Healthcare REITs Agree To Merge, Form $21B Medical Property Giant
Healthpeak Properties and Physicians Realty Trust announced plans to merge Monday in a deal that would create a combined company with a value of roughly $21B.
The all-stock merger of the two medical REITs is expected to close in the first half of 2024 with the combined entity having around 52M SF of medical and lab space under management, according to a release. The merged firms would operate as Healthpeak Properties but take over Physicians’ DOC symbol on the New York Stock Exchange.
Healthpeak would pay roughly $2.6B in stock to complete the merger. Under the terms of the deal, a Physicians Realty Trust share would be converted 0.674 shares of a newly issued Healthpeak common share. Physicians shareholders are expected to own approximately 23% of the combined entity.
The merger will create “a competitive advantage that should lead to more opportunities for growth and enhanced value creation for shareholders,” Healthpeak CEO Scott Brinker said in a statement.
“We expect the transaction to be immediately accretive to each company’s shareholders, augment our strong balance sheet, and position the combined company for offense,” he said.
The deal is expected to reduce overall costs for the combined company, with run-rate synergies of at least $40M by the end of the first year and up to $60M by the end of the second, according to the release. The combined company is planning to pay an annualized dividend of $1.20 per share.
The two REITs both have concentrations of properties in Sun Belt markets like Dallas, Houston, Nashville, Phoenix and Denver.
“Together, we will be well-positioned to create significant value from our real estate, relationships, and platform while benefiting from the secular growth in demand,” Katherine Sandstrom, Healthpeak's board chair, who is expected to lead the new combined board, said in a statement.
Healthpeak will assume the existing senior unsecured notes and term loan from Physicians and enter into a five-year, $500M term loan for “general corporate purposes including repayment of borrowings under Healthpeak’s commercial paper program,” according to the release.
Brinker will remain CEO of the combined Healthpeak, with Physicians CEO John Thomas joining as vice chair of the board of directors, which will include eight existing Healthpeak directors and five Physicians directors. Peter Scott will stay on as Healthpeak’s chief financial officer.
The combined company’s headquarters will be in Denver, where Healthpeak is based. Physicians’ headquarters is in Milwaukee. The merged firm will maintain other existing offices, according to the release.
Healthpeak was founded in 1985 and joined the S&P 500 in 2008. It owns 475 assets valued at over $20B, according to its third-quarter report. Just over half of its assets are labs, with 37% of holdings in outpatient medical centers and 9% of its assets in continuing care retirement centers.
Physicians Realty Trust owns 290 properties in 36 states totaling 16M SF of medical space and around $6B in owned assets at the end of 2022, according to its annual report.
Healtpeak’s stock was down 4.8% in early trading Monday, and Physicians slipped around 1%. The REITs have been shedding value this year, with Healthpeak down 38% year-to-date and Physicians off by 24%.
