Specialists in Healthcare Real Estate Merge

Last Updated: 5. November 2023By

This week, a multi-billion dollar merger made headlines. The two US companies Healthpeak Properties and Physicians Realty Trust are joining forces. The value of the merger is estimated at around 21 billion dollars. The merger will create a heavyweight that will manage healthcare properties, clinics, hospitals, and surgical centers.

Healthpeak Properties—the specialist in healthcare properties… Healthpeak Properties‘ story begins in 1985 when the company was founded as National Health Investors (NHI). In the early years, the company primarily focused on leasing nursing homes and clinics. Over the years, however, the company has expanded its business model and developed new products and services.

Today, the company acquires, develops, owns, leases, and manages healthcare properties in the United States. The company’s strategy is to invest in a diversified portfolio of high quality healthcare properties in the three core areas of Life Science, Medical Office, and Continuing Care Retirement Community (CCRC) properties.

The Life Science segment’s properties include, for example, laboratory and office space, which is primarily leased to biotechnology, medical device, pharmaceutical, and scientific research organizations, as well as governmental agencies. The company’s Medical Office segment includes medical office buildings and hospitals, among other things.

…snaps up rival Physicians Realty Trust The target of desire is Physicians Realty Trust, a real estate investment trust that also focuses on acquiring, developing, owning, and managing healthcare properties. The deal values Physicians at approximately $2.64 billion, based on 238.45 million shares outstanding. Under the transaction, each share of Physicians will be converted into 0.674 of a newly issued Healthpeak share, leaving Healthpeak shareholders approximately 77% of the combined company. The new company will operate under the name Healthpeak Properties. The merger is expected to close in the first half of 2024.

Healthpeak expects to assume a portion of Physicians’ existing debt, which was approximately $2 billion as of June 30.

Market position is significantly strengthened “With a broader presence in strategically important markets and a high-quality portfolio, we will be able to better address the real estate needs of leading tenants in the healthcare systems, physicians, and biopharma, which we believe is a competitive advantage that should lead to more,“ says Scott Brinker (Healthpeak’s board of directors).

The new company will own healthcare properties valued at 4.8 million square meters in the United States. Of these, 3.7 million square meters of outpatient medical properties are concentrated in growth markets such as Dallas, Houston, Nashville, Phoenix, and Denver. As of December 31, Physicians Realty owned approximately 277 properties, while Healthpeak owned approximately 450.

Management anticipates synergies It is expected that the merger will generate synergies of at least $40 million by the end of the first year and up to $60 million by the end of the second year. Upon completion of the merger, the combined company is expected to pay an annual dividend of $1.20 per share.

The stock prices of both companies reacted positively yesterday. While Healthpeak Properties’ shares rose by around 7%, Physicians Realty Trust’s shares climbed more than 8%.