ civil complaint and incurred legal and regulatory defense costs during the six months ended June 30, 2016 of $3.1 million.

        HCRMC ended the quarter with $174.4 million of cash and cash equivalents and continues to be current on its obligations under the Master Lease.

RESULTS OF OPERATIONS

Basis of Presentation

        The historical financial statements of QCP's Predecessor were prepared on a stand-alone basis and were derived from the consolidated financial statements and accounting records of HCP. These statements reflect the historical financial condition and results of operations, in accordance with GAAP, of the QCP Business, which we will own following the Spin-Off. The historical combined consolidated financial information below reflects the adoption of ASU 2016-02 (see Note 3 to the Annual Financial Statements and Note 3 to the Interim Financial Statements).

95


Table of Contents

Operating Results

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

        Results for the six months ended June 30, 2016 and 2015 (in thousands):

 
  Six Months Ended
June 30,
  Change  
 
  2016   2015   $  

Revenues:

                   

Rental and related revenues

  $ 243,175   $ 287,318   $ (44,143 )

Tenant recoveries

    762     703     59  

Total revenues

    243,937     288,021     (44,084 )

Costs and expenses:

                   

Depreciation and amortization

    93,991     124,114     (30,123 )

Operating

    2,024     1,892     132  

General and administrative

    9,228     15,519     (6,291 )

Impairment

        47,135     (47,135 )

Total costs and expenses

    105,243     188,660     (83,417 )

Gain on sales of real estate

    6,460         6,460  

Other income, net

    42     43     (1 )

Total other income, net

    6,502     43     6,459