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Healthpeak Properties, Inc.’s PEAK life-science portfolio is well-positioned for growth, given its footprint in high barrier-to-entry markets and strong industry fundamentals. While it is recycling capital through non-core dispositions of senior housing assets to expand the core portfolio, the near-term dilutive impacts on earnings from such sales are unavoidable.
Particularly, the healthcare REIT is making concerted portfolio-repositioning efforts to focus on life-science, medical office and continuing care retirement community (“CCRC”) assets. By using proceeds from senior housing operating portfolio and triple-net leased asset sales. Such expansion moves have enabled it to benefit from favorable operating trends and tenant demand, thereby, renewing growth opportunities for the company.
Notably, the company follows a cluster strategy in three premier life-science epicenters — San Diego, San Francisco and Boston — to assemble assets through acquisitions, developments and redevelopments. On the back of the portfolio moves, Healthpeak is gaining scale and is well-poised to meet the growing demand from life-science tenants.
The company’s sound liquidity position too supports such growth moves. In fact, Healthpeak had cash and cash equivalents of $34 million as of Mar 31, 2021. Additionally, as of Mar 31, 2021, the company enjoyed long-term investment-grade credit ratings from Moody’s, Fitch and S&P Global. This along with the provision to issue $1.25 billion additional shares under its at-the-market program offers it easy access to the debt and equity markets to fund capital commitments at favorable costs.
Also, going forward, national healthcare expenditure is expected to rise. Senior citizens constitute the major customer base of healthcare services as they end up spending more on healthcare services compared to the average population. Hence, with an expectation of a high senior citizen population in the years ahead, we believe that Healthpeak has strong upside potential, being well-poised to capitalize on the favorable demographic trend.
Over the past few years, Healthpeak has significantly reduced the size of both SHOP and triple-net portfolios. Eliminating SHOP and triple-net exposure through divestitures will reduce COVID-related operational uncertainty for the company in the near term and offer stability to earnings, going forward. Although such efforts are strategic fits for the long term, the dilutive impacts on earnings, lost revenues and reduced cash flows in the near term from the sale of assets are unavoidable.
Also, the company’s senior housing business has been adversely impacted by the pandemic. Move-ins have been low in light of the pandemic-related protocols, reduced in-person tours and incidences of coronavirus outbreaks at the company’s facilities. This along with significant move-outs has resulted in year-over-year declines in occupancy rates at its CCRC portfolio, thereby, denting revenues and net operating income (NOI).
Shares of this Zacks Rank #3 (Hold) company have gained 15% over the past three months compared with the industry's growth of 11.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Industrial Logistics Properties Trust’s ILPT funds from operations (“FFO”) per share estimate for the current year has moved marginally up to $1.88 in the past week. The company currently carries a Zacks Rank of 2 (Buy).
OUTFRONT Media Inc.’s OUT Zacks Consensus Estimate for 2021 FFO per share has moved marginally north to 89 cents over the past month. The company currently carries a Zacks Rank of 2.
Braemar Hotels & Resorts Inc. BHR carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised around 38% upward in a month to 44 cents.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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