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Should You Retain Healthpeak Properties Stock in Your Portfolio Now?
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Healthpeak Properties, Inc. (DOC - Free Report) is well poised for growth given the solid demand for lab assets amid the increasing need for drug innovation and developments. The rise in senior citizens’ healthcare expenditure is expected to support its continuing care retirement community (CCRC) portfolio.
Encouraging capital-recycling moves and efforts to bolster near-term liquidity bode well for long-term growth. However, competition from the industry players and substantial debt add to its woes.
Last month, DOC’s operating partnership amended and extended its revolving credit facility to $3 billion. The arrangement is set to mature in January 2029, with the option for two six-month extensions, subject to certain conditions.
What’s Supporting DOC Stock?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals. 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. This is expected to lead to a rise in the allocation of healthcare spending by healthcare research institutes in the coming years. Amid these industry tailwinds, Healthpeak is likely to grow. In the third quarter of 2024, the lab portfolio witnessed year-over-year growth of 2.8% in the total merger-combined same-store cash (Adjusted) net operating income.
With an expected rise in the senior citizens’ population in the years ahead, Healthpeak’s CCRC portfolio, which includes independent living, assisted living and skilled nursing units, has a strong upside potential. In the third quarter of 2024, occupancy in its CCRC portfolio was 85.2%.
The company maintains a healthy balance sheet and exited the third quarter of 2024 with around $3.18 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.1x. It also enjoys favorable long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global as of Sept. 30, 2024. With investment-grade credit ratings, the company can easily access the debt and equity markets to fund capital commitments at favorable costs. With a sound liquidity position, Healthpeak is well placed to bank on growth opportunities.
Over the past year, shares of this Zacks Rank #3 (Hold) company have gained 9% against the industry's downside of 0.4%. Analysts seem bullish on this healthcare REIT with its 2024 funds from operations (FFO) per share revised northward marginally to $1.81 over the past month.
Image Source: Zacks Investment Research
What’s Hurting DOC Stock?
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.
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 Sept. 30, 2024, was approximately $8.58 billion.
The Zacks Consensus Estimate for SL Green Realty’s 2025 FFO per share has moved 1.3% upward over the past month to $5.51.
The Zacks Consensus Estimate for OUTFRONT Media’s 2025 FFO per share has moved marginally upward in the past two months to $1.90.
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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Should You Retain Healthpeak Properties Stock in Your Portfolio Now?
Healthpeak Properties, Inc. (DOC - Free Report) is well poised for growth given the solid demand for lab assets amid the increasing need for drug innovation and developments. The rise in senior citizens’ healthcare expenditure is expected to support its continuing care retirement community (CCRC) portfolio.
Encouraging capital-recycling moves and efforts to bolster near-term liquidity bode well for long-term growth. However, competition from the industry players and substantial debt add to its woes.
Last month, DOC’s operating partnership amended and extended its revolving credit facility to $3 billion. The arrangement is set to mature in January 2029, with the option for two six-month extensions, subject to certain conditions.
What’s Supporting DOC Stock?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals. 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. This is expected to lead to a rise in the allocation of healthcare spending by healthcare research institutes in the coming years. Amid these industry tailwinds, Healthpeak is likely to grow. In the third quarter of 2024, the lab portfolio witnessed year-over-year growth of 2.8% in the total merger-combined same-store cash (Adjusted) net operating income.
With an expected rise in the senior citizens’ population in the years ahead, Healthpeak’s CCRC portfolio, which includes independent living, assisted living and skilled nursing units, has a strong upside potential. In the third quarter of 2024, occupancy in its CCRC portfolio was 85.2%.
The company maintains a healthy balance sheet and exited the third quarter of 2024 with around $3.18 billion of liquidity and a net debt-to-adjusted EBITDAre of 5.1x. It also enjoys favorable long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global as of Sept. 30, 2024. With investment-grade credit ratings, the company can easily access the debt and equity markets to fund capital commitments at favorable costs. With a sound liquidity position, Healthpeak is well placed to bank on growth opportunities.
Over the past year, shares of this Zacks Rank #3 (Hold) company have gained 9% against the industry's downside of 0.4%. Analysts seem bullish on this healthcare REIT with its 2024 funds from operations (FFO) per share revised northward marginally to $1.81 over the past month.
Image Source: Zacks Investment Research
What’s Hurting DOC Stock?
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.
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 Sept. 30, 2024, was approximately $8.58 billion.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are SL Green Realty (SLG - Free Report) and OUTFRONT Media (OUT - 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 SL Green Realty’s 2025 FFO per share has moved 1.3% upward over the past month to $5.51.
The Zacks Consensus Estimate for OUTFRONT Media’s 2025 FFO per share has moved marginally upward in the past two months to $1.90.
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.