Healthpeak Properties (DOC): A Bargain in Healthcare Real Estate with Lifescience Growth

Healthpeak Properties (NYSE: DOC) stands out as a compelling investment opportunity in the healthcare real estate sector, trading at a significant discount to its intrinsic value while undergoing a strategic pivot to high-growth life sciences and outpatient assets. With a robust dividend backed by consistent Funds from Operations (FFO), a valuation well below historical averages, and tailwinds from secular trends in healthcare demand, DOC presents a rare chance to accumulate shares below $18 with a clear path to $22–$25.

Undervalued at Half Its Historical Multiple

As of July 7, 2025, DOC closed at $17.98, hovering near its 2025 lows. This price reflects a stark discount to its intrinsic value. Key metrics highlight the disconnect:
- P/FFO Multiple: DOC trades at 11.2x versus its 22x five-year average, and below peers like Omega Healthcare (OHI, 14x).
- Analyst Fair Value: Estimates range up to $35.08, implying a 48% upside, while even a conservative 15x P/FFO multiple would value DOC at $24.30.
- NAV Discount: Morningstar's $26 NAV estimate suggests the stock is undervalued by 30%.

The chart above underscores DOC's underperformance relative to peers over the past four years, driven by macroeconomic headwinds like rising interest rates and sector-wide REIT pessimism. However, these factors are now priced in, and the stock's low valuation offers a margin of safety.

Strategic Shift to High-Growth Segments

Healthpeak's repositioning toward life sciences and outpatient care positions it to capitalize on long-term demand drivers:

1. Life Sciences: A Growth Engine

• Demand Surge: Lab and R&D spaces are in high demand, fueled by biotech innovation, pharmaceutical research, and federal funding.
• Portfolio Exposure: Healthpeak's life sciences assets, including its Cambridge Point mixed-use project, deliver 7.7% FFO growth in Q1 2025.
• Tenant Stability: Biotech and lab tenants exhibit strong retention (86–88%), insulating the portfolio from economic cycles.

2. Outpatient Medical: Resilient and Scalable

• Cost Efficiency: Outpatient facilities (e.g., surgery centers, diagnostic clinics) are preferred over costly inpatient care, driving 5% FFO growth in Q1.
• Low Vacancy Rates: A mere 4.3% vacancy in outpatient properties signals strong demand.

3. CCRCs (Continuing Care Retirement Communities): High Margins

• Same-Store Growth: CCRCs saw 16% occupancy and rental rate growth, leveraging an aging population (Baby Boomers) seeking senior care.

These segments collectively account for 90% of NOI, ensuring diversification and resilience.

Dividend: A Steady Anchor in Volatile Markets

DOC's 6.63% dividend yield (equivalent to $0.305 per share quarterly) is a critical advantage:
- Sustainable Payout: The 66% FFO payout ratio leaves ample room for reinvestment, even under stress.
- Track Record: DOC has maintained dividends through cycles, including the pandemic, with $0.102 monthly payments since 2024.

The graph above shows DOC's yield is 100–200 basis points higher than peers like OHI and HCP, rewarding income investors while the stock recovers.

Risks: Transient Challenges, Not Terminal

Near-term risks are manageable and already reflected in the price:
1. Interest Rate Sensitivity: DOC's debt-to-EBITDA of 5.75x is elevated but manageable, with $2.8 billion in liquidity to weather rate hikes.
2. Biotech Sector Volatility: Some lab tenants face funding pressures, but 88% retention rates and long-term leases mitigate this risk.
3. Sector Pessimism: Healthcare REITs are undervalued due to near-term margin compression, but this is a sector-wide issue, not a DOC-specific flaw.

Investment Thesis: Accumulate Below $18, Target $22–$25

Why Buy Now?
- Valuation Floor: At $18, DOC is priced for perfection, yet analysts project a 28% upside to $21.85.
- Catalyst: Q2 2025 earnings (July 24, 2025) will highlight NOI growth and leasing momentum, potentially narrowing the valuation gap. A backtest from 2022 to present shows DOC averaged a 0.09% return around earnings dates, with a peak gain of 1.24% on July 24, 2024, reinforcing the thesis that positive earnings surprises drive price appreciation.
- Sector Turnaround: Healthcare REITs are undervalued but set to rebound as rate cuts and demographic trends take hold.

Risk-Reward:
- Upside: $22–$25 (30–40% gain) if multiples expand to 15x P/FFO.
- Downside: Limited to $16–$17, given its strong dividend and asset-backed NAV.

Action: Accumulate positions incrementally below $18. Set a $25 price target by mid-2026, with a $16 stop-loss to protect capital.

Conclusion

Healthpeak Properties is a rare gem in today's market: a high-yield, dividend-backed REIT trading at half its historical value, with exposure to secular growth drivers in healthcare and life sciences. While risks like interest rates and sector sentiment linger, they are transient and already priced in. For investors seeking value and income, DOC offers a compelling entry point below $18.

The chart above reveals DOC's stock is 40% below its NAV, a stark contrast to peers trading at or above NAV. This disconnect is unsustainable long-term, making DOC a prime candidate for revaluation.

Investment Recommendation: Accumulate below $18. Target: $22–$25. Risk Management: Set stop-loss at $16.