Company Reports

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is entering its senior years, and the 80-plus population, an age group that spends more than 4 times as much on healthcare per capita as the national average, should almost double in size over the next 10 years. In the long term, the best healthcare companies are well-positioned to capitalize on these industry tailwinds.

Healthpeak Properties reported adjusted funds from operations of $0.46 per share and same-store net operating income growth of 1.8% in the second quarter.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. In the long term, the best healthcare companies are well-positioned to capitalize on these industry tailwinds.

Healthpeak Properties reported adjusted funds from operations of $0.45 per share and flat year-over-year growth for same-store net operating income in the first quarter.

Healthpeak Properties reported adjusted funds from operations of $0.47 per share and same-store net operating income growth of 3.9% for the fourth quarter.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. In the long term, the best healthcare companies are well-positioned to capitalize on these industry tailwinds.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Healthpeak Properties reported adjusted funds from operations of $0.46 per share and same-store net operating income growth of 0.9% for the third quarter.

Healthpeak Properties reported adjusted funds from operations of $0.46 per share and same-store net operating income growth of 3.5% for the second quarter.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Healthpeak Properties reported adjusted funds from operations of $0.46 per share and same-store net operating income growth of 7.0% for the first quarter.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Healthpeak reported fourth-quarter results that were in line with our expectations, leading us to reaffirm our $30.50 fair value estimate for the no-moat company. The company reported same-store net operating income growth of 3.1% for the medical office portfolio, in line with our estimate for the quarter, and 4.9% growth for the life science portfolio, slightly better than our 4.4% estimate. Combined with 22.3% growth from the continuing care retirement community portfolio, Healthpeak reported total same-store NOI growth of 5.4% in the fourth quarter, the highest figure the company has reported since the third quarter of 2023. Healthpeak reported adjusted funds from operations of $0.46 per share in the quarter, matching our estimate and the figure the company reported in the fourth quarter of 2023.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Third-quarter results for Healthpeak were in line with our expectations, leading us to reaffirm our $30.50 fair value estimate for the no-moat company. The company reported same-store net operating income growth of 3.4% for the medical office portfolio and 2.8% for the life sciences portfolio, both of which were relatively in line with our estimates for the quarter. The continuing care retirement community segment saw same-store NOI growth of 14.2%, leading to total company same-store NOI growth of 4.1% for the third quarter. Healthpeak reported adjusted funds from operations of $0.45 per share in the third quarter, which matched our estimate for the quarter and also matched the $0.45 figure the company reported in the third quarter of 2023.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

Healthpeak reported second-quarter results that were above our estimates for the quarter, which gives us confidence in our $30.50 fair value estimate for the no-moat company. Same-store net operating income for the life science portfolio was up 3.0%, better than our estimate of 2.3% growth. Same-store NOI growth for the medical office portfolio was 3.1% in the second quarter, matching our estimate. Meanwhile, the continuing care retirement community segment continues to perform very well with same-store NOI growth of 20.5%. Combined, Healthpeak reported same-store NOI growth of 4.5% for the total company, which was ahead of our 3.4% estimate for the second quarter. The company also reported adjusted funds from operations of $0.45 per share in the second quarter that was a penny better than our $0.44 estimate.