Healthpeak Properties (DOC): A Healthcare REIT Powerhouse Post-Merger and Amid Rising Rates

Healthpeak Properties (NYSE: DOC) has emerged as a formidable player in the healthcare real estate sector following its merger with Physicians Realty Trust in March 2024. The combination has unlocked significant synergies, operational efficiencies, and a strengthened balance sheet, positioning the company to capitalize on long-term healthcare trends while navigating rising interest rates. With its focus on high-demand sectors like lab space and outpatient medical facilities, Healthpeak stands out as a defensive yet growth-oriented investment in an uncertain macroeconomic environment.

Strategic Advantages Post-Merger: Synergies and Operational Excellence

The merger created a $50 billion healthcare real estate powerhouse, combining Healthpeak's expertise in lab and outpatient facilities with Physicians Realty's strong tenant relationships. Key highlights include:
- Surpassing Synergy Targets: Healthpeak exceeded initial synergy targets by over 25%, with total annualized synergies now exceeding $65 million. This includes cost savings from streamlined operations and enhanced property management.
- Internalization of Property Management: The company has internalized management for 34 million sq ft (combining 2024 and 2025 goals), reducing third-party fees and improving tenant engagement. This shift has boosted direct operational control, with 70% of its workforce now focused on core real estate functions—a 20% increase from two years ago.

Financial Resilience Amid Rising Rates

Healthpeak has demonstrated financial flexibility even as interest rates climb:
- Strong Liquidity: The company maintains $2.8 billion in liquidity as of April 2025, including unrestricted cash and undrawn credit facilities. This provides ample room to fund growth initiatives and share buybacks.
- Cost-Effective Debt: In February 2025, Healthpeak issued $500 million in 10-year senior notes at 5.375%, the lowest spread (102 bps over Treasuries) in its history. This underscores investor confidence in its creditworthiness.
- Dividend Growth Despite Headwinds: While many REITs have cut dividends, Healthpeak raised its quarterly dividend by 1.7% in February / 2025 to $0.305 per share, annualizing to $1.22. The shift to a monthly dividend structure (starting April 2025) aligns with rental income timing, ensuring steady cash flows for investors.

Operational Momentum and Sector Tailwinds

Healthpeak's focus on lab and outpatient medical spaces aligns with secular trends in healthcare delivery:
- Lab Space Boom: Demand for biotech and pharmaceutical lab space remains robust, with Healthpeak reporting 7.7% NOI growth in this segment in Q1 2025. Post-Q1, the company secured 400,000 sq ft in lab lease letters of intent, signaling future growth.
- Outpatient Growth: Outpatient medical NOI rose 5% in Q1, driven by strong retention (86%) and rental increases. The sector benefits from a shift toward cost-effective, decentralized healthcare.
- Development Pipeline: Partnerships like the Cambridge Point mixed-use project (with Hines) highlight Healthpeak's ability to expand into high-potential markets. The project's potential 5 million sq ft scale underscores its long-term vision.

Defensive Profile with Upside Catalysts

Healthpeak's mixed-asset portfolio and balance sheet strength make it a compelling defensive play:
- Diversified Portfolio: Its assets are 55% outpatient medical, 35% lab, and 10% continuing care retirement communities (CCRCs). CCRC NOI surged 15.9% in Q1, benefiting from aging demographics.
- Share Buybacks: The company has returned $94 million to shareholders in 2025 alone, with $406 million remaining under its $500 million repurchase program. This signals confidence in undervalued shares.

Risks and Considerations

While Healthpeak's execution has been strong, risks include:
- Economic Sensitivity: Rising interest rates could pressure occupancy in lab spaces if biotech funding wanes.
- Tenant Defaults: Exposure to smaller healthcare providers could pose risks in a downturn.

Investment Thesis

Healthpeak's combination of defensive dividends, sector-aligned growth, and balance sheet resilience makes it an attractive investment. The merger's success has created a lean, efficient operator well-positioned to benefit from healthcare's shift toward outpatient and lab-based care. With a dividend yield of ~6.5% (based on a $19 share price) and a strong pipeline of development and lease opportunities, DOC offers both income and growth potential.

Recommendation: Buy. Healthpeak's strategic advantages and alignment with healthcare trends suggest it can outperform peers in both rising-rate and recessionary environments. Investors seeking stability with growth should consider adding DOC to their portfolios.