HCP CEO Says Too Early To Predict a Readjustment of Asset Prices

Lauralee Martin, president and CEO of HCP, Inc. (NYSE: HCP), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

Martin discussed some of the themes that the health care REIT’s investors are consistently bringing up in meetings. She noted that investors are curious as to whether the changes in the cost of capital for REITs and the anticipated rise in interest rates will result in a readjustment of asset prices and capitalization rates.

“I would say it’s a little early to make that call,” Martin said.

Martin also discussed two segments of the health care industry that look particularly promising for HCP at this time. The first area is medical office buildings (MOBs). Martin noted that HCP has several relationships with hospital systems that have built new acute care hospitals and want MOBs surrounding them. HCP is involved in development with two systems right now, Martin said.

“We think they’ll be very good opportunities,” she commented.

HCP is also seeing opportunity in the life science segment and is busy with a co-development in south San Francisco. Martin pointed out that the market has less than 1 percent vacancy, while rental rates are rising “very nicely.”

As for the prospect of rising interest rates, Martin stressed that the majority of HCP’s debt is 10-year paper.

“That puts us in a very good place relative to our portfolio, and the few maturities we have coming up, we’ll be able to refinance favorably,” she said. “Not only do we have built-in organic growth, but it’s a very protected organic growth for our investors,” Martin added.

Looking across the HCP portfolio, Martin highlighted one asset that is particularly noteworthy. Park View, a medical office property in Nashville, Tennessee, was the original facility for Hospital Corporation of America (HCA), Martin said. HCA was the first investor-owned hospital company and brought efficiency, scale and high-quality care to the health care community, according to Martin.

“We’re very proud to have that relationship with HCA,” she said.