CapitalSource Selling Healthcare Lease Portfolio

CapitalSource Inc. (NYSE: CSE) has agreed to sell substantially all of its healthcare net lease portfolio to Omega Healthcare Investors (NYSE: OHI). The deal includes $280 million of cash and $51 million of OHI stock, with Omega also expected to assume or pay off $529 million of assumed debt. 

PRESS RELEASE

CapitalSource Inc. (NYSE: CSE) today announced that it has entered into a definitive agreement to sell substantially all of its healthcare net lease portfolio to Omega Healthcare Investors, Inc. (NYSE: OHI – “Omega”), subject to usual and customary closing conditions and adjustments. The sale, covering 143 long term care facilities, will be completed in a series of closings. Expected net proceeds to CapitalSource include $280 million cash and $51 million of OHI stock. Omega is expected to assume or pay off $529 million of debt related to the assets being purchased. CapitalSource owns 38 additional long term care facilities not included in this sale, but which the Company expects to sell in a separate transaction.

“This transaction is another important step in our ongoing transformation to a bank model,” commented John K. Delaney, CapitalSource Chairman and CEO. “We intend to use the cash proceeds principally to pay down debt, which further strengthens our balance sheet and liquidity. After exploring a number of alternatives in recent months, we believe this direct asset sale is the best result for our shareholders,” concluded Delaney.

“As we have been saying for quite some time, we anticipated that realizing the equity value in our net lease portfolio could be a process that stretched out over many months. This transaction will permit us to more quickly capture that value, recognize a gain and further simplify our business, as we seek to finalize the monetization of the remaining facilities within this portfolio,” added James J. Pieczynski, President of the CapitalSource Health Care Real Estate business.

The sale to Omega will be completed in three steps. The first two are expected to be completed by the end of the second quarter of 2010 and will result in net proceeds to CapitalSource of $250 million in cash and $51 million of Omega stock. The first closing, expected to occur in late December or January, will cover 40 facilities for a purchase price of $269 million and will also include Omega’s payment of $25 million for an option to purchase 63 facilities for an additional $295 million or a total purchase price of $320 million. The second closing is expected to occur in the second quarter of 2010 and will cover 40 facilities for a purchase price of $271 million. Omega will assume a total of $264 million of indebtedness relating to the facilities sold in the first two transactions.

The third closing for the remaining 63 facilities, at a purchase price of $320 million, would occur upon Omega’s exercise of its purchase option prior to 12/31/11. The consideration would consist largely of the extinguishment of $265 million of indebtedness relating to the facilities sold in the transaction, plus $30 million in cash, in addition to the previously paid purchase option of $25 million.

Wells Fargo Securities LLC acted as lead advisor to CapitalSource on the transaction.

A conference call will be hosted on Tuesday, November 17, 2009 at 11:00 a.m. EST. Analysts and investors interested in participating are invited to call (866) 843-0890 from within the United States or (412) 317-9250 from outside the United States, with pass code 7193742. A webcast of the call will be available on the Investor Relations section of the CapitalSource web site at .http://www.capitalsource.com

A slide presentation that provides additional detail about the transaction, and will be referred to on the conference call, will be posted to the Investor Relations homepage of the CapitalSource website prior to the call at the following address: http://www.capitalsource.com/investor_relations.

A telephonic replay will also be available from approximately 2 p.m. EST November 17, 2009 through February 18, 2010. Please call (877) 344-7529 from the United States or (412) 317-0088 from outside the United States with pass code 435866. An audio replay will also be available on the Investor Relations section of the CapitalSource website.

About CapitalSource
CapitalSource Inc. (NYSE: CSE) is a commercial lender that provides financial products to middle market businesses and offers depository products and services in southern and central California through its wholly owned subsidiary CapitalSource Bank. As of September 30, 2009, CapitalSource had total commercial assets of $10.4 billion and $4.4 billion in deposits. The Company is headquartered in Chevy Chase, MD. Visit www.capitalsource.com for more information.