Why BofA Sees Upside In Health Care REITs Healthpeak, Welltower

The senior housing segment is poised for a recovery this summer, with occupancy and margins poised for an upturn in the back half of 2021, according to BofA Securities.

The Health Care REITs Analyst: Joshua Dennerlein upgraded the ratings for Healthpeak Properties Inc PEAK and Welltower Inc WELL from Neutral to Buy.

He raised the price target for Healthpeak Properties from $34 to $35.50 and for Welltower from $73 to $78.

The Healthpeak Properties Takeaways: The company has made “significant progress” on its exit from the senior housing segment by closing $2.5 billion so far and with “the balance under letters of intent or purchase agreements,” Dennerlein said in the Tuesday upgrade note.

The analyst views the 2021 guidance given by Healthpeak Properties as conservative.

“We see upside to its SS NOI assumptions, particularly within its life science segment,” he said. “Longer term, we like PEAK’s development pipeline which we think should create significant value,” he further added.

The Welltower Takeaways: The cap rates on the company’s recent acquisitions “have been trending well above our prior expectations,” Dennerlein said. 

Welltower had suggested during the fourth-quarter earnings call that "they are likely to be net acquirers this year," the analyst said. 

“We now expect acquisitions to be accretive to the bottom line unlike our prior view that near-term accretion would be very limited given their focus on broken development deals/projects in lease up.”