Healthpeak cut to Sector Perform at Scotiabank amid tougher life sciences outlook

Healthpeak Properties (NYSE:PEAK) stock slipped 1.3% in Monday afternoon trading after Scotiabank analyst Nicholas Yulico downgraded the life sciences-focused REIT to Sector Perform from Sector Outperform on the prospect of a tougher operating environment for the life science segment in 2023-2024.
The life science segment accounts for ~50% of PEAK's NOI, he said.
"We see a scenario unfolding whereby early-stage biotech startup formation is slowing at the same time that sublease space is rising across South San Francisco (61% of Q4/22 Life Science NOI), San Diego (16%), and Boston (21%)," the analyst said in a note to clients.
While Yulico still considers Healthpeak's (PEAK) portfolio to be high quality, he expects some additional vacancy and credit risk to affect results in the coming year.
"While valuation has become more discounted (-11% discount to NAVPS) we see limited upside for the stock until the leasing environment improves," Yulico added.
The Sector Perform rating aligns with the SA Quant rating of Hold and diverges from the average Wall Street rating of Buy.
SA contributor Justin Purohit called Healthpeak's (PEAK) Q4 a solid end to 2022