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Is it a Wise Decision to Hold Healthpeak Properties Stock Now?
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Healthpeak Properties, Inc. (DOC - Free Report) owns diversified and top-quality healthcare real estate assets in the high barrier-to-entry markets of the United States. Solid demand for lab assets amid the increasing need for drug innovation and developments is likely to drive its lab portfolio’s growth. The rise in senior citizens’ healthcare expenditure is expected to support its continuing care retirement community (CCRC) portfolio.
However, competition from industry players and a high interest rate environment add to its woes.
What’s Supporting DOC?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals and led to a rise in demand for such assets.
Also, the use of artificial intelligence and machine learning is likely to increase the probability of success in drug research and lower the timeline for development, indicating a rise in the allocation of healthcare spending by healthcare research institutes in the upcoming years.
With a cluster strategy in three premier lab epicenters, namely San Diego, San Francisco and Boston, to assemble assets through acquisitions, developments and redevelopments, Healthpeak is gaining scale and is well-poised to meet the growing demand from lab tenants.
With the likelihood of the senior citizen population rising in the years ahead, Healthpeak’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, is positioned to benefit from the high healthcare expenditures incurred by this age cohort.
Healthpeak is making portfolio-repositioning efforts to focus on lab, outpatient medical and CCRC assets. As part of such efforts, the company recycled capital through non-core dispositions of SHOP and triple-net leased assets to acquire and fund the development of lab and outpatient medical assets in high barrier-to-entry markets.
The company maintains a healthy balance sheet position and exited the second quarter of 2024 with around $3.08 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.2X. It also enjoys favorable long-term credit ratings from Moody’s and S&P Global, rendering it easy access to the debt market at favorable costs. With a sound liquidity position, Healthpeak is well-placed to bank on growth opportunities.
Over the past six months, shares of this Zacks Rank #2 (Buy) company have gained 27.8% compared with the industry's upside of 12.9%.
Image Source: Zacks Investment Research
What’s Hurting DOC?
Healthpeak operates in a competitive market and contends with several other companies providing similar healthcare services or alternatives. The company’s operators contend with peers for occupancy, which could limit its power to raise rents and affect revenues and profitability.
DOC’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs. Over the recent years, increasing construction spending, along with the rising costs of capital, has affected the expected yields on the company’s development and redevelopment projects.
Additionally, a high interest rate environment is a concern for Healthpeak. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. DOC has a substantial debt burden, and its net debt, as of June 30, 2024, was approximately $8.60 billion.
The Zacks Consensus Estimate for National Health Investors’ 2024 FFO per share has moved 1.3% upward over the past month to $4.55.
The Zacks Consensus Estimate for CareTrust’s current year FFO per share has moved marginally upward in the past month to $1.48.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Is it a Wise Decision to Hold Healthpeak Properties Stock Now?
Healthpeak Properties, Inc. (DOC - Free Report) owns diversified and top-quality healthcare real estate assets in the high barrier-to-entry markets of the United States. Solid demand for lab assets amid the increasing need for drug innovation and developments is likely to drive its lab portfolio’s growth. The rise in senior citizens’ healthcare expenditure is expected to support its continuing care retirement community (CCRC) portfolio.
However, competition from industry players and a high interest rate environment add to its woes.
What’s Supporting DOC?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals and led to a rise in demand for such assets.
Also, the use of artificial intelligence and machine learning is likely to increase the probability of success in drug research and lower the timeline for development, indicating a rise in the allocation of healthcare spending by healthcare research institutes in the upcoming years.
With a cluster strategy in three premier lab epicenters, namely San Diego, San Francisco and Boston, to assemble assets through acquisitions, developments and redevelopments, Healthpeak is gaining scale and is well-poised to meet the growing demand from lab tenants.
With the likelihood of the senior citizen population rising in the years ahead, Healthpeak’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, is positioned to benefit from the high healthcare expenditures incurred by this age cohort.
Healthpeak is making portfolio-repositioning efforts to focus on lab, outpatient medical and CCRC assets. As part of such efforts, the company recycled capital through non-core dispositions of SHOP and triple-net leased assets to acquire and fund the development of lab and outpatient medical assets in high barrier-to-entry markets.
The company maintains a healthy balance sheet position and exited the second quarter of 2024 with around $3.08 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.2X. It also enjoys favorable long-term credit ratings from Moody’s and S&P Global, rendering it easy access to the debt market at favorable costs. With a sound liquidity position, Healthpeak is well-placed to bank on growth opportunities.
Over the past six months, shares of this Zacks Rank #2 (Buy) company have gained 27.8% compared with the industry's upside of 12.9%.
Image Source: Zacks Investment Research
What’s Hurting DOC?
Healthpeak operates in a competitive market and contends with several other companies providing similar healthcare services or alternatives. The company’s operators contend with peers for occupancy, which could limit its power to raise rents and affect revenues and profitability.
DOC’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs. Over the recent years, increasing construction spending, along with the rising costs of capital, has affected the expected yields on the company’s development and redevelopment projects.
Additionally, a high interest rate environment is a concern for Healthpeak. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. DOC has a substantial debt burden, and its net debt, as of June 30, 2024, was approximately $8.60 billion.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are National Health Investors (NHI - Free Report) and CareTrust REIT (CTRE - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for National Health Investors’ 2024 FFO per share has moved 1.3% upward over the past month to $4.55.
The Zacks Consensus Estimate for CareTrust’s current year FFO per share has moved marginally upward in the past month to $1.48.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.