Healthpeak Properties, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• Introduced Kelvin Moses as new CFO, highlighting his well-rounded experience and strategic/operational role.
• Discussed strategy around leveraging the balance sheet, including merger with Physicians Realty Trust, which increased allocation to the outpatient medical business to over 50%, generating earnings accretion and improving the balance sheet.
• Outpatient Medical segment has strong demand with outpacing new supply, positive NOI growth for two decades, and internalized property management is successful.
• Senior Housing portfolio had strong occupancy and rental rate growth, driving 16% same-store growth.
• Lab segment faces challenges but sees potential policy positives like government focus on biopharma, support for onshore manufacturing, and FDA initiatives.
• Capital allocation activities: Sold $1.4 billion of stabilized assets, used proceeds for development pipeline, stock buybacks, and reduced leverage.
• Update on West Cambridge master plan development project, selecting Hines as development partner for residential component.

Segment Performance:

• Outpatient Medical: First quarter same-store growth of 5% driven by strong tenant retention, a positive rent mark to market of 4.1%, and internalization efforts. It is the largest business segment.
• Lab: Reported same-store growth of 7.7% including the positive impact from the expiration of pre-rent on two large leases in South San Francisco and a full quarter benefit of internalization, representing approximately 35% of income.
• CCRCs: Reported same-store growth of 15.9% driven by rate growth of approximately 6% and a 100 basis point increase in occupancy.

Guidance:

• Maintaining FFO as adjusted guidance in the range of $1.81 per share to $1.87 per share.
• Maintaining blended portfolio of same-store growth in the range of 3% to 4%.
• Maintaining $500 million investment guidance this year, including stock buybacks, and intending to maintain leverage within the mid 5s target range.

Risks:

• Uncertainty in biopharma capital raising, regulatory environment, and market instability impacting the Lab segment.
• Potential delays in lease executions due to market uncertainty.
• Possible impact of tariffs on development costs for outpatient medical, though active developments have limited exposure.

Q: About weakness in life science and potential changes to positive expectation A: Kelvin Moses and Scott Bohn discuss diversified portfolio, potential inflection points in biopharma policy, and leasing momentum in Lab segment despite initial capital raising challenges Q: Quantifying pushouts of life science leases A: Strong leasing momentum, active LOI pipeline, and leases signed but not yet occupied, with leases commencing in coming quarters Q: Color on deceleration in Lab side A: Deceleration due to free rent normalization, internalization benefit no longer year-over-year, and funding environment uncertainty Q: Ranking of markets for Lab segment A: Boston slowest, San Diego consistent, San Francisco most demand due to portfolio and scale Q: 2Q Lab leasing activity and rents A: Strong LOI pipeline in operating portfolio, but details of specific deals not disclosed yet Q: Tenant credit concerns in Lab segment A: Significant improvement in rent collections, but some tenants still raising capital with uncertainty on success Q: Reassessing required returns on life science loan program A: Reassessing due to market conditions, stepping back to evaluate appropriate risk-adjusted returns Q: West Cambridge development project details A: Hines selected as development partner for residential component, with potential economics from land value and upside share, and existing credit tenants in the area