This transformational deal will create a larger and healthier healthcare real estate investment trust (REIT) that is poised for growth and success.

The merger between Healthpeak Properties (PEAK -2.69%) and Physicians Realty Trust (DOC -1.36%) will result in the formation of a leading healthcare REIT that will own over 750 properties, encompassing a massive 52 million square feet of space dedicated to healthcare discovery and delivery. Among these properties, the combined company will own 12 million square feet of lab space and 40 million square feet of outpatient medical space, which are leased to reputable healthcare systems, physician groups, and biopharma companies.

One of the key benefits of this merger is the enhanced position of the new Healthpeak Properties in high-growth markets such as Dallas, Houston, Nashville, Phoenix, and Denver. The combined company will be better equipped to leverage these markets, capitalize on the expanding drug discovery and outpatient healthcare delivery sectors, and create more attractive opportunities for growth.

Moreover, the deal is expected to strengthen Healthpeak's portfolio by expanding its scale in over 30 markets where the two companies have overlapping footprints. This increased scale will enable the REIT to foster new relationships, broaden existing ones, and reduce tenant concentration, thereby enhancing its diversification.

In terms of financial benefits, Healthpeak expects the merger to be immediately accretive to its adjusted funds from operations (FFO) per share. Cost savings of at least $40 million are anticipated in the first year, with the potential to reach $60 million by the end of the second year. With these improvements, the dividend payout ratio of Healthpeak Properties will be lowered, making its already generous dividend yield of 7.7% even healthier.

Despite the sizeable merger, Healthpeak Properties aims to maintain a strong balance sheet. The company anticipates maintaining a leverage ratio in the low 5 times range, even after factoring in Physicians Realty Trust's existing debt. To further enhance its liquidity, Healthpeak will enter into a new five-year, $500 million term loan.

This fortress-like balance sheet will position the new Healthpeak for success in the current market environment and beyond. It will provide the company with the flexibility to make additional acquisitions, invest in high-return development opportunities, and increase its income over time. Ultimately, this income growth could pave the way for potential dividend growth in the future.

In summary, the mega merger between Healthpeak Properties and Physicians Realty Trust is set to create a formidable $21 billion healthcare REIT. With an expanded portfolio, increased scale, and favorable financial prospects, the combined company is well-positioned to capitalize on the robust healthcare market. This merger not only strengthens Healthpeak Properties' ability to pay dividends but also sets the stage for further growth and success in the healthcare real estate sector.