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CEO: HCP Has Balanced Portfolio and Clear and Differentiated Strategy


Thanks, Andrew and good morning everyone. With me today are Pete Scott, our Chief Financial Officer and Scott Brinker, our Chief Investment Officer. Also here and available for the Q&A portion of the call are Tom Klaritch, our Chief Operating Officer and Troy McHenry, our General Counsel.

HCP is well positioned. That is according to CEO Tom Herzog.

On the firm’s Q4 earnings call, Herzog noted that the REIT completed its portfolio restructuring and operator transitions, leaving the company with a balanced portfolio and a clear and differentiated strategy.

Additionally, he said, “our balance sheet is strong and positioned to support our growth strategy. Recent credit rating upgrades from S&P and Moody’s confirmed the progress we have made on this front. Across our three core segments, we continue to see plenty of opportunities to capture embedded upside in our portfolio and to create new value over time with development, redevelopment and complementary acquisition activities.”

Specifically, in medical office, he said, tenant demand for on-campus properties remains strong. “We are working to fill vacancies within the portfolio and seeing positive mark-to-markets on rents. We continue to mine our portfolio for redevelopment opportunities and are also actively working with HCA to schedule additional on-campus developments in our partnership program.”

In life science, he explained, “we have focused on sourcing complementary acquisitions and creating value through our development pipeline. Late last year, we expanded this pipeline for a compelling opportunity to capture value at The Shore at Sierra Point. We added a combined $385 million for Phases 2 and 3, resulting in a $1.2 billion pipeline, which is higher than normal for us, but allows us to pursue the opportunities we have worked hard to create. Even including the just commenced Phases 2 and 3 of The Shore, our pipeline is almost 65% pre-leased and approximately $500 million is already funded. The remaining $700 million of development costs will be spent over the next 2 to 3 years and is captured in our guidance.”

In senior housing, the company is being positioned for success. “In 2019, you will see us continue to work to make incremental moves to improve our portfolio and operator mix, while supporting our platform with enhanced asset management capabilities and data analytics. We have come a long way in the last 2 years, but there is still plenty of room for additional improvement and upside and we intend to pursue them aggressively.”

Moving on to our outlook for 2019, “we are guiding to a solid total portfolio same-store growth in 2019. Over the last months, we have communicated our expectations for chopping near-term senior housing fundamentals. Scott will elaborate on in a minute. We are feeling pressure on both occupancy and expenses, but we are also navigating the headwinds that were the result of a number of intentional moves we made to improve our portfolio and position it for the long-term.”