Thomas Herzog
Thomas Herzog

Healthpeak Properties’ planned exit of its senior living operating and triple-net lease portfolio businesses is substantially complete, as the healthcare real estate investment trust focuses on increasing the size of its biotech-centric life sciences and medical office building portfolios. The REIT will continue to invest in continuing care retirement communities, however.

“Despite the enormous challenges of 2020, I believe we will exit the pandemic in a stronger place than we started,” CEO Tom Herzog said Wednesday during a fourth-quarter and full-year 2020 earnings call. Rental senior housing will continue to be a “vital and growing business that serves a vital need in the healthcare continuum,” he added.

Herzog said the Denver-based REIT’s executive team and board identified five priorities to navigate the COVID-19 crisis, which proved “critical in guiding its path through the fog.” Those priorities included protecting the health of teammates, residents and tenants; guarding the balance sheet, liquidity and credit ratings; communicating frequently with stakeholders; determining all classes of real estate are vital post-pandemic; and taking advantage of opportunities as a result of the pandemic.

Discontinued operations

Using those priorities, Herzog said Healthpeak decided to test the market to determine whether it was feasible to reduce its presence in or exit the rental senior housing business. After six months, the company closed on $2.5 billion of senior housing operating portfolio (SHOP) and triple-net (NNN) transactions, with another $1.5 million under contract. 

Among the transactions closed in the fourth quarter was a $358 million sale of a 10-property NNN portfolio operated by Aegis Senior living; a $312 million sale of a 12-property SHOP portfolio operated by Atria Senior Living; and a $156 million sale of 10 SHOP properties and thee NNN properties operated by Atria Senior Living, Capital Senior Living, Sunrise Senior Living, Saber Healthcare Group and LCB Senior Living.

In January, Healthpeak closed  a $664 million sale of a 32-property SHOP portfolio operated by Sunrise; a $510 million sale of a 24-property NNN portfolio operated by Brookdale Senior Living; and a $230 million sale of a portfolio of 16 SHOP properties operated by Capital, Atria and Life Care Services.

In February, the REIT closed a $132 million sale of an eight-property NNN portfolio operated by Harbor Retirement Associates. 

Healthpeak President and Chief Investment Officer Scott Brinker said the makeup of the buyer pool is diverse but includes repeat buyers who are motivated and well-capitalized to enter the senior living sector.

As of Dec. 31, Healthpeak classified its triple-net leased and SHOP assets as discontinued operations. Brinker said that Healthpeak could close on all of its remaining senior housing deals by the end of the second quarter.

Herzog said the REIT’s focus on life sciences and medical office buildings (85%), as well as a smaller portfolio of “high-quality, high-yielding” CCRCs, represents “irreplaceable, high-barrier-to-entry portfolios that are impossible to replicate and provide a strong growth trajectory based on demographic tailwinds.”

CCRC portfolio

Healthpeak’s CCRC portfolio includes 15 communities, each with an average of 500 units on 50-acre parcels. Herzog said these campuses have high barriers to entry, given the eight to 10-year development from concept to stabilization period and the heavy infrastructure required to operate. 

Brinker said that the REIT’s CCRC portfolio continued to outperform its rental senior housing portfolio. CCRC occupancy declined 100 basis points (1%) November to December, driven by the intensity of the third wave of the coronavirus. Performance improved throughout the quarter, he said, with flat occupancy in December: 81.6% in assisted living, independent living and memory care, and 66.4% in skilled nursing. That momentum carried through January, with occupancy up 20 basis points (0.2%) over the previous month.

New entrance fee contracts increased almost 100% in the fourth quarter, Brinker added. Although new entrance fees remain 30% below the prior year, he said they are heading in the right direction. All of the CCRCs are open to in-person tours, move-ins and visitation.

Herzog said the portfolio produces an element of diversification for the company. Positive momentum is coming with the vaccine rollout along with low interest rates and some pent-up demand, he added. 

“We’ve continued to conclude it is a business we would like to own and grow slowly,” Herzog said of Healthpeak’s CCRC portfolio. “It won’t be a huge part of our company in the future, but one that we think is additive.”


During the fourth quarter, the REIT had $9.6 million in COVID-19-related expenses; the number was $42.9 million for all of 2020. COVID-related expenses in the CCRC portfolio were reported to be approximately $17.5 million for 2020, including $300,000 in the first quarter, $7.4 million in the second quarter, $5.3 million in the third quarter, and $4.3 million in the fourth quarter.

Some of those costs were offset by Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Funds. In the fourth quarter, the REIT received $15.5 million in Provider Relief funds; the number was $32.9 million for the whole year.

Pete Scott, executive vice president and chief financial officer, said that the CCRC portfolio remains “challenged,” but he added that he is encouraged by the vaccine rollout, which he called a “catalyst” for improving near-term results.