There's a new CEO at specialty real estate investment trust HCP (NYSE:HCP). The company's board of directors elected Tom Herzog to be the Chief Executive Officer, effective this past January 1. Herzog replaces Michael McKee, who was named interim CEO last July.
Herzog will also hold a seat on the board of the REIT, which focuses on providing senior housing.
He is a familiar presence in HCP's C-suite. He joined the company last June as its Chief Financial Officer, having previously served in the same position at residential REIT, United Dominion Realty Trust, from early 2013 until then. United Dominion is no small fry either -- it's market cap is just under $10 billion, which makes Herzog's previous experience there all the more impressive.
HCP said it has retained executive search company Korn Ferry to assist it in the search for a replacement CFO.
Does it matter?
Selecting a new CEO from its own executive team and one with years of REIT experience to boot indicates that HCP will stick to its current business strategy.
That's a positive development, in my view, as HCP has historically been a good performer. These days, it's a leaner and more focused company thanks to last October's divestment of the volatile unit now trading separately as Quality Care Properties.
Some investors might be concerned about the REIT's share price, which has dipped by nearly 7% over the past few months. I believe, however, that much of this is due to worries about rising interest rates, which increase the costs of funding for REITs and theoretically make rival assets like bonds comparatively more attractive.
Yet HCP operates in a field that is almost certain to grow robustly, as both the overall number of seniors and their proportion to the general population are forecast to rise significantly.
The appointment of Herzog signals business as usual for HCP. Hence, we can consider it a good and sensible move by the company.