Healthpeak: As Merger With Physicians Realty Trust Closes, We Lower Fair Value Estimate to $30.50

No-moat Healthpeak closed on the previously announced merger with Physicians Realty Trust and will now trade under the ticker DOC. The merger adds a 278-property portfolio of medical office buildings with 16 million square feet of space in a deal valued around $5 billion. We believe that the portfolio is complementary to Healthpeak's existing portfolio and makes the company the leading medical office REIT in the United States. We are in favor of the deal given that the additional scale adds diversification benefits and should increase the chance Healthpeak can achieve a higher credit rating and thus lower long-term debt costs. Management believes that the deal should see $40 million in cost savings in the first year and another $20 million as additional synergies between the companies are realized, though we have assumed a more conservative figure in our model as many of these synergies can be difficult to achieve. While the deal does not significantly change our funds from operations estimates for the company, we are pleased to see management execute a deal that has the potential to create long-term benefits.