Grade: F — Major Red Flags (Healthcare REIT Stress)
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-03, FY ended December 31, 2025) + Yahoo Finance
Auditor: Deloitte & Touche LLP — Unqualified opinion
CIK: 0001628280 (filing entity)
One-line verdict: Healthpeak's F grade reflects two genuine concerns: Debt/EBITDA of 6.2x with interest coverage of only 1.8x (below the 2x safety threshold), and cash of $498M covering only 5% of $10.1B debt. Net income was just $71M on $2.8B revenue — a 2.5% net margin depressed by heavy depreciation and merger integration costs. CFFO/NI of 17.5x (extreme) occurs because operating cash flow of ~$1.2B dwarfs the tiny GAAP net income. The M-Score of -2.75 is clean. Zero goodwill. But the 1.8x interest coverage is a real constraint — every dollar of operating income is nearly consumed by interest payments.
| Metric | Result |
|---|---|
| Red Flags | **2** (Cash-to-debt 5%, Debt/EBITDA 6.2x + interest coverage 1.8x) |
| Watch Items | **1** (CFFO/NI extreme ratio) |
| Checks Completed | **17/18** (1 N/A) |
| Beneish M-Score | **-2.75** (clean) |
| Auditor | Deloitte & Touche LLP — Unqualified opinion |
Healthcare REIT Operations
Revenue grew 4.5% to $2,823M. Per the filing, DOC uses "Adjusted NOI" and "Merger-Combined" same-store metrics to track operational performance. The company completed a merger (Physicians Realty Trust) and is still integrating, which inflated costs and depressed GAAP net income.
Per the filing's pro forma disclosure: "Year Ended December 31, 2024 — Total revenues $2,765,670, Net income (loss) applicable to common shares $353,347." The FY2025 net income decline to $71M reflects "incremental costs incurred in integrating the businesses."
The filing emphasizes tenant quality: "We provide high-quality property management services to encourage tenants to renew, expand, and relocate into our properties, which drives increased occupancy rates." The SG&A/Gross Profit ratio of 5.3% is among the lowest in any REIT — extremely lean management.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1-A2 | Revenue Quality | ✅ | DSO 10 days, AR tracking revenue |
| A3 | Revenue vs CFFO | ✅ | Revenue +4.5%, CFFO +17.0% |
| B1-B4 | Expense Quality | ✅ | 60.0% gross margin, 5.3% SG&A ratio |
| C1 | CFFO vs NI | ⚠️ | CFFO/NI 17.5x (NI depressed by non-cash) |
| C2-C3 | FCF & Accruals | ✅ | FCF $1.3B, accruals -5.8% |
| C4 | Cash vs Debt | ❌ | Cash $498M = 5% of $10.1B |
| D1 | Goodwill | ✅ | Minimal ($680M, 10% of equity) |
| D2 | Leverage | ❌ | Debt/EBITDA 6.2x, interest coverage 1.8x |
| D3-D4 | Balance Sheet | ✅ | Normal |
| E1-E2, F1 | Risk & M-Score | ✅ | Clean |
Summary
Grade: F reflects interest coverage stress. The 1.8x interest coverage is the critical finding — it leaves almost no room for revenue disruption. Net income of $71M on $2.8B revenue is anemic even by REIT standards. The integration of Physicians Realty Trust is suppressing earnings temporarily, and if synergies materialize, coverage should improve. But at 6.2x Debt/EBITDA with 1.8x interest coverage, Healthpeak has limited financial flexibility.
**Disclaimer**: This report is based on Healthpeak Properties' FY2025 10-K filed with SEC EDGAR on February 3, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: Deloitte & Touche LLP (Unqualified opinion)
Fiscal year ended: December 31, 2025