Healthpeak Properties (DOC) FY2025 Earnings Quality Report

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.

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.

Healthcare REIT Dynamics: Operator Concentration and Segment Mix

Healthpeak Properties is an S&P 500 healthcare REIT operating across three core segments: outpatient medical (507 properties, Adjusted NOI $795.8M), lab (145 properties, Adjusted NOI $567.4M), and senior housing (34 properties, Adjusted NOI $176.7M). The March 2024 merger with Physicians Realty Trust added 299 outpatient medical buildings and dramatically scaled the portfolio.

Operator and Tenant Concentration Risk

Per the 10-K, HCA Healthcare accounts for 15% of outpatient medical segment revenues and 7% of total revenues -- the single largest tenant. CommonSpirit Health contributes 6% of segment and 3% of total revenues. Approximately 79% of outpatient medical buildings are located on or adjacent to hospital campuses, and 96% are affiliated with hospital systems. This creates a direct dependency: the 10-K warns that if a hospital "is unable to meet its financial obligations, and if an affiliated healthcare system is unable to support that hospital or goes bankrupt, the hospital may be unable to successfully compete or could be forced to close, relocate, or be sold to another provider."

Medicare/Medicaid Reimbursement and Regulatory Disruption

The 10-K identifies federal policy as a major risk driver. "Reductions in Medicaid spending and cuts to Medicaid provider rates, the expiration of health insurance subsidies under the Affordable Care Act... could reduce patient volumes, increase uncompensated care, and put downward pressure on reimbursement rates for hospitals and outpatient medical facilities." Facilities in non-expansion states face "significantly higher financial risk due to Medicare / Medicaid and Affordable Care Act provisions in the One Big Beautiful Bill Act." NIH indirect cost reimbursement caps and changes to visa policies could also affect the lab tenant pipeline.

Lab Segment Vulnerability

Lab properties are concentrated in three markets: San Francisco (59%), Boston (22%), and San Diego (17%) by total square feet. The 10-K warns that "recent policy shifts and administration priorities affecting research funding, drug pricing, drug review and approval processes, and tariffs have created uncertainty in the life science ecosystem." Lab infrastructure improvements are "typically significantly more costly than improvements to other property types due to their highly specialized nature." With 89% triple-net leased, tenant credit quality is the primary risk variable.

REIT-Specific Metrics from the MD&A

Total portfolio Adjusted NOI for outpatient medical was $795.8M, lab $567.4M, and senior housing $176.7M. The company completed its Physicians Realty Trust merger in March 2024, acquiring 299 buildings. Interest expense rose to $305.2M from $280.4M (+8.8%), reflecting new debt issuances including $500M of 5.38% notes due 2035 and $500M of 4.75% notes due 2033. Transaction and merger-related costs declined sharply from $132.7M to $25.5M as integration activities wound down. Depreciation of $1.059B reflects the massive asset base. The senior housing portfolio has 84.3% average occupancy across 34 communities with 10,422 units, with average annual rent per occupied unit of $87,611. A Janus Living IPO is planned for H1 2026 to spin off the senior housing segment into a separately traded REIT.

The 18-Point Screening

Key Risks from the 10-K

1. Federal Healthcare Policy and Reimbursement Risk

The 10-K extensively details risks from "reductions in Medicaid spending and cuts to Medicaid provider rates, the expiration of health insurance subsidies under the Affordable Care Act," and "site-neutral payments and changes to reimbursement for certain outpatient services." These could reduce patient volumes and increase uncompensated care for hospital tenants, directly impacting their ability to pay rent. Facilities in non-expansion states face "significantly higher financial risk."

2. Life Science Tenant and NIH Funding Risk

"Recent policy shifts and administration priorities affecting research funding, drug pricing, drug review and approval processes, and tariffs, among other policies, have created uncertainty in the life science ecosystem." NIH grant funding changes, visa policy shifts affecting the scientific workforce, and efforts to cap NIH indirect cost reimbursements could impair lab tenants' ability to secure funding. "Sustained funding cuts to NIH grants could have long-lasting impacts to the industry."

3. Merger Integration and Janus Living Execution Risk

The $132.7M in 2024 merger-related costs (declining to $25.5M in 2025) reflect the Physicians Realty Trust integration complexity. Additionally, the planned Janus Living IPO introduces execution risk: the 10-K notes the offering "may not be completed on the currently contemplated timeline or terms, or at all, and may not achieve the intended benefits." DOC will retain a majority interest and serve as external manager, creating potential conflicts.

4. Debt Maturity Concentration and Interest Coverage Stress

With $9.8B total debt (including $650M of senior unsecured notes and $345M of mortgage debt due within 12 months), interest expense of $305.2M, and interest coverage of only 1.8x, DOC has limited margin for error. Future interest payments total $1.7B, with $336M payable within 12 months. Credit ratings of Baa1/BBB+ are investment grade but any downgrade would increase borrowing costs.

5. Lab Impairments and Unconsolidated Joint Venture Losses

Equity loss from unconsolidated joint ventures surged from -$1.5M to -$174.0M in FY2025, "primarily as a result of other-than-temporary impairment charges on certain lab unconsolidated joint ventures." This $172.5M swing signals material stress in lab assets held through JVs, potentially reflecting softer demand or valuation markdowns in the life science real estate market.

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