LONG BEACH, CA—HCP Inc. had a weak firstquarter with slow investment activity, accordingto the first quarter reports from RBC CapitalManagement. Although RBC Capital is maintaining HCP's“underperform” rating, it raised target per share price to $40 dueto confidence from HCP's recent joint venture with Brookdale, which is valuedat $1.2 billion and is expected to close in the second half of theyear.

During the first quarter, HCP had a net of $80 million ininvestments and $60 million in developmentexpenditures. The joint venture with Brookdale will require anadditional $334 million in cash; however, the joint venture willgenerate 23% NOI. Initially, the joint venture will only have $0.02per share while Brookdale will cancel several purchase options andHCP will amend its Emeritus leases. According toRBC Capital, this will not affect AFFO.

Although HCP had a slow investment quarter, theREIT holds a strong financial position. RBCestimates that it has over $2 billion of “dry powder,” while theREIT reported a debt-to-total-undepreciated-book-capitalizationratio of 38.6%. For these reasons and the joint venture, RBC isincreasing its FFO estimate to $3.02, an increaseof $0.02, per share for 2014 and $3.14 per share for 2015.