During the COVID-19 pandemic, healthcare real estate has been a mixed bag. Medical office properties and life science facilities have held up quite well, while senior housing has been extremely hard hit.
One healthcare REIT that invests in all three of these property types is Healthpeak Properties (PEAK), giving it an excellent combination of steady, predictable income properties as well as the ability to benefit from the end of the pandemic in 2021.
In this Dec. 1 Fool Live video clip, two of our experts from our real estate brand Millionacres, Matt Frankel, CFP, and Deidre Woollard, discuss why this REIT belongs on investors' radar.
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Deidre Woollard: Well, you mentioned Healthpeak. I want to dive in a little bit more on that one, because you had an article recently about, I believe, about Healthpeak and how it's been. It's an interesting story to me because they've gotten rid of some of their skilled nursing. They've really changed the makeup of what they invest in a lot. That's one thing I'm curious about too. Because we talk about senior housing, but there's a difference between things like assisted living versus skilled nursing, and so there's all sorts of variants also within those types of properties, senior living, and there's memory care. There's a lot of different offerings.
Matthew Frankel: With skilled nursing, I will talk about Healthpeak in just a second. Skilled nursing, one of the biggest issues, it's very reliant on government reimbursements like Medicare, whereas senior housing is generally private pay. Welltower (WELL), I mentioned this a senior housing focused REIT, and they make a big deal about saying we rely on private pay revenues, we're not Medicare-dependent, things like that. That was the big reason for Healthpeak exiting the senior housing business. Their properties are doing terrible at the time, but that was the big motivating factor.
Healthpeak has done a great job of transforming itself over the past couple of years. You mentioned they spun off their senior housing properties into a REIT called QCP, which was since acquired by Welltower, by the way. I've been a Healthpeak shareholder for some time, so there's that whole little, I owned QCP for like a year and then it was a Welltower thing again. So they got rid of their senior housing properties and sold some other properties to generally boost their balance sheet, and be able to grow in other areas. They really embraced the life science properties first. They're one of the more diverse big REITs because they have about a third of their money in senior housing. A third comes from medical offices and a third comes from life science. A lot of the other big REITs like Ventas (VTR), which, we mentioned, are just now really starting to aggressively grow into life science.
Healthpeak has been doing that for a few years now. They were really ahead of the curve. No one can really understand why they were putting all these money into these office buildings instead of their senior housing properties, which was supposed to be the big growth market. But it really turns out they were ahead of the curve. So now they have a diverse portfolio, and a rock-solid balance sheet. They really did a great job of transforming their whole strategy, and it's paying off.