Healthpeak experiences highest-ever leasing activity for continuing care retirement communities in Q2

Healthpeak Properties, a real estate investment trust based in Denver, experienced unprecedented leasing activity in its continuing care retirement community (CCRC) portfolio during the second quarter, according to President, CEO, and Director Scott Brinker’s statements during the recent earnings call. Brinker emphasized the strategic shift toward enhanced affordability through a unique entry fee structure as a driving force behind the increased demand and differentiation of the product offered. The net entry fee for these properties stands at 60% of the local median home value, presenting a compelling value proposition to prospective residents.

The CCRC portfolio comprises nine properties in Florida, with additional locations in Pennsylvania, Alabama, Michigan, Texas, and Virginia, as indicated on the REIT’s official website. Brinker highlighted that the annual net operating income from these properties, including cash entry fees, now surpasses $200 million, marking a 50% surge from pre-pandemic levels in 2019. The decision to engage LCS (Life Care Services) as the primary operator has been instrumental in boosting performance, with current occupancy rates at 86%, showcasing room for growth moving forward.

Of the 15 CCRC communities under Healthpeak’s purview, 13 are managed by LCS, with the remaining two overseen by Sunrise Senior Living, according to a supplemental report filed with the Securities and Exchange Commission. Chief Financial Officer Kelvin Moses underscored the CCRC’s outstanding same-store net operating income growth of 8.6% in the second quarter. This growth is driven by a 5% increase in rates and strong entrance fee sales, underscoring the efficacy of operational strategies and the quality of the asset portfolio.

The CCRC collected $19 million in entrance fees, and as of June 30, the REIT carried $65 million in notes receivable associated with loans provided to residents facilitating their transition. These loans are due upon the sale of the residents’ prior homes. The portfolio remains strong due to favorable market conditions, with a year-to-date same-store growth of 12%, exceeding segment guidance.

The combined CCRC portfolio features 4,824 independent living units, 921 assisted living units, 304 memory care units, and 1,016 skilled nursing units. Despite a slight dip in total occupancy from 86.2% to 86% from the first to the second quarter, independent living/assisted living/memory care occupancy increased marginally to 85.9%. Conversely, skilled nursing occupancy declined to 86.4% from 89.1% in the first quarter.

Brinker noted that the profitable segments of the CCRC business lie in independent living, assisted living, and memory care components, with skilled nursing services contributing to the continuum of care offered. He acknowledged that the seasonal nature of skilled nursing components could lead to fluctuations in occupancy during the second quarter.