Healthpeak Properties, Inc 10-Q for FY2020 Q1

Healthpeak Properties, Inc. (DOC)

10-Q 2020-05-06 For: 2020-03-31

Added on April 09, 2026

About this 10-Q

Healthpeak Properties, Inc filed this 10-Q on May 6, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $585.15M; up 34.2% from $436.15M a year earlier
Net income: $279.08M; up 354.0% from net income of $61.47M a year earlier
Diluted EPS: $0.54; up 315.4% from $0.13 a year earlier

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Maryland		33-0091377
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $1.00 par value	PEAK	New York Stock Exchange



Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐



PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income (Loss)	5

	Consolidated Statements of Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to the Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	54

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

Item 6.	Exhibits	77

Signatures



	March 31, 2020			December 31, 2019
ASSETS
Real estate:
Buildings and improvements	$	12,720,111		$	11,120,039
Development costs and construction in progress	588,343			692,336
Land	2,114,024			1,992,602
Accumulated depreciation and amortization	(2,840,632		)	(2,771,922		)
Net real estate	12,581,846			11,033,055
Net investment in direct financing leases	44,706			84,604
Loans receivable, net of reserves of $9,314 and $0	220,652			190,579
Investments in and advances to unconsolidated joint ventures	479,900			825,515
Accounts receivable, net of allowance of $8,594 and $4,565	85,037			59,417
Cash and cash equivalents	783,542			144,232
Restricted cash	106,557			40,425
Intangible assets, net	550,348			331,693
Assets held for sale, net	271,861			504,394
Right-of-use asset, net	171,843			172,486
Other assets, net	776,387			646,491
Total assets	$	16,072,679		$	14,032,891
LIABILITIES AND EQUITY
Bank line of credit and commercial paper	$	—		$	93,000
Term loan	249,002			248,942
Senior unsecured notes	5,650,053			5,647,993
Mortgage debt	490,049			276,907
Intangible liabilities, net	72,137			74,991
Liabilities of assets held for sale, net	31,724			36,369
Lease liability	156,808			156,611
Accounts payable, accrued liabilities, and other liabilities	856,031			540,924
Deferred revenue	753,432			289,680
Total liabilities	8,259,236			7,365,417
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 538,135,188 and 505,221,643 shares issued and outstanding	538,135			505,222
Additional paid-in capital	10,213,011			9,183,892
Cumulative dividends in excess of earnings	(3,512,143		)	(3,601,199		)
Accumulated other comprehensive income (loss)	(2,495		)	(2,857		)
Total stockholders' equity	7,236,508			6,085,058
Joint venture partners	373,495			378,061
Non-managing member unitholders	203,440			204,355
Total noncontrolling interests	576,935			582,416
Total equity	7,813,443			6,667,474
Total liabilities and equity	$	16,072,679		$	14,032,891



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended March 31,
	2020			2019
Revenues:
Rental and related revenues	$	314,688		$	294,222
Resident fees and services	263,505			126,695
Income from direct financing leases	3,269			13,524
Interest income	3,688			1,713
Total revenues	585,150			436,154
Costs and expenses:
Interest expense	58,376			49,327
Depreciation and amortization	189,276			131,951
Operating	376,013			168,927
General and administrative	22,349			21,355
Transaction costs	14,848			4,518
Impairments and loan loss reserves (recoveries), net	39,123			8,858
Total costs and expenses	699,985			384,936
Other income (expense):
Gain (loss) on sales of real estate, net	164,869			8,044
Loss on debt extinguishments	833			—
Other income (expense), net	210,608			3,133
Total other income (expense), net	376,310			11,177
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	261,475			62,395
Income tax benefit (expense)	33,044			3,458
Equity income (loss) from unconsolidated joint ventures	(11,979		)	(863		)
Net income (loss)	282,540			64,990
Noncontrolling interests' share in earnings	(3,460		)	(3,520		)
Net income (loss) attributable to Healthpeak Properties, Inc.	279,080			61,470
Participating securities' share in earnings	(1,616		)	(441		)
Net income (loss) applicable to common shares	$	277,464		$	61,029
Earnings per common share:
Basic	$	0.55		$	0.13
Diluted	$	0.54		$	0.13
Weighted average shares outstanding:
Basic	506,476			477,766
Diluted	515,045			479,131



	Common Stock					Additional Paid-In Capital			Cumulative Dividends In Excess Of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Total Noncontrolling Interests			Total Equity
	Shares		Amount			Additional Paid-In Capital			Cumulative Dividends In Excess Of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Total Noncontrolling Interests			Total Equity
December 31, 2019	505,222		$	505,222		$	9,183,892		$	(3,601,199	)	$	(2,857	)	$	6,085,058		$	582,416		$	6,667,474
Impact of adoption of ASU No. 2016-13⁽¹⁾	—		—			—			(1,524		)	—			(1,524		)	—			(1,524		)
January 1, 2020	505,222		505,222			9,183,892			(3,602,723		)	(2,857		)	6,083,534			582,416			6,665,950
Net income (loss)	—		—			—			279,080			—			279,080			3,460			282,540
Other comprehensive income (loss)	—		—			—			—			362			362			—			362
Issuance of common stock, net	33,104		33,104			1,031,518			—			—			1,064,622			—			1,064,622
Conversion of DownREIT units to common stock	23		23			486			—			—			509			(509		)	—
Repurchase of common stock	(268	)	(268		)	(9,469		)	—			—			(9,737		)	—			(9,737		)
Exercise of stock options	54		54			1,752			—			—			1,806			—			1,806
Amortization of deferred compensation	—		—			4,832			—			—			4,832			—			4,832
Common dividends ($0.37 per share)	—		—			—			(188,500		)	—			(188,500		)	—			(188,500		)
Distributions to noncontrolling interests	—		—			—			—			—			—			(8,432		)	(8,432		)
March 31, 2020	538,135		$	538,135		$	10,213,011		$	(3,512,143	)	$	(2,495	)	$	7,236,508		$	576,935		$	7,813,443


(1)	On January 1, 2020, the Company adopted a series of Accounting Standards Updates (“ASUs”) related to accounting for credit losses and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.


(2)	On January 1, 2019, the Company adopted a series of ASUs related to accounting for leases and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.


•	The Company, which owned a 49% interest in the CCRC JV, purchased Brookdale’s 51% interest in 13 of the 15 communities in the CCRC JV based on a valuation of $1.06 billion (the “CCRC Acquisition”);


•	The management agreements related to the CCRC Acquisition communities were terminated and management transitioned (under new management agreements) from Brookdale to Life Care Services LLC (“LCS”); and


•	The Company paid a $100 million management termination fee to Brookdale.


•	Brookdale acquired 18 of the properties from the Company (the “Brookdale Acquisition Assets”) for cash proceeds of $385 million;


•	The remaining 24 properties (excludes the one property to be transitioned to LCS, as discussed below) were restructured into a single master lease with 2.4% annual rent escalators and a maturity date of December 31, 2027 (the “2019 Amended Master Lease”);


•	A portion of annual rent (amount in excess of 6.5% of sales proceeds) related to 14 of the 18 Brookdale Acquisition Assets was reallocated to the remaining properties under the 2019 Amended Master Lease; and


•	Brookdale paid down $20 million of future rent under the 2019 Amended Master Lease.


•	The remaining two CCRCs will be jointly marketed for sale to third parties.


•	The Company will terminate the triple-net lease related to one property and transition it to a RIDEA structure with LCS as the manager;


•	The Company will provide up to $35 million of capital investment in the 2019 Amended Master Lease properties over a five-year term, which will increase rent by 7% of the amount spent, per annum.


•	The Company received the right to sell, or transition to other operators, 32 of the 78 total assets under an Amended and Restated Master Lease and Security Agreement (the “2017 Amended Master Lease”) with Brookdale and 36 of the RIDEA Facilities (and terminate related management agreements with an affiliate of Brookdale without penalty), certain of which were sold during 2018 and 2019;


•	The Company provided an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018; and


•	Brookdale agreed to purchase two of the assets under the 2017 Amended Master Lease for $35 million and four of the RIDEA Facilities for $240 million, all of which were sold in 2018.



	March 31, 2020			December 31, 2019
Present value of minimum lease payments receivable	$	16,255		$	19,138
Present value of estimated residual value	44,706			84,604
Less deferred selling profits	(16,255		)	(19,138		)
Net investment in direct financing leases before allowance	44,706			84,604
Allowance for direct financing lease losses	—			—
Net investment in direct financing leases	$	44,706		$	84,604
Properties subject to direct financing leases	1			2



	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment	Carrying Amount		Percentage of DFL Portfolio	Performing DFLs		Watch List DFLs		Workout DFLs
Other non-reportable segments	$	44,706	100	$	44,706	—		—
	$	44,706	100	$	44,706	$	—	$	—



	March 31, 2020			December 31, 2019
Secured mortgage loans⁽¹⁾	$	169,176		$	161,964
Mezzanine and other	59,998			27,752
Unamortized discounts, fees, and costs	792			863
Reserve for loan losses	(9,314		)	—
	$	220,652		$	190,579


(1)	At March 31, 2020, the Company had $16 million remaining of commitments to fund $174 million of senior housing development projects. At December 31, 2019, the Company had $25 million remaining of commitments to fund $174 million of senior housing development projects.



Investment Type	Year of Origination										Total
Investment Type	2020		2019		2018		2017		2016		Total
Secured mortgage loans
Risk rating:
Performing loans	$	—	$	55,955	$	—	$	108,484	$	—	$	164,439
Watch list loans	—		—		—		—		—		—
Workout loans	—		—		—		—		—		—
Total secured mortgage loans	$	—	$	55,955	$	—	$	108,484	$	—	$	164,439
Mezzanine and other
Risk rating:
Performing loans	$	2,901	$	36,114	$	—	$	8,896	$	8,302	$	56,213
Watch list loans	—		—		—		—		—		—
Workout loans	—		—		—		—		—		—
Total mezzanine and other	$	2,901	$	36,114	$	—	$	8,896	$	8,302	$	56,213



				Carrying Amount
				March 31,		December 31,
Entity⁽¹⁾	Segment	Property Count⁽²⁾	Ownership %⁽²⁾	2020		2019
SWF SH JV⁽³⁾	SHOP	19	54	$	411,057	$	428,258
MBK JV	SHOP	5	50	32,821		33,415
Other SHOP JVs⁽⁴⁾	SHOP	4	50 - 90	16,843		17,719
Medical Office JVs⁽⁵⁾	MOB	3	20 - 67	9,809		9,845
Other JVs⁽⁶⁾	Other	—	41 - 47	9,370		10,372
CCRC JV⁽⁷⁾	CCRC	2	49	—		325,830
Advances to unconsolidated joint ventures, net				—		76
				$	479,900	$	825,515


(1)	These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.


(2)	Property count and ownership percentage are as of March 31, 2020.


(3)	In December 2019, the Company formed the SWF SH JV with a sovereign wealth fund. See Note 4 for discussion of the formation of the SWF SH JV.


(4)	In June 2019, the Company acquired the outstanding equity interests in, and began consolidating, the Vintage Park JV (see Note 4). Remaining unconsolidated SHOP joint ventures (and the Company’s ownership percentage) include: (i) Waldwick JV (85%); (ii) Otay Ranch JV (90%); and (iii) MBK Development JV (50%).


(5)	Includes three unconsolidated medical office joint ventures (and the Company’s ownership percentage): (i) Ventures IV (20%); (ii) Ventures III (30%); and (iii) Suburban Properties, LLC (67%).


(7)	See Note 3 for discussion of the 2019 MTCA with Brookdale, including the acquisition of Brookdale’s interest in 13 of the 15 communities in the CCRC JV in January 2020.



Intangible lease assets	March 31, 2020			December 31, 2019
Gross intangible lease assets	$	887,516		$	615,538
Accumulated depreciation and amortization	(337,168		)	(283,845		)
Intangible assets, net	$	550,348		$	331,693



Intangible lease liabilities	March 31, 2020			December 31, 2019
Gross intangible lease liabilities	$	113,213		$	113,213
Accumulated depreciation and amortization	(41,076		)	(38,222		)
Intangible liabilities, net	$	72,137		$	74,991



Date	Amount		Coupon Rate		Maturity Date
November 21, 2019	$	750,000	3.000	%	2030
July 5, 2019	$	650,000	3.250	%	2026
July 5, 2019	$	650,000	3.500	%	2029