Healthpeak Properties CEO Thomas M. Herzog
Healthpeak Properties closed on the final sale of $149 million of its seniors housing portfolio in the third quarter, bringing total sales proceeds on the properties to $4 billion since July 2020, CEO Thomas Herzog said during Wednesday’s third-quarter earnings call.
The sales finalize the Denver-based real estate investment trust’s planned exit from senior housing, other than continuing care retirement communities. The REIT has funneled sales proceeds into life sciences and medical office building acquisitions as well as debt reduction.
Healthpeak’s remaining rental senior housing consists of a 53.5% interest in a 19-property senior housing joint venture.
Third-quarter operating and earnings results were favorable, Healthpeak said, as the REIT was “very active and productive” in transactions, development and leasing activities.
President and Chief Investment Officer Scott Brinker said the company’s CCRC concentration in Florida looks positive in the long term.
The sector, he said, was challenged in the third quarter by an increase in the COVID-19 delta variant across the Sunshine State, which had a temporary effect on occupancy, especially in assisted living and skilled nursing. CCRC occupancy in the REIT’s portfolio as of Sept. 30 was 80.7% in assisted living, independent living and memory care, and 73.5% in skilled nursing.
Labor also is a “headwind” for the senior living sector, Brinker said, particularly in the third quarter. Expenses were up $5 million (5%) sequentially for the quarter, mostly driven by labor costs. Labor shortages, he said, are particularly acute in Florida and “meaningful” on the healthcare side.
Labor expenses had a short-term effect on margins, and reduced skilled nursing admissions affected revenue as well, he said.
“We do see that improving, but it’s going to take some time,” Brinker said. “This is a year-plus process, where I think we’ll slowly decline to more normalized levels.”
COVID-19 expenses in Healthpeak’s CCRC portfolio totaled approximately $1.2 million in the third quarter and are $5.9 million year to date.
In Independent living, which represents two-thirds of the unit count in the CCRC campuses, occupancy remains strong, Brinker said. Brinker said entry fee sales are nearly back to 2019 levels, and entry fee cash receipts exceeded historical levels.
“The fundamental demand for that business and underlying profit center — independent living — is strong as well,” Brinker said.