Irvine, CA-based Healthpeak Properties told investors this week that the firm is eyeing a potential exit of its senior housing operator portfolio and triple-net lease assets, if the pricing is right. The remarks from CEO Thomas M. Herzog came during a presentation Wednesday at the Bank of America Merrill Lynch 2020 Global Real Estate Virtual Conference.
The real estate investment trust indicated during its second quarter earnings call in August that the senior housing industry is facing a tough operating environment, though Wednesday’s comments seemed to cement an exit — or at least an attempt to lighten Healthpeak’s seniors housing portfolio — in the near future. Herzog noted that the firm has been evaluating several inquiries in recent weeks from private equity firms interested in purchasing its seniors housing assets.
“There will be a need for [these assets], but I just don’t know if it’s as well-set for a REIT as it used to be,” Herzog said. He pointed to the fact that barriers to new development have decreased, leading to many newer, smaller players in the market. Herzog also expressed concern over the potential for more federal oversight of the industry as a result of COVID-19 stimulus money. This could affect the firm’s ongoing interest in more private-pay residents, he added, noting that taking a step away could also help differentiate Healthpeak from its peers.
“If the pricing is not right, however, we are perfectly good to play through and benefit over time from the industry’s inevitable recovery.”
Herzog noted, however, that the firm is not considering any selloffs within its continuing care retirement community portfolio, which he deems “irreplaceable” due to its high barriers to entry, large campus size and an eight- to 10-year average length of stay among residents.
“Our CCRC properties are all relatively immune to new supply,” Herzog said. “In fact, in the last 10 years, within a 10-mile radius we have had exactly zero new entrants of supply into our immediate market.”