On Monday, Scotiabank increased its price target for Healthpeak Properties (NYSE:DOC) Inc (NYSE:PEAK) shares to $24.00, up from the previous target of $23.00, while retaining a Sector Outperform rating. The adjustment reflects a closer examination of the Net Operating Income (NOI) upside potential in the company's Lab segment, which is anticipated to be a significant contributor to future earnings growth.
The analyst at Scotiabank highlighted the main (re)development campuses of Healthpeak: Vantage, Gateway, and Portside, which present a total annual NOI opportunity of $60 million. It is projected that Healthpeak will capture 50% to 100% of the incremental benefit in Funds From Operations (FFO) by the end of 2025 and 2026, respectively. The leased percentage of the total 912,000 square feet at these projects is expected to grow from 14% (124,000 square feet) to 50% and 100% by the third quarter of 2025 and 2026.
The second-quarter call commentary indicated that these projects account for approximately half of the 620,000 square feet of signed Letters of Intent (LOIs). If these LOIs are converted to leases, the leasing percentage is estimated to reach 48%. The analyst's report includes more detailed assumptions and introduces estimates for 2026.
The anticipated growth in Funds From Operations Per Share (FFOPS) and Adjusted Funds From Operations Per Share (AFFOPS) for 2025 and 2026 are 4.0% and 3.4%, and 5.0% and 2.7%, respectively. The expected increase in NOI is believed to counterbalance some dilution from a lower capitalized interest benefit. According to Scotiabank, improvements in leasing should drive Healthpeak's stock closer to the price target and Net Asset Value Per Share (NAVPS) estimates of $24.00.
In other recent news, Healthpeak Properties has reported robust earnings results and strategic mergers. The company's raised 2024 financial guidance, following a strong second quarter, reflects its confidence in its growth trajectory.
In addition, Healthpeak's merger with Physicians Realty (NYSE:DOC_OLD) has brought additional scale and tenant relationships, further strengthening its position. The company also fully acquired King Street Properties' minority stake in their joint venture, expanding Healthpeak's greater Boston portfolio to a total of 2.7 million square feet.
Analysts have responded positively to these developments, with Citi raising its price target for Healthpeak Properties to $22 while maintaining a Neutral stance. Similarly, Baird increased its price target to $24, citing operational management strength, lab improvements, and merger synergies. RBC Capital and Evercore ISI also raised their price targets to $25 and $24, respectively, maintaining Outperform ratings.
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