It’s not uncommon for a person to quote an inspiring leader—Lincoln, Gandhi or even Vince Lombardi—during an acceptance speech.
HCP Inc.’s Troy McHenry went with the following quote upon winning the Business Journal’s ninth annual General Counsel Awards honor in the public company category: Fate rarely calls upon us at a moment of our choosing.
Forget Shakespeare. Those words were first uttered in a 2009 movie by a talking intergalactic robot, Transformers leader Optimus Prime.
The credo still rings true, said McHenry, a military school graduate who’s spent the past two years as general counsel at HCP (NYSE: HCP) transforming one of the country’s largest healthcare-focused real estate investment trusts.
He kicked off his tenure in the role with quite a start—overseeing a $6 billion spinoff of the Irvine-based REIT’s skilled nursing and assisted-living assets.
The transformation of the $13.6 billion company didn’t stop there.
He guided a pivot to private-pay healthcare, and was part of a complete overhaul of the executive team.
“We emerged as a company,” McHenry said, noting that the process made him “a better person, better leader [and a] better attorney.”
Another (nonrobot) credo of McHenry’s: “Don’t ever hesitate to embrace hardship, and be confident in your capabilities.”
McHenry is one of four general counsels and one legal team feted by the Business Journal before a crowd of more than 400 legal professionals and other guests on Nov. 13 at Hotel Irvine (see stories on the other winners, pages 4, 6, 8 and 10).
Startup
HCP emerged from the restructuring this year with a private-pay-focused portfolio, and plans to have equal representation in medical office, life sciences and senior housing.
“Prior to the spin[off], we looked at our entire portfolio and asked ourselves what we wanted to be,” he said, referring to the ManorCare portfolio of skilled nursing properties spun off into independently NYSE-traded REIT Quality Care Properties Inc.
The skilled nursing asset class is riskier because it’s subject to changes in government reimbursement.
The spinoff was one of the company’s most significant transactions “because that gave us a new beginning and set us on the path to execute our strategic goals,” McHenry said.
He and his team also helped diversify HCP’s portfolio by reducing dependency on its largest tenant, Brookdale Senior Living Inc. (NYSE: BKD), including selling 64 communities of Brookdale-operated senior housing communities to Blackstone for more than $1.1 billion. The troubled Brentwood, Tenn.-based operator previously made up about 35% of HCP’s portfolio; it now represents about 17%.
He and his team disposed of noncore assets, and in March completed the sale of a troubled mezzanine loan portfolio for $112 million.
This year, HCP generated nearly $1 billion in proceeds from asset sales, allowing the REIT to invest in acquisitions and new developments and pay back over $1.2 billion in debt.
On top of owning approximately $1.5 billion in new life sciences campus developments totaling over 1.8 million square feet in San Francisco and Boston, it formed a $605 million joint venture with Morgan Stanley on a 2-million-square-foot medical office portfolio.
Strategic Adviser
Corporate changes also extended to HCP’s management team.
McHenry, who joined HCP in 2010 and took on the GC role in 2016, is the longest-serving member of the REIT’s executive team. Over the past two years, he advised the appointment of, among others, a new chief executive, chief operating officer, chief investment officer and chief financial officer.
It was a challenge during the transition, he pointed out. “Some investors talk about the importance of investing in the management team … your company can have the greatest product, but it stills needs a cohesive and best-in-class management team to execute business strategy.”
His approach to the transition was to enhance transparency in corporate governance, public disclosure, compensation and sustainability.
“We take pride in being transparent,” he said.
The important thing to remember is that the role of the legal department is to support the company’s strategic initiatives and objectives, said the general counsel, executive vice president and corporate secretary. “It has got to be to advance the company’s interest.
“Where I get the most job satisfaction is that we are not considered to be a separate department … we are strategic advisers.
Team Tenets
The HCP legal team numbers 22.
“My military background means I want the department to be perceived as an elite department, and that’s not for everybody,” said McHenry, who graduated from U.S. Military Academy at West Point and received his law degree from the University of Southern California.
Members of his team must demonstrate “a passion to grow as a professional,” which translates to dedication and sacrifice. The right candidate should also be a team player.
McHenry said he restructured the department to “better align with leadership and the company’s strategic initiatives.” He’s added about 10 people since he became general counsel, with the goal of bringing some functions in-house and reducing outside legal spending.
HCP plans to add more people to its legal team in Irvine and Nashville, Tenn., the former calling for those with real estate development and acquisition experience, the latter focused on real estate operations and leasing.
“We continuously evaluate and look for ways to be more efficient and optimize the legal department’s operations. If that’s bringing work in-house without outsourcing, we’ll do it. If it makes more sense to outsource, that’s the way we’ll go.”
He said he’s hands-on but wants everyone on his team to succeed. “There’s no job too big, no job too small … I really want people to be strategic advisers.”
Work-Life Balance
McHenry thanked his wife, Angela, and his three children, two girls and a boy all younger than 6, for their support.
Involved in his children’s school and sports activities, he gave a shoutout to his wife for picking activities for their children that are near his workplace.
“My son does mixed martial arts that’s five minutes away, and my daughter has dance, which is 10 minutes away from the office so I can be there,” he said.
He thanked his company for being accommodating and supportive so that “I can duck out and see those things and come back [to work].”
Startup
McHenry said he’s excited about HCP’s position after two years of changes, with a strong management team and a robust pipeline of acquisitions and development projects to boost its portfolio of high-quality private-pay healthcare real estate assets.
The REIT also experienced significant updates to the board of directors, which it refreshed with three new independent directors this year, of whom two are women.
“We affectionately say we have the commitment and feel of a startup company, even though we are a company that’s been listed on the New York Stock Exchange for almost 35 years,” he said, adding that there’s “a renewed energy to take the company forward.”
What’s his secret to success?
Don’t be afraid of failure.
“You have to approach things confidently and without reservations … you just have to dedicate yourself to a cause and hope for the best and surround yourself with talented people,” he said.
“You can’t do this job by yourself. It truly takes a talented, dedicated team to achieve success.”
An intergalactic robot couldn’t say it better.
