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Healthpeak (PEAK) Announces 3 Deals to Enhance Core Segments

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Healthpeak Properties, Inc. PEAK recently announced a series of transactions in efforts to strengthen and enjoy continued growth momentum across its senior housing, life-science and medical office businesses.

Management noted that these transactions will be funded primarily through the company’s recent forward equity offering and sale proceeds from senior housing joint venture.

The Boardwalk Development Project

Healthpeak expanded its life-science development pipeline with the addition of The Boardwalk in the Torrey Pines life-science cluster. It will be Healthpeak’s flagship campus in Science Center Drive, San Diego.

Construction on this $164-million development and redevelopment project will commence in first-quarter 2020. The 190,000-square-foot campus will enclose three adjacent Healthpeak properties. This will include the redevelopment of the existing 10275 Science Center Drive property, spanning 85,000 square feet of space and two ground-up developments, aggregating 105,000 square feet.

The company anticipates to accommodate occupancy in second-quarter 2021. It expects the campus to generate an estimated yield on cost of 7% upon stabilization. 

Purchase Option Agreement With Oakmont Senior Living

Strengthening its relationship with Oakmont Senior Living, Healthpeak has also entered into an agreement, which offers the option to acquire up to 24 senior housing development properties when Oakmont elects to sell.

These communities, worth $1.3 billion, are concentrated in California. The option to acquire the properties will likely be offered in tranches between 2020 and 2023, with nearly $200 million being offered in first-half 2020. The properties will be added to the RIDEA agreement between the two companies.

Further, at closing, Healthpeak intends to enter into a highly-incentivized management contract with Oakmont Management Group.

Expands Ongoing Development Program With HCA Healthcare

Fortifying its medical office development program with HCA Healthcare, the companies have added a development project to the joint project. This $46-million project is 45% pre-leased, with construction anticipated to commence in mid-2020.

The companies will develop a six-story, Class-A medical office building, spanning 172,000 square feet of space. Situated in the TriStar Centennial Medical Center Campus in Nashville, TN, the development will expand the campus, which is also HCA's second largest campus in the nation.

Bottom Line

Healthpeak has made concerted efforts to reposition its portfolio. Per management, the company has executed $4.5 billion of non-core senior housing dispositions in the last few years. This has improved its portfolio quality and mix. Further, this has favorably positioned the company to now focus on strategic investments in life-science properties, medical office buildings and selective buyouts of high-quality senior housing assets in high barrier-to-entry markets. By strengthening its core segments, the company has replenished its growth opportunities. 

Although these non-core asset disposals are a strategic fit for the long term, the dilutive impact on earnings in the near term is unavoidable. In fact, in its third-quarter 2019 earnings report, management noted that the sale of 13 non-core senior housing properties to Prime Care and the U.K. joint-venture disposition was slightly dilutive. 

Rank and Price Performance

Healthpeak currently carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have gained 12.7%, underperforming the industry’s rally of 18.6%.

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