Healthpeak Properties, Inc. (PEAK - Free Report) has made concerted efforts to reposition its portfolio and strengthen all three core segments — senior housing, life-science and medical office. As part of such efforts, the company has recycled capital through non-core dispositions to its solid investment and development pipeline. While such efforts are a strategic fit for the long term, the dilutive impact on earnings in the near term from the sale of assets is unavoidable.
Recently, the company expanded its life-science development pipeline with the addition of The Boardwalk in the Torrey Pines life-science cluster. Construction at the project will commence in first-quarter 2020.
Further, fortifying its medical-office development program with HCA Healthcare, the companies have added a $46-million development project to the joint project, with construction anticipated to commence in mid-2020. Healthpeak has also entered into an agreement with Oakmont Senior Living, offering the company the option to acquire up to 24 senior housing development properties worth $1.3 billion, when the latter elects to sell.
Notably, the company has transformed its senior housing portfolio quality through addition of strategic properties and recycling of capital on the back of dispositions. Through these prudent capital-allocation measures, it has improved operator diversification and expanded geographic footprint of this portfolio in high-growth and affluent markets, leading to superior gains in RevPOR.
Also, with an expectation of rising senior citizens’ population in the years ahead, there is strong upside potential for Healthpeak’s senior housing platform, being well poised to capitalize on this expenditure trend of senior citizens on healthcare services.
The company also maintains an investment-grade balance sheet, providing it the dry powder to pursue its growth endeavors.
While the above-mentioned strategic transactions will be funded through sale proceeds from the company’s senior housing joint venture (JV), such dispositions have a dilutive impact on earnings. In fact, the sale of 13 non-core senior housing properties to Prime Care, and the U.K. JV disposition was dilutive in third-quarter 2019.
Further, choppy senior housing fundamentals amid rising new supply in the market is expected to persist in the near term. This is anticipated to affect the company’s pricing power and occupancy level. Moreover, a competitive market makes it more challenging for this healthcare REIT to increase its rents.
In the past three months, shares of this Zacks Rank #3 (Hold) company have declined 7.5%, wider than the industry’s loss of 0.8%.
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