Healthpeak Properties Inc (PEAK) 2019 Q3 法說會逐字稿

Good day, everyone, and welcome to Healthpeak Properties third quarter financial results conference call. (Operator Instructions) Please also, note that this event is being recorded.

At this time, I'd like to turn the conference call over to Barbat Rodgers, Head Investor Relations. You may begin.

Thank you and welcome to Healthpeak's third quarter 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.

A discussion of risks and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In an exhibit of the 8-K we furnished with the SEC today, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance to the Reg G requirements. The exhibit is also available on our website at www.healthpeak.com.

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

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

Today, we are excited to announce that we are changing our name to Healthpeak Properties, effective immediately. Our common stock will begin trading under our new ticker, PEAK, on the New York Stock Exchange at the start of trading on November 5. We have also redesigned our corporate website, which you can find at healthpeak.com. I think you will find the site more user-friendly and easier to navigate, with enhanced information about the company and our portfolio.

So why Healthpeak? The word Health of course communicates the sector in which we invest and operate. And PEAK denotes our position as one of the country's premier REITs and to us, elicits the concepts of focus, stability and high quality. Today marks the beginning of a new chapter. Changing our name represents the culmination of efforts to reposition our strategy, team, portfolio and balance sheet. At Healthpeak, we believe in the power of clarity. That a simple strategy, unwavering focus and deliberate actions enable consistent delivery on our vision.

Over the past few years, we've become more disciplined in our investment approach with a focus on the 3 primary private pay health care segments of life science, medical office and senior housing. As an innovative company at the forefront of providing high-quality real estate to the evolving health care industry, we are committed to delivering value to our shareholders, customers and employees.

For our shareholders, we now have a much-improved and more-focused portfolio that we expect to produce high-quality cash flows, consistent earnings and generate strong dividend growth over time. For our customers, including tenants, partners, operators and senior residents, we provide sustainable properties in strategically selected markets that offer modern amenities, state-of-the-art design, great locations and accessibility. And for our employees, we are fostering an innovative and collaborative culture, where leadership is accessible and people have the necessary tools and resources to develop their own leadership skills and make a positive impact. We have worked hard to create an environment that attracts and retains top talent by offering the opportunity to build a lasting and rewarding career at Healthpeak.

To support the successful execution of our strategy and vision, we are also announcing key leadership promotions.

Scott Brinker, in addition to his role as Chief Investment Officer, will be promoted to President. Scott's exceptional talent and deep industry expertise has contributed to the successful repositioning of our portfolio. In his expanded role, he will assume operational oversight of Healthpeak's 3 business segments while continuing to be responsible for enterprise-wide investments and portfolio management. This new structure will enable better strategic alignment across our businesses, accelerated decision-making and continued portfolio optimization. Scott's promotion will allow me more time to focus on the strategic direction of our company, our key relationships and our culture. I look forward to continuing to work closely with Scott for years to come.

Jeff Miller will be promoted to Executive Vice President, Senior Housing. He has been instrumental in developing the senior housing team, improving the portfolio and implementing systems and data analytics across the senior housing platform. In his elevated role, Jeff will have full oversight and execution of the senior housing segment.

Lisa Alonso will be promoted to Executive Vice President and Chief Human Resources Officer. Lisa has done an outstanding job transforming the HR function, rebuilding our team and cultivating a people-first culture. She will continue to oversee all human resources activities with expanded leadership of our ongoing effort to attract and retain top talent that makes Healthpeak an employer of choice.

Finally, Barbat Rodgers, who led off our call today, has been promoted to Senior Director and will be leading Healthpeak's IR effort going forward. Andrew Johns, who has done a great job as Head of IR over the last 3 years has been elevated to lead our FP&A team.

I want to extend my congratulations to Scott, Jeff and Lisa as well as for Barbat and Andrew on their promotions.

Turning to operations. We had another busy quarter with several important transactions announced or closed that will continue to strengthen our portfolio.

In Senior Housing, we've announced over $1.4 billion in acquisitions year-to-date which served to diversify our operator mix, improve our geographic footprint and expand our relationships with top-tier partners. We also made significant strides on completing the final steps of our restructuring effort.

First, we announced a series of transactions that will ultimately reduce our Brookdale concentration to just under 6%,which include the October first announcement related to our CCRC portfolio and our Brookdale triple-net leased portfolio and the joint venture transaction with a sovereign wealth fund that we announced yesterday related to our Brookdale SHOP portfolio.

Second, we closed the previously announced sale of the Prime Care portfolio, a legacy direct financing lease structure.And finally, we completed our path to exit the U.K., signing an agreement to sell our remaining 49% interest to Omega Healthcare, which we expect to close by year-end.

In Life Science, we further expanded our Boston presence through the acquisition of 35 CambridgePark Drive, bringing our total investment in the Boston market to $1.2 billion with a projected yield of 6%-plus, inclusive of the 101 CambridgePark Drive development project. Additionally, our approximately $1 billion life science development pipeline in South San Francisco, San Diego and Boston will provide incremental earnings growth as we head into 2020 and 2021, along with strong NAV accretion.

And in Medical Office, our proprietary development program with HCA continues to provide us with accretive growth opportunities. With yesterday's announcement of 2 new developments, our active HCA pipeline totals 7 projects, representing approximately $145 million of development spend. We also have a number of additional projects that we expect to announce in the coming months under the HCA program.

So our momentum remains positive on a variety of fronts. We completed a number of important strategic transactions, earnings and SPP are performing at or above our expectation, developments and deal pipelines remain robust and our infrastructure continues to improve.

And now, I'll turn the call over to Pete.

Thanks, Tom. I am pleased to once again report a solid quarter of operating and financial results. All 3 of our core segments continue to perform at or above our expectations. For the third quarter, we reported FFO as adjusted of $0.44 per share and blended same-store cash NOI growth of 2.4%. Year-to-date, our same-store portfolio has delivered 3.1% growth.

Let me provide some details around our major segments. Starting with Life Science, which represented 29% of our SPP pool. The momentum we established in the first half of the year continued into the third quarter with same-store cash NOI growing 5.8%. This brings our year-to-date same-store growth to 6.3% and is a reflection of the continued tenant demand for high-quality space in the 3 most important life science markets.

On the leasing front, year-to-date, we have executed over 1.2 million square feet of leases, including 390,000 square feet in the third quarter. We signed 114,000 square feet of renewals during the third quarter at an average cash mark-to-market of positive 50%, bringing our year-to-date cash renewal spreads to positive 25%.

Turning to Medical Office, which represented 39% of our SPP pool. Third quarter cash NOI grew 2.5%, bringing our year-to-date growth to 3.3%. As we discussed on prior calls, in addition to higher occupancy and contractual rent escalators, growth in the first 2 quarters of the year benefited from outsized add rents at our Medical City Dallas campus. Accordingly, we expected some deceleration in our same-store growth rate during the second half of 2019. Our year-to-date retention rate remains above 80%, which demonstrates the consistent level of tenant demand for our on-campus portfolio of assets.

Turning to Senior Housing, of which triple net represents 16% and SHOP 10% of our SPP pool. Third quarter cash NOI declined 1.3% with triple net growing 1.9% and SHOP declining 6% . Given the small size of our SHOP pool, the decline equates to just over $1 million. Year-to-date, our Senior Housing portfolio has met our expectations with triple net growing positive 2.2% and SHOP declining 4.7%, in line with the components to our guidance we provided at the beginning of the year.

The portfolio mix between triple net and SHOP has shifted because of triple net asset sales, and results in a blended year-to-date decline in Senior Housing of 0.5% on track with our expectation.

Turning to the balance sheet. September, we announced a $1 billion unsecured commercial paper program providing an incremental source of attractively-priced short-term floating rate financing. As of October 29, we had approximately $650 million of commercial paper outstanding at a weighted average rate of 2.2% and roughly $71 million outstanding on our revolver. We ended the quarter with net debt-to-EBITDA of 5.8x, which is in line with our targeted range.

In October, Fitch recognized our meaningful balance sheet and portfolio repositioning progress with an upgrade to BBB+. We are now rated BBB+ Baa 1 by all 3 of the major rating agencies.

A quick note on sources and uses given our recent transaction activity. We ended the quarter with approximately $570 million of forward equity remaining. With yesterday's announcements of our senior housing joint venture and U.K. joint venture sale, we expect another approximately $450 million of proceeds by year-end, giving us total sources of approximately $1 billion. We plan to utilize these proceeds to: fund our announced $333 million purchase of 35 CambridgePark Drive, expected to close in early December; fund $225 million net for the Brookdale CCRC and triple net transaction, expected to close in the first quarter of 2020; fund our remaining 2019 development, redevelopment and capital spend, estimated at approximately $200 million; and reduce our floating rate debt allowing us to end the year with net debt-to-EBITDA of 5.6 to 5.7x.

From a balance sheet perspective, we are in a strong position to take advantage of the accretive opportunities in front of us. We have a robust acquisition pipeline, an attractive development and redevelopment pipeline and we are well positioned in both the debt and equity markets as we head into 2020.

Turning now to guidance. We are increasing the midpoint of our FFO as adjusted guidance to $1.76 per share from $1.75 per share. In addition, we are increasing the midpoint of our blended SPP guidance to 2.75% from 2.5%. The update to both guidance ranges are driven by fine-tuning our expectations in our Life Science and Medical Office segments. Senior Housing remains on track with our expectations.

One final bookkeeping item. On Page 27 of our supplemental, we added a table outlining the material near-term purchase options in our portfolio. We hope you find this new disclosure useful.

With that, I would like to turn the call over to Scott.

Thank you, Pete. The third quarter was highly active across all 3 business segments. We closed more than $500 million of strategic, accretive acquisitions, including Oakmont in senior housing and Hartwell in life science. We also entered into new agreements, for $900 million of acquisitions to expand our life science footprint in Boston and to continue transforming our senior housing business. We're under contract to acquire 35 CambridgePark Drive, a brand new life science property in West Cambridge that's next to door to the property and land parcel that we acquired in January. The purchase price of $333 million is a 4.8% cash cap rate and a 5.7% GAAP cap rate. Including the future development project, this campus will have approximately 450,000 square feet, and a blended stabilized yield of 5.6%. The campus is directly adjacent to the Alewife Station, a transportation hub with more than 10,000 passengers each day. So this Class A campus has outstanding accessibility and the rents are at least $20 per foot cheaper than East Cambridge, where the vacancy rate is near 0.

We added 2 on-campus medical office buildings to our development partnership with HCA, the nation's leading for-profit health system. The total spend is $34 million, with 50% preleasing and a blended return on cost of 7.1%. These MOBs allow HCA to expand their outpatient capacity in core markets. They're typically developed in tandem with HCA investing significant capital into the adjacent hospitals, making these strategic locations.

There was an avalanche of positive activity in senior housing. We're approaching the end of a complete transformation of the portfolio and platform. As announced on October 1, we agreed to a series of transactions with Brookdale, which are neutral to slightly accretive to earnings, assuming no change in leverage. We expect to close in the first quarter of 2020. As background, since 2014, Healthpeak and Brookdale have been joint venture partners in a 15-property CCRC portfolio managed by Brookdale.

Healthpeak will acquire Brookdale's interest in 13 of those CCRCs for $541 million. That's a slight increase from the October 1 announcement because we recently came to an agreement to add the 740 unit CCRC in Bradenton, Florida to the Healthpeak acquisition pool. An updated presentation is available on our website.

This is a unique and differentiated portfolio. The campuses include nearly 600 acres of land, which today would be virtually impossible to recreate. That scale allows the properties to offer unmatched amenities and significant expansion opportunities. The massive scale of a CCRC creates barriers to entry, so there has been 0 new CCRC supply within 10 miles of these properties in the past 10 years.

Residents typically enter CCRCs around age 80, which positions these assets to capture the earliest wave of aging baby boomers. Finally, the average length of stay is 8 to 10 years, so the resident turnover is very low. The investment also allows us to grow with LCS, a well-known and well-respected brand, with a 50-year track record. LCS is the largest operator in the CCRC industry and an excellent addition our family of partners..

As part of the transaction, Healthpeak will sell 18 triple net properties to Brookdale for $405 million. This will materially improve the quality of our triple net lease with Brookdale. In particular, the asset quality and rent coverage will increase and we'll move from having 11 separate lease pools with various maturity dates, to a single master lease with an 8-year term.

Just yesterday, we announced an agreement to sell a 46.5% interest in our Brookdale SHOP portfolio, another important step in the transformation of the SHOP portfolio. Our new capital partner is a large sovereign wealth fund. The gross asset valuation is $790 million, which is a yield on sale in the low to mid-6% range before asset management fees. The transaction reduces our pro forma Brookdale concentration to 6%, and improves the age and demographics of our SHOP portfolio. The joint venture will be unlevered. And we expect to close by year-end.

In September, we closed the sale of noncore Prime Care senior housing portfolio for proceeds of $274 million. This was an important cleanup transaction and allows us to efficiently recycle capital into our pipeline.

We also reached agreement to sell the remaining 49% interest in our U.K. portfolio. We expect to close by year-end, marking our exit from the U.K.

We recently reached agreement for the early termination of our 9 property master lease with Capital Senior Living that would have otherwise matured in October 2020. We intend to market the 5 noncore assets for sale, and the rent for those properties will terminate on the applicable closing dates.

We plan to transition the 4 core properties to existing partners, 3 to Atria and 1 to discovery. Capital Senior will pay contractual rent through the transition date, which should occur in the first quarter. Our 6 property master lease with Capital Senior, which matures in 2026 and has just over $4 million of annual rent, is not affected by the transaction.

We've now tackled key challenges in the triple net portfolio with Brookdale, Prime Care, Capital Senior, HRA and the U.K. We also recast our relationships with core partners like Oakmont, Sunrise and Aegis. Every action was purposeful and strategic, and now emerging in clear view is a far stronger triple-net portfolio with higher-quality assets, master lease arrangements with long-dated maturities and a rental stream that should consistently grow in the 2% to 3% range each year. To see the transformation visually, take a look at the heat map on Page 28 of our supplemental and compare it to prior periods.

The surgery underway in the SHOP portfolio has been equally proactive, thoughtful and decisive. Though as stated previously, due to the timing of all the activity, it won't be until 2021 when SHOP SPP fully reflects the transformation that's been accomplished. But we do feel good about the portfolio and platform that we're building.

Wrapping up with yesterday's announcement, I was fortunate to join HCP in early 2018 at such a unique point in the company's history. A fully aligned executive team with a clear vision of where they wanted to take the company, and supported by high-caliber and collaborative teammates. Today, I feel even more fortunate to have Tom ask me to take on an expanded role at Healthpeak, a company with a differentiated strategy, a high-quality portfolio and balance sheet, disciplined portfolio management and deep relationships to drive growth.

Our new colors are purposeful and help tell the story of our future. The black and white show simplicity, clarity and focus. And the final color is gold because we intend to maintain our standards at the very highest level.

I'll turn the call back to the operator for Q&A.

(Operator Instructions) Our first question today comes from Rick Anderson from SMBC.

So just, okay, two questions, perhaps to Scott. The core versus transition portfolio of the SHOP business kind of flip-flopped in terms of performance in the third quarter. You mentioned the full effect of everything you're doing sort of a 2020 -- 2021 event. Can you describe are we going to see sort of kind of variability like this through the process? Or was this sort of a one-in-done type thing you expect to see core do better than transition, just get a sense of what it would look like over the course of the next year or so?

I think there are a couple of things to focus on. One is the small numbers. So with pool... this small especially over a 90-day period, this is like senior housing, the numbers can jump around quite a bit and become very hard to predict. So that's part of it. The other is that in the core portfolio, almost half of that pool is in Denver, in Houston, 2 markets that have a ton of new supply, just a very competitive environment. Good long-term markets. We're in good areas within those 2 MSAs, but, it's a very competitive market today. And the NOI was down pretty significantly. In fact, in the core portfolio, if you take out Houston and Denver, our year-over-year SPP would have been flat instead of down 7.4%.

So the balance of the portfolio is actually performing quite well, it's just those 2 markets and our properties there, given our concentration are having huge outsized effect. So that's what explains the decline in the core portfolio. I think that number will certainly improve moving forward.

I'd also note that all the communities in Denver and Houston are part of the portfolio that we are selling a 46.5% share of through the sovereign wealth fund. And then the transition portfolio, it was nice improvement. That's a... although down 2.7%, that's a lot better than it has been the previous 6 or 7 quarters and we feel like the fourth quarter should be a positive number, hopefully materially positive. So hopefully that gives you some color about the change in direction between core and transition, Rich.

Perfect. And then, second question. I appreciate the color on the CCRCs and protection, they exhibit in terms of competition and the length of stay. But 40% of your SHOP I think is CCRCs now, are you comfortable, I mean obviously the risk is housing market sort of tanks and you have trouble getting people into the communities. So to what degree do you see that going down in perhaps in dramatic fashion as you kind of change your portfolio or slop it from triple net to SHOP in the senior housing space?

Richard, it's Tom. The CCRCs do definitely represent a different model from straight senior housing. The barriers to entry are dramatically different as you probably know, they're huge properties sitting on lots of acres of infill type land. They appeal to an earlier wave of baby boomers, more in the range of 81 rather than 85 for purposes of entrants. They have an 8- to 10-year length of stay, which obviously produces a better earnings model due to the predictability of those tenants. And we think that with the approach that we've taken to that business, that it produces a more stable component to our senior housing business that we like blending against the AL and IL continuum of care of products. So we actually really like it.

But 40% is the right number or do you see that -- I mean, what's your appetite for other CCRC, I guess, is the question as you go forward?

Yes, I think that's a fair question. Here's the thing about CCRCs. They don't trade that often because they're difficult to put up. I mean, for instance, the new supply hitting the stuff in a 10-year period and a 10-mile radius system as Scott indicated absolutely, 0. So there -- and they're in a lot of traded hands. So when quality product does change hands and now that we've got the infrastructure set up to take advantage of this product type, we certainly would like to purchase some more, but it's not going to be an outsized portion of our portfolio. It's just going to be one line of business that we have within senior housing. So we think it's a good diversification within the senior housing segment to own a portion of it.

Our next question comes from Jordan Sadler from KeyBanc.

Just a follow-up to Rich's last question there. Why are the cap rates so much higher on these properties? And what is the tail risk as sort of you guys think about it? How should we be thinking about it?

I'll take this one too. The cap rates and the risk, and I'll ask Scott to chime in on this as well. From a risk perspective, one of the things that one has to consider is that the entrance fees oftentimes are paid for by the senior sale of the single-family home. So if there was a dramatic decline in home values and it was prolonged, that could have some impact. Yet the accounting, in a way that it is set up, amortizes that entrance fee over the actuarial life of the tenant. So that produces a more appropriate matching of income with the services that are required on those properties. So a good earnings pattern that we think to be quite correct. So despite the fact that does have the risk factor of a downturn on housing, which hopefully would not be long term, it does produce a strong pattern of earnings that will go through the cycles. And as far the cap rates where they currently stand, that's where the market is. And there's complexity in setting these things up. The accounting of both actuarial work, Shawn Johnston, our CEO, spent 2, 3 months working around-the-clock to make sure that we had it right, did a great job of pulling it together. And now that we've got it all set up and we've studied the business, we've been in the business for a period of years along with our friends, Brookdale, we think that it's going to be a great business. Accordingly, the cap rates to me feel like they're a bit high. So I think there could be some compression as we look forward over the next several years. That's my take. Scott?

Yes. There's also a lot -- a whole lot of comparable transaction activity to point to on cap rates. So I've seen them anywhere from 7% to 10% for the year, so it's hard to say that there is a specific market cap rate. I think it's easier to find comparables in the rental senior housing where there's just a lot of activity, which is very rare to see core properties here seeing trade particular because the vast majority of the product is nonprofit, that rarely if ever transacts. So that would be the other comment I would make is that there's obvious comparable cap rate to point to off of the transactions standpoint, Jordan.

So I've seen, to your point, we don't get ton of granularity on these from a lot of folks, but one of the smaller players in the space public REIT has a significant portfolio. I've noticed there's a -- at the operating level, there's a significant resident buying liability. I would imagine those sit on these assets as well, just these fees essentially that are refundable ultimately upon move out at some rate. Where does that liability sit based on sort of now that this JV will be sort of consolidated. Is that going to be on HCP's balance sheet? And if so, how big will that be? And if not, just kind of still curious how big it is.

Yes. The refundable entrance fees sits as a deferred liability, it's an evergreen liability. In other words, as one resident moves out that refundable liability gets refunded to that senior or their estate when the next resident moves in, so it becomes an evergreen liability. That number is about $300 million on our books. When we think in terms of the nonrefundable fee, that represents our deferred revenue because of the future service obligation. And therefore, when you have a deferred revenue that's picked up in purchase accounting, appropriately over the remaining actuarial lives of those seniors, that is amortized into income and as a booster to the total income that's earned on that portfolio or that particular property, which does create a nice earnings recognition pattern. That liability on the portfolio that we purchased in at the 100% level is at about $400 million. Scott?

Yes, Jordan, I wanted to add one other thing. The average total entry fee on this portfolio is only about $200,000. So it's a very modest price point. It really appeals to a wide demographic. That $200,000 is below the median home value in these markets pretty significantly. And all entry fee communities are different. Sometimes there are 90% refundable plans or it could be a 0% refundable plan. This portfolio is closer to the 0% refundable. On average of that $200,000 entry fee, only 25% of it is actually refundable and the balance is nonrefundable. So this portfolio in our view is pretty unique from that standpoint as that refundable liability is pretty small relative to the size of the asset value. So I think it's important to keep that in mind as well. And as Tom mentioned, it functions more like a security deposit. I mean there's no interest rate associated to it. It just sits on our balance sheet. So it's one of the complexities of CCRCs and maybe that is one reason that the cap rates a little bit higher, but we're perfectly comfortable with it, especially given the ability to do it in scale here.

I'm going to add one thing, Jordan, because you've obviously studied these and I don't know, but everybody on the call have the same time. The kind of cap rates that you're speaking to when we did the Brookdale transaction that was under the affinity of a 10 cap, somewhere in that range and that's based on NOI and the entry fees that we received. But when one breaks it down, let's get down to actual cash flows.

Yes, that was my next question.

Yes. So let's break the cash flows in part. So if we went from -- let's just call rough numbers a 10 cap, it probably, on a recurring CapEx basis to recurring CapEx, it probably brings it down to about 8.25 cap. And that means we spend a lot of money on these assets because they have to be kept in tip shape. If we included the revenue-enhancing capital improvement type spend as we have seek to make these assets, along with Brookdale, we have seek to make them to a better and better quality, it's probably more in the 7% to 7.5% yield range but that is what's the pretty vast improvement in the quality of the assets. So again, going from a 10 cap to probably an 8.25 run rate yield based on recurring CapEx and we put a lot of money into the assets and that's probably putting us more of the 7.5% cap rate range, just to give you feel.

Our next question comes from John Kim from BMO.

Can you -- I think you provided some mark-to-market on the life science that you had this quarter, but I was wondering if you could provide that same figure for MOBs? And also, what should we expect for 2020 expiration?

The last part was what do we expect for 2020 what?

The 2020 mark-to-market.

Okay. Tom?

In the past couple of years, we have actually seen the mark-to-market in the MOBs move up. This year, it's been very good. We're in that kind of 3.4% last quarter, 3.2% this quarter and based on historical numbers and where we've been moving, I would suggest the same kind of numbers next year, 2% to 4% kind of say in that range.

Okay. My next question is on the purchase option details that you provided this quarter. Is the annualized base rent, is that a good numerator for the cap rate that's you'll be selling at?

Hey, John, that's a good approximate for the numerator.

Okay. Do you have any indication on what's going to happen to 2021 option in L.A.?

On the Hoag hospital in Irvine, I mean it's likely to get exercised so it's on the list here. That's the current assumption right now.

I'd say it is likely, but as they continue to work through their plans, if they decide that it's advantageous to them to have more time. We're going to be flexible and open with them in working through that.

Is 6.5%, is that a market cap rate for that asset type in L.A.?

Yes. This is Tom Klaritch. That's a good market cap rate for that kind of hospital.

Asset, I mean it -- Hoag is -- if you're not familiar with Orange County, that's the best health system in Orange County and it's fantastic location in Irvine. So I don't think that's is representative of hospital cap rates, but it's is certainly representative of such a unique health system and market location.

Our next question comes from Michael Carroll from RBC.

Can you discuss the South San Francisco life science market. What type of demand are you seeing at your Sierra Point projects right now? And has that interest changed since one of your peers announced this quarter that they fully leased their development project that's nearby?

Mike, it's Pete. Happy to dig into that. I think as I said before, South San Francisco is a very important market to Healthpeak. We own more 4 million square feet in that market and the current vacancy rate is around 2% right now, which is one of the reasons why you're seeing a lot of new construction. When you think about the new construction, there's about 3 million square feet right now that is getting filled with all the new leases that have been signed, they're probably around 2/3 committed. Within that is obviously the Cove Phase IV, which is 100% leased. The Shore Phase I, which is 100% leased and also within is The Shore Phase II, we're not at a point yet where we're ready to give any additional information on that, but I think you can glean from the demand within that marketplace that we feel very good about the prospects of The Shore Phase II. We're going to continue to focus on life science tenants. I know there's been some activity with non-life science tenants in that marketplace, which when something get leased out to a non-life science tenant that should probably a good thing for us since our core focus is on life science users and that's where our core competency is. So we feel quite good about that marketplace and we think all these projects will do well and we feel very good about our positioning with The Shore Phase II.

Granted we discussed this a little bit last quarter, but I know you have some land sites still in South San Francisco. Is there a point where you would want to bring forward some of those projects and break ground on another one?

Yes. That's a good question, Mike. We actually have a lot of land opportunities in life sciences, both within South San Francisco, but also in San Diego as well as Boston. If we had to prioritize where we are today, within South San Francisco, we'll continue to build out The Shore Phase II as well as The Shore Phase III, that's our focus right now. I think as you look at San Diego, we will probably prioritize our Science Center Drive project down there ahead of some of the other projects in South San Francisco right now, just given that we have a decent pipeline ongoing currently. And then in Boston, we have our 101 CambridgePark Drive opportunity. We're into the city of Cambridge right now, trying to seek our site permits, and we're going as fast as we can there, but we feel quite good about how we're positioned in that West Cambridge market with 101 there. So our priority is probably 101 as well as Science Center Drive, finishing up The Shore Phases 2 and 3. And then to the extent that there's still significant demand, we'll start to assess those other land parcels in South San Francisco. Tom, you want to add anything?

Yes. There are a few things that I would add is as we look at any new developments, one of the things we consider and do a lot of work-around is the demand/supply fundamentals. We'll look at the amount of pre-leasing that's taking place, not just within the market, but within our own properties. We'll look harder as to how we would match fund those investments with noncore sales, in fact, this happen to be a topic of -- with our Board meeting a week and a half ago where we did a full deep dive on that. So we like our prospects. We like what's coming down the pipe. We do have some of these projects, that Pete just mentioned, that fit very neatly into our clusters, and therefore, that represents additional opportunity for us in the way clusters work with biotech tenants and the like. So we like our play, but we're also going to continue to approach it with a degree of caution, while still seeking to take advantage of the opportunities that we have.

Our next question comes from Vikram Malhotra from Morgan Stanley.

Just first on senior housing SHOP, we've now had a -- the 3 large health care REIT support, there's been a range of results and views. I know you guys gave some thoughts longer term at NAREIT. I'm just wondering specifically in SHOP, Scott, if you could give us a sense of 2 things. One, how did occupancy trend for maybe just the multiple pools, but just some of the pools to get a sense of how things are shaping up going into 4Q? And then what sort of the range of pricing bar that you saw exhibited across all your partners?

Vikram, so I'll comment on the entire SHOP pool. So year-over-year, the occupancy was down about 70 basis points, but sequentially, in the third quarter, it actually moved up quite nicely. And if you look at where we were on January 1 of this year versus where we're at today, the first 5 months of the year, we've declined about 100 basis points. And the last 4 months of the year, we've increased about 100 basis points. So we're basically right back to where we started on January 1 in the SHOP SPP portfolio, which is pretty good actually. So that's where we're at on occupancy. The recent trend has been actually been quite positive obviously, up 100 basis points over the last 4 to 5 months. And then on rate, I think, it's more appropriate to talk about the 2 pools separately because of the core portfolio, which is the more stabilized of the 2. The year-over-year REVPOR is up 3.5%, 4%. So actually it's been quite strong and continues to be. The transition portfolio and year-over-year growth rate is slightly negative. And I think there are a couple of things there. One is, we do have a number of low occupancy properties within that pool, when one of the operating partners has been more aggressive on the rate to improve occupancy, which is bringing down that average. It's just a small pool. Again, the law of numbers. The other thing that's happening in that pool is that the acuity level is declining. Brookdale just ran a higher acuity level than Atria, and that's the vast majority of that pool. So the REVPOR, which is an all-in rate, including care is naturally going to decline a bit when acuity comes down. So I think that's a factor as well, Vikram.

Okay. That's helpful. On the JV with the sovereign wealth fund -- sorry, I missed this. It's, I think, 238 unit, did you give you the cap rate on that?

We did Vikram. It's in the low to mid-6s, before the asset management fee.

Okay. Low to mid-6s. And then maybe just one for Pete. There's a lot of changes obviously over the last 2 quarters. I know you'll eventually give us 2020 guidance, but just sort of looking to get a sense of some of the bigger moving pieces as we go into 2020, given there have been so many changes that have gone on over the last 2 quarters. If I look at sort of consensus numbers, it seems like sort of a $0.45 -- $0.44, $0.45 run rate throughout the south next year. Just wondering, if you can talk about some of the bigger moving pieces we should be aware about as we update our models?

Vikram, it's Herzog here. I'll take that one. I think I want to do this. Okay. So we do expect to have more normal earnings growth going into 2020. As you know, we're -- we still got the fourth quarter in front of us, and we're in the midst right now of our annual operating plan that we'll present to our Board in December. But I will share with you some directional thoughts based on where we stand today as long as you recognize that our full year guidance is not going to come out until February, which is our standard practice. So given that, why don't I -- I'll just give you guys a run down and you can use it as you do your modeling and -- so let's start with MOBs. MOBs are primarily on-campus for our portfolio as you know. It's been a steady performer for the last decade plus. Consistently has operated in the 2% to 3% range. In 2019, when you look at our numbers, we did benefit some from the outsized growth in Medical City Dallas, which brought our SPP to the upper end or maybe a little above the top end of our typical range. And as we look at 2020, I think we can't assume that, that additional add rent continues to grow, although it might, but we're not going to forecast that. So I would probably say somewhere in the low to mid-2s for MOBs.

Going to life science, the fundamentals remain very strong right now. We continue to see near-term upside. Our positive mark-to-market is in the 15% to 20% range, that is in our portfolio. We've got healthy lease escalators as I think you know. So if we were going to swag a number for purposes of this call, I would say growth in the 4% to 5% range. And let me caveat that for a moment. You guys realize we used a cluster strategy, which is vital in the 3 core life science markets, and we've got strong scale in these markets. And that, combined with the significant development platforms that we have, that we're delivering on heavily in 2020 and 2021, it gives us the ability to proactively collaborate with our tenants to meet their space needs as they grow, which has been a common thing we've done with our tenants. We have a lot of development coming online. So what this means is, we'll have certain tenants that have smaller space that want to grow into bigger space, which would move from one of our SPP properties into one of our non-SPP properties, primarily lease-up of development.

We, in fact, we've seen a few fairly significant tenants that are taking these exact moves that we've signed letters of intent and that's at The Cove, The Shore. We might have some of that stuff going on in Boston, we'll see. And it's absolutely a positive to our earnings and is the right economic move, but can be a negative in the short term to SPP due to the downtime we'd have and repositioning that vacant space for new leases. So it's a really good thing for the company. We get this blip in the metric of SPP. So Pete and Brinker and I and the senior team have been talking about how to best present that as we go into 2020, economics are going to be great, we'll figure out that metric and whatever the most appropriate way to present that. But bottom line is, life science looks great, the real growth is in the 4% to 5% range. Now it takes us to senior housing, that's our triple-net, that's easier. We've dramatically overhauled that triple-net portfolio. Brinker talked to that. Take a look at that heat chart and go back a few quarters as he indicated it's in the supp. It's dramatic when you look at it. And -- but we're looking for that business to have same-store growth at 2% to 3%, long-dated leases, good credit so that business looks great.

Let's go to SHOP. SHOP makes up 15% of our total pool but 10% of our SPP pool, some of our best assets will come into the pool over the next year, year and a half. So they're not going to be in 2020 SPP. So back to SHOP, SPP being at about 10%. So consistent with the previous views that Scott provided, we believe we've gotten operating environment that is going to be choppy in 2020, but we expect to see steady improvement going forward. And we have worked really hard to remake the SHOP platform to favorably position us for our portfolio, the work done to date has been dispositions, transitions, recycling of capital into higher-quality assets, which we think will be rewarded in the direction that we want to move. And for 2020, our same-store pool is going to remain very small, and the highest quality assets won't even be in the pool until 2021.

So given all that and, by the way, I would just make a statement. SHOP is inherently difficult to forecast for everybody out there, and especially when you have a smaller pool and you've got transitions. So we'd like to see Q4 play out, so we have that information in hand. And on SHOP, I think we probably want to wait until February and give us our best guidance at that date in the SHOP with, again, which represents 10% of our SPP pool. I'll go a little further to your question.

On external growth our development pipeline is going to produce some really positive impact from an FFO as adjusted perspective. We're taking probably $0.04 a share just from what earns in. And you'll also see earn in from 2019 accretive acquisition activity, assuming we're successful which we think there's a good chance that we'll have some upside there. We won't forecast to it, but we do feel good about that. But at the same time, there will be some offset that I think you guys probably have in your models. If you don't, make sure that you talk to Barbat and Andrew and the guys here. But there's going to be some rollover impact on some of the late 2019, for instance, the Prime Care sale, that we made. That was a great sale, a cleanup sale, it came with a bit of dilution. The U.K. joint venture disposition came with a little bit of dilution. We're going to have the normal annual pruning of our noncore assets. We're going to do that forever. Just assume we're going to sell $300 million of older tired assets every year and recycle that into development. We've got the North Fulton hospital purchase option. Pete mentioned that we've added a new schedule. We wanted to make sure you guys saw that. It's an $82 million purchase option that -- it roughs out to about a 10% cap rate, a little bit of dilution there.

So given all this, back to, I think, what your original question is, we expect to move back forward to a more normal earnings growth beginning in 2020 with some potential positive or negative noise from the senior housing transitions and some of these new acquisitions that we still -- and there are some lease-up required for stabilization. But we'll come back to you with more specifics on the fourth quarter call. So that's what I'm willing to tell you on the 2020.

That's actually very helpful. And I would agree with you on the triple-net side, even your metrics on the amount of new supply, the median household income and the median home value, they all jumped as well. So definitely agree with you.

Our next question comes from Joshua Dennerlein from Bank of America.

Curious on the Brookdale SHOP JV that you created this quarter. Why not just sell those assets outright? And then maybe could you talk about their performance versus your overall SHOP performance, and maybe the impact on your SHOP pool today and in the future how you might present that?

Yes, you don't want to call out a specific performance of that portfolio. Although I did mention that Houston and Denver are significant part of the core portfolio. And that the balance of the core portfolio was actually flat year-over-year versus down 7.4%. So I think that gives you at least directionally an indication of how that portfolio was performing. The decision to do a JV rather than sell the assets outright was a couple of things. One, it's a new capital partner that we've been talking to for a good period of time that overtime, we think could be an excellent strategic partner on any number of opportunities. So there was a mutual desire to establish a partnership. It may never grow. It may grow significantly. We'll see based on the opportunities. But that was an important consideration for us. And the other is that over time, we think these are going to be good assets. For the next couple of years, we think it's going to be more challenged because of the markets that they're in. And fortunately, the sovereign wealth fund, there are some benefits to be in private. They are able to take a long-term view which they do. We're able to take a long-term view but only to a certain extent, and we need to manage the portfolio accordingly. So we think that over time, this will be a very good portfolio in a couple of years. It probably will be more challenged. So we thought this was strategically and economically the right thing for us to do with the assets. And Pete, do want to?

And then, Josh, let me try and answer your question on SPP, I'll speak up as we've been told that there's some sound difficulties. It's the first time I've been told that I'm too quiet. So from a SPP perspective, our policy is to remove JVs from SPP. So if this deal does close in the fourth quarter, it could have a material positive improvement on our reported numbers. Importantly, and this is very important, our current guidance does not assume these assets come out of our full year pool, and we will be transparent in the fourth quarter on the impact of these assets and show it both with and without these assets included.

I'll just add one thing to that, Pete, if I could. As we go into 2020, we will be assessing whether to show these types of JVs on a pro rata basis going forward because when we get some larger JVs like this, it just feels like there's assets missing up, we would like to report on. I'm sure, you'd like to have the information. So we're working on that.

Our next question comes from Chad Vanacore from Stifel.

This is [Pao Chiu] on for Chad. Congrats on the rebranding. My first question is on the SHOP performance. It looks like occupancy has improved quarter-on-quarter across the board. Given the competition you mentioned in Denver and Houston on your core portfolio, did you offer more concession in the quarter to defend occupancy? What is the outlook for 4Q and going forward? And how should you think of occupancy versus rate increases in the choppy market that you just mentioned in 2020?

There wasn't as much price concession as there was increased marketing spend. So that's one reason that the year -- well, actually, the sequential performance was a bit weaker. So not significant discounting, it was more capital into the buildings as well as elevated expenses to improve the marketing effort, including the salespeople.

Okay. And my second question is on dispositions. You just mentioned the plan to like recycle $300 million assets annually is the normal run rate. So other than the 18 triple-net assets, you are selling to Brookdale, are there any other major portfolio dispositions that are in the works near term?

No, nothing dramatic. It's more just typical pruning.

Our next question comes from Nick Joseph from Citi.

It's Michael Bilerman here with Nick. So just wanted to come back to the joint venture. And Scott, you mentioned a low to mid-6 cap on a total portfolio value of $790 million, which equates to total NOI of that $49 million. And then the other piece that you sort of talked about was that it included the assets in Houston and Denver that if were excluded from the SHOP pool, would mean it would be flat. So if you were to look on Page 34 of your supp in the third quarter, right, there was $14.6 million of cash NOI that was down 7. So half of that is Denver and Houston, down, let's call it, 15 to make the math simple. How does that all tie out to a -- what's embedded to about a $49 million NOI at a 6.25% cap on $790 million of value. I just had to piece it all together maybe the cap rates on a different NOI number versus what's in place, maybe not have -- maybe there's other assets outside of what is in here. Can you just sort of tie it all together?

Yes. I'll try to, and maybe a follow-up call would helpful, too, just to walk through all the details. But the assets that we are selling to the sovereign wealth fund, we're doing a JV, not all of those assets are in the SPP pool. Because there are some that are actively being redeveloped, so they're not in SPP. And then, if you look throughout the supplemental when you see the SHOP asset count for Brookdale, that also includes a number of assets that are held-for-sale. So there's a population difference that I think is maybe driving some of the confusion. But you're correct on the roughly $48 million, $49 million of NOI over the $790 million purchase price.

But what is that NOI? Is that a current in-place reported 3Q number, arguably, a part of that sounds like under redevelopment, a part of that where you had significant NOI weakness? Or is it what is forecasted for next year? Is it trailing 12 months? What does that $49 million represent?

Yes, it's a T12. Michael, the T3 annualized would be more like high 5% to 6%. And the forward-looking cap rate, I'll probably let the sovereign wealth fund comment on that, and we'll give our view when we give February guidance.

Yes. But that's an important number at least from a 3Q annualized because that's the NOI, we got to pull out of our model, in which case it's going to be less dilutive if it's in that 5% to 5.5% range versus 6% to 6.5%. The other thing and -- it was really helpful, Tom, as you walked through a lot of the elements of next year coming from this year. You had life storage, a south storage company come out and give 2020 guidance. It's, actually, a lot fewer companies give 2020 now. It's like BXP and a few others. Would you consider, you have a big conference coming up with NAREIT in a few weeks, maybe putting more of those building blocks together so you can give a little bit more color to The Street versus waiting until February?

Michael, I thought about that and I must say is -- I've got a past in other sectors where one was dealing with a single sector. When you start dealing with multiple sectors, it becomes much more complex as you can imagine. And I will say, the senior housing sector is a far different animal to forecast than the others that I've ever dealt with. And so we almost need to see how the year completes out to get a feel for the fourth quarter to see how January looks before we set guidance for the year because there are so many moving parts. And even the moving parts, despite the difficulty and the transition, it comes down to -- think in terms of assets that are often at 15%, 20%, 25%, 30% margins. Smaller changes in the NOI -- it could be rents, it could be expenses, a variety of different things can cause some pretty dramatic changes in the numbers. And that's especially true when we have a small pool like we have in SHOP. I was -- what I worry about in SHOP is that we can have a change that is literally immaterial to our outcome for earnings, for the year, but it can swing this metric that seems so exceedingly important to The Street because I know that they're comparing it to certain peers where it's an enormous number in their portfolio. And so we have a tendency to want to get enough time to model it as best as we can to get good estimates on that number. It would be hard for us to come out with full guidance early when we've got the SHOP number that we want to dial in as best we can. So I'm inclined not to come out with specific guidance at NAREIT, but rather give the directional guidance as we can like I just did and then dial it in, in February.

Listen, I agree with you on same store. There's way too much focus when all 3 of you calculate in a different way. I mean, Welltower doesn't even calculate it the same between their SEC filings and their supplemental. Where do you stand at least trying to come together? The industrial REITs came together 24 months ago to at least agree to a common definition on same store. Is that something that you feel you can do that there's willingness to do?

Yes, Michael, it's something that we would gladly do. But it requires all parties to want to come together and come to a common definition. So if we find that our peers want to do the same, we will be the first to sign up.

Okay. Last one just on same store. I guess, you must have listened to Welltower event of this call. I'm sure Scott listened to Welltower because he had some really nice comments from his old boss on it. But from the same-store perspective, where do you lean in terms of the description of the senior housing operating environment overall?

Yes, Michael, I guess, we'd be somewhere in between.

What did you say, I can't hear you that well. You're very distant.

Michael, I would just say the industry environment is generally in line with what we've been talking about for the past 2 years. So it's challenging. Certain markets are better positioned than others. Certain operators are better positioned than others. We're starting to see modest signs of improvement in more markets than we would have a year ago. In general, our portfolio is performing in line with what we expected it at the beginning of the year, even though it's a really small portfolio and hard to forecast. So our view hasn't changed on industry fundamentals. We didn't see any dramatic change in the third quarter, but that doesn't mean that somebody else didn't. It's a very local business, especially if you got transitioned assets in the pool.

I certainly wouldn't disagree with any comments that were made by anyone else, but we can't comment more specifically on what we're seeing as well as the conversations we have with operators who have bigger footprints. And I would just say our view is that it's challenging, it's been challenging, things are getting better, but it's going to take a bit more time to improve at least at a national level. There are certain pockets that are doing extremely well already. Oakmont is a great example. Aegis is a great example. So there are some markets and operators that are making a lot of money right now and would be confused by anyone talking about a challenging operating environment. And then there are others at the exact opposite end of that spectrum, particularly in smaller markets with older assets in particular if you're in the middle of transition. So I think it requires a lot of nuance about what portfolio you're talking about and the best to avoid sweeping generalizations about senior housing.

Our next question comes from Steven Valiquette from Barclays.

Tom, Pete, Scott, congrats on your continued life science strength, which is pretty important. But unfortunately, I also have a question on senior housing. So just a follow-up further around the discussion of performance in the SHOP core versus transition portfolio. Your comments around Denver and Houston were helpful. But when you look at it, in the revenue growth trends year-over-year were actually fairly comparable between the core versus transition portfolios. And instead, to me, it was only the operating expense growth that kind of jumped out. It was higher at around 5% in core versus only 1% in the transition portfolio. So I'm not sure if that was related to the acuity differences that you alluded to earlier in the Q&A, but I guess the question really is, with the overall industry discussion around rising labor costs and other expenses, is there any extra color you can provide about initiatives that you and your partners may have to try to control operating expenses within the overall SHOP portfolio?

Yes, happy to take that one. Part of the gap between the transition and core portfolio on expenses is that, last year, we talked about some of the transition assets having disproportionally high operating expenses during the transition, whether it's repair and maintenance or overtime or contract labor. So that started to reverse a little bit. So that's one reason that the growth in operating expenses in that transition portfolio this year is lower than what you're seeing in the core portfolio. Because the cost of labor, I think, you've seen this pretty consistently among the other health care REITs as well as the publicly traded operators. It's in the 4% to 5% range in most markets. And that was true of our core portfolio and true of our transition portfolio. So it was really expenses outside of labor that we're driving most of the difference in operating expenses between the 2 pools this quarter.

Is there any hope to kind of bring that expense level down to pay some initiative, or you kind of stuck with the costs or expenses growing in that 4% or 5% range that you just talked about?

Yes. I wouldn't say that your stock -- at the same time, seniors are moving into these communities with an expectation of a certain service level. And it requires a lot of human-to-human interaction and that's not something that we're willing to compromise. So any consideration around cutting expenses, but at the expense of the service level that that's really off the table and it's a competitive labor market. And at the end of the day, usually companies with the best employees end up having the best performance and the senior living community is no different. So you have to pay a competitive wage to get a high-quality worker. Now at the same time, if there's a strong culture, good development opportunities, et cetera, you have a better chance to have less turnover and attract a more talented workforce and that's really the emphasis. Now longer term, are there chances for technology to reduce the amount of personnel needed at the community? Yes, I think, that's the case, but I wouldn't say that there's a dramatic opportunity on that front in the next year or 2.

Our next question comes from Drew Babin from Baird.

Just a couple of quick ones from me. The capital senior properties that are -- the ones that are flipping over to RIDEA, I know when this happened with Sunrise, I think their rent payments were subordinate to capital spending. And so there wasn't really a noticeable uptick in CapEx from HCP's perspective. With these properties, are you going to see kind of a noticeable increase in the amount of CapEx that HCP is responsible for? If you could just kind of talk about the structure there?

Sure, Drew. I'll take that. So it's 4 assets those will probably transition in the first quarter of 2020. They're good properties and we think good submarkets. I think it's more likely than not that all 4 of those will end up being redeveloped. They're 25-year-old properties under a triple-net lease. Over time, the amount of capital reinvested in the property is not always as significant as you might want. So I think it's more likely that goes with -- move into the redevelopment pool in which case it's a different type of spending than CapEx that would be impacting earnings.

Okay. That makes sense. And then, just one more for me. The Bradenton CCRC that ultimately Healthpeak will be buying, what was the reasoning for bringing that one in? What changed in the deal? Or could you just give a little more color on that, I'd appreciate it.

It was nothing more than valuation. So we've been talking to Brookdale about this portfolio for a long period of time, and there was a disconnect on that particular property about the right valuation that did not get resolve by October 1, but we subsequently were able to come to agreement on the right valuation for that asset at a price that we were a willing buyer and they were a willing seller, and LCS is excited to take it on as well. It fits very nicely within the Florida geographic footprint for that portfolio. So we think it's a nice add.

Our next question comes from Daniel Bernstein from Capital One.

I just want to ask -- go back to the comment you made on additional land at the CCRCs and just generally, given the impressive restructure the portfolio and where the starts have been in CCRCs and maybe senior housing generally coming down, do you see some additional opportunity to ramp up your construction and development, senior housing and maybe to what extent would you do that?

Yes. It's not going to be a steep ramp-up. But as a long-term owner, we think there's substantial long-term opportunities. There is one active project underway and that virtually every campus there is some level of expansion opportunity. As an example, the project that were under way with already, the independent living portion of the campus, which is usually, 2/3 to 3 quarters of the total units are in very good condition. They've been reinvested in over the -- over a period of time, but the community has a very tired health care unit. There's no memory care provision. The assisted living is studio apartments. The skilled unit is semi-private occupancy. And this is a campus with 50 acres of land. So there is the ability to construct a brand new assisted living community as well as memory care and create private units for the skilled nursing. So today, it's a property that you walk in independent living and it's fantastic, and then you see the health care component of the campus and there's not much to talk about. So there's really an opportunity to dramatically change the health care side of that campus. So that's just one example of the type of project that you can do when you got 600 acres of land.

Okay. And then, just one last question is, you've done some recent private equity and sovereign wealth fund transactions in the MOB and senior housing space, do you see any opportunities in life science to expand that -- expand those opportunities as well?

There's certainly plenty of interest, but Dan, one of the things Tom talked about before is our cluster strategy and our ability to allow tenants to grow within the portfolio as they have success. That becomes more challenged as you start joint venturing different campuses and moving tenants from perhaps a wholly-owned campus to a joint venture campus or vice versa, so to speak. We have not done any joint ventures within the life sciences space and that's the primary reason why.

Our next question comes from Tayo Okusanya from Mizuho.

Again, congrats on the name change. Hopefully, it's a start of a bigger and better thing. As we start to think about 2020 again, just along the lines of the CSU questioning, there are a couple of other operators to where lease coverage kind of remains weak. As we start thinking ahead of 2020, should we be kind of throwing some kind of consideration around lease restructuring around some of those names as well?

No, I don't think so. Tayo, I mean the vast, vast majority of the triple-net rent, now it's with Brookdale, Aegis and HRA, and those are now a very long-term master leases with improved credit. There are a couple of, I'll call them, cats and dogs that have very little amount of rent. All of them have corporate guarantees though, and I think we're more likely to just collect the rent through the maturity date. If we did choose to do something early, which is not our expectation today, the amount of rent from those properties is so insignificant that it wouldn't even be a blip for earnings.

Got you. Like I said, that's number one. And then number two, Tom, I'm not trying to show you the door or anything, but with the promotion of Scott, I mean, what kind of signal are you really trying to send us just around maybe succession planning at this point?

Well, that's -- I think I don't want to answer this one, Tayo. By the way, welcome back. It's good to have you back. Here's my thinking. Tayo, don't read anything into that. It wasn't so long ago that I thought of a 57-year-old is an old guy, but as far as CEOs go, I think it's a relatively young guy, near as I can tell. So I expect to be around for a lot of years. I'm looking forward to working with Scott and partnering with him, and I think that's going to be for many years to come back. So don't read anything to that -- into this promotion at all other than, I think, Scott is going to be able to help us run this business even better by bringing under one extremely talented person, the overall oversight of our 3 businesses, along with the transactions so that, that's being headed up by one person, and that was the sole rationale for it as well as that will allow Scott to continue to groom himself for bigger things going forward.

(Operator Instructions) Our next question comes from Lukas Hartwich from Green Street Advisors.

Just one last for me. Can you provide an update on the tenant interest level at 75 Hayden?

Sure. It's Pete here Lukas. So one of the interesting things about 75 Hayden is we actually had to build a parking garage first before we could begin construction of the steel. That has been completed fairly recently. Steel has gone up and, in fact, we just had the topping off event a few weeks ago. We think we're really well positioned with 75 Hayden vis-à-vis the market fundamentals there. So similar to The Shore Phase II, nothing to report today, but we feel very good about how we're positioned. And we're looking to deliver that basically a year from now. So we're right in that sweet spot where we think we can get some leases signed.

And ladies and gentlemen, at this point, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

Well, thank you, operator, and thank you for all joining us on the call today and your continued interest in Healthpeak. We'll look forward to seeing many of you at NARIET, and talk to you soon.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.