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Healthpeak (PEAK) Leases Life-Science Asset, To Construct Another

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Healthpeak Properties, Inc. PEAK is seeing robust demand for its life science properties in key markets. Recently, the company announced that it inked a long-term lease with Turning Point Therapeutics, Inc. for the entire Callan Ridge densification project that was announced this March. The lease is anticipated to start at the end of 2022, after the completion of the construction.

Markedly, the company earlier unveiled plans to densify its Callan Ridge campus at 3020-3030 Callan Road in the Torrey Pines submarket of San Diego to double the current leasable area. It will replace the existing outdated 90,000-sq-ft building with a new class A life science campus, consisting of two buildings with 185,000 square feet of space.

The property is located in the center of Healthpeak-owned Torrey Pines Science Park, which spans more than 20 acres and will continue to cater to San Diego's life-science tenants’ needs. The company has another ground-up development in the Torrey Pines submarket — The Boardwalk — which is also fully pre-leased and expected to be delivered for initial occupancy in fourth-quarter 2021.

Following the successful pre-leasing of its two ground-up developments of The Boardwalk and Callan Ridge campuses in San Diego, Healthpeak has announced that it will break ground on another development in the Sorrento Mesa submarket in third-quarter 2021, marking its third in San Diego since 2020.

Particularly, the company will begin construction of Sorrento Gateway, a Class-A development, which will comprise a five-story building, spanning nearly 163,000 square feet. It will be purpose-built with numerous amenities, allowing the company to capitalize on the demand from existing and new tenants alike. The project is expected to be delivered for initial occupancy in first-quarter 2023. It is likely to see strong demand, similar to Callan Ridge, supported by industry tailwinds that are benefiting life-science epicenters such as San Diego.

Particularly, the aging demography and increasing life expectancy of the U.S. population are driving the demand for life-changing therapies and cures. This is offering scope for scientific innovation and biopharma drug development by biotechs. Moreover, in light of global efforts to develop vaccines and treatments for coronavirus, there is a higher demand for drug innovation.

The underlying demand drivers are strengthening life science fundamentals, leasing activity and rent growth. Also, favorable drug approval trends and high life-science funding have been positives. Amid this, with an existing biotech-heavy tenant base, Healthpeak is seeing decent demand and retention at its lab properties. In fact, for 2021, the company expects same-store cash net operating income growth of 4.5-5.5%.

Shares of this Zacks Rank #3 (Hold) company have gained 16.5% over the past year compared with the industry’s growth of 15.3%.

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Zacks Investment Research

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Notably, over the past few years, Healthpeak has significantly reduced its seniors housing exposure through divestitures. This will reduce pandemic-related operational uncertainty in the near term, offer stability to earnings and increase capital allocation to targeted businesses. However, the dilutive impact on earnings as well as reduced cash flows and net operating income in the near term from such dispositions is unavoidable.

Stocks to Consider

Industrial Logistics Properties Trust’s ILPT funds from operations (FFO) per share estimate for the current year has moved up to $1.88 in the past month. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OUTFRONT Media Inc.’s OUT Zacks Consensus Estimate for 2021 FFO per share has moved 3.5% north to 89 cents in the past month. The company currently carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. BHR carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised 37.5% upward in a month to 44 cents.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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