HEALTHPEAK PROPERTIES, INC. (DOC) stock intrinsic value fair value estimate & owner earnings analysis

Healthpeak owns U.S. healthcare real estate in three groups: outpatient medical buildings, laboratory (life-science) buildings, and senior housing in continuing-care retirement communities. On 2025 same-store figures, outpatient medical earned $746 million of net operating income (54% of the three groups' total), up 3.8%, with 92.0% of space occupied at year-end versus 92.7% a year earlier; laboratory earned $472 million (34%), up 1.5%; and the senior housing group (continuing-care retirement communities) earned $154 million (11%), up 12.6% on higher resident fees and occupancy. The company's history is not continuous: the Quality Care Properties portfolio was spun off on October 31, 2016, and the merger with Physicians Realty Trust closed on March 1, 2024, so the business is measured from the merger forward. What a share has earned. We define owner earnings as the cash the properties generate after the recurring cost of leasing space, fitting out tenant suites and upkeep ($134 million in 2025) and after stock compensation, setting aside year-to-year swings in receivables, payables and deferred revenue. Per diluted share that was $1.57 in 2017, $1.43 in 2018, $1.42 in 2019, $1.01 in 2020, $1.19 in 2021, $1.20 in 2022, $1.36 in 2023, $1.32 in 2024 and $1.43 in 2025, about 9% below 2017. Over the same span the diluted share count rose 48%, from 468.9 million to 696.0 million, and in 2025 alone the company spent $764 million on development and redevelopment and $487 million on acquisitions. The key fact is that large amounts of new capital have not yet raised what one share earns. How we measured the business. Because debt is subtracted separately below, we start from the cash the buildings produce before paying lenders: 2025 owner earnings of $998 million plus $260 million of cash interest paid, or $1,258 million, which is $1.81 per share (2024: $1.69). We use $1.75 per share, the average of 2024 and 2025, the two years that reflect the merged company. Accounting judgements that matter: (1) every working-capital change was removed, including a $147 million rise in deferred revenue in 2025 (deferred revenue also rose in 2023 and 2024), which lowers our figure relative to counting it; (2) only recurring leasing, tenant-improvement and upkeep spending is treated as the cost of standing still, while development, redevelopment and acquisition spending is treated as growth, and no income is credited from it unless it is under way and evidenced; we gave no credit for the $969 million of development in process at June 30, 2026, because we found no expected-income figure for it that we could rely on; (3) large non-cash charges such as depreciation ($1,059 million) and a $174 million equity loss from unconsolidated joint ventures in 2025 are added back because they are not cash. For 2025, net income plus these non-cash items, less upkeep spending and stock compensation, ties to our figure with no gap. Growth check. Owner earnings per share rose 8.4% in 2025 and business cash flow per share rose 6.8%. Our base case starts 2026 at a 1.0% decline, below the trailing rate, for two reasons in the data: business cash flow per share in the first half of 2026 was $0.91 versus $0.93 in the first half of 2025 (down 2.4%), and laboratory space ended 2025 at 90.1% occupied versus 97.8% a year earlier, which points to lower laboratory rent in 2026. Base case: $18.09 per share. Outpatient medical grows 3% a year for five years and 2.5% after, below the 3.8% achieved in 2025 and driven by the annual rent escalations the company cites. Laboratory income falls about 7% in 2026 (our estimate of the effect of the year-end occupancy), 2% in 2027, is flat in 2028 and grows 1.5% a year after, the rate the 2025 same-store result delivered while occupancy was falling. The senior housing group grows 3% from rate increases only; the 2025 gain of 12.6% included occupancy gains we do not assume repeat. Blended, business cash flow per share changes by -1.0%, +1.3%, +2.0%, +2.5%, +2.5% and then about 2.2% a year through year ten, and is held flat after that, because we can name nothing that supports growth beyond. The business is worth $33.38 per share ($23.0 billion); it owes $15.29 per share ($10.5 billion); the difference is $18.09 per share ($12.5 billion). Bear case: $9.97 per share. Laboratory income falls 7%, 10% and 8% in the first three years as occupancy keeps slipping (it lost 7.7 points in 2025), outpatient grows 2% and senior housing is flat. In year four a downturn like 2020 arrives, when business cash flow per share fell 23% (from $1.84 in 2019 to $1.41 in 2020); recovery is slow (+7%, +4%, +3%, then 1.5% a year), and income is flat after year ten. Business cash flow per share bottoms at $1.27 ($873 million), which is 2.5 times the $343 million of interest the company paid or capitalized in 2025, and 1.3 times the $660 million that interest would be if all $10.15 billion of debt cost 6.5%; so the bear case can carry its debt without assuming distress. The business is worth $25.26 per share ($17.4 billion), owes $15.29 ($10.5 billion), leaving $9.97 ($6.9 billion). Bull case: $22.15 per share. Laboratory occupancy recovers toward the 97.8% it held a year earlier (lab income -4%, then +4% and +5%), outpatient continues at roughly its 2025 pace of 3.8% and then eases to 3%, and senior housing grows 8% then 6% before easing to 3%. Business cash flow per share grows about 1.6%, 4.1%, 4.5%, 3.4%, 3.3% and then 3.0% a year, flat after year ten. The business is worth $37.44 per share ($25.8 billion), owes $15.29 ($10.5 billion), leaving $22.15 ($15.3 billion). What the company owes. Debt principal was $10.15 billion at June 30, 2026 (versus $9.98 billion at December 31, 2025), including $6.9 billion of senior unsecured notes and $1.1 billion of commercial paper at December 31, 2025. Scheduled maturities are $0.75 billion for the rest of 2026, $1.35 billion in 2027, $1.25 billion in 2028, $2.90 billion in 2029, $0.75 billion in 2030 and $3.15 billion after. The revolving credit facility and term loans carry covenants limiting total debt to 60% of gross asset value and secured debt to 40%, and requiring fixed-charge coverage of at least 1.5 times and tangible net worth of at least $7.7 billion; the company stated it believed it was in compliance at December 31, 2025. We did not test how close the bear case comes to those limits. We subtract the debt, less $1.53 billion of cash beyond an assumed $100 million operating need (cash was $1.63 billion), plus the claims of outside owners of consolidated businesses: $1.59 billion for what appear to be outside shareholders in Janus Living, the new company the annual report described as holding the 34-community, 10,422-unit senior housing portfolio, which Healthpeak would manage and mostly own; $647 million for joint-venture partners and other minority holders at book value; and $14 million of exercisable buy-out rights. The June 2026 figures show $1.59 billion of proceeds from minority shareholders during the first half and a new $979 million minority interest, which fits the offering having been completed; we could read the quarter's reported numbers but not its text, so that link is our inference. Because the company's interest cost averaged about 3.6% in 2025 ($343 million on average debt of $9.4 billion), well below the 6% yearly rate we apply to every company, its debt is worth less than face, and we reduced the debt figure by $331 million for the maturities through 2030; we did not credit the low coupons on the $3.15 billion due later because we could not extract their rates and dates. The result is $10.5 billion owed, or $15.29 per share. We gave no separate value to the $527 million carrying value of investments in unconsolidated joint ventures and affiliates beyond the distributions already in operating cash flow. What could make this wrong. If laboratory income proves 20% below 2025 permanently, the base case falls by about $2.61 to roughly $15.48. If $100 million a year of the development and redevelopment spending is actually needed to hold today's income, the base falls by about $2.76; both together would give about $12.72. If the outside Janus Living holders' stake is worth 30% more than they paid, the base falls by about $0.69. Using 2023 to 2025 rather than 2024 to 2025 would lower the starting level to $1.71 and the base by about $0.84. We tested the outpatient assumption against the 2025 result: income rose 3.8% even as occupancy slipped from 92.7% to 92.0%. Margin-of-safety price: $9.50 per share. We are fairly sure of the outpatient half of the business, whose income has escalators and grew 3.8% last year, and the first-half 2026 figures are consistent with the level we use. We are least sure of laboratory space, whose income has not yet absorbed the occupancy lost in 2025, and of how much of the development spending is really needed to keep income, which the cash-flow statement reports as a single line. The worst plausible outcome that no case models is a closed credit market when the $2.9 billion of 2029 maturities come due on top of a weak laboratory market; most of the debt is unsecured and the covenants above are the main structural limit, but in that situation we would expect the dividend to be cut (a judgement, not a computation). The dividend was $1.22 per share in 2025 and $0.305 a quarter in the first half of 2026; 2025 owner earnings of $998 million covered the $849 million paid 1.18 times. The price assumes a three-to-five-year holding period. If the base case plays out, the shares would be worth roughly $17 to $18 in that time while paying $1.22 a year, and from $9.50 the base case implies about 23% a year over five years (about 34% over three); the highest price from which the base case alone implies 20% a year is roughly $10.60 for a five-year holding period and $12.80 for three. The margin-of-safety price is lower than that because, if both of the doubtful points above go against us, the base value is about $12.72 and from $9.50 that outcome implies about 14% a year over five years, and because $9.50 is just below the bear value, so that a downturn of the kind modeled would leave the value roughly equal to the price. Return figures assume the $1.22 dividend continues and the shares eventually trade at our estimate of their worth. Since the previous analysis. Our earlier figures were built on a different basis and are not comparable. What has moved in the business: business cash flow per share in the first half of 2026 came in 2.4% lower than a year earlier; debt principal rose $0.17 billion while cash rose $1.16 billion; and outside investors appear to have put $1.59 billion into the senior housing business, which entitles them to a share of that business's cash flow.