Healthpeak Properties and Brookfield Asset Management have formed a long-term strategic joint venture involving 86 outpatient medical properties valued at approximately $2.1 billion. The portfolio contains about 5.6 million square feet across 11 states, including Kentucky, Indiana, Pennsylvania, Arkansas, Illinois, Minnesota, New Jersey and New York. It is approximately 95% leased and has a weighted average remaining lease term of six years.
Brookfield and its affiliates acquired a non-controlling 49% interest in the venture. Healthpeak retained a 51% controlling stake and will continue serving as managing member.
Healthpeak will provide asset management, leasing and property management services for the portfolio. The structure allows the healthcare real estate investment trust to maintain operational control and participate in future value creation while bringing in long-term institutional capital.
Healthpeak received approximately $1.025 billion in gross proceeds from the sale of the 49% interest. The transaction implies a trailing cash capitalization rate of about 5.9% and a valuation of approximately $380 per square foot.
A capitalization rate measures a property portfolio’s annual operating income relative to its value. The disclosed rate provides an indication of the valuation applied to the portfolio’s current cash flow.
Healthpeak will have a call right for a limited period beginning after the venture’s seventh year. The provision allows Healthpeak to repurchase Brookfield’s interest at a price designed to provide Brookfield with a 6.5% net annual return, excluding initial transaction expenses.
The joint venture is expected to remain consolidated on Healthpeak’s financial statements because Healthpeak retains control. Brookfield’s investment will be recorded as a non-controlling equity interest.
The transaction gives Healthpeak additional capital that can be allocated across acquisitions, development projects, debt reduction or other corporate priorities. It also establishes a framework the company may use for future investment partnerships across its real estate segments.
Demand for outpatient medical facilities is being supported by the healthcare industry’s continuing shift toward lower-cost settings outside traditional hospitals. These properties can house physician practices, diagnostic services, ambulatory procedures and other healthcare operations.
Newmark served as financial adviser to Brookfield. Kirkland & Ellis provided legal counsel to Brookfield.
KEY QUOTES:
“Brookfield’s reputation, scale, and long-term investment approach complement our deep sector expertise and leading operating platform.”
“This transaction advances our capital allocation priorities and highlights our unique ability to capture the favorable tailwinds driving demand for outpatient care.”
Scott Brinker, President and CEO of Healthpeak Properties
“This joint venture underscores the differentiated platform Healthpeak has built and highlights our investment management capabilities.”
“It also provides us with a framework to replicate as we pursue broader investment opportunities and deploy capital across our segments.”
Adam Mabry, Chief Investment Officer of Healthpeak Properties
“Healthpeak is a recognized leader in healthcare real estate, and we’re excited to establish a long-term strategic capital partnership centered on a portfolio of premier outpatient medical properties.”
“As real estate companies increasingly seek innovative capital solutions, Brookfield is well positioned to structure investments that advance our partners’ strategic objectives while providing our investors with access to differentiated, high-quality real estate opportunities.”
Alexander Elawadi, Managing Partner of Real Estate at Brookfield
