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Should Investors Retain Healthpeak (PEAK) Stock for Now?
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Healthpeak Properties, Inc.’s is well-poised to benefit from its diversified, high-quality and well-balanced portfolios across three core asset classes of life science, medical office and continuing care retirement communities (CCRC) real estate.
The company has been focusing on enhancing its life-science real-estate properties, which are set to gain from the increasing life expectancy of the United States population and biopharma drug development growth opportunities.
Moreover, the life science portfolio’s top 25 tenants represented 50% of the annualized base rent (ABR) as of Sep 30, 2022. As of the same date, publicly-traded tenants accounted for 73% of the ABR. This assures steady revenue generation for the company.
Further, its active life science developments are expected to be accretive to annual net operating income in the upcoming period, which bodes well for the company.
Healthpeak’s CCRC portfolio, which refers to its retirement communities, is owned and operated through the REIT Investment Diversification and Empowerment Act of 2007 (commonly referred to as RIDEA) structures. Under this structure, the residents pay the third-party manager-operators directly or via private insurance. This reduces the operators’ dependency on government reimbursement programs like Medicare and Medicaid, ensuring steady cash flows.
PEAK has been making concerted efforts to dispose of non-core assets belonging to the senior housing operating property (SHOP) and triple-net leased categories through its capital-recycling program. It has been redeploying the proceeds to acquire and fund the development of life science and medical office assets in high barrier-to-entry markets.
Moreover, its development pipeline seems encouraging. As of Sep 30, 2022, Healthpeak had five life science development projects underway with an estimated total cost of around $1.03 billion and one medical office building development project in process with an aggregate estimated cost of nearly $33 million.
On the balance-sheet front, Healthpeak exited third-quarter 2022 with $2.4 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.3X. Also, long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global and Fitch as of Oct 31, 2022, render easy access to the debt market at favorable costs. With enough financial flexibility, Healthpeak is well-placed to capitalize on future growth opportunities.
Analysts seem bullish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has been revised marginally upward over the past month.
Shares of Healthpeak have gained 9.2% in the quarter-to-date period compared with its industry’s growth of 1.1%.
Image Source: Zacks Investment Research
However, intense competition from other industry players in the healthcare services sector is a key concern for Healthpeak. Also, the company’s operators contend with peers for occupancy and to manage expenses. This could hurt Healthpeak’s revenues and limit profitability to a certain extent.
PEAK’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs amid the inflationary environment.
Further, rising interest rates are likely to increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Image: Shutterstock
Should Investors Retain Healthpeak (PEAK) Stock for Now?
Healthpeak Properties, Inc.’s is well-poised to benefit from its diversified, high-quality and well-balanced portfolios across three core asset classes of life science, medical office and continuing care retirement communities (CCRC) real estate.
The company has been focusing on enhancing its life-science real-estate properties, which are set to gain from the increasing life expectancy of the United States population and biopharma drug development growth opportunities.
Moreover, the life science portfolio’s top 25 tenants represented 50% of the annualized base rent (ABR) as of Sep 30, 2022. As of the same date, publicly-traded tenants accounted for 73% of the ABR. This assures steady revenue generation for the company.
Further, its active life science developments are expected to be accretive to annual net operating income in the upcoming period, which bodes well for the company.
Healthpeak’s CCRC portfolio, which refers to its retirement communities, is owned and operated through the REIT Investment Diversification and Empowerment Act of 2007 (commonly referred to as RIDEA) structures. Under this structure, the residents pay the third-party manager-operators directly or via private insurance. This reduces the operators’ dependency on government reimbursement programs like Medicare and Medicaid, ensuring steady cash flows.
PEAK has been making concerted efforts to dispose of non-core assets belonging to the senior housing operating property (SHOP) and triple-net leased categories through its capital-recycling program. It has been redeploying the proceeds to acquire and fund the development of life science and medical office assets in high barrier-to-entry markets.
Moreover, its development pipeline seems encouraging. As of Sep 30, 2022, Healthpeak had five life science development projects underway with an estimated total cost of around $1.03 billion and one medical office building development project in process with an aggregate estimated cost of nearly $33 million.
On the balance-sheet front, Healthpeak exited third-quarter 2022 with $2.4 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.3X. Also, long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global and Fitch as of Oct 31, 2022, render easy access to the debt market at favorable costs. With enough financial flexibility, Healthpeak is well-placed to capitalize on future growth opportunities.
Analysts seem bullish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has been revised marginally upward over the past month.
Shares of Healthpeak have gained 9.2% in the quarter-to-date period compared with its industry’s growth of 1.1%.
Image Source: Zacks Investment Research
However, intense competition from other industry players in the healthcare services sector is a key concern for Healthpeak. Also, the company’s operators contend with peers for occupancy and to manage expenses. This could hurt Healthpeak’s revenues and limit profitability to a certain extent.
PEAK’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs amid the inflationary environment.
Further, rising interest rates are likely to increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Lamar Advertising (LAMR - Free Report) and Chatham Lodging Trust REIT (CLDT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is currently pegged at $1.92.
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share presently stands at $7.34.
The Zacks Consensus Estimate for Chatham Lodging Trust REIT’s ongoing year’s FFO per share is pegged at $1.17, presently.
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.