Physicians Realty Trust, Healthpeak to combine in all-stock merger of equals

Healthpeak Properties (PEAK) and Physicians Realty Trust (DOC) announced they have entered into a definitive agreement to combine in an all-stock merger of equals valued at approximately $21B. Under the terms of the agreement, each Physicians Realty Trust common share will be converted into 0.674 of a newly issued Healthpeak common share. The merger is expected to generate run-rate synergies of at least $40M by the end of year one and up to $60M by the end of year two. Given the synergy profile, the transaction is expected to be accretive to run-rate AFFO per share and FFO per share, subject to final merger accounting adjustments, for both Healthpeak and Physicians Realty Trust shareholders. The combined company will be led by Scott Brinker as President and Chief Executive Officer, Peter Scott as Chief Financial Officer, and John Thomas as Vice Chair of the Board who will have an active role in strategy, relationships, and business development. Upon completion of the merger, the combined company will operate with the Healthpeak Properties, Inc. name and is expected to trade under the ticker symbol “DOC” on the New York Stock Exchange. The headquarters of the combined company will be in Denver and it will maintain other existing offices. Under the terms of the agreement, each Physicians Realty Trust common share will be converted into 0.674 of a newly issued Healthpeak common share. Pro forma for the transaction, Healthpeak and Physicians Realty Trust shareholders will own approximately 77% and 23% of the combined company, respectively. The all-stock merger is intended to be a tax-free transaction and is expected to close in the first half of 2024, subject to customary closing conditions, including the approval of both Healthpeak and Physicians Realty Trust shareholders. The respective boards of directors for Healthpeak and Physicians Realty Trust have unanimously approved the transaction. Following the closing of the merger, the combined company is expected to pay an annualized dividend of $1.20 per share, consistent with Healthpeak’s current dividend level and representing a pro forma AFFO payout ratio of 80% or below. Healthpeak expects to assume Physicians Realty Trust’s existing senior unsecured notes and term loan and to enter into a new five-year, $500 million term loan at a rate of SOFR plus 85 basis points. Proceeds from the term loan will be used for general corporate purposes including repayment of borrowings under Healthpeak’s commercial paper program. Pro forma net debt to EBITDAre is expected to be in the low 5x range.