Healthpeak Properties Third Quarter 2026 Conference Call - HEALTHPEAK PROPERTIES INC

Good morning, and welcome to the HealthPeak Properties, Inc. third quarter 2026 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star one again. Please note, this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. Please go ahead. Welcome. As a reminder, certain statements made in this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although healthy, please, any forward-thinking statements are based on reasonable assumptions. The company can give no assurances that its projected results will be attained, and we do not undertake a duty to update any forward looking statements. Factors that could cause actual results differ materially from those in the forward-licking statements are detailed in the company's filings with the SEC. We refer to certain non-GAAP financial measures during this call, which are reconciled to the most directly comparable GAAP measures in an exhibit to the 8K referred to the SEC yesterday in accordance with Reg G. I'll now turn the call over to our President, Chief Executive Officer, Scott Brinker. Thanks, Adrian, and welcome to our 3Q earnings call. I want to congratulate the team here on a very strong quarter operationally, which allowed us to increase earnings guidance for the third time this year, and by a total of five cents per share at the midpoint. The guidance raises this year were primarily driven by operations across the portfolio and the flow-through impact of Janus Living. In outpatient medical, the strong fundamentals we spoke to with the merger three years ago continue to be validated. Cost pressures are making outpatient delivery a strategic mandate for health systems across the country, and we play a vital role helping them address that mandate. The aging population is driving record demand and new supplies at historical lows. Against that favorable backdrop, we created the leading platform and portfolio in the outpatient sector with the merger. Third quarter results included positive net absorption, strong retention and releasing spreads, and modest PIs and commissions. These are the metrics that drive cash flow and value creation. We don't focus on same store because it ignores equally important items like CapEx and moving properties in and out of the pool. Our all-patient business is stronger than ever and we expect internal growth to accelerate in 2027 given our recent lease executions and pipeline. We're also happy to have closed nearly two billion dollars of fully stabilized outpatient sales, recaps, and loan repayments earlier this year at a blended 6% cap rate. More than half of that amount was joint venture recaps with Blue Chip LPs who chose to partner with HealthPeak given our platform. Moving to our life science business. Earlier this year, we shared our expectation of growing total occupancy by 100 basis points in 2026. That was not a consensus view at the time, but we saw early signs of an improving environment and we were confident we'd capture market share. Year-to-date, we've outperformed our own expectations. Total occupancy increased 130 basis points last quarter and by 270 basis points year-to date. Not sure anyone else in the sector could make that same claim. And why the success? We've made strategic new hires. We own really good real estate. We have liquidity and credibility. And we can move quickly given our buildings are unencumbered by third-party debt. All of those factors will continue to drive leasing out performance. Life science job growth turned positive in 3Q, which is consistent with the growing demand that we see in our pipeline. On the supply side, we continue to see certain quote-unquote life science buildings go to alternative uses, which are soaking up some of the vacancy. The robust infrastructure of a lab building is attractive to AI-adjacent users, including robotics because of power, floor loads, and ceiling heights. We're seeing a lot of that type of demand in the marketplace. The net effect is that supply and demand are starting to move in our favor, albeit at different rates depending on the sub market. For example, we're now fully leased in Torrey Pines versus 65% leased and that sub market just six months ago. Strong occupancy will of course allow us to drive better economics on future leases. We continue to make good progress at the Gateway Campus we acquired earlier this year with 125,000 square feet of leases signed so far in the fourth quarter alone, plus 100,000 square feet under signed LOI or in active discussions. The three acquisitions announced yesterday are building surrounded by existing HealthPeak real estate and add to our competitive advantage in core sub markets. It's a great time to be a buyer because most life science GPs, LPs and lenders are upside down. Capital availability in this sector has gone from overly abundant to severely constrained. As a result, we can now buy core assets at a basis with both downside protection and significant upside. Current occupancy across the acquisitions is 41%, with a 5% in place yield, going to nine to 10% at stabilization. And these are not passive investments. We're bringing our relationships and expertise to the table, and we already have strong leasing activity on 70% of the acquired vacancy. When we acquire quality real estate in our core sub markets, there's a network effect that increases the value of our entire local footprint, as we become the easy button for tenants and brokers. More broadly, we entered the sector downturn in 2022 as the number three player in life science real estate. We're entering the recovery as the only company growing its footprint and adding talent. More work to do, but we're on a trajectory to become the leading portfolio and platform in the life science real estate sector. In senior housing, the lifestyle and value of our communities is driving higher occupancy and revenue. Our same store portfolio had 300 basis points of occupancy growth and 26% NOI growth in the quarter. Entry fee sales in 3Q were simply incredible, achieving a new all-time high for the quarter, we've closed $2.2 billion of acquisitions since the IPO and the NOI on these deals is trending in line or ahead of underwriting. Most important to the long-term strategy, we have gone from two operating partners to 13, which dramatically increases JAN's external growth as those partners are now bringing us proprietary acquisitions jan success is also driving earnings growth and value creation at health peak given our unique and creative deal structure that aligns the interests of both companies i'll turn it to kelvin thank you scott each of our business segments are running ahead of the plan we set in february and our team on the ground has delivered excellent results leveraging our relationships to convert demand into executed leases and drive total occupancy gains our operating results in the third quarter reflect that execution we reported ffo's adjusted of 44 cents per share total same store cash noi growth of 3.6 percent and net debt to adjusted ebitda of 4.7 times beginning with outpatient medical for the quarter we executed 846 000 square feet of leases including 218 000 square feet new leasing and 628 000 square foot of renewal that brings our unit 8 executions to 3.2 million square feet we delivered another quarter of positive net absorption with new lease commencements that averaged over 11 years and included two large health system and physician practice master leases at attractive rents north of 30 dollars per square foot on a triple net basis tenant retention increased from last quarter to 81.7 percent and we achieved cash releasing spreads of approximately five percent above our historical averages importantly these renewals come with modest leasing costs of 9.5 percent of rents on average we ended the quarter with total occupancy of 90.3 percent which reflects the negative 50 basis points impact from the brookfield recapitalization and asset sales on a comparable basis total occupancy increased sequentially HEADING INTO THE FOURTH QUARTER, WE EXPECT OUR LEASING VELOCITY TO CONTINUE WITH AN ADDITIONAL 269,000 SQUARE FEET OF EXECUTED LEASES AND 1.03 MILLION SQUERE FEET SIGNED LOIs. TURNING TO LAB, DURING THE QUARter WE EXECUTIONED 480,000 LEASERS, OUR STRONGEST QUARтер IN OVER A YEAR. THAT BRINGS OUR YEAR-TO-DATE EXECUCED LEASE TOTAL TO OVER 1 MILLION. THESE EXECUTIONS REPRESENT APPROXIMATELY 70% NEW LEASING, OVER 80% WITH BIOTECHNOLOGY AND R&D TENANTS AND OVER 40% ON VACANT SPACE. SUBSEQUENT TO QUARTER END, WE HAD AN ADDITIONAL 643,000 SQUARE FEET OF EXECUTED LEASES AND SIGNED LOIs. FROM A COMMENCEMENT PERSPECTIVE, WE ACHIEVED A THIRD CONSECUTIVE QUARDER OF POSITIVE NET ABSORTION. THE LOWER RENT PER square foot on commencements this quarter reflects two large office leases signed in 2025 that carry lower starting rents than lab space but also require significantly lower ti's renewal rents this quarter increased to an average of 72 dollars per square foot up from last quarter with a modest 5.6 percent roll down on a small sample size caused by a single renewal total occupancy during the third quarter increased by 130 basis points sequentially ending the period at 79.8 percent this represents a 270 basis points increase since the start of the year as we close on the acquisition scott referenced our reported total occupancy base will reset lower given these campuses are 41 percent occupied today we view that availability as embedded upside to capture in sub markets where we have considerable scale and a deep tenant network to draw from and in senior housing for the quarter janice living delivered same store noi growth of 26 percent total revenue growth of 78 percent and adjusted ebitda growth of 101 percent during the quarter and through october janice livin completed the acquisition of 39 communities totaling approximately 2.1 billion dollars bringing the year-to-date acquisition total to 2.9 billion HealthSeek's ownership totaled 69% of the outstanding shares of Janus Living, which represents roughly $6.1 billion of market value. We'll take a moment on the balance sheet before moving on to guidance. While our credit spreads have largely held, borrowing costs have increased through the year due to Treasuries, and we have taken proactive measures to utilize efficient tools to help mitigate our near-term refinancing costs. year-to-date we have originated to delay draw term loans a 400 million dollar term loan which we expect to draw in the fourth quarter and a 500 million dollar turn loan which we expect to draw the first quarter of 2027 both priced at so far plus 80 basis points which is inside of where we could issue bonds today the term loans will reduce our commercial paper balances and provides flexibility as we look to refinance our 1.4 billion dollars in maturities in 2027 We ended the quarter at 4.7 times net debt to adjusted EBITDA, and as of October 30th, we had approximately $3.8 billion of liquidity. And finally, guidance. We raised our FFOs adjusted guidance for the third consecutive quarter by two cents at the midpoint to a range of $1.76 to $1,78 per share. The update to our guidance reflects stronger leasing across the portfolio, the delayed timing of our remaining dispositions and highlights the strength of our operating performance year-to-date, including a 50 basis points increase to total same store at the midpoint to a range of 0.5% to 2.0%. Our increase to same store includes a 25 basis points increase in outpatient medical to 2 1⁄2% to 3%, a 100 basis points increase in lab to down 3% to down 6%, and a 250 basis points increase in senior housing to 16% to 19%. With that, operator, please open the line for Q&A. We will now begin the question and answer session. In the interest of time, callers will be limited to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Rich Anderson from Cantor Fitzgerald. Your line is now open. Please go ahead. Hey, thanks. Good morning, team. So, Scott, I wanted to ask you about the life science acquisition sort of strategy. These are unique in the way that they kind of blend into what you already have. I'm curious if you could sort of kind of communicate a pipeline of opportunities, whether you get zero or 100% of them in the future. Like, how active is pipeline coming at you given that you're kind of the only game in town in terms of you know being a a reasonable acquirer of life science assets thanks yeah thanks rich yeah i think the common overlap in the acquisitions we've done year to date as well as what's under contract is that they're cheap on a price per foot basis but also strategic you know usually when you're buying assets you get one but not the other if it's strategic it's usually expensive if it's cheap it's usually not strategic this is kind of a unique point in time in life science in particular where we can buy assets that are cheap and strategic and that's what we've done so a billion dollars plus or minus of acquisitions either closed or in the pipeline if you look at them on a map they're essentially part of an existing health peak campus so we really have no interest in going into sub markets where we have no competitive advantage the whole idea here is to buy things cheaply that are not leasing up today for one reason or another in bringing our team our tenant network our balance sheet our credibility to the table to lease them up it is working uh we've made tremendous progress at gateway uh the campus in south san francisco with scott and the team and we expect to do the exact same with these three acquisitions uh the fact is these are unique in that we have uh significant lease interaction on about 70 percent of the acquired vacancy in some cases before we even formally close the acquisition so really amazing traction on those and we feel like at the price that we're buying these they're just a significant margin of safety and we're underwriting them at today's rents i think you can paint a component picture given the difficulty of bringing new development anytime soon given and replacement costs of rents to run once occupancy does recover, and it's clearly on that trajectory. So, we've said for a while we're going to be a consolidator. That's proven to be correct. We've got a highly valued outpatient business that's allowing us to recap at really strong prices and redeploy into assets at essentially the same initial yield with vastly higher stabilized yields. We're making great progress towards that goal. So, next question. Your next question is from the line of Michael Carroll from RBC Capital Markets. Your line is now open. Please go ahead. Yeah, thanks. Scott, I wanted to touch on your comment answering that last question. And I believe you said that DOC has good targets on 70% of the acquired vacancy. I mean, how far along are those conversations? And in your underwriting, when do you assume that these assets reach stabilized occupancy? Yeah, we're generally underwriting these in the two- to three-year range to fully lease up, and we're pretty far along in those conversations, so I would call it active negotiations comprising that 70%. Next question. Your next question is from the line of Jamie Feldman from Wells Fargo. Your line is now open. Please go ahead. Great. Maybe just kind of add to the prior line of questioning. Just as we think about 27, can you talk us through kind of what's baked in terms of leases that have been signed when they come in and the net of move outs? Just what that NOI stream is going to look like from some of the acquisition activity or even just some of leasing activity? Hey, this is Kelvin, and I'll jump in there. We've done a pretty tremendous job, I'd say, this year from a leasing perspective. We've got about a million square feet of lease executions year-to-date, and as we mentioned in the prepared remarks, another 640,000 square feet under LOI are executed post-quarter end, so pretty tremendous progress. And these leases probably require, you know, 12 to 15 months, depending on the build out of the space and the specific requirements of that tenant before they're able to flow through into NOI and subsequently earnings. Keep in mind, you as we execute these leashes, there are free rent periods as well that factor into the timeline of when you start to see that cash flow in. But from an earnings perspective, you know, you'll see over the next couple of quarters, the executions that we've had over the last few quarters start to flow in. But it's a 12 to 15 month process to get those spaces into a position for occupancy. Your next question is from the line. Your next questions is from Ronald Camden from Morgan Stanley. Your line is now open. Please go ahead. Hey, great. Just staying on the lab piece, just looking at the same store and why, asking the question sort of in a different way, does this feel like it's an inflection point from here? As you talked about, lease is commencing, obviously, 12 to 15 months, but there are sort of puts and takes as you're thinking of the same story and why going forward, and is this sort of inflection point. Thanks. Hey, Ron. This is certainly a base that we can grow from. I think we've been saying our focus for purposes of really guiding investors towards NOI growth and subsequently earnings growth has been total occupancy. And to be able to achieve 130 basis points of occupancy capture this quarter, 270 basis points on the year, certainly putting us in the position to see NOI growth over the subsequent quarters as these leases commence and the tenants start paying rent. So we're certainly on the right path for future NOI growth here in the lab business. Your next question is from the line of Nick Ulico from Scotiabank. Your line is now open. Please go ahead. Oh, thanks. Just going back to the lab, given that you're about 80% occupied in lab and you already have sort of vacancy in the existing submarkets where you did the acquisitions, maybe you just talk about why you think it makes sense to be adding more vacancy exposure to the portfolio. And within those different submarkets as well, if you could just talk about how, like, HQ points that building's position versus, you know, the vacancy you have next door at Director's Science Park. And then similarly, you have 100 Acorn, you've owned the asset, and the JV, there's been vacancy. Why do you feel better about it, you're leasing it now? And then in South San Francisco, 5,000 Shoreline, you also have, you know, redevelopment projects right next door. So just, you know, how you could talk about the positioning of that space. Thanks. Yeah, there were a few questions there. I'll try to address most of them. I may ask Scott Bowen to jump in as well. But we think we're buying opportunity at a really cheap price. So the more we can do, the better, because we are trending positively and there's a lot of upside to capture here. I'm not sure how many commercial real estate sectors there are where you can buy super core assets that stabilize in the 9% to 10% range. I mean, that sounds like a development plus plus type return with a lot less risk and you have to think about these local markets as ecosystems what's happening in the bay area has nothing to do with what's happening in san diego or boston and the more local scale we have the more competitive our entire footprint is so it's not a single asset although each of these could stand alone as strong investments you have think about the impact on our entire ecosystem like i said earlier we're the only group that's actually growing. We're doing it pretty significantly in markets where we already have a strong competitive position, and that's only getting stronger with these transactions. You asked about HQ Point. That's a bigger building, bigger floor plates, bigger users than we can accommodate at our director's place campus that's right next door. So that's an easy way to distinguish that building from what we have in the marketplace today. The building in uh south san francisco um is a smaller uh uh availability vacancy in terms of the size of the building so that's really not competing um with our existing development redevelopment portfolio and there's a tenant in the building already that's growing pretty fast so that is a totally unique um uh building and then the building in uh cambridge remember we were in a jv but we were not leasing or property managing that portfolio um so when that transaction closes will be able to take over the leasing and the property management and hopefully drive a better leasing outcome there's also financing on that deal today which as i said in the earlier uh answer that does restrict uh an owner's ability to move quickly and make decisions and kind of meet the market where it is so hopefully having an unencumbered uh uh property as well as the fact that we'll be leasing it in property managing will be the difference maker there okay next question Your next question is from the line of Juan Sanabria from BMO Capital Markets. Your line is now open. Please go ahead. Good morning. Thanks for the time. Clearly things are improving in lab leasing, but hoping you could talk a little bit about any known move outs or how the tenant credit profile, any sort of bad debt updates you could provide as an offset, just to make sure we're correctly tempering our enthusiasm going forward. skip calling on those two items that'd be great. Hey Juan, yeah happy to jump in. I'd say at this point we're working towards continuing to execute on our our kind of stated leasing objectives really you know looking at 2027 and working through renewals that we can pull forward. We've done a really great job of that over the last 15 or so months really addressing some of the early renewals there so that that plan continues um and then from a credit perspective i'd say there's probably been over 150 billion dollars of capital flowing into the biotech space between ipos m a secondary offerings and we're certainly seeing that benefit in the demand and our pipeline the pipeline's been strong extremely healthy and our existing tenants have been able to access the capital markets where they've had positive data outcomes in their business so the credit profile overall within our lab portfolio has meaningfully improved um and you know we're looking forward to kind of capitalizing on that pipeline or rather further capitalizing on that uh pipeline to drive net absorption through the business so a lot of positives that we've been seeing we've been echoing that you know same sentiment for the balance of the year and it continues Your next question is from the line of Sydney McEntee from JP Morgan. Your line is now open. Please go ahead. Hi, guys. So on the transaction market, given the recent rate volatility, have you guys seen cap rates move across the different asset classes? And has it changed at all how you think about sourcing more distressed deals or the composition of the pipeline overall? yeah it's definitely been volatile the tenure goes from four to four and a half to five plus and now back to around five i wouldn't be surprised if the transaction markets close down a little bit across all commercial real estate but including health care given that volatility and people just trying to understand what their cost of capital is especially a levered buyer that's using 60 to 70 financing that pretty big impact on asset values So I wouldn't be surprised to see a bit of a slowdown. I think some sectors will be more impacted than others. You think about a lower growth, longer, least-term portfolio or asset, that probably is more impacted by the change in rates. A sector like senior housing, probably a little bit less, just given the growth profile. But TBD, there has been a lot of volatility, and these transactions take, I don't know, six months, plus or minus, from start of discussions until a closing. So anything that's happening now was negotiated a long time ago that it's hard to say or be precise, but we certainly are aware of a lot of transactions across commercial real estate that are being put on pause or buyers attempting to retrade. We have not done that. We commit to something, and we honor the price that we provided, but мы think that we negotiated a really compelling price in the first place, which allows us to move forward. Next question. Your next question is from the line of Michael Goldsmith from UBS. Your line is now open. Please go ahead. Good morning. Thanks a lot for taking my question. Scott, you mentioned AI and robotics uses as an emerging source of demand. Can you give us a sense of how meaningful that is within the current pipeline, and is that truly incremental demand for space that would otherwise compete with traditional users, or is it primarily absorbing space that'd be more difficult to lease those here michael it's scott bone i can i can take that one you know from a demand perspective leasing to biotech still our bread and butter right if you look at our pipeline it's still over 75 percent biotec whether it be public or private um but there is a significant amount of uh increased demand from the air and robotics across all three markets um i think the epicenter of that is san francisco where we've seen the most of it so there is purely incremental demand um from that you know and uh taking additional space in you know we're enacted discussions and and deals on several of those um users where we got space that you know was either in shell condition or wasn't built out as lab that uh we can do a deal at a much lower ti and a very competitive rent um economics make make sense to do a deal like that um and it's also taking you know a lot of the spaces buildings that were set to be converted to lab kind of in the periphery that probably never should have been converted to lab frankly um and taking those out of the out of new uh the new supply numbers your next question is from the line of farrell granite from bank of america your line is now open please go ahead good morning thank you for taking my question i I wanted to go back to the three transactions that we've been speaking about. If you can touch on the pricing dynamics, as well as really the equity in debt or basis that you were able to really structure these deals, and how does that give you a preference, I guess, going forward of how you would like to potentially do other opportunistic deals? yeah for the last two to three years when we considered making investments in life science they tended to be more structured investments because we didn't feel like the prices to buy an asset fee simple had fallen by enough um to make it uh uh worthwhile for us um so we did some mortgage lending uh we did one preferred stock investment uh we feel like in 2026 the prices have come down to a point on a per foot basis that even at today's market rents, we can underwrite a really compelling stabilized return. And therefore, we've shifted towards doing fee simple acquisitions in 2026. The dynamics of each deal are a little different. The lender in Cambridge essentially gets out at par, but with very little left for the equity. And on the other two transactions, the lenders, the first mortgage lenders took a modest loss. So we were negotiating directly with them. Next question. Your next question comes from the line of Nick Joseph from Citi. Your line is now open. Please go ahead. Thanks. You mentioned it's a great time to be a buyer. You talked about the attractive stabilized returns and the timeline for achieving that. Why don't you think you've seen more competition for life science assets? Maybe you could just touch on kind of the buyer pool broadly in the lending environment? Hey, Nick, I think it's mostly that so many people lost so much money in the last four years. It became a pretty hot sector to participate in, say, starting in 2017, 18, 19, and then got turbocharged in 2020 and 21. So there are a lot of new entrants, both GPs, LPs, and lenders. And obviously, they did not have a good outcome. Some did okay, but a lot of people certainly lost a lot of money, and it will take time for those scars to heal. It's still kind of a bad word, life science, in most real estate shops around the country, and maybe for good reason if they came in without a platform to drive performance and the competitive advantage that a company like HealthPeak has, I think they're going to have a hard time even in today's market, which is clearly improving. So I think it's just a niche business that requires an existing footprint to give tenants flexibility to have the credibility to own operate develop very specialized real estate and then the tenant relationships not just the tenants but the venture capital firms themselves who are driving a lot of those decisions i think all of that just makes it a unique business where it's not just real estate it's not just having capital those things are important you also have to have the platform and we've got all three next question Your next question comes from the line of Michael Stroyek from Green Street. Your line is now open. Please go ahead. Thanks. Good morning. Maybe one question on the $200 million of additional outpatient asset sales outlined in the presentation. Can you just provide a bit of color of the types of assets you're selling and how they compare to your in-place portfolio? And then you guys called out 7% cap rates on those assets. I imagine they were negotiated several months ago. Do you think if they were negotiated today, you'd be able to achieve similar pricing? Hard to say, Michael. That's a hard contract with Money at Risk, so we felt comfortable publishing it. But we had a portfolio kind of in the southeast where the health system was debating whether or not to renew the lease. It's actually four buildings. And we ultimately decided rather than renewing the lease that we'd go ahead and sell those. They weren't particularly strategic for us in the scheme of things, and they offered a fair and reasonable price for those particular assets. I'd say they're below average in terms of asset quality, and we were willing to transact at that price. So that one should be done by year-end. Next question. Your next question is from the line of Dave Rogers from Raymond James. Your line is now open. Please go ahead. Yeah, good morning. obviously getting more comfortable putting equity into the life science acquisitions that you've done, you know, probably tells us that you're also getting a little more comfortable with where pricing for lease deals is. So I'm kind of curious, I think in the quarter you said negative five, six was the lab spread, but maybe that was one deal that Kelvin noted as opposed to kind of a broader, you Know, transaction market for you guys. So can you give us a better sense for where, you know maybe face rates and and where economic rents have moved or are moving um in the life science business and how that compares to where you guys see your existing in-place rents across the three major markets uh sure i could take that one scott bone but i think i'd probably start in boston um probably the most pressure on deal economics still in boston just given that supply demand um in balance is probably still the greatest the greatest there you know i would say our portfolio there is mid 80s occupied we're very little uh lease roll over the next 12 to 18 months so you know we're i feel like we're in a good position though and our and our assets are in the um top sub markets where the lion's share of the demand has been so we've actually been able to to do pretty well in the leasing that we've done there um san diego as scott mentioned um you know we've brought tory pines to 100 so you known our portfolio so we'll have additional pricing power there um as we look to any renewals kind of in the near term um in that market and then in the bay area uh we continue to work through our dominant position there and a lot of the deals we do in the bay area are deals that you know are with our existing tenants kind of moving pieces around the chessboard um and where we tend to do you know better than you know the market on the rental rates so you know i think there's signs of evening out a little bit on the uh landlord and tenant side in in pockets um but it's very deal dependent you know you're still looking at every deal is different depending on the tenant uh the space how much capital is going in term and all those things so it's hard it's harder to paint with a pretty broad brush on on market rents across the market uh because it is very deal specific today Yeah. We've had even a few situations in recent months where we have multiple tenants bidding for the same suite or building, which we haven't seen in many years. So the market doesn't have to get back to 95% to create that dynamic. It's a tenant that wants to be in our portfolio or has an existing lease with us. It does help create tension on the leasing economics that should turn favorable for us. And I just reiterate that we're underwriting the acquisitions to today's current market rents and TIs. So it's not like we're underwriting some big improvement, although we do think that's possible in the years ahead. Next question. As a reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star 1 again. Your next question is from the line of Austin Wurtschmidt from T-Bank Capital Markets. Your line is now open. Please go ahead. Hi. Good morning, everyone. Have a two-parter. One, just clarifying, what does the 9 to 10 percent stabilized returns assume for stabilized occupancy? And then separately, maybe, Kelvin, you know, based on the 4Q implied guidance of 42 cents, getting to an annualized rate of $1.68, realize you're not providing guidance, but any high-level thoughts that you could share around puts and takes next year that we should be thinking about? Thanks. Yeah, Austin, on the occupancy, and then I'll turn it to Kelvin. Like, we underwrote Gateway in the mid-'80s. I think these three were more in the 90% range. But just given the size of leases in the life science space, the more likely scenario is you're either 100% or you're something below 75%. They tend to be chunky, but we have built in a pretty sizable vacancy in most of these acquisitions we've done. Kelvin? Yeah, and Austin, maybe on just the performance so far this year and how that might translate next year, we've done a pretty phenomenal job throughout the year. We had the opportunity to increase guidance due to the operating results of each of our businesses. So that's outpatient lab and senior housing that are outperforming our initial expectations. We continue to get the benefit from Janus Living from its organic growth and external growth. contributor to HealthPeak going into 2027. And naturally, as you know well, we're managing the balance sheet prudently. We have $1.4 billion maturing next year on balance sheet. We've taken some proactive measures to kind of position ourselves well and have maximum flexibility to address those. But, you know, quite a bit of work to do on the balance sheet front going into 2027. So, I want to make sure we highlight that, given that our cost of borrowing that's maturing is around 3%, and that's certainly much lower than where the market is today. Okay, next question. Your next question comes from the line of Jim Kammer from Evercore ISI. Your line is now open. Please go ahead. Good morning. Thank you. You know, again, And back on the lab leasing and your constructive comments, can you sort of quantify, are these tenants, you know, new to market on average in the transactions you're engaged on, leases done and discussions underway, or are they, you know, beggar thy neighbor from neighboring assets? I'm just curious what the overall tone for the market is, please. I can give a little bit of context, Jim. from both an execution standpoint and the pipeline, I'd say 50% of our executions and active discussions are with existing clients, 50% are with new clients. So the demand is developing from within our portfolio and it's, you know, coming from the marketplace. As Scott mentioned earlier, you're getting the benefit of, you Know, just continued improvement in biotechnology demand, but also the spillover technology adjacent demand that is attracted to our buildings that are highly flexible that can accommodate those uses. So the demand is certainly widespread geographically across each of our markets. It's probably proportional, I would say, to our footprint in those markets. We see quite a bit of activity in the Bay Area, just given our scale. But San Diego has been quite interesting as you look at the way in which we've been able to lease in Torrey Pines and the demand that's coming in behind that that's now eyeing and circling around our West Toronto Mesa portfolio. So a lot of positive indications in that pipeline that we've been seeing. And now the team is hard at work trying to convert that into LOIs and executions. Your next question is from the line of Rich Anderson from Cantor Fitzgerald. Your line is now open. Please go ahead. Hey, sorry to keep this going, but I wanted to follow up with something you said early, Scott, about same store and you not focusing on same store because it's kind of a fungible calculation depending on what's going on at the present any moment. But how would you describe the process of taking assets out of the pool and into the pool and redevelopment and help for sale, all those sort of forces at work? How does that impact your, even though you're not focusing on same-store, how does it focus your same-story pool, particularly in medical office? What would be your comment around those observations? Thanks. yeah i mean we have 500 plus buildings in the outpatient space i think we have five buildings under redevelopment we have nothing in health for sale um so the i don't know what percentage that 99 i don' know it's really high um is is not in redevelop or health for sales the building needs to be redeveloped it does happen it's more likely in lab where you've got a full building that's been used for 20 years and you just have to start over from the base building all the way through the TIs and that's a process. That is a lot of money and it makes sense to put a building like that in redevelopment. A multi-tenant net of office building, it's more rare. On occasion, we do spend a fair amount of money. We've got a handful of them. We find great success leasing them up. But I've always felt like this whole concept of moving stuff in and out of the pool is just very misleading. I understand why same store became a metric that the real estate community monitored, but I just think it's been abused. So I've had a very strong desire to move the culture of HealthPeak to being a healthcare real estate company and making the best real estate decisions to drive bottom line cash flow in a way from more of a finance accounting mindset of moving things from one bucket to the next. And CapEx is another example of that. You can make the releasing spread wherever you want. Just give the tenant a massive amount of same store, of TI, and it bumps up the retention in the same store. And it all impacts the top line, but not the bottom line. And we're only focused on the bottom-line cash flow. And that's how we run the business. And I think it's a disservice to the whole sector that people are so focused on the same story. But we'll provide it because the sector requires it, but we don't run our company that way. Next question. Your next question is from the line of Jamie Feldman from Wells Fargo. Your line is now open. Please go ahead. Great. Thank you. I was hoping to dig a little deeper into the comments you made on debt maturity. So can you just give us a little bit more of your thoughts on the debt coming due, what your options are, what you think the earnings might drag might be to refi at the higher rates? And then I guess taking a step back, Just kind of capital needs in general, you know, you've done a lot of leasing. It sounds like you'll have a decent amount of CapEx to get to that NOI in 12 to 15 months. Just how do we think about the puts and takes on your capital needs over the next year or so in line with, and then your leverage targets as well, and how you think that puzzle all fits together? All right, I'll try to unpack the questions there. But maybe holistically to start, you know, we ended the quarter with 4.7 times net debt to EBITDA, which is a very strong balance sheet to begin with. And we certainly have some maturities coming in 2027 that we mentioned, about $1.4 billion that we're working towards. We've made some proactive early decisions to kind of position ourselves with $900 million of delayed draw term loan that we can access over the next two quarters. The first will be drawn in December and the second at some point in the first quarter of next year, which will help us reduce our CP balances and then work towards the maturities that are really coming forward in the First Quarter. We have about $1.1 billion maturing in Q1. And from a strategy standpoint, I would say we're obviously focused on the most cost-effective tools available to us that make sense for our business at the time to be able to, you know, kind of think about the long-term debt that we are comfortable with on balance sheet. So too early to give you exactly what those tools will be that we're utilizing, but the bank debt market has been supportive, and that is certainly the first step. And then we'll be able to utilize CP on an interim basis as we work through the decision making around the balance sheet and long-term financing needs there. So quite a bit of flexibility that our team has put us in the position to have as we work towards those maturities. And then from a capital standpoint, I would say you should expect CapEx kind of consistent with years past. We've brought capital down considerably from 2025 to 2026 with the leasing that does come with TIs, so there will be some capital invested back into the buildings as we secure the occupancy but don't have an expectation for CapEx dramatically in excess of where we are today. James Jensen, Okay, thanks, Jamie. Your next question is from the line of Omoteo Okasanya from Deutsche Bank. Your line is now open. Please go ahead. Omoteyo Okasanyan, Deutsche Bank, Yes, good morning, everyone, and congrats on the solid quarter and outlook. Again, realize we're not given 27 guidance yet, but again, just thinking when we take a look at consensus numbers, consensus is not really implying any real earnings growth in 27 versus your updated 26 guidance, we've kind of talked about some of the drag from interest expense, but again, we also kind of talk about really strong operating results heading into 27. So, I'm just curious a little bit what you kind of think about that, kind of where some of the puts and takes could be to end up, you know, with you guys starting to kind of generate an earnings acceleration, which has always been a goal after the past few years of not a lot of earnings growth? Yeah, it was pretty severe downturn in life science to lose 2,500 basis points of occupancy. I mean, I think some companies in that sector are down 50% in four years. I think we've done a remarkable job in light of what happened in life science, which was more than 50% of our business four years ago. So I think they've done a pretty remarkable job to keep earnings where they're at. Obviously, interest rates have changed pretty dramatically. That is a headwind. There's a lot of volatility, so hard to predict, but it's certainly a higher refinancing cost than we have in place. But Kelvin and the team are doing a great job to position us for as much flexibility with as many options as possible. But this life science, it does take time. I mean, we were still losing occupancy in 2025, and there's just a reality in real estate, the great pipeline that turns into executions, that turns into commencements, that turned into cash paid rent. I mean, that's a process and it takes time because of the build out in particular. Kelvin mentioned earlier, plus or minus 12 month build out for a lot of these spaces. So it just takes time for those lease executions to turn into rent. And obviously there's a capital cost in the interim. So I think all of that is playing into the timing of earnings growth. But I'll just note that, you know, we've increased guidance three times year to date and by five cents in total. So I Think we're making the most of the environment that we're in and the team's doing a great job and really happy with the momentum across all three of our businesses. Your last question, I think there's one more. Your last question is from the line of Juan Santabria from BMO Capital Markets. Your line is now open. Please go ahead. Hi. I think at the top of the call you talked about MOB core growth accelerating, so hoping you could maybe frame that and the drivers of that pickup or acceleration for outpatient. Yeah, we had quite a few big lease expirations in 25 and 26 that we knew about that had a temporary impact on our growth rate in that business, but we're still in the two and a half to three percent range for the outpatient business. We're still getting great releasing spreads with very modest TIs, important to put those two things together. and we've grown occupancy the last two quarters. Set aside the impact of transactions like the recap, but Mark and the team have actually grown total occupancy two straight quarters. Fourth quarter may be closer to flat, plus or minus, but we see a real chance to materially move total occupancy higher in 2027. We have fewer expirations and the leasing pipeline is terrific. So we feel really good about the trajectory of that business, both on the top line, but also the bottom line. Okay. Any more questions, operator? That was the last question, and the conference is now concluded. Thank you for attending today's presentation.