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Healthpeak (PEAK) Leases Phase II at The Shore at Sierra Point

Zacks Equity Research

Healthpeak Properties PEAK recently announced a lease with a subsidiary of Johnson & Johnson JNJ at The Shore at Sierra Point. The move will help the company fortify its long-term partnership with the Johnson & Johnson Family. It also reflects strong demand for the company’s life-science real estates.

Particularly, this long-term lease with Janssen BioPharma, Inc. is expected to start in January 2022, following completion of construction. The lease is for 60% of Phase II at The Shore at Sierra Point, though Janssen BioPharma enjoys expansion rights under the lease, which can be exercised during 2020.

Notably, the five-building campus — The Shore at Sierra Pointis — aggregates more than 620,000 square feet across 23 acres on the waterfront in the city of Brisbane, in the greater South San Francisco, California life-science cluster. The campus offers close proximity to South San Francisco, Highway 101, public transit, as well as a high concentration of research companies.

The Phase I of The Shore, which totals 222,000 square feet, is nearing completion and is fully pre-leased to two tenants. Construction is on for Phase II and III, and is expected to be accomplished in 2021 and 2022.

Specifically, Phase II comprises two Class A purpose-built life-science buildings in the larger campus. Moreover, the addition to Phase II will link the two buildings across three of the four floors, boosting connectivity and functionality. In total, Phase II will comprise around 298,000 square feet, marking a rise from the initial 266,000 square feet planned.

Healthpeak has made concerted efforts to reposition its portfolio over the past few years. As part of these, the company has recycled capital through non-core dispositions to its solid investment and development pipeline. The strategic expansion of its life-science and medical office building (MOB) portfolio footprint, and selective buyouts of high-quality senior housing assets in high barrier-to-entry markets has renewed the company’s growth opportunities.

Increasing life expectancy of the U.S. population and bio-pharma drug development growth opportunities have boosted the institutional life-science and medical-real estate market fundamentals. Amid these, Healthpeak has adopted a cluster strategy in three premier life-science epicenters — San Diego, San Francisco and Boston — aimed at assembling assets through acquisitions, developments and redevelopments. On the back of these, the company is gaining scale and is well poised to meet the growing demand of life-science tenants.

Healthpeak currently carries a Zacks Rank #3 (Hold). In the past six months, shares of this REIT have gained 9.3% compared with its industry’s rally of 3.3%.

Stocks to Consider

Duke Realty DRE currently carries a Zacks Rank of 2 (Buy). The company’s funds from operations (FFO) per share estimate for 2020 has been revised marginally upward to $1.52 in two months’ time. The stock has rallied 5.5% in three months’ time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medical Properties Trust, Inc. MPW Zacks Consensus Estimate for the current-year FFO per share moved a cent upward to $1.61 in a week’s time. Shares of this Zacks Rank #2 company have gained 10.3% over the past three months.

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

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