Tags: HCP | builds | healthcare | demand

HCP Builds On Healthcare Demand

By    |   Monday, 21 Nov 2011 05:18 PM

Demand for healthcare services tends to remain steady during both good times and bad, and all those medical service providers will need buildings to operate. Real estate investment trust HCP (HCP) builds its business on that steady, and growing, demand.

As a REIT, the company invests primarily in real estate serving the healthcare industry across the United States. Business is gaining ground and cash flow is strong, say executives.

Funds from operations (FFO), an item used by the industry to measure the performance of a real estate investment trust, hit $259.6 million during the third quarter of 2011, up from $96.1 million during the same quarter of 2010. Net income came to $166.4 million, up from $17 million a year earlier.

Ratings agencies like the company's exposure to the healthcare industry, which provides more robust and stable revenue streams than do other commercial properties.

"HCP's portfolio includes assets across the property spectrum, including senior housing, post-acute and skilled nursing, medical office, life science, and hospitals. Each property type is subject to varying supply and demand drivers, lowering risk at the portfolio level," Fitch Ratings analysts write in a note on the company.

"Cash flow coverage for the bulk of HCP's portfolio has remained solid, indicating that its facilities are generally performing well."

Fitch adds that lease expirations don't pose too much of a financial issue for the company either.

Too concentrated

However, HCP's properties may be a little concentrated, analysts noted, pointing out that 47 percent of the firm's consolidated revenue stem from wholly-owned assets at the end of last year came from properties in California and Texas.

Nevertheless, HCP is wrapping up an acquisition of the Ventures II project, which owns 25 senior housing assets, as well as almost all of the real estate assets of HCR Manor Care, which should pump fresh cash flow into company coffers.

Wall Street analysts seem to agree that the company merits consideration from equities investors. In late 2010, Robert W. Baird upgraded its recommendation to outperform from neutral while more recently, in August, Hilliard Lyons upgraded its recommendation to neutral from underperform.

The company will report fourth quarter earnings on Feb. 15.

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Demand for healthcare services tends to remain steady during both good times and bad, and all those medical service providers will need buildings to operate. Real estate investment trust HCP (HCP) builds its business on that steady, and growing, demand. As a REIT, the...
HCP,builds,healthcare,demand
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2011-18-21
Monday, 21 Nov 2011 05:18 PM
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