Healthpeak: Sizing The Dividend Cut

Seeking AlphaREITsHealthpeak: Sizing The Dividend CutDec. 1, 2020 3:46 PM ET|| About: Healthpeak Properties, Inc. (PEAK), Includes: ARE, BXP, HRby: Joe XJoe X ValueSummaryHealthpeak is accelerating a portfolio shift to MOB's and Life Science.
The current $1.48 annual dividend is not well supported.
Dividend yields at peers ARE and HR are materially lower.
We expect PEAK to lower the dividend in 2021.
Introduction
In its 3Q earnings release, Healthpeak Properties (PEAK) announced that it intends to exit substantially all of its senior housing investments. A number of individual portfolios aggregating $4 billion of assets are in various stages of closing or under LOI, and the remaining properties "are being actively marketed for sale." Some of the sub-portfolios could close as early as 4Q with the balance falling into the first half of 2021.
The senior housing sale culminates almost a five-year restructuring effort at Healthpeak, a process that began in 2016 with the spin-off of the Manor Care nursing home portfolio. Since then, Healthpeak has been a net seller of senior housing properties, which have suffered from oversupply issues in prior years and a far deeper dislocation due to COVID-19. While a recovery is perhaps in the wings, management has decided to forgo any additional drama and focus attention on its less-volatile businesses. Healthpeak's portfolio will now consist of medical office buildings, life science (lab space) properties, and a small group of CCRC properties that have been steady performers.
While management was careful to say that the latest round of divestitures would not necessarily be dilutive, 2021 is likely to be another flattish earnings year as Healthpeak works to redeploy the cash. Among the myriad of moving parts to the Healthpeak story is what to do about the $1.48 dividend, which management noted was running at 101% of AFFO.
The question of a dividend cut was raised on the 3Q earnings call. While CEO Tom Herzog... Read more