Healthpeak (PEAK) Wraps Up Merger With Physicians Realty Trust
Healthpeak Properties PEAK completed its previously announced merger with Physicians Realty Trust in an all-stock merger of equals. The combined company will operate under the name “Healthpeak Properties, Inc.” and trade under the ticker symbol “DOC” on the NYSE from Mar 4, 2024, onwards.
The merger will aid in broadening and deepening the industry-leading relationships that both companies already have with the top health systems, increasing opportunities for internal and external growth. In addition, a more diversified, creditworthy tenant roster will help generate stable annualized base rent.
According to management, the merger is expected to result in $40 million in merger-related synergies in 2024, with the possibility of an additional $20 million or more in synergies by the end of 2025.
Scott Brinker, president and CEO of Healthpeak, commented, “We believe this transaction augments our earnings, balance sheet and platform. Our integration efforts are progressing ahead of schedule with property management internalized in four markets to date, with an additional five markets scheduled by the end of the second quarter.”
According to Healthpeak’s October press release regarding the merger, the deal will be immediately accretive to both Physicians Realty Trust’s and Healthpeak’s standalone AFFO and FFO (subject to final merger accounting adjustments) and bolster Healthpeak’s balance sheet strength.
With a 52 million square feet portfolio, including 40 million square feet of outpatient medical properties concentrated in high-growth markets of Dallas, Houston, Nashville, Phoenix and Denver, the combined company is expected to be a leading real estate platform dedicated to healthcare discovery and delivery with greater competitive advantage.
Furthermore, Healthpeak entered into a new $750 million five-year unsecured term loan on Mar 1, 2024. The $210 million in Physicians Realty Trust private placement notes were repaid with the proceeds of the term loan. The remaining funds would be utilized for general corporate purposes, such as transaction expenses and repaying borrowings taken out under Healthpeak's commercial paper program. It has entered into swap agreements that will lock in the new term loan's interest rate at around 4.5% for the five-year term of the loan.
Healthpeak owns a portfolio of top-quality healthcare real estate assets in the high barrier-to-entry markets of the United States. Going forward, such expansion moves will enable it to benefit from favorable operating trends and tenant demand, thereby driving growth opportunities for the company. However, competition from industry peers and a high interest rate environment are key near-term concerns.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have declined 6.9% against the industry's upside of 2.5%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are American Tower AMT and SL Green Realty SLG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for AMT’s 2024 funds from operations (FFO) per share is pegged at $10.27, suggesting year-over-year growth of 4.1%.
The Zacks Consensus Estimate for SLG’s 2024 FFO per share stands at $5.88, indicating an increase of 19% from the year-ago quarter.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
American Tower Corporation (AMT) : Free Stock Analysis Report
SL Green Realty Corporation (SLG) : Free Stock Analysis Report
