Healthpeak Properties Third Quarter 2026 Conference Call - HEALTHPEAK PROPERTIES INC

Explicit Guidance:

• FFO Adjusted (FY2026): Raised to $1.76–$1.78 per share (midpoint), up $0.02 from prior quarter.
• Same Store NOI Growth (FY2026): Raised to 0.5%–2.0% midpoint.
  • Outpatient Medical: 2.5%–3.0% (up 25 bps).
  • Life Science: –3.0% to –6.0% (up 100 bps).
  • Senior Housing: 16%–19% (up 250 bps).
• Leasing Velocity (Q4 2026): Expect 269,000 sq. ft. of executed leases and 1.03 million sq. ft. signed LOIs.
• Capital Expenditures (2027): Expected to remain consistent with historical levels despite TI investments for new leases; no dramatic excess anticipated.
• Debt Maturities: $1.4 billion in maturities scheduled for 2027, with ~$1.1 billion maturing in Q1 2027.
• Term Loan Draws: $400 million delayed draw term loan expected in Q4 2026; $500 million turn loan expected in Q1 2027, priced at SOFR + 80 bps.

Business-Segment Outlook:

• Outpatient Medical: Internal growth expected to accelerate in 2027 driven by strong lease execution and pipeline. Fewer expirations in 2027 and a "terrific" pipeline suggest a material increase in total occupancy.
• Life Science:
  • Occupancy: On track to close 2026 at 79.8%; total occupancy growth driven by acquisitions (3 campuses at 41% occupancy) and organic leasing.
  • Acquisitions: 70% of acquired vacancy already has strong leasing activity pre-closing; 125,000 sq. ft. signed at Gateway Campus in Q4 alone, plus 100,000 sq. ft. under LOI.
  • Leasing Pipeline: 1 million sq. ft. executed YTD; additional 643,000 sq. ft. executed/signed post-Q3.
  • Tenant Profile: ~70% new leasing, >80% Biotech/R&D, >40% vacant space.
  • Stabilization Timeline: New acquisitions underwritten for 2–3 year stabilization period; 90% occupancy assumed for stabilization (mid-80s for Gateway).
  • Economics: Renewal rents averaging $72/sq. ft.; new commencements reflect lower rents for office-to-lab conversions but lower TIs.
• Senior Housing (Janus Living):
  • Performance: Same store NOI +26%, Revenue +78%, Adjusted EBITDA +101% in Q3.
  • Acquisitions: $2.9 billion in acquisitions YTD (39 communities, ~$2.1B in Q3); 13 operating partners (up from 2) driving external growth.
  • Strategy: Continued expansion via proprietary deal flow from operating partners; NOI trending in line or ahead of underwriting.

Market and Competitive Outlook:

• Life Science Supply/Demand: Supply and demand shifting favorably; "alternative use" demand (AI, robotics, lab space conversion) absorbing vacancy. Torrey Pines fully leased (vs. 65% 6 months ago).
• AI/Robotics Demand: Significant incremental demand in San Francisco for lab-adjacent space; these users absorb space previously slated for conversion or underutilized, reducing net new supply counts.
• Acquisition Environment: "Great time to be a buyer"; most GPs/LPs/lenders are "upside down," creating a pool of distressed assets at significant discounts.
• Consolidation: HealthPeak entering recovery as the "only company growing its footprint and adding talent"; targeting 100% occupancy in core submarkets.
• Transaction Market: Cap rates volatile (4% to >5% and back to ~5%); transaction volume expected to slow due to rate uncertainty, but HealthPeak's committed pricing allows forward progress.

Macro / Industry Outlook:

• Interest Rates: Borrowing costs increased due to Treasury yields; commercial paper balances will be used to mitigate near-term refinancing costs.
• Refinancing Risk: Current cost on maturing debt is ~3% vs. current market rates; refinancing $1.4B in 2027 presents earnings drag potential.
• Capital Markets: Biotech capital flow has been robust (> $150B YTD via IPOs/M&A/secondary offerings), improving tenant credit profiles and pipeline health.
• Development: New development remains difficult due to high replacement costs and financing constraints; acquisition focus is on stabilized or near-stabilized assets.
• Economic Sensitivity: Lower-growth, longer-lease-term assets (e.g., medical office) more impacted by rate volatility than senior housing (higher growth profile).

Strategic Initiatives:

• Acquisitions: Closed ~$2B in stabilized outpatient sales/recaps (6% cap rate); acquired three life science campuses (70% vacancy active leasing, 5% in-place yield → 9–10% stabilized yield).
• Pipeline: $1B+ in life science acquisitions either closed or in pipeline; focus strictly on core submarkets with existing competitive advantage (no entry into new markets).
• Portfolio Optimization: Selling 4 non-strategic outpatient assets (Southeast) for 7% cap rate to complete by year-end; 5 buildings under redevelopment in outpatient.
• Balance Sheet Management: Utilizing $900M delayed draw term loans to reduce commercial paper and fund Q1 2027 maturities; maintaining 4.7x Net Debt/Adjusted EBITDA leverage.
• Platform Expansion: Increasing operating partners from 2 to 13 to accelerate proprietary acquisition flow for Janus Living.

Risks and Headwinds to Outlook:

• Refinancing Costs: Potential earnings drag from refinancing ~$1.4B debt in 2027 at higher market rates compared to current ~3% cost.
• Leasing Lag: 12–15 month timeline from lease execution to cash flow flow-through due to TI work and free rent periods.
• Market Volatility: Transaction market slowdown or buyer retraction due to rate volatility could impact future acquisition pricing and execution speed.
• Development Constraints: High replacement costs and difficult development environment limit new supply but also constrain organic growth speed.
• Tenant Credit: While improved, biotech sector volatility remains a risk; reliance on capital markets for tenant growth.
• Same Store Definitions: Management notes that same-store metrics are misleading due to CapEx and portfolio turnover, which could obscure true cash flow performance.

Management Tone on the Future:

• Confidence: High confidence in Life Science recovery; CEO notes "no one else in the sector" could claim 270 bps occupancy growth YTD.
• Strategic Shift: Explicit pivot to "consolidator" status; confident in buying "cheap and strategic" assets that competitors cannot execute due to lack of platform.
• Earnings Trajectory: Expects earnings acceleration in 2027 as lease executions flow through and occupancy stabilizes, despite current rate headwinds.
• Operational Focus: Strong emphasis on "bottom-line cash flow" over same-store metrics; belief that operating performance is validating long-term strategy.
• Hedges: Repeatedly notes that real estate recovery is a "process" taking time (lease -> execution -> commencement -> rent) and that market conditions can change.

Miscellaneous:

• Liquidity: $3.8 billion liquidity as of Oct 30.
• Valuation: Janus Living ownership (69%) represents ~$6.1B market value.
• Market Specifics: Boston market still under supply/demand pressure; San Diego (Torrey Pines) and Bay Area showing strong pricing power and competition (multiple bidders).
• Lease Economics: Net absorption positive; new lease terms averaging 11+ years; retention rates at 81.7%.