DOC Q3 2026 earnings call transcript, November 3, 2026

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 1 on your touchstone phone. To withdraw your question, please press star 1 again. Please note, this event is being recorded. I would now like to turn the call.

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-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results should 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-looking statements are detailed in the company's filings of the SEC. We will refer to certain non-gap financial measures during this call, which are reconciled to my most directly comparable gap measures in an exhibit to the AK refers 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, AJ, 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 out

patient 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 TI 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 $2 billion 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 And so, will everyone out there? I do not know if you'll see the challenge has a feeling of opportunity for anything. I do not know if you're going to have a hypothetical. venture recaps with blue chip LPs who chose to partner with health peak 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 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 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 is 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 Ponds versus 65% leased in 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 buildings surrounded by existing Health Peak 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 GP these 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 9 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 to become the leading portfolio. We're on a trajectory. We're on a trajectory. We're on a trajectory. We're on a trajectory. 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 and 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've gone from two operating partners to 13, which dramatically increases Jan's external growth as those partners are now bringing us proprietary acquisitions. Jan's success is also driving earnings growth and value creation at HealthPeak, 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 occupations.

Our operating results in the third quarter reflect that execution. We reported FFOs adjusted of 44 cents per share, total same-store cash NOI growth of 3.6%, 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 of new leasing and 628,000 square feet of renewals. That brings our year-to-date 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 and attractive rents north of $30 per square foot on a triple net basis. Tenant retention increased from last quarter to 81.7%, and we achieved cash-releasing spreads of approximately 5% above. of our historical averages. Importantly, these renewals come with modest leasing costs of 9.5% of rents on average. We ended the quarter with total occupancy of 90.3%, 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 square feet of signed LOIs. Turning to lab, during the quarter, we executed 480,000 square feet of leases, our strongest quarter in over a year. That brings our year-to-date executed leases total to over 1 million square feet. 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 quarter of positive net absorption. 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 TIs. Renewal rents this quarter increased to an average of $72 per square of $72 per square foot. up from last quarter with a modest 5.6% 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%. 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% occupied today. We view that availability as embedded upside to capture and 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 and a wide growth of 26% total revenue growth of 78% and adjusted EBITDA growth of 101%. During the quarter and through October Janice living completed the acquisition of 39 communities totaling approximately. 2.1 billion dollars bringing the year to date acquisition total to 2.9 billion. Health Feet's ownership totaled 69% of the outstanding shares of Janice living which represents roughly 6.1 billion dollars 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 refinances.

Year to date, we have originated two delayed draw term loans, a $400 million term loan, which we expect to draw in the fourth quarter, and a $500 million term loan, which we expect to draw in the first quarter of 2027, both priced at SOFR plus 80 basis points, which is inside of where we could issue bonds today. The term loans will reduce our commercial paper balances and provide flexibility as we look to refinance our $1.4 billion in maturities in 2020. 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 2.5% 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 1 to raise your hand. To withdraw your question, press star 1 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.

these are unique in that we have significant leasing traction on about 70% 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 replacement costs. 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 proving to be correct. We've got an 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 the last question that 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? We're generally underwriting. Writing 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.

Hey, this is Kelvin. 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 know, as we execute these leases, 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.

Your next question is from the line of Ronald Camden from Morgan Stanley. Your line is now open. Please go ahead.

Your next question is from the line of Nick Uliko from Scotiabank. Your line is now open. Please go ahead.

Yeah, there were a few questions there. I'll try to address most of them. I may ask Scott 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 nine 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 to 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 place, 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 South San Francisco is a smaller availability vacancy in terms of the size of the building. So that's really not competing with our existing development redevelopment portfolio. And there's a tenant in the building already. It's growing pretty fast. So that's a totally unique building. And then the building

in Cambridge. Remember, we were in a JV, but we were not leasing or property managing that portfolio. So when that transaction closes, we'll be able to take over the leasing and the property management and hopefully drive better leasing outcome. There's also financing on that deal today, which, as I said in the earlier answer, that does restrict an owner's ability to move quickly and make decisions and kind of meet the market where it is. So hopefully having an unencumbered property as well as the fact that we'll be leasing it and 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.

Yeah, happy to jump in. I'd say at this point, we're working towards continuing to execute on our kind of stated leasing objectives, really 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. Yeah. really addressing some of the early renewals there. So that plan continues. And then from a credit perspective, I'd say there's probably been over $150 billion 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. And, you know, we're looking forward to kind of capitalizing on that pipeline or rather further capitalizing on that 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 J.P. Morgan. Your line is now open. Please go ahead.

Yeah, it's definitely been volatile. The 10-year goes from forward. Four and a half to five plus and now back to around five. I wouldn't be surprised if the transaction market slows 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 60-70% financing, that's a 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 lease 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 things. put on paused or fires attempting to retrade. We have not done that. We commit to something and we honor the price that we provided, but we 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.

Your next question is from.

line of feral granite from Bank of America. Your line is now open. Please go ahead.

Good morning. Thank you for taking my question. I want 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 operations?

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 to make it worthwhile for us. So we did some mortgage lending. We did one preferred stock investment. We feel like in 2026 the price. Just 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 were 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.

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 Health Peak 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, and 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 Stroyak from Green Street.

Your line is now open. Please go ahead.

Thanks, and 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 know, 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 that one should be done by your end. Next question.

Your next question is from the line of Dave Rogers from Raymond James. Your line is now open. Please go ahead.

And then in the Bay Area, we continue to work through our dominant position there, and a lot of the deals we do in the Bay Area are deals that are with our existing tenants kind of moving pieces around the chessboard and where we tend to do better than the market on the rental rates. So, you know, I think there's signs of evening out a little bit on the landlord and tenant side in pockets, but it's very deal dependent. You know, you're still looking at every deal is different depending on the tenant, the space, how much capital is going in, term, and all those things. So it's hard to pay with a pretty broad brush on market rents across the market because it is very deal specific today. And 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, you know, 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 1 to raise your hand. To withdraw your question, press star 1 again.

Your next question is from the line of Austin Wertschmidt from T-Bank Capital Markets. Your line is now open. Please go ahead.

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 scenarios 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 then 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 operations. We're getting 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. So that's a contributor to HealthPeak going into 2027. And naturally, as you know, well, we're managing the balance sheet prudently. We have $1.4 billion So that's where we're managing the balance sheet prudently.

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.

Next question. Your next question comes from the line of Jim Kammer from Evercore ISI. Your line is now open. Please go ahead.

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. Um, that is attracted to our buildings that are highly flexible that can accommodate those uses. So, um, the demand is, uh, it's certainly widespread geographically across each of our markets. Um, it's probably proportional, I would say, to our footprint in those markets. We see kind of bit of activity in the Bay Area, just given our scale. Um, but San Diego has been quite interesting as you look at, uh, 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, you know, eyeing and circling around our West Sereno Mesa portfolio. So, uh, a lot of, um, you know, positive indications in that pipeline that we've been seeing. And, you know, now the team is hard at work trying to convert that into LOIs and execution. Your next question is from the line. 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.

the pool is just very misleading. I understand why SameStore 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 store, but we'll provide it because the sector requires it, but we don't run our company that way. Excellent. 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, you know, give us a little bit more of your thoughts on the debt coming to you, 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,

say you should expect CapEx, you know, kind of consistent with years past. We 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.

Okay, thanks, Jamie.

Your next question is from the line of Omoteo Okasanya from Deutsche Bank. Your line is now open. Please go ahead.

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 Sanabria from BMO Capital Markets. Your line is now open. Please go ahead.