Healthpeak Properties’ continuing care retirement community segment is seeing unprecedented entry fee collections, according to executives speaking during the Denver real estate investment trust’s second-quarter earnings call Wednesday.
President and Chief Investment Officer Scott Brinker said the company’s CCRC business is performing strongly, with entry fee cash receipts up 40% year over year. This news follows first-quarter cash sales volumes being up 42% year over year. The CCRC portfolio, he said, continues to have pricing power, with providers offering no discounting.
CEO Thomas Herzog called its CCRC portfolio “irreplaceable” due to a lack of competition and a younger and healthier resident population that provides an eight- to 10-year length of stay. Healthpeak’s CCRC portfolio also will benefit from strong baby boomer tailwinds, he said.
With 15 CCRC campuses occupying more than 700 acres in total, Herzog added, the replacement cost for those communities would be three times the REIT’s initial investment, making the properties impossible to replicate. He said it would be difficult for another company to come in due to scale and platform requirements.
“We feel good about the business,” he said.
Brinker said that June proved to be one of the best months for CCRC sales, as well as price points. Similar activity in July has the REIT expecting the CCRC portfolio to perform ahead of expectations for the first half of the year.
Total occupancy in Healthpeak’s CCRC portfolio was 81.1% for the quarter, up 20 basis points (0.2%) from the first quarter and 170 basis points (1.7%) from the second quarter of 2021, according to a supplemental report released in conjunction with the earnings call.
A housing shortage across the country, including the 15 Healthpeak CCRC markets that are concentrated in Florida, bodes well for housing prices, executives said. Higher construction costs, particularly in Florida, also mean a building slowdown and no new competition in Healthpeak’s markets, Brinker said.
“We feel good about the ongoing demand,” Brinker said, adding that Healthpeak is not targeting “super affluent” residents, with average entry fees falling just below $200,000. “The demand outlook is strong.”
