Healthpeak Earnings: Same-Store Net Operating Income Better Than We Anticipated

Second-quarter results for no-moat Healthpeak Properties PEAK were slightly better than we anticipated, giving us confidence in our $33.50 fair value estimate. Same-store net operating income for the life science segment grew 3.8%, slightly better than our 2.6% estimate. The medical office segment saw same-store NOI growth that was in line with our 2.5% estimate. The continuing care retirement community segment’s same-store NOI growth was 19.3%, well ahead of our estimate of 6.4%. Combined same-store NOI for the company overall grew 4.8%, better than our estimate of 2.8%. As a result, Healthpeak reported 3.6% growth in adjusted funds from operations, to $0.45 per share, beating our estimate of $0.43 for the second quarter.

For 2023, management raised its guidance for total company same-store NOI growth by 25 basis points to a new range of 3.25%-4.75%, which moves our 3.7% estimate from the midpoint of the guidance range to the lower end. Management also raised the low end of its adjusted FFO guidance by $0.02 to create a new range of $1.73-$1.77, which puts our $1.76 estimate closer to the updated midpoint. Overall, we view the revisions to management’s outlook as confirmation of our short-term view for the company.

Healthpeak issued $350 million of unsecured debt at 5.25% in the second quarter, using the proceeds to pay down its outstanding credit facility. While the rate on the long-term debt is higher than the 3.38% the company has on the rest of its unsecured notes, it did lower the average rate on Healthpeak’s debt, since the floating rate on the credit facility had risen to 5.45%.