Healthpeak Properties, Inc. (PEAK) Q4 2020 Earnings Call Transcript

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Healthpeak Properties, Inc. (DOC 2.13%)
Q4 2020 Earnings Call
Feb 10, 2021, 12:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Healthpeak Properties Incorporated Fourth Quarter Conference Call. [Operator Instructions]

I would now like to turn the conference over to Andrew Johns, Vice President, Corporate Finance and Investor Relations. Please go ahead, sir.

Andrew Johns -- Vice President, Finance and Investor Relations

Thank you, and welcome to Healthpeak's fourth quarter and full year 2012 financial results conference call. Today's conference call will contain certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations. The discussion of risks and risk factors is included in our press release and detailed in our filings with the SEC. Do not undertake a duty to update any forward-looking statements.

Certain non-GAAP financial measures will be discussed on this call. An exhibit of the 8-K we filed the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. The exhibit is also available on our website at www.healthpeak.com.

I will now turn the call over to our Chief Executive Officer, Tom Herzog.

Thomas M. Herzog -- Chief Executive Officer

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

With the vaccination gaining more traction every day, it seems we can finally see it in light at the end of the tunnel. Yet our intense effort executing through COVID will most certainly continue for a while yet. Despite the enormous challenges of 2020 for Healthpeak, I believe we will exit the pandemic at a stronger place than where we started. More on that shortly, but first let me temporarily digress.

Around a year ago, the first confirmed case of COVID-19 was identified in the United States and then spread insidiously across the country. Like so many companies at the time, our executive team and Board were busy determining how best to navigate the imminent crisis with consideration to its then on certain penetration and duration on human beings and on the market.

At the time we identify five priorities. First, to protect the health of our teammates, residents, and tenants without overriding consideration to expense. Second, to guard our balance sheet, liquidity, and credit ratings to ensure we remained rock solid on the other side of the crisis. Third, to communicate frequently and ultimately with our investors, analysts, and rating agencies as best we could with the facts we had at the time. Fourth, in a post-COVID world, we considered key societal and market trends and determined that all of our classes of real estate would remain vital after the pandemic was resolved. And fifth, we aimed to take advantage of any opportunities that might result from disruptions caused by the pandemic.

Initially, we thought it possible, there may arise distressed buying opportunities but that never did transpire in our desired asset classes of anchored MOBs and purpose-built life science. And, in fact, we saw cap rates compressed rather than rise. Fortunately, that positively impacted our gross asset values for these portfolios. Execution on these five priorities turned out to be critical in guiding our path through the fog and relative to our priority of identifying opportunities created by the crisis, we decided to test the market to determine if it might be feasible to lighten up or even exit our rental senior-housing business without undue incremental dilution, that was a half a year ago.

So after six months of hard work on this plan, yesterday, we announced that during the fourth quarter and year-to-date 2021, we closed on $2.5 billion of shop and triple-net sales, with the remaining $1.5 billion under binding and non-binding contracts. In aggregate, this $4 billion of rental senior housing sales is right on top of the estimate we provided in our Q3 earnings call. We are not very far along for full exit of rental senior housing, with some work left to do. Accordingly, we will soon be able to focus our team entirely on growing and operating our biotech-centric life science and our primarily on-campus MOB portfolios, which together will soon represent 85% of our company. And additionally, we continue to hold a relatively smaller portfolio of high-quality and high-yield in CCRCs.

Importantly, and fundamental tenant to our strategy, we believe all three of these businesses represent irreplaceable high-barrier-to-entry portfolios that are impossible to replicate and provide a strong growth trajectory based on demographic tailwinds. Additionally, our land bank and densification opportunities aggregate to $7 billion-plus, which will keep us busy for around a decade without the need to purchase any additional land. But inevitably, I'm sure we will do that too.

In our purpose-built Life Science business, available land in the three hotbed markets is scarce and competition from office conversions is typically cost-prohibitive. And even if such conversions are completed, they do not provide the same heavy lab useability as purpose-built life science. In addition to our 10 million square feet of operating life science properties, we have another 5 plus-million square feet available through our land bank and densification pipeline, which represents $6 billion-plus of embedded accretive development spend.

The majority of this consists of low-rise properties in the heart of some of the strongest life science locations in San Francisco and San Diego. Some of these assets were developed 25-plus years ago by our pioneering predecessor Slough Estates. Our current market conditions in land use regulations allow for much higher FARs. This represents an enormous gem within our portfolio, and we will unlock this value over time. In our on-campus and affiliated MOB business, we currently own and operate 23 million square feet and future growth typically requires invitations from hospitals and health systems. Fortunately, we have a number strong and time-tested relationships that will allow continued future development and acquisition growth, plus we have a number of land bank opportunities.

And in CCRCs, we have 15 communities, each with an average of 500 units, located on 50-acre parcels of infill land. Such campuses have high barriers to entry, given the typical eight to 10-year development concept to stabilization period and heavy infrastructure required to operate. And, of course, we do like the high-yield produced by this asset class, which I think is quite attractive given the quality of the cash flows. Our 15 campuses also provide future densification opportunities, aggregating to more than $0.5 billion. Additionally, from time-to-time, certain not-for-profit owners, sometimes capital-constrained, may choose to exit and we will be natural buyers if the properties meet our criteria.

With consideration to all of this, it's important to note that we believe rental senior housing will continue to be a vital and growing business that serves an important need within the healthcare continuum. While we concluded that for Healthpeak, our more focused portfolio mix will create a strong and unique investment opportunity and one that cannot be synthetically replicated through investment in pure-play rate alternatives, given our platform, irreplaceable portfolios, and embedded growth opportunities.

Moving on to our dividend. Yesterday, we announced but we have adjusted our dividend in Q1 to $0.30 per share or $1.20 per share annualized. Our full-year 2020 dividend payout ratio came in at 102% and in Q4, it was 106%. But we held off adjusting in prior quarters to wait for sufficient visibility into our future portfolio mix and related cash flows. We estimate the $1.20 per share annualized dividend will represent a 2021 payout ratio in the high 80s to low 90s but result in a stabilized payout ratio of around 80%, which will be our target going forward.

Stabilized earnings will follow the completion of our shop and triple net sales, ultimate reinvestment of our sales proceeds in core life science and MOB assets, and reaching the COVID inflection point for our CCRC operations. The $0.30 quarterly dividend currently represents an approximate 4% yield on our share price and on a stabilized basis, will provide incremental positive cash flow of around $150 million per year from reinvestment into our accretive development and densification activities.

Finally, before turning the call over to Scott, I would like to inform you that Barbat Rodgers will be leaving Healthpeak in late February from Investor Relations' leadership role with a mixed-use REIT in Maryland, which is closer to our extended family on the East Coast. Barbat, your contributions have been immense and your hard work, dedication, and great attitude will be missed by the entire team and me in particular. Andrew John, who most of you know well, will have his responsibilities expanded to include leadership of our Investor Relations department, in addition to his continued strategic contributions to our FP&A team.

With that, let me turn it over to Scott.

Scott M. Brinker -- President and Chief Investment Officer

Thank you, Tom. I'll begin with a life science leadership update, followed by operating results for each business segment, and close with transactions. I'm pleased to announce that Scott Bohn and Mike Dorris have been named the Co-Heads of Life Science continue to report up to me. They have been on the ground in San Francisco and San Diego respectively for the past decade for Healthpeak. They will now take on broader responsibilities including expanded roles in our development and acquisition strategy and P&L responsibility.

Staying with life science, we reported same-store cash NOI growth of 7.8% for the fourth quarter in outstanding result, driven by strong leasing, mark-to-market on renewals, and rent collections at 99-plus percent. Sector fundamentals are strong and we're capturing more than our fair share of the demand. Our full-year cash NOI growth was 6.2% exceeding the high end of our pre-COVID outlook by 120 basis points and driven by the same factors as above.

We executed 300,000 square feet of leases in the fourth quarter, including renewals at a 13% cash mark-to-market. For the full-year, we executed 1.6 million square feet, which was 188% of our pre-COVID expectations. Leasing was particularly strong and early renewals and our development pipeline. We continue to excel by growing with our existing biotech-heavy tenant base. So far in 2021, we signed 115,000 square feet of leases and the pipeline is significant with an additional 360,000 square feet under letters of intent. There is strong demand in all three of our core markets.

Turning to medical office. We reported same-store cash NOI growth of 1.2% and 2.1% for the fourth quarter and full year respectively. Performance was driven by contractual rent escalators and 5.1% cash mark-to-market on renewals partially offset by COVID-related reductions in parking income, also the addition of our small hospital portfolio to the pool, which Pete will discuss reduced same-store results in the fourth quarter by 40 basis points. Fourth quarter and full-year rent collections exceeded 99%.

During the course of 2020, we commenced leases on approximately 3 million square feet, slightly above our pre-COVID expectations. We ended the year with 90.4% occupancy, down 30 basis points from the prior quarter. The small decline was driven by moving recently completed development and redevelopment projects into the operating portfolio. In addition, we signed nearly 700,000 square feet of leases that will commence in 2021 and our leasing pipeline is solid with 560,000 square feet under letters of intent.

Turning to CCRCs. They continue to out-perform rental senior housing. Occupancy declined 100 basis points from September to December. The occupancy decline was a bit below our outlook, driven by the intensity of the third wave of the virus. CCRC performance did improve throughout the quarter, with occupancy being flat in December. And the momentum carry through to January with occupancy up 20 basis points over the prior months. Notably, new entrance fee contracts in the fourth quarter increased nearly 100%, in comparison to the low point in the second quarter. New entrance fees are still 30% below the prior-year but clearly heading in a positive direction. We're also pleased to report that all of our CCRCs have received or have been scheduled for the first dose of the vaccine and our open in in-person tours, move-ins, and visits with them.

Moving to the shop portfolio, all of which is held for sale. Occupancy was down 170 basis points from September to December toward the low end of our outlook range. Shop occupancy saw an additional 230 basis points in January, driven by the third wave of the virus. Turning to our development pipeline. In the fourth quarter, we signed leases totaling 175,000 square feet at The Shore, expanding our relationship with two existing tenants. Phases 2 and 3 at The Shore are now 91% pre-leased with occupancy expected in 4Q '21 and 1Q '22 respectively. The economics on the new leases were above our underwriting as life science rents in the Bay Area remained strong.

Growing with our existing biotech-heavy tenant base is a competitive advantage for owners who like to scale to accommodate the growth of their tenants. As an example, 75% of the leases we signed at The Cove in The Shore or 1.1 million square feet of space were signed with existing Healthpeak tenants who we're looking to grow. During the fourth quarter, we delivered 173,000 square feet of life science development, including the final building at Phase 1 of The Shore and the final building at the Ridge View campus in San Diego, both developments were 100% leased upon delivery.

In medical office, we continue to execute on our proprietary HCA development program delivering a 42,000 square foot building in the fourth quarter. The project is located on the campus of the Oak Hill Hospital in Florida and was 65% leased to HCA upon delivery. In total, our $1 billion active development pipeline, with 68% pre-leased at year-end. Upon delivery and stabilization, these projects will generate significant earnings and NAV accretion.

Moving to transactions. We're finding strategic ways to recycle capital into our core segments through both acquisitions and redevelopment. In December, we closed on the previously announced off-market Cambridge Discovery Park acquisition for $664 million at a 5% stabilized cash yield and 6.5% GAAP yield. The 600,000 square foot campus enhances our number 1 market share in the dynamic and growing West Cambridge submarket, which is highly convenient to Alewife Station, Route 2, and the Minuteman Bikeway. The campus also provides a future densification opportunity.

Also in December, we acquired an off-market 5.4 acre land parcel on our Medical City Dallas campus for $33.5 million. The land at currently houses a behavioral facility that is leased to HCA. Over the next few years, we expect the parcel to be developed into a in-patient and out-patient tower to accommodate HCA's growth on this world-class campus. In early February, we acquired an off-market $13 million MOB on the campus of HCA's Centennial Medical Center, a leading hospital in Nashville. The stabilized cash yield is 6%. We already own more than 600,000 square feet of highly successful MOBs on the campus, plus a large new development that delivers in 4Q '21. This campus is one of the trophies in our MOB portfolio.

In senior housing, we've made tremendous progress on the previously announced sale of approximately $4 billion of shop and triple-net assets. We've now closed on 12 separate transactions generating gross proceeds of approximately $2.5 billion. It was wide variance by portfolio in price per unit and cap rate given the highly disparate asset quality. Importantly, overall pricing is in line at previous disclosures.

The larger shop sales included a 32 properties Sunrise portfolio, a 12-property Atria portfolio, and a 16-property portfolio operated primarily by Atria in Capital Senior Living. If we look at the entire portfolio of shop sales, both completed and under contract, the cap rate on annualized fourth quarter NOI is roughly 3% excluding CARES Act revenue. The blended cap rate on pre-COVID NOI is approximately 6%. The larger triple-net sales include the 10-property Aegis portfolio, the 8-property HRA portfolio, and the 24-property Brookdale portfolio in which we were relieved of funding a $30 million remaining capex obligation. The blended cap rate on the aggregate triple-net portfolio including assets currently under contract is approximately 8% on rent and in the low 5% range and property level trailing three-month EBITDAR excluding CARES Act revenue.

In the aggregate, we have provided $620 million in first mortgage seller financing to date, with approximately $250 million of that amount expected to be repaid in the next few weeks. The seller financing is in the 65% loan-to-value range, with terms ranging from one year to three years and escalating rates to encourage early repayment. We've signed purchase agreements or letters of intent on all of our remaining shop and triple net properties, representing an additional $1.5 billion in gross proceeds. These remaining assets sales do not include any material amounts of seller financing. Upon completion of the sales, our only remaining exposure to rental senior housing would be our sovereign wealth joint venture, a small handful of legacy loans, and the short-term seller financing. With the significant asset sale proceeds, we're in great shape to continue executing on a pipeline of strategic acquisitions and new development. As an example, we are essentially out of space in South San Francisco and San Diego, so we're looking closely at our land bank and densification opportunities and we're seeing opportunities in medical office. We expect to share more news on these activities shortly.

And now, over to Pete.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Thanks, Scott. I'll start today with a review of our financial results, provide an update on our recent balance sheet activity, and finish with 2021 guidance. Starting with our financial results. For the fourth quarter, we reported FFOs adjusted of $0.41 per share and blended same-store growth of 4.2%. For the full year, we reported FFOs adjusted of $1.64 per share and blended same-store growth of 3.8%. Our earnings in same-store growth numbers continue to be fueled by an irreplaceable life science portfolio located in the three hotbed markets of San Francisco, San Diego, and Boston that is in the midst of a virtuous cycle and shows no signs of abating, a differentiated medical office portfolio that is 84% on-campus, 97% affiliated, and continues to outperform producing consistent and reliable results.

We've experienced headwind in our CCRC portfolio, but we are encouraged by the successful rollout of the COVID vaccine, which should be a catalyst for improving results in the near term. There are a few reporting items I would like to mention. First, during the fourth quarter, all remaining triple-net and shop assets were sold or classified as held-for-sale. As a result, in accordance with GAAP, these segments are now characterized as discontinued operations. On Pages 37 to 39 of the supplemental, we have provided detailed operating results for our discontinued operations, including a reconciliation that ties back to our income statement.

Second, we moved the sovereign wealth shop joint venture, which we expect to have approximately $10 million to $20 million of pro-rata annual NOI for 2021 into the other non-reportable segments. Third, we moved our small hospital portfolio into the Medical Office segment. As a reminder, once our near-term hospital purchase options are exercised, we have only $15 million of total annual NOI. All of these changes are effective for the fourth quarter and our supplemental on Page 40, we have included a pro forma table showing what our same-store results would have been before the aforementioned changes. For the full year, our pro forma blended same-store growth was a positive 1%.

Turning to our balance sheet. When we announced our intention to exit the Shop and Triple-Net segments, we outlined a clear plan of what we intended to do in the near term with the $4 billion of expected proceeds. At a high level, that plan included approximately $1 billion of identified acquisitions including Cambridge Discovery Park, the Midwest MOB portfolio, and the South San Francisco land acquisition. We discussed some amount of short-term seller financing to expedite sales. We now expect total seller financing of approximately $300 million to $400 million after incorporating an approximate $250 million repayment we expect shortly. And the balance of the proceeds would be utilized for the repayment of near-term debt and unidentified acquisitions to the extent we are able to match funds.

Accordingly, in January, we announced the repurchase of $1.45 billion of bonds maturing in 2023 and 2024. In late January, through a tender offering, we closed on the repurchase of $782 million of these bonds. In late February, we will repurchase the remaining $668 million balance. With additional senior housing proceeds expected on the horizon, during the first quarter, we will likely repay another $400 million to $500 million of bonds.

Pro forma all of our anticipated debt repayment activity, our net debt to EBITDA is expected to temporarily drop to approximately 5.0 times. This use of proceeds plan provides us with significant benefits including, first, it is our intent to not sit on dead cash and so would be significantly dilutive. The debt repayment allows us to put cash to work immediately. Second, the debt repayment materially enhances our already strong credit profile by improving our weighted average tenure to approximately 7.5 years and eliminating bond maturities until 2025. Third, it provides our investments team with the time necessary to reinvest the proceeds into accretive, portfolio-enhancing acquisitions funded with new long-term debt bringing our leverage to approximately 5.5 times.

Turning to our 2021 guidance. As a result of where our portfolio mix stands today, we are in a position to provide earnings guidance for 2021. Before I get into the details, I did want to spend a moment level setting our approach to guidance this year. First, the near-term outlook for life science and medical office, which equals 85% of our portfolio NOI, remains as robust as it has ever been. We are seeing increased leasing demand, positive mark to markets, and continued lease-up of our development and redevelopment projects. The other 15% of our portfolio NOI, primarily our CCRCs, remains challenged but with positive trends starting to take hold with the rollout of the COVID vaccine.

Second, there are several important variables that are extremely difficult to predict, which is why we are guiding to a wider earnings range. These variables include timing of our senior housing sales, the reinvestment of sale proceeds into acquisitions, and the inflection point of CCRCs and our shop JV. Third, we have made the important decision to operate going forward with less leverage than we have in the past. Our target net debt-to-EBITDA is now 5.5 times compared to the near 6 times we consistently operated at pre-COVID. The impact of this is moderately reduced earnings relative to what may be in your models. So with that as a backdrop, our 2021 guidance is as follows.

FFOs adjusted ranging from $1.50 per share to $1.60 per share, blended same-store NOI ranging from 1.5% to 3%. The components of blended same-store NOI growth are life science, which is 50% of the pool ranging from 4% to 5%, medical office, which is 47% of the pool ranging from 1.5% to 2.5%, CCRC, which is only 3% of the pool ranging from minus 15% to minus 30%. In 2021, our full-year same-store pool for CCRCs consist of just two Sunrise assets. Furthermore, a large negative decline is primarily from the significant roll-down CARES Act grants. The 13-property LCS portfolio will enter our quarterly pool starting in the second quarter and enter our full-year pool in 2022.

Let me provide more color on the range of potential guidance outcomes. Please refer to Page 41 of the supplemental if you would like to follow along. The low end of guidance assumes a more prolonged impact from COVID resulting in an inflection point in CCRCs during the third quarter and no additional acquisitions beyond what we have already announced. The high end of guidance assumes an accelerated COVID recovery resulting in an inflection point in CCRCs during the second quarter and a full redeployment of $1.5 billion of senior housing proceeds into accretive acquisitions.

The major earnings variances from the low end to high end of guidance include $10 million of earnings or approximately $0.02 a share from our same-store portfolio, $35 million of earnings or approximately $0.06 to $0.07 a share from our LCS CCRC portfolio, and our sovereign wealth shop JV. And $10 million of earnings or approximately $0.02 a share from the timing of accretive acquisition our assumption on the high-end as we invest over $1 billion into unidentified acquisitions in the second half of the year at a 5% cash yield funded entirely would get, taking our net debt to EBITDA back to target.

In closing, our 2021 guidance is on our best information and estimates as of today. I would caution against drawing too many conclusions from the midpoint of our range as there are many puts and takes that could cause us to tighten, increase, or reduce the range as circumstances dictate during the course of the year.

With that, operator, please open the line for any questions.

Questions and Answers:

Operator

[Operator Instructions] And the first question will come from Nick Yulico with Scotiabank. Please go ahead.

Nicholas Yulico -- Scotiabank -- Analyst

Thanks. I guess just first question on the acquisitions. Maybe you could just talk a little bit more about what you're seeing in the market right now and I guess as well, why you think it's more of a back half of the year, the story in terms of getting acquisitions done?

Scott M. Brinker -- President and Chief Investment Officer

Hey, Nick, Scott speaking here. I'll take that one, Tom may have something to add. Over the last quarter, we've closed about $1 billion of really strategic acquisitions in both life science and medical office, virtually all of it off-market. We added two of our most successful medical office campuses with Medical City Dallas as well as Centennial, in Nashville and then of course the big acquisition in West Cambridge to solidify our number 1 market share, and then we took down some land in South San Francisco to really position us as the market leader in that important sub-market really indefinitely.

So we're being pretty selective about what we're acquiring even though we do have a significant amount of proceeds from these asset sales and more coming and we are seeing attractive opportunities. With the focus of course on medical office and life science, we may find one or two CCRCs as Tom mentioned in his prepared remarks. But by paying down the debt, we've really got flexibility to wait and make sure that we find something that is particularly attractive.

The team has been pretty focused on executing the senior housing sales between what's closed and what's in process. It's almost 30 separate transactions, I mean, it's an astounding number, virtually all of that done internally without relying on third-party advisors. So the team's been running pretty hard on the dispositions but I will say that the pipeline is significant and it is attractive and it's strategic. There is some development including activating land bank opportunities that we're looking closely at but we do expect there will be some acquisitions, but we usually prefer to wait until those are closed before we actually talk about them in detail. Tom, anything you'd add to that?

Thomas M. Herzog -- Chief Executive Officer

One thing I would add is, Nick, as we look at the sale transactions, the $1.5 billion that we have lined out through binding, non-binding contracts, we also do have some acquisitions that could be back-to-back with that. So that may be something you see announcements on as we go forward, but we'll wait until we get a little bit closer until we close those to make final announcements.

Nicholas Yulico -- Scotiabank -- Analyst

Okay, thanks. And just a follow-up on the development spend that you have in the guidance this year. It looks like that's actually more than what's left on in terms of cost to complete the project. So are you starting new projects and are any then going to be in your lab pipeline for development or redevelopment?

Thomas M. Herzog -- Chief Executive Officer

Yes, I'll start with that one and Brinker can add. Nick, the answer is absolutely yes. We have some opportunities in San Francisco and San Diego that we do see some near-term potential. So I think you'll probably hear something from us in the fairly near-term on some opportunities that will come forward with. So, yes, correct observation on your point in those comments.

Nicholas Yulico -- Scotiabank -- Analyst

Okay, all right. Thanks, guys.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Nick.

Operator

The next question will come from Juan Sanabria with BMO Capital Markets. Please go ahead.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, thanks for the time, guys, and good morning. Just curious on the acquisition pipeline. Seems like you guys don't want to get ahead of yourselves, which is understandable but if you could just give us a flavor for the makeup of that, the split between life science and MOBs, which seems to be the focus. And, Tom, I believe you commented on some cap rate compression. So if you can just give us a sense of where cap rates are today across those two asset classes for the quality of products you're looking for.

Thomas M. Herzog -- Chief Executive Officer

Yes, Scott, why don't you go ahead and start on that one.

Scott M. Brinker -- President and Chief Investment Officer

Yes, I'd say cap rates for medical offices stayed in the 5% to 5.5% range for quality products. We've been able to find some more one-off one-at-a-time acquisitions that are a bit better than that, but any reasonably sized portfolio is probably going to be in that 5% to 5.5% range. Life science, it depends on the sub-market of course, but there have been some pretty sizable portfolio traits in the core markets that are more in the mid-4s for good quality product. Of course, there's your big portfolios that maybe trade a bit better than in individual asset, but certainly there is a lot of interest in that sector. So cap rates certainly haven't gone up over the past 12 months, have been probably come down a little bit, which obviously benefits the incumbent players with big portfolios.

In terms of the mix of the acquisition pipeline, it really is a combination of one-off acquisitions like the ones we announced at -- with Medical City Dallas and Centennial where we know an existing sub-market or campus extremely well and maybe there's one or two buildings that we don't own and we're proactive and trying to capture that last remaining asset on a particular campus. And then there are some portfolios that we're looking at, but I don't want to say more than that in terms of the mix between the two business segments until we actually get them done.

Juan Sanabria -- BMO Capital Markets -- Analyst

Okay, and then just my follow-up just with regards to land bank and densification which you guys tried to highlight, and I think there is an attractive growth opportunity. Just a sense of how much you guys to put to work and what you're thinking of in terms of returns for that capital just to help us kind of benchmark or guidepost around what you could do over the next couple of years.

Thomas M. Herzog -- Chief Executive Officer

Juan, fair question, because we've talked about a very large number of $7 billion-plus of embedded opportunities. And as we look at it, this is a decade-long pursuit or maybe even longer. And so what we do over the next couple of years, I think you're definitely going to see some activity both in the execution of land bank opportunities and in some densification opportunities. We'll become in forward of more of that information soon but we're going to hold off for just a bit until we complete the analysis, bring it through our Board and then make announcements, perhaps at some of the upcoming couple conferences that we have coming.

Juan Sanabria -- BMO Capital Markets -- Analyst

Fair enough. Thanks, guys.

Thomas M. Herzog -- Chief Executive Officer

Thank you, Juan.

Operator

The next question will come from Nick Joseph with Citi. Please go ahead.

Nick Joseph -- Citi -- Analyst

Thanks. Hopefully, we'll get that for our conference in a few weeks. Just on the short-term seller financing for the $300 million to $400 million, so after the near-term repayment. If you give some more details on the rate, I guess expected timing of repayment, if it's cash or accrued and then just comments on the credit of the borrowers.

Scott M. Brinker -- President and Chief Investment Officer

Yes, the interest rate on average, Nick, is around 4%. Some are a bit higher, some are a bit lower. The LTVs tend to be in the 60% to 65% range, which we thought was a reasonable amount of equity standing behind the loan. Obviously, we're getting our first mortgage to secure the loans, the term tends to be in the one to three-year range, and we did have their rates escalate over time to encourage retain that. So we put out about $620 million to date on $2.5 billion of sales. We do think about $250 million of that gets paid back in the next few weeks, leaving us with plus or minus $300 million to $400 million remaining. And of the $1.5 billion of asset sales that are left in under contract, there's really not any material amount of seller financing, there'll be a bit but nothing significant.

So actually, at the end of the day, the net amount of seller financing that we're providing is a lot less than what we thought we might have to and we really did provide it so that we could get to a commitment in a closing sooner than later because some of the portfolios were just more challenging to finance. So I am pretty pleased with how it came out.

Nick Joseph -- Citi -- Analyst

That's really helpful. And then is it just secured by the properties or are there any guarantees from the buyers?

Scott M. Brinker -- President and Chief Investment Officer

Just the typical recourse carve-out guarantees.

Nick Joseph -- Citi -- Analyst

All right, thank you.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Nick.

Operator

The next question will come from Rich Anderson with SMBC. Please go ahead. Pardon me, Mr. Anderson, your line is open. The next question will come from Jordan Sadler with KeyBanc Capital Markets. Please go ahead.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Thanks, guys. Just keying in on the remaining asset sales, if you would, maybe a little bit more color on sort of the timing and the pricing.

Scott M. Brinker -- President and Chief Investment Officer

Yes. Hey, Jordan, it's Scott. I'll take that. Of the $1.5 billion, the vast majority of it that is remaining, the shop, most of our big triple-nets have now been sold with Brookdale, HRA, and Aegis. So there's really just a small handful of triple-nets left. We are under contract, either binding or non-binding with every asset that we face in the portfolio, it's pretty astounding.

More than half of that is a PSA and the balance is in offer letter. And the makeup of the buyer pool, it's diverse because it's more than 15 separate transactions. A few are bigger, a couple of hundred million-plus, and then a bunch of smaller transactions. So it's a pretty diversified pool of that debt so that the buyer pool is naturally diverse. But there are two common characteristics, one, is a counter-party that we know pretty well, so it's a lot of repeat buyers, which gives us good confidence. And then the other category is the very well-capitalized buyers who seem particularly motivated to get into the sector and obviously plan the five to seven-year IRR turnaround opportunity and that's a good fit for the private equity groups that have been the predominant buyers.

So we're far down the path, we're making good progress. If everything went well, I think we could close all of it by the end of the second quarter, but transactions are always somewhat uncertain, even in a great environment, and it's still pretty choppy environment for senior housing. So anything could happen, but we certainly feel good about the progress made to date and the quality of the buyer pool that exists.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

When you sort of think about the -- when you think about the pricing, obviously there has been pretty meaningful degradation in cash flow sequentially...

Scott M. Brinker -- President and Chief Investment Officer

Right.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

On shop side. So are we looking at cap rates continuing to fall versus what was quoted on the last half or just sort of holding the line?

Scott M. Brinker -- President and Chief Investment Officer

Yes, when we announced the likely pricing on the portfolio sales at the last earnings call, the pricing has really remained consistent with that so it's about a blended 3% cap rate on run rate NOI for shop and around 8% cap rate on the rent for triple-net and there's really no change. So the portfolios that have closed to date in shop, they had us touch higher cap rate than what remains, but the blended pricing is pretty much right in line with what we talked about three months ago. And over the last three months, you had some really good news with multiple vaccines that seem to be highly effective. And then you had a pretty brutal third wave, so the two sort of offset, well, now they're in a transaction market that we didn't have any really, certainly no material changes in pricing.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Okay, it's helpful. Just on the seller financing. What -- did you guys say what the rates were or maybe what the total interest income expectation is from seller financing that is baked into guidance?

Scott M. Brinker -- President and Chief Investment Officer

The blended interest rate in year one is about 4%, that's paid in cash. Some are a bit higher, some are a bit lower. And then we have rates that escalate every six to 12 months, usually by 25 or 50 basis points.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Okay.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

And then, Jordan, it's Pete here. The other items section within our guidance page, we do include interest income and so that does have the interest income from the seller financing embedded within the guidance.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Okay, so is that all -- so it's a 100% to $20 million that's all from the...

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Correct. Yes.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

$300 million?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Because I -- it just that I -- it didn't tie back. I was unsure like it's $300 million a seller financing, $28 million, I thought that rate was a little bit high but maybe.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes. And so, Jordan, there's a couple of other legacy loans in there, it's not entirely seller financing that makes up that full amount. There is a couple of others, it's about $100 million of other financings that are not part of this seller financing that are in place. So it's the combination of those two that makes up the full interest income.

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Thanks, guys.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Jordan.

Operator

The next question will come from Rich Anderson with SMBC. Please go ahead, sir.

Richard Anderson -- Sumitomo Mitsui Banking Corporation -- Analyst

Hey, sorry about that. A little tech glitch, I am putting a cell rating on this phone, I think. So I was wondering when I think about the long-term of the portfolio, primarily life science and medical office, have you done any sort of work to see how they kind of behave together, in other words, like you can marry life science and medical office as an asset class and maybe there is some crossover interaction between the two, but how do they behave like from a standard deviation of growth perspective? I would think medical office being the counter to life science, which probably has a higher degree of volatility in earnings. Have you given a look back to that to see how you might behave as this new organization going forward from that standpoint like an algorithmic like type of approach?

Thomas M. Herzog -- Chief Executive Officer

The algorithmic part, we haven't done that type of a calculation. But, Rich, I would say this, MOBs for the last decade-plus have produced -- any on-campus affiliated type product have produced 2% to 3% same-store growth literally every year. So it's a very, very stable product, somewhat immune to new supply because it requires that invitation from hospitals and health institutions in order to be able to grow those portfolios. And then with the specialists that reside in those properties, it produces a very consistent result whereas life science has been subject to some more cycles, but biology-based drugs have become so explosive in recent years for the whole variety of reasons that we all know that the demand has been very strong and they're not producing any more new land in these hot-bed markets. So it does feel to us like there is going to be a nice runway of continued strong demand without a lot of new supply. So we feel that there is going to be strong returns on that front. But of course, that is more volatile than MOBs.

We like the fact that that produces some diversification between those two asset classes. Then, of course, CCRCs, which is only about 10% of our business, is very different, produces a high yield, high barrier to entry irreplaceable product eight to 10 year development period for new product, and then the interest fee concept creates a very different -- in the IO environment produces a very different type of portfolio to match off against our other two businesses. So we like the way the three come together, but as far as running algorithmic math, I'm not even sure would be all that useful because the biotech business has grown so rapidly over the last eight to 10 years that it seems that some of the longer historic past would probably end up in a distorted result.

Richard Anderson -- Sumitomo Mitsui Banking Corporation -- Analyst

Yes. Okay, fair enough. And then just a quick follow-up. CCRC's not really at all a rounding error when you think about the portfolio in the next few years at least, at 10% or 15% of the entirety. Have you given any look at the housing market, obviously that has taken off in a lot of markets and if you're seeing any early signs of people monetizing and finding their way into these facilities, is it starting to crawl a little bit in that direction or just not -- it's just too soon?

Thomas M. Herzog -- Chief Executive Officer

Well, we had a strong fourth quarter -- excuse me, a strong December, and then going into January, obviously, you've got housing prices that have increased dramatically, low-interest rates,, some pent-up demand, and this is an IO-based product with a younger senior group. So it does seem like we have some positive momentum coming. At the same time, we have some choppy results remaining from COVID but we're optimistic at this point, the vaccine as Scott had mentioned, is been either completed or at least the first shot or scheduled in each of our different communities. Scott, anything that you would add to that?

Scott M. Brinker -- President and Chief Investment Officer

Yes, I would maybe, I'll just add that about two-thirds of our CCRCs are actually located in Florida, where the demographics are going to be particularly attractive for a number of reasons. So that was one of the things that attracted us to the CCRC portfolio in the first place. We did have a pretty strong fourth quarter as Tom mentioned and the volume of leads in tours, etc. seem to be picking up. So things look good and our entry fee price is at a pretty big discount to the local home value. So that feels good too that this -- it's not really a luxury product it's certainly very nice, but it's not like we're trying to attract a price point that's stretching the average consumer in those local markets.

Richard Anderson -- Sumitomo Mitsui Banking Corporation -- Analyst

Okay, great, thanks for the color, guys.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Rich.

Operator

The next question will come from Steven Valiquette with Barclays. Please go ahead.

Steven Valiquette -- Barclays -- Analyst

Thanks. Hello, everyone, and thanks for taking the questions. First one here, just the same-store cash NOI growth in life sciences is obviously -- be strong exiting 2020, 7.8% number in the fourth quarter. In the 2021 guidance, you're incorporating 4% to 5% growth of that same metric for life sciences. I may have just missed the comment on the delta between those two numbers, is it just due to a different set of assets included in the same-store pool this year versus last year or were there some other drivers in there, that are worth calling out? Thanks.

Scott M. Brinker -- President and Chief Investment Officer

Yes, the pool isn't changing that much. I guess one of the challenges with printing such a strong result in 2020 is it just creates a more challenging base to grow off of. But at the beginning of 2020, our guidance was somewhere to 5% and the ended up for the full year at 6.2%. Our guidance again this year is in the 4% to 5% range. We'll see, hopefully, there is some conservatism in that number.

We did have a significant number of mark-to-market renewals this year, which really helped. We just don't have as many. In 2021, we have very few maturities and among those that we do, some of the projects are redeveloping. So we probably won't have as much of a mark-to-market upside in 2021. We also had incredible rent collections. So congrats to the team in 2020, we had virtually no bad debt. And of course, we do have some bad debt baked into our guidance for 2021. It could be a source of upside if we're as successful with collections this year.

Steven Valiquette -- Barclays -- Analyst

Okay, great, and then, one real quick one here. Just the $9 million in CARES Act grants that's included in the 2021 guidance. Does that include everything that's been applied for and is there any chance for additional relief dollars above the $9 million that could stem from additional relief packages this year under the -- by the administration, just curious there could be something above the $9 million if things progress here? Thanks.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes, hey, Steve, it's Pete. That's everything we've applied for. In fact, we've actually received a portion of that around $3 million already, and hopefully, we'll receive the balance in the next couple of weeks. So if there is anything above and beyond what we've applied for perhaps there could be some upside to that. But that is not baked within our guidance.

Steven Valiquette -- Barclays -- Analyst

Perfect. Okay, all right, great, thanks.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Steve.

Operator

The next question will come from Amanda Sweitzer with Baird. Please go ahead.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Great, thanks. Good morning, everyone. Want to dig into your medical office same-store growth guidance a bit. It's kind of below that stabilized 2% to 3% growth you'd expect. How impactful is hospitals visitations of the full-year range? And then are you assuming any occupancy increase in your guidance?

Thomas M. Klaritch -- Executive Vice President and Chief Development and Operating Officer

Yes, this is Tom Klaritch, how you doing? The range is a little lower than the normal 2% to 3% we usually quote. That's primarily due to the overhang of the parking degradation we're still seeing. With COVID still with us, there's a lot of limitations on visitations at a lot of our campuses. So that really the biggest item that's driving that growth down. We continue to see good mark-to-markets and escalators in the portfolio that's driving about 2.7% occupancy, it'll be up a little toward the end of the year. And we actually had a pretty good start to the year, so that's positive also. But really it's the parking revenue that's causing that.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Okay, that's helpful. And then as you do shift more of the fibra to life science, are there any other markets that look like interesting investment opportunities that have those high barrier to entry where you could increase scale and I know at least one of your development partners you've expanded to New York recently.

Thomas M. Herzog -- Chief Executive Officer

Amanda, that's something we spend a lot of time thinking about, we would never rule it out. There are other opportunities out there but one of the things that we've used as a central tenet of our investment approach is that we believe strongly in high barrier to entry portfolios and within the clusters that we operate in San Francisco, San Diego, and Boston, it's very difficult for new participants to come in and compete effectively because biotechs really rely on that cluster concept, where all that talent resides and they can grow with a landlord rip up one lease to form a larger lease in a sister property within our campus. So because we have that huge competitive benefit, we've been more inclined to stay within the three markets that we have this huge competitive advantage. And we'll keep an eye on the other markets, but for now, we're happy with the three markets that we're focused in.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Makes sense. Thank you for the time.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Amanda.

Operator

The next question will come from Michael Carroll with RBC Capital Markets. Please go ahead.

Michael Carroll -- RBC Capital Markets -- Analyst

Yes, thanks. Tommy talks a lot about this core on the strength within the life science space and the amount of densification opportunities do you have. I mean, is it reasonable to expect that your development activity can accelerate over the next few years compared to the past few years, just due to the uptick we're seeing in life science demand?

Thomas M. Herzog -- Chief Executive Officer

Michael, it's a very good question. It's something that we've talked a lot about as an Executive Chairman of the Board. If you look back at where we were four, five, six, seven years ago, our development pipeline was much, much smaller. And we've expanded it to capture these opportunities and this demand and take advantage of our land bank, With the densification opportunities added to that with a lot of 25-plus-year-old product built on low-rise properties in some of the best markets in San Francisco and San Diego, it definitely provides some highly accretive development and redevelopment possibilities for us. So you could certainly see us grow that. We'll always take into account how much drag we want to add at any point in time. I'm a big believer in the rollover effect taking place and making sure that we've got very clear funding for whatever it is that we add to our portfolio and also look a lot of pre-leasing. And we'll take all those things into account, but we have enough opportunity where I think you could see us expand that over the next several years.

Michael Carroll -- RBC Capital Markets -- Analyst

Yes, I know a lot of your densification opportunities within San Francisco, I mean, would you be willing to pursue multiple projects at the same time? I mean obviously, you've had really good success at The Shore and then you don't really have much space available, but you'd be willing to break ground on multiple projects at the same time in the same market?

Thomas M. Herzog -- Chief Executive Officer

You go ahead, Scott.

Scott M. Brinker -- President and Chief Investment Officer

Yes, Michael, I think it really depends on what the competitive supply outlook is like, as well as the demand. I mean as we look forward over the next two years in our core markets, I mean in San Francisco, there is plus or minus 3 million square feet under way, but it's 80% pre-leased and that's going out 24 months. So we can see a pretty high confidence that anyone in the life science sector opening a building over the next 24 months is likely going to have a huge amount of success. San Diego has similar dynamics, it's a bit smaller in terms of the development pipeline, which is the smaller market but similar pre-leasing. And Boston is similar to San Francisco as well, a little bit lower.

Now as you look out to 2023 and beyond, it's hard to say there is a huge potential pipeline but it's unclear how many of those projects would proceed, when they would proceed, when they would open, and trying to time your project, so it matches up well with the competitive supply that's coming is critically important. So anytime we pull the trigger on a development, there is a pretty intense deep dive done on the local supply and demand dynamics as well as timing and submarket location so that we feel really good about the next two years. Beyond that, we just have to continue to assess. I mean, it could go up, it could go down. It just depends on what the dynamics look like at that time.

Michael Carroll -- RBC Capital Markets -- Analyst

Yes. Great, thank you.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Thanks, Micheal.

Operator

The next question will come from Daniel Bernstein with Capital One. Please go ahead.

Daniel Bernstein -- Capital One -- Analyst

Hi. Just wanted to follow-up on the CCRCs since that's a large kind of variance in your '21 guidance. So wanted to understand, is there any discounting going on in terms of entrance fees and maybe if you could talk a little bit more about some of the leading indicators at the CCRCs whether that's tours, inquiries, etc.

Scott M. Brinker -- President and Chief Investment Officer

Hey, Dan, it's Scott. There is no discounting going on. Any change in RevPAR quarter-to-quarter is impacted as much by the service mix as anything because there is the full continuum of care, obviously. So change in independent living versus a change in skilled nursing has a pretty dramatic difference on the RevPAR, but we're not discounting the monthly rate or the entry fee. So we are seeing continued strength there.

In terms of forward-looking indicators, we've grown pretty significantly off of the base in 2Q entrance fees in the fourth quarter were up 100% versus 2Q and up about 30% versus the third quarter. So there is good momentum and now that all of our CCRCs has received COVID scheduled for the first dose of the vaccine. That's obviously a good sign. Today we're entirely open to move-ins, and tours, and family visitation but with limits. So it's still doesn't feel like the operating environment that would have existed 12 months ago. We think over the next two to three months, it will increasingly return the businesses normal as the portfolio is fully vaccinated. So we are starting to see a pickup, it coincides of course with the phased reopening of the properties and we expect that to continue once the vaccine is fully completed at the properties.

Daniel Bernstein -- Capital One -- Analyst

Okay and then just a quick follow-up on the CCRCs as well. Large part of the occupancy was I think was on the skilled nursing side, so has there been any stabilization there, any signs that [Technical Issues]

Scott M. Brinker -- President and Chief Investment Officer

Senior housing, which was down more than 1,000 basis points driven obviously by the length of stay. Skilled nursing was down more than 2,000 basis points. So very significant decline. There's obviously a lot of short-term rehab business running through the communities and that business that got decimated early in the pandemic. Even today, our skilled nursing units -- and keep in mind, that's only 15% of the total units at these buildings. So it's not hugely material but it does move the needle. We're in the mid-60s as an occupancy percentage when the historical run rate is more in the mid-80s. So we're comfortably above where we were in April and May but still significantly below a stabilized level.

And it bounces around, we had started to come back over the summer and then we sell back when the virus took off again. We came back again in October, November, and then in December, we sell again as the virus picked up. And of course, once again now in January and the February, it's picking up again. So it really does follow the trend of the virus, which hopefully is a good sign given that the numbers nationally are coming down pretty significantly and the vaccine rollout seems to be picking up some significant momentum.

Daniel Bernstein -- Capital One -- Analyst

Yes, that's great color. I appreciate it. I'll hop off. Thank you.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Dan.

Operator

The next question will come from Omotayo Okusanya with Mizuho. Please go ahead.

Omotayo Okusanya -- Mizuho Financial Group -- Analyst

Hi. Yes, good afternoon, everyone. Again congrats on the progress with the portfolio transformation. Just noticing on this call again, a lot of questions around the CCRC. It's going to be 3% of your portfolio going forward. I know you guys have talked in the last earnings call about strategically why you decided to hold on to it, but has anything kind of changed your mind after the success you've had with estate in senior housing allowance. How you think about the CCRCs whether holding onto it becomes too much of a distraction, given the strong pivot toward life sciences and MOB is going forward.

Thomas M. Herzog -- Chief Executive Officer

Tayo, that's another conversation that we had extensively as an Executive Chairman of the Board, and you're right, it only represents 10% of our company and it is a very different business from life science and MOB. So it's a fair question, but it also is of great note that these portfolios produce a very strong yield which given that the quality of the cash flows and the baby boomer growth tailwinds, we feel quite positive about. And again, I'm repeating myself, but they're impossible to replace these portfolios. New supply is almost non-existent due to the eight to 10 year development period and we've got these enormous embedded densification opportunities within our campuses.

And you almost have to see these to fully appreciate what a high-quality CCRC looks like. With 500 units sitting on 50 acres of infill land, it has a very different look and feel than what you'd expect if you haven't toured them. So it's so hard to replace, the yields are so high and we have a strong infrastructure in place. So our view that for 10% of our company at this type of a yield that it produces another element of nice diversification and one that we think we can build slowly over time, but every time we add one, it's going to be at a very nice yield. So we've continued to conclude that it is a business that we would like to own and maybe grow slowly, it's not going to be a huge part of our company in the future, but one that we think is additive.

Omotayo Okusanya -- Mizuho Financial Group -- Analyst

Gotcha. And then one other quick question. So kind of post this, the scale -- the portfolio mix is going up 50% life sciences, 47% MOB, 3% CCRC. By the end of this year, giving development deliveries, assuming you do your $1.5 billion of acquisitions, could you talk about at the end of the year, what that mix could look like, and on a longer-term basis, what the target mix is?

Thomas M. Herzog -- Chief Executive Officer

Yes, so the numbers you just cited Tayo are exactly correct, 50% life science and 47% MOBs, and 3% CCRCs, but keep in mind that that is just the same-store pool as it currently stands...

Omotayo Okusanya -- Mizuho Financial Group -- Analyst

Yep.

Thomas M. Herzog -- Chief Executive Officer

Because there are only two of our -- the older existing Sunrise assets that sit in our CCRC portfolio or pool for 2021, but of course in 2022, the whole LCS portfolio will come in. So that mix will look differently. Pete, do you have those numbers handy that you could speak to that, for what it looks like '22 and going forward?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes. It will be a little bit more weighted, as Tom said, toward CCRCs and we can follow up with some more specifics with you, Tayo, offline. Some of it too will depend on how that investments come together as well and where it attracts toward when you look at 2022 and 2023. So you will have to factor in the CCRCs, you will still see life sciences be our largest segment, where MOBs falls out within that, well, as I've said depend largely on the acquisitions that are forthcoming.

Omotayo Okusanya -- Mizuho Financial Group -- Analyst

Sounds good. Thank you.

Thomas M. Herzog -- Chief Executive Officer

Great, thank you.

Operator

The next question will come from Lukas Hartwich with Green Street. Please go ahead.

Lukas Hartwich -- Green Street -- Analyst

Thanks. In regard to the sovereign wealth shop JV, did the plans change on keeping that, and if so, I was just hoping you could provide some color around that decision?

Thomas M. Herzog -- Chief Executive Officer

Yes, so our thinking on that, Lukas, is we have an important partner who also has interest in things that they thinking about, and so we're going to work with them over the coming few months to see what makes sense for both parties, and then we'll either move forward with that and retain it or we'll choose to do something different but stay tuned on that one. Lukas, you still there.

Lukas Hartwich -- Green Street -- Analyst

Yes, sorry, I was on mute. Thank you.

Thomas M. Herzog -- Chief Executive Officer

Yes.

Operator

The next question will come from Joshua Dennerlein with Bank of America. Please go ahead.

Joshua Dennerlein -- Bank of America -- Analyst

Yes. Thanks for the question, guys. Just wanted to -- think this for Pete. You mentioned you're going to have a lower leverage target going forward, I believe you said 5.5 or 6 before. What's driving that decision, I would have assumed kind of getting rid of the senior housing from your portfolio, your -- less cyclicality involved, so maybe it would have been easier to keep that higher leverage, but just curious on your thoughts.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes. It's a really good question, Josh. As we look at our leverage, we want to be firmly in that BBB+, BBaa1 metrics with the rating agencies and as we -- we are consistently being at the, call it high 5s, around 6, it puts a lot of pressure on capital raising. And then you also take into account, we've talked a lot about development and densification opportunities on this call. As we factor that as a major piece of our portfolio and allocation of capital, we felt like it was appropriate to take our leverage down, so we had additional cushion. I think we learned some lessons with COVID as well as to what can happen pretty quickly in the overall macro environment, and with all those factors combined, we just felt like operating half a turn less made sense for our portfolio and for the way we want to run the company going forward. Tom, anything you want to add?

Thomas M. Herzog -- Chief Executive Officer

Yes, I mean, let me just add a couple of things, Josh. When we look the way we're positioning going forward, what we deem to be a very high-quality portfolio, we've got a strong development and densification pipeline and we want this to be supported by what we think of it as a fortress balance sheet. So it just simply plays into the strategy in what we want our REIT to look like as we go forward under our new strategic approach. So it's really that simple.

Joshua Dennerlein -- Bank of America -- Analyst

Okay, got it. Thanks, guys. Appreciate it.

Thomas M. Herzog -- Chief Executive Officer

Thank you.

Operator

The next question will come from Todd Stender with Wells Fargo. Please go ahead.

Todd Stender -- Wells Fargo Securities -- Analyst

Hi, thanks, and probably for, Tom. Just because you're on the Board as well, but maybe you could just share some thoughts on how the Board was evaluating the dividend? Sure they factored in management's recommendation regarding timing of asset sales and redeployment of proceeds, but maybe just some color there.

Thomas M. Herzog -- Chief Executive Officer

Well, really. Yes. Of course, the Board takes into account management's recommendation, you're completely right. And -- but from the Board perspective, we simply looked at it that we wanted to have a stabilized target payout ratio of 80% and we thought that that made sense given our life science and MOB-centric portfolio mix along with the substantial development pipeline and land bank densification opportunity that we had in front of us. We looked at the current dividend yield at 4% and felt that to be a very strong and sufficient yield and we wanted the $150 million or so of stabilized retained earnings as we went forward for reinvestment into our accretive development and densification opportunities. So those were all the different things that we discussed at length over a period of about three quarters as we came in for the decision of $1.20 per share.

Todd Stender -- Wells Fargo Securities -- Analyst

All right, that's helpful. And then maybe for Pete. Do you have a capex budget for 2021, you could share just on the existing portfolio?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes. So if you look, we did include a capex budget on Page 42 of our supplemental with regards to development and redevelopment spend, $600 million to $700 million, revenue-enhancing capex of $115 million to $140 million, and then our first-gen TI and some initial capital expenditures from $85 million to $110 million. I will point out that some of the revenue-enhancing is up a little bit this year relative to last year. There are two actually important items, one, we're actually doing more spend in MOBs on green initiatives, so there'll be a nice return on that. And then, two, we did slow down a little bit as well last year, just given the fact that COVID made it difficult to do some revenue-enhancing capex at our CCRCs, so we're projecting that that picks up again in 2021. And then we also do give some recurring capex above on Page 42, I won't go through all of those, but it's all lined out in there.

Todd Stender -- Wells Fargo Securities -- Analyst

Got it. I see it. Thank you, Pete.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes.

Thomas M. Herzog -- Chief Executive Officer

Thanks, Todd.

Operator

The next question will come from Mike Mueller with J.P. Morgan. Please go ahead.

Michael Mueller -- J.P. Morgan -- Analyst

Yes, hi, just a quick one. I think you mentioned life science spreads were up 13% in the fourth quarter. Can you let us know what they were on the 2021 leases that you've done so far and what's under way? Are the numbers comparable?

Scott M. Brinker -- President and Chief Investment Officer

Yes. And most of the leasing to date, it's 115,000 square feet. In January, is new leasing so there isn't a great sample size so far. But our mark-to-market across the portfolio is in line with what we achieved in the fourth quarter, so it's in the 10% to 15% range. It does vary by tenant, by lease, by year. So it's going to bounce around a little bit but it's in that range if you look at the entire portfolio. Now, at the same time, market rents continue to grow in the 5% range, maybe better, and our contractual escalator is more in the 3% to 3.1% range. So if that dynamic continues, obviously we'll continue to have even stronger mark-to-markets.

Michael Mueller -- J.P. Morgan -- Analyst

Got it. Okay, so thank you.

Scott M. Brinker -- President and Chief Investment Officer

Thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Tom Herzog for any closing remarks. Please go ahead.

Thomas M. Herzog -- Chief Executive Officer

Yes. Thank you, operator, and thanks for everybody for joining our call today and your continued interest in Healthpeak and I hope you all stay safe and we'll talk to you soon. Thanks, much. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 76 minutes

Call participants:

Andrew Johns -- Vice President, Finance and Investor Relations

Thomas M. Herzog -- Chief Executive Officer

Scott M. Brinker -- President and Chief Investment Officer

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Thomas M. Klaritch -- Executive Vice President and Chief Development and Operating Officer

Nicholas Yulico -- Scotiabank -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Nick Joseph -- Citi -- Analyst

Jordan Sadler -- KeyBanc Capital Markets, Inc. -- Analyst

Richard Anderson -- Sumitomo Mitsui Banking Corporation -- Analyst

Steven Valiquette -- Barclays -- Analyst

Amanda Sweitzer -- Robert W. Baird -- Analyst

Michael Carroll -- RBC Capital Markets -- Analyst

Daniel Bernstein -- Capital One -- Analyst

Omotayo Okusanya -- Mizuho Financial Group -- Analyst

Lukas Hartwich -- Green Street -- Analyst

Joshua Dennerlein -- Bank of America -- Analyst

Todd Stender -- Wells Fargo Securities -- Analyst

Michael Mueller -- J.P. Morgan -- Analyst

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