Wachovia Initiates Health Care Property Investors (HCP) with a Market Perform
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Wachovia initiates coverage on Health Care Property Investors (NYSE: HCP) with a Market Perform rating and a $31 to $33 valuation range.
The firm said, "Although we believe HCP has a solid track record--cash flow per share CAGR of 4.5%, second only to VTR (Not Rated) in the peer group--solid management team, a diversified, high-quality portfolio and various avenues for growth, continued de-levering hurdles remain (though the company has made solid progress thus far, in our view). The potential capital risks and its premium valuation cause us to take a neutral stance on HCP shares."
The firm highlights that HCP's management has consistently demonstrated its ability to gauge key industry trends well ahead of the competition, and position the portfolio accordingly. In addition, the company is looking to ramp up its institutional capital management business through JVs (currently $2.1 billion). The firm believes "HCP's scale provides it with an advantage as it has the management depth and capital capacity to pursue larger transactions, which tend to be more attractive to the capital partners HCP is pursuing."
Moreover, the company has made progress in its de-leveraged efforts to date, having raised ~$1.8 billion in 2008 (including $685MM in assets currently under LOI) through asset sales and capital raises (equity and debt). However, debt maturities remain including bridge loan for $1.4B in 2009 (likely $900MM post-paydown after asset sales), though HCP maintains a 1 yr extension option.
Health Care Property Investors, Inc. operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries and joint ventures, invests in health care-related properties and provides mortgage financing on health care facilities.
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