Healthpeak Properties Inc (DOC) 2025 Q4 法說會逐字稿

Good morning and welcome to the Healthpeak Properties Inc. fourth quarter 2025 conference call. (Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. You may begin.

Welcome. Today's conference call contains certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, these statements are subject to risks and uncertainties that may call actual results to differ materially from expectations.

Discussion of risk and risk factors is included in our press release in detail in our findings with the SEC. We do not undertake a duty to update any forward listing statements. Certain non-GAAP financial measures we discussed on this call, and exhibit to the 8-K, we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with the reg G requirements. The exhibit is also available on our website at healthpeak.com.

I'm now turn the call over to our President and Chief Executive Officer, Scott Brinker.

Thanks, AJ, and welcome to Healthpeak's fourth quarter earnings call. Joining me for prepared remarks is our CFO, Kelvin Moses. First and most important, thank you to our entire team for battling through an historic life science environment to finish 2025 with earnings in line with the midpoint of our original guidance range and significant transaction activity that should drive future earnings growth.

Couple of comments on our segments. Outpatient medical represents just over 50% of our portfolio income. Kelvin will discuss our outstanding operating results in that segment, but I want to make some more general comments, including the benefits of the merger with Physicians Realty Trust. That merger created the best platform and portfolio in the outpatient sector and positioned us to quickly and profitably internalize property management across our entire outpatient and life science portfolio. 70 plus million dollars of synergies certainly helped offset the life science environment.

The outpatient sector is benefiting from the ongoing shift in care delivery to lower cost, more convenient outpatient settings. Policy changes from Washington also support demand, including CMS, allowing more and more surgeries to be done in outpatient settings, and new supply continues to be very low given the cost of new construction.

All of the above contribute to the favorable operating environment we spoke to when we announced the merger 2.5 years ago. The private market is now recognizing this as well, which is driving down cap rates. We're taking advantage of that demand by selling fully stabilized, less core outpatient assets at strong prices, including $325 million in the fourth quarter at a low 6% cap rate.

Turning to our last segment, the operating environment over the past four years peaked in intensity in the first half of 2025, which is now fully impacting earnings. But in the last five months, we've seen continued improvement in capital raising and M&A. New deliveries will soon go to zero and will remain at zero for several years. Certain life science buildings are pivoting to alternative uses, which helps address the supply overhang.

All of the above points to early signs of an inflection point. Naturally, earnings will lag the underlying recovery because of the time to build a pipeline, sign leases, and build up the space before rent commences, but the building blocks of a recovery are in place. Four years ago we had the opposite view of the trajectory in the sector, and this team chose to cut off capital deployment in life science, which at the time was by far our largest business segment. That decision combined with the merger and related synergies has allowed us to grow the dividend and maintain earnings since 2022 when the downturn began, a significant accomplishment given the severity of the environment we've been up against.

As the sector recovers, we now have opportunities to acquire properties that would have been untouchable in the past, and to do so on a compelling basis. While others in the sector are retrenching, we're strengthening our portfolio and platform, including the recent Gateway acquisition and hiring Dennis Sullivan to lead San Diego and Claire Brown to lead Boston.

Our team was working hard over the new year. In late December and early January, we closed the outpatient medical sales and recycled that capital into a highly strategic 1.4 million square foot campus in South San Francisco.

We see potential for significant upside as the sector recovers, as the campus has more than 500,000 square feet of vacancy in a prime location. We now own and control 210 acres in South San Francisco, which is roughly one-third of the land in the entire submarket.

We own 6.5 million square feet of space at various sizes and price points, so we can provide unmatched solutions to current and future tenants. A recent report from a leading brokerage firm that showed the Bay Area led all life science markets in the fourth quarter and full year 2025 in absorption and leasing activity and has the largest volume of current tenant demand. That broker report is consistent with our own leasing activity and pipeline and further supports the acquisition.

Moving to senior housing, our fourth quarter results were outstanding, with 17% same store growth.

We point to three factors driving the growth. First, are highly amenetized full continuum campuses that resonate with seniors. Second, our asset management team collaborates with our operating partners to develop and execute property specific business plans. And third, favorable supply and demand fundamentals. We expect all three factors to drive another year of strong growth in 2026. Okay, I want to comment on the Janus Living announcement from January 7.

Our senior housing portfolio has been operating at a very high level but was largely ignored inside Healthy given its relative scale. In addition, we have significant expertise and relationships in the sector, to valuable resources that were being underutilized.

Over the past several quarters, with a singular focus on generating shareholder value, we worked alongside our Board and advisors to review a range of strategic alternatives to the status quo. We chose to pursue the creation of a pure play senior housing [re].

We believe the planned IPO is a unique and creative way to capture value in the near term through a higher multiple on our senior housing NOI and as a significant shareholder in Genus Living to participate in future value creation from internal and external growth. The transaction can be summarized as follows.

Healthy intends to contribute its entire senior housing portfolio to Janus Living in exchange for all the shares in the new company. Shares in the new company will be sold to the public in the IPO, which will dilute Health Peak's ownership. Janice Living will own 100% of its properties in a ridea structure.

Healthpeak will be the manager for Janus Living with strong alignment given our ownership interest in the new company. Simply put, our economics will be driven by Janus Living's operating results and stock price. Since making the announcement in January, we closed on the purchase of our joint venture partners 46.5% interest in a 3,400 unit senior housing portfolio for $314 million.

We now have full control of those 19 communities. Over the next few months, we expect to transition 11 communities to Pegasus senior living and 8 communities to CL senior living under highly aligned management contracts. We have long and successful relationships with the principles of each company.

Both Pegasus and CL have successfully underwritten and executed operator transitions, and they have strong track records in these regions. We have $360 million of additional relationship driven acquisitions in our senior housing pipeline. These are newer vintage assets located in high growth markets in Orlando and the northern suburbs of Atlanta, both markets that we know very well. We expect the acquisitions will close in the first quarter and be contributed to Janus living.

We're excited to add Jonathan Hughes to our team as SVP of Finance and Investor Relations. Jonathan knows the sector well and will lead our efforts with the street at Janus Living, while Andrew Johns will continue to lead that effort at Healthpeak.

In terms of timing, we filed a [confidentials-11] with the SEC in December. The SEC process will determine the ultimate timing of the IPO, but our current expectation is to close the offering in the first half of this year. I'll turn it to Kelvin to review our 2025 results and 2026 outlook.

Thank you, Scott. Before we get into the 2025 financial results, I want to briefly highlight one of our operational initiatives. We continue to make investments in technology, team, and process to deliver our investment management capabilities to a broader asset base, even more efficiently than we have in the past.

A component of the strategy is the acceleration of corporate automation, which will streamline our internal workflows and deliver a best in class experience to our clients. We're excited to welcome Omkar Joshi as our new Head of Enterprise Innovation to lead us through this next chapter of our growth. Omkar previously held leadership roles in both healthcare and real estate at [Palantir].

Now turning to the results.

For the fourth quarter, we reported FFO is adjusted at $0.47 per share, AFFO of $0.40 per share, and total portfolio Same-Store Cash and NOI growth of 3.9%. For the full year, we reported FFOs adjusted of $1.84 per share, AFFO of $1.69 per share, and total same store cash and wide growth of 4%.

Starting with Outpatient Medical. We continue to deliver sector leading results, and for the year, we executed 4.9 million square feet of leasing, including 1 million square feet of new leasing. This is the first time in company history that we have achieved this record milestone for new leasing.

We also achieved cash releasing spread of 5% on renewals, 79% tenant retention, and ended the year at 91% total occupancy. We also ended the year with the same store growth of 3.9%, which was above the high end of our original guidance range.

These results reinforce our leadership position in outpatient medical, highlight our focus on deepening relationships with leading health system partners, and demonstrate our ability to capitalize on strong sector fundamentals. Most importantly, this reflects a tremendous team effort and a fantastic outcome for our platform.

Moving to lab, we ended the year with 1.5% same store growth and total occupancy of 77%, inclusive of our recent gateway portfolio acquisition in South San Francisco, which depressed total occupancy by more than 150 basis points.

For the full year, we completed nearly 1.5 million square feet of lease executions, including 562,000 square feet of new leasing, and positive 5% cash releasing spreads on renewals. Since year end, we have an additional 100,000 square feet of leasing activity either executed or under LOI.

And finally, senior housing. We ended the year with 12.6% same store growth, which was meaningfully above the high end of our original guidance range and includes 16.7% growth in the fourth quarter. Our 15 life plan communities that comprise our same store pool have delivered tremendous results over the last five years, and our entire senior housing portfolio is well positioned to take advantage of healthy sector fundamentals.

Congratulations to Patrick Chang, our entire senior housing team, and operating partners for achieving a record year in entrance fee sales. Highlighting excellence in execution and underscoring the importance of aligning with the right operating partners that have the expertise to deliver leading results.

Briefly on the balance sheet before moving on to guidance. We ended the year at 5.2 times net debt to adjusted EBITDA and $2.4 billion of liquidity. We maintained focus on the strength of our balance sheet and prioritize disciplined capital allocation to pursue strategic investments and fund portfolio growth.

Now turning to 2026 guidance. We are forecasting FFOs adjusted to range from $1.70 to $1.74 per share. Our total same store NOI growth is forecasted in the range of down 1% to up 1%. This assumes outpatient medical between 2% to 3%, lab down 5% to down 10%, and senior housing ranging from 8% to 12%.

Our earnings guidance for 2026 reflects the life science environment over the past several years.

The reduction in earnings is attributable to the loss of occupancy in lab, which as we have noted, has a lagging impact to earnings. This equates to $0.12 of earnings from the loss base rent, OE, and capital to lease the space, and includes the impact of a $68 million contractual purchase option exercised in Salt Lake City at an 11% cap rate.

Strengthen our outpatient medical and senior housing segments, offset the impact of balance sheet refinancing at higher rates, the receipt of loan proceeds of $150 million in 2025 at an approximately 10% interest rate, and drag redevelopment and development.

The leading indicators supporting each of our businesses gives us a foundation to grow from and an opportunity to capture demand as the life science sector recovers. Touching on sources and uses, we're off to a busy start to the year with transaction activity. So far in 2026, we've completed $464 million of acquisitions, including $314 million buyout of our joint venture partner in our senior housing rental portfolio and the acquisition of the remaining South San Francisco Gateway lab portfolio.

We have an additional $360 million of senior housing investments under LOI or purchase agreement. To fund these transactions, we're well underway on our opportunistic capital recycling plan, including $1billion or more of asset sales, recapitalization, and loan repayments in 2026.

Given the strong private market for outpatient medical, we'll continue to take advantage of that demand as an attractive source of capital. And finally, we have approximately $1.1 billion of refinancing activity in 2026, including $650 million of senior unsecured notes maturing in July, and an additional $440 million of secured mortgages maturing throughout the year, which will either be refinanced or repaid.

And finally, two housekeeping items related to Janus Living before we move into Q&A. With respect to our previously announced Janus Living IPO, the impact of the proposed formation and public offering are not reflected in our most recent supplemental materials or in our earnings guidance. We should note that we do not anticipate any meaningful impact on 2026 guidance from the transaction.

And one last point on this, while we understand there will likely be many questions about the IPO, we're limited in what we can discuss specifically, and we'll focus our answers to information that we have previously disclosed on the transaction and operational information that we provide in the normal course for our senior housing segment.

Operator with that, you can open the line for Q&A.

Thank you (Operator Instructions)

Nicholas Yulico, Scotiabank.

Thanks. Good morning. I guess first question, perhaps for Scott, in terms of the gateway acquisition, can you just talk a little bit more about how you saw that as a compliment to your existing portfolio in that market and how you're comfortable, taking on more vacancy with the acquisition?

Hi Nick, good morning. You're always first on the list. You must call in really early. It's all good. It gives us something to, we know what to expect. Nick is always first. Yeah, Gateway. No, we're really excited about the Gateway acquisition. We feel like decisions we've made over the past four years really positioned us to take advantage of these opportunities. It's a campus that never would have been available at the peak. I mean, this is either the number one or number one submarket in the whole country, we've got a huge footprint there already. This is complementary.

It really just gives Scott and [Natalia] and the team an additional 1.5 million ft of it's really opportunity is the way we're thinking about it, not so much vacancy, and we're using proceeds from our outpatient sales where there's a really deep market. We're getting great prices, fully stabilized assets. That have decent growth but certainly not the type of potential growth that we see at this Gateway campus, and we really view it as one enormous campus at this point. I mean, it's 6.5 million square feet. You can park your car once and walk to the whole thing. I mean, it's pretty impressive in terms of what we can provide to our current tenants and most important perspective tenants.

We really are the market leader in South San Francisco. It had really a phenomenal 4Q in terms of leases signed. A lot of tenants in the market. Doesn't mean that all that vacancy, goes away within a year, but the momentum is positive. Love the team that we have on the ground, and, we see kind of a breakeven year one yield with the opportunity to create some real growth over time at a basis that I think, in the 5, 10 years from now, people will look at and say, wow, that's an amazing buy at a time when there's really no one else at the table. So yeah, we're pretty excited about it, Nick.

Okay, great, thanks. And then, the second question is on, the Lab segment, and I wanted to see if there's any way you can give us a preview of how to think about, occupancy, sort of total occupancy for lab, the cadence of that throughout the year, and then also I think you I think you've built in some cushion for some tenants where there may be a capital raise or not, so there's some contingency on that if you could just sort of talk about, that impact as well, thanks.

Yeah, let's assume that the recent improvement in the capital markets and capital raising continues. We saw that commence around Labor Day in '25, and it's continued into the first month of the new year. The conversations we have with bankers, capital markets desks, venture capitalists are quite positive, so we are optimistic that that will continue.

We do think total occupancy by year end '26 should improve from where we ended the year in 2025 just with the [caveat] that the leases in life science, are big, they're chunky. The average size is like 60,000 square feet.

So, it can't jump around from quarter to quarter, but the pipeline is good. It's weighted more towards new leasing, which is a huge positive, and we don't have a ton of expirations this year. So it should be a good setup to start growing occupancy again. But again, it obviously depends on the capital markets can continue to be cooperative.

All right, thanks, Scott.

Farrell Granath, Bank of America.

Thank you. Good morning, this is Farrell Granath. I first also just want to dive in deeper with the lab leasing and just thinking about it going forward, I believe you made the commentary around 100,000 of leasing activity under execution or LOI.

Can you give us a little bit more background? Around that [100,000], it seems a little bit lower than potential past LOIs that we've been seeing, that you've stated on calls. So are you seeing a slowdown in incoming or is it just year end, processes that now need to pick back up heading into '26?

Hey Farrell, it's Scott Bohn. I can, I can take that one. I mean, I think when you look at where we are in the calendar year, you have the holidays to at the end of the year, which are always a little bit slower, and you roll right into the JP Morgan conference, which, a lot of these companies, spent a lot of time preparing for, so it's typically a slower time of the year, we do feel good with the pipeline with where it is today, a little over 1.5 million square feet.

You look at that compared to where we were last year, we're 50%, higher starting the year, so our jumping off point going into 26% is much improved from where we were, a year ago, I think what's important too on the pipeline as we look at it, the mix of that pipeline continues to shift towards new leasing, versus being very heavy on the renewal side, 9, 12 months ago, so we're, I think it's a good indicator of where demand is broadening.

Okay, great. And then also on the lab guidance, the 5% to 10% same for NOI growth, can you walk through a few of the underlying assumptions within that range? I understand that a chunk of that is coming from the '25 expirations, but then also looking forward to '26. What elements are in that range, that is building?

Yeah, Ferrell, this is Kelvin. I'll take that one. I think what was probably most important from the fourth quarter results is that the disconnect between the occupancy decline and the NOI that we achieved for the quarter, it's probably important to note as you're looking into 2026 as you think about that 5% to 10% decline to same store NOI.

Occupancy today is in the high 77% area. We do have the opportunity over the course of the year to improve that, as Scott and Scott just mentioned, but we're likely going to see in the first quarter, some incremental impact to NOI and earnings as a result of the lower occupancy. At the end of the year, so that trajectory is not clear in the Q4 numbers, but will become a little bit more clear in the first quarter as that occupancy starts to set into income.

Thank you very much.

Austin Wurschmidt, Key Bank Capital Markets.

Hey, good morning, everybody. Kelvin, I was hoping to better understand the impact that the lab occupancy losses are having on 2026 FFOA. And if the $0.12 that you highlighted, is that specifically from the expirations that occurred in the fourth quarter of last year and, tenants that didn't renew, or are there additional move outs in that figure, beyond maybe what was, captured in the lease expiration schedule?

Yeah, so I think it's a combination of things. We've walked through the component parts of that $0.12 impact, there's the Salt Lake City transaction that we mentioned, that's a component of that, it's about a penny.

From the $68 million sale at 11% cash cap rate, that's a component, there's also outside of the lab portfolio, our refinancing borrowing costs are just higher today than our in-place levels, so that's another reduction to our 2026 FFO and we also received $150 million of loan proceeds at a 10% interest rate, so that's offsetting the FFO performance and that 12 penny.

Number that we're talking about, but specifically with respect to the lab occupancy, we did lose about 600 basis points of total occupancy for the year, and for each 100 basis points of total occupancy, that's about a penny to penny [$0.01 to $0.015] impact on earnings.

So that incorporates the base rate reduction, the OpEx that we will absorb with respect to the triple nets, and then some cost for releasing. So as we get into the first quarter again, 2026, you're looking at occupancy levels now that are more representative of where earnings are headed.

So you'll start to see the income reduction in that first quarter and through the year. But again, when we get to the end of the year, we hope that occupancy will start to take back up again, and we'll start to be able to capture earnings and growth from there.

It and can you just, that was helpful, but can you just help me better understand what's driving the lag between, I guess, when the expiration occurs and the financial impact, are these, planned move outs where they've gone to month to month and you're still collecting, rental income, or--what's driving that delay between, what we're seeing, I guess, in the supplemental on, the operating metrics and then what actually flows through to the financials.

Thank you.

Yeah, I mean, part of it also often you've got, our reported au is just at a point in time. It's just literally December 31, so it can be a little misleading, and I get back to the point I made that our life science leases tend to be pretty big. They're 60,000 ft on average, so you did have a number of lease expirations in 4Q where we got the rent for most or all of 4Q but then lost the occupancy. The very last day of the year. So that that's a material component.

And then when we have an early termination, we generally do have security deposits, letters of credit. In some cases there are modest termination fees. All of the above can help cover up for a quarter or two the impact of an early termination, but it's really kind of that forward 12 to 18 months worth of full impact is realized and of course you're now putting capital into the building, so it's really a combination of all those things that that explains the lag in to the impact in earnings, the same will be true on the way back up as we sign leases and grow occupancy. It'll take a little bit of time for that to flow through earnings, so it does go both ways right now we're on the wrong side of it, obviously, but we feel like the building blocks are there to get on the right side of it as we, look towards 2027.

I appreciate the clarification there. And just lastly I guess on the 1.5 million square feet, can you characterize the types of tenants looking for space? Are these large established biotech companies or more smaller kind of early stage type of tenants that, may have a greater sensitivity to the capital markets backdrop? And that's all for me. Thanks for the time.

Yeah, hey, Austin, Scott Bohn, I mean, I could take that. I think if you look at the pipeline, it's a pretty good cross section of the industry, from [Series A] companies up through, established public biopharma, and some of that is new tenancy with that would be to our portfolio. Some of that is tenants, renewing some of that is tenancy expanding within the portfolio, so it's a pretty wide range in the pipeline today.

Thanks.

Rich Anderson, Cantor Fitzgerald.

Thanks. Good morning, everyone. So back to Gateway and Scott, you said in a response to an earlier question, five years from now we'll look back. I don't think you're being scientific in saying that it's going to take five years for that.

You know that that campus to recover, but when you guys were thinking when you were underwriting this, what was the cadence of the recovery at Gateway specifically and how do you think that compares generally to Life Science overall? I mean, do you think it moves quicker or slower for whatever reason versus the entirety of the life science continuum?

Yeah, so I mean the acquisitions break even on day one just to be clear, so the upside probably gets captured over the next two to three years, best guess incrementally, so yeah, the 5 years, 10 years, obviously I'm not, that wasn't intended to be a comment about the lease up period. So I could clarify that if that was somehow misunderstood.

No, not at all. I figured that just wanted to. Put it on record, and, so that, okay, so to, call it two plus years to sort of recapture some of that vacancy or a lot of that 500,000 square feet of, vacancy, is that about right? I mean, rough guess right now, who knows?

I mean it's not going to go to 100%, yes, yeah, got it.

Second question for me, different topic for Kelvin, you got the--$1.1 billion of refinancing activity for this year at a 4% rate. But then you look at your debt maturity schedule, you got a, you got some chunkiness in the aftermath in '27, '28 and '29, mostly at lower rates than the 4%. I'm wondering, is there a strategy around any of that, pre preemptively, for this year, or do you let that ride out and see what the day brings, this time next year for future debt expirations thanks.

Yeah, I think just like in years past, Rich, we'll be very opportunistic and access the market when we see the best pricing opportunity. This year we'll focus on our, maturities that are ahead of us. The in place rates are fairly attractive relative to the new issue pricing, so we'll continue to try to be opportunistic, throughout the year, but there's no plan currently to accelerate some of our 2027 maturities into 2026.

Okay, thanks.

Seth Bergey, Citi.

Thanks. It's Nick Joseph here with Seth. Just on the 2026 explorations for life science, what percentage of that do you know is moving out, and where are you on negotiations with the remainder?

I can start, this is Kelvin, so for 2026 we have about 450,000 square feet of exploration, and that'll be fully offset, by commencements throughout the year. I think we did a great job of pulling forward some of our, renewals into 2025 to really pull that number down as we head into 2026. And a substantial majority of our--explorations are actually in South San Francisco, our biggest market where we have the deepest tenant relationships, so we feel good about being able to capture some of those renewals, but Scott, maybe I'll kick it to you to add some more context.

Yeah, I know, I think as Kelvin said, we did, address some of the 2026, expirations already in 2025, some of the ones we're working on. So later in the year are still TBD still, probably a little bit too early to tell on some of those.

Thanks, that's helpful. And then just as you've been, going through the leasing process, have there been any changes to the pipeline in terms of converting to executed leasing and conversion timelines?

Yeah, I think you're still working through a process where you know it's different than it was in the peak when there was no space available and people were making very quick decisions, people are being, Boards and CEOs are being a little bit more cautious and taking the time to make sure that they, have the plan's fully baked and the economics fully baked, so it is it the duration is still, longer than it used to be, but, I think what we're seeing today is the credibility of the pipeline is much stronger in so much that you know that we have more confidence in that the pipeline will transact, versus if you go back to two years ago, it's a lot of tire kicking, versus deals that were actually going to turn into transactions.

Thank you.

Juan Sanabria, BMO Capital Markets.

Hi, good morning. Just going back to, the kind of the bridge from fourth quarter to first quarter with regards to the NOI, the occupancy loss being back unloaded.

Can you comment on like, on what that NOI bridge like? Was there any, can you quantify how much one-timers there were in the fourth quarter that are going away, and or what like the pro forma NOI is on the lap side just so we can have a clear runway to start modeling for the full year '26.

Yeah, this is Kelvin, Juan. I think maybe I'll start, and it's a lot to unpack, but, I think starting with total occupancy at around 77%, we came down about 375 basis points, sequentially, and from an NOI perspective, that shift in NOI will be a lot more pronounced in the first quarter, as we mentioned.

If you think about our guide between, down 5% to down 10% for the segment, that should give you some context for, the decline that we'll expect in that first quarter from a same store and a perspective, as Scott mentioned, there were a number of other items that don't impact the same store as well that we got the benefit of in 2025 that you won't see in 2026.

So there's incrementally more of an impact with respect to earnings. So if you look at from an earnings perspective, our, the midpoint of our guidance range at $1.72 if you take that over the four quarters, it'll probably be a little bit higher in the first quarter in the fourth quarter, and it'll be a little bit lower in the second and third quarters, plus or minus the penny, as you think about it. But hopefully that gives you a little bit of direction in the trajectory that we're expecting.

Okay, great. And then just, a question on Seniors Housing. I know you guys kind of commented that you, you'd rather not get into specifics, but just curious on the previous sub sovereign wealth JB, how we should think about CapEx for that business and what kind of deferred CapEx there may be associated with that portfolio with the transitions upcoming, I'm not sure what kind of unit per year spend has been, put into those assets, but just curious on how we should think about cutbacks for that piece of the portfolio?

Yeah, hey Juan, it, it's Scott, and it's not that we don't want to talk about it. We just have to focus our comments on healthy just to be clear. So this is totally fair game. These are assets, mostly in Houston, in Denver, so big markets, we think they've underperformed, not the capital. There will be some normal transition stuff that we have to put into the buildings, technology, signage, stuff like that, but it's not like there's some massive CapEx plan.

To revitalize these, we think this is more operational in nature, so we're glad to have full control of the assets again, and we've already moved decisively after that buyout to align ourselves with two groups that we've got a good track record with, and we have high confidence that they're going to turn these around, over the next two to three years. So there's significant opportunity in these buildings, so we're excited to capture it.

Thank you.

Wesley Golladay, Baird.

Hey, good morning everyone. Can you unpack the lab watch list? How much has that list changed from a year ago? Obviously flushed out a lot of the tenants in the last few quarters, and I guess maybe can you quantify the exposure to call it higher risk pre-clinical Phase 1 companies?

Hey Wes, I'll start. This is Kelvin, and then I'll probably ask Scott to jump in as well. But I think if you start looking back at the capital markets activity over the last four months, we are certainly encouraged by the volume of activity both from an M&A perspective and equity capital markets perspective. The IPO backlog is building secondary equity offerings have been far more prevalent than what we saw for the first three quarters of 2025.

M&A activity picking back up again, so there's a good amount of capital recycling again in the biotech sector, which is very important to see, and as a result, our watch list has reduced considerably as tenants have raised capital, so we're encouraged by that.

That being said, in our portfolio we're still monitoring, tenants as we always do. It's just a part of this business, and there's some folks that we expected to vacate in the fourth quarter that didn't, that could come out of our portfolio, so we're still keeping our eye on specific names. We could be surprised at the upside as well, where they, continue to engage in BD discussions and engage in strategic discussions that could bring capital into their businesses and allow them to continue beyond our expectations. So I don't know, Scott, if you'd have anything more.

Yeah, I think just from the industry perspective too, which is fueling the capital markets, I mean the interest rate cuts, the three cuts last year, the two in the fourth quarter were fairly helpful for the industry in from a policy perspective in DC, they reached MFN deals with 14 companies. Those deals had little to no impact on share prices of those biopharma companies.

So the read through is the general impact on those deals is going to be pretty minimal, on biopharma, which is, helpful to understand and just get more clarity there. And then you look at the FDA. The FDA approved 52 drugs last year, which is right in line with the 10 year average, a little bit below the 5 year average, but given all the, chaos and change there, it provides reassurance to the industry that the agency is still functioning, and hitting dates and processing approval.

And we talked to our CEOs. I talked to 30 different CEOs of the JP Morgan conference and asked the question to virtually all of them, and the response was that the feedback they're receiving from the agency is normal and responsive.

And the FDA, again, if you look at the commissioner speak, they're talking about process improvements and streamlining reviews and lowering costs which are all changes, helpful changes to the industry which, again isn't directly correlated to the capital markets, but, certainly helping the sentiment behind the industry, and to go back to answer the first part of your question too, less than 10% of our, ABR on the--lab side is from pre-clinical kind of.

Okay. Thank you for that. And then when you look at your leasing pipeline, is that starting to shift more towards some of the redevelopment and development properties?

Yeah, I, we had a good quarter on the [Devin Redo] side. We executed 121,000 square feet of leases, on our redevelopment properties in the quarter, additionally, we completed 100,000 square feet of, [TIs] and delivered space, both at, combined advantage, and Gateway in San Diego. So, certainly we have more credible activity again and ongoing discussions. On those development and redevelopment spaces today than we've had in a while, but nothing far enough to talk about in detail today.

Okay. Thank you.

Vikram Malhotra, Mizuho.

Good morning. Thanks for taking the questions. I guess just two clarifications. So first of all, I guess Kelvin, can you just confirm or clarify, fourth quarter I think you had between $0.02 or $0.04 of, whether it was termination income or the benefit from the occupancy bag versus the income hit, etc. Like you mentioned, in terms of security deposits.

So that's like the, $0.12, $0.13, but how much of that is actually still flowing into 1Q because you mentioned 1Q extra four is like the higher before we still the full before we see this the full impact just because $0.03 is a lot in the quarter. So I just want to make sure we understand how much of that, $0.02 to $0.04 or $0.03 kind of percolates into 1Q.

Yeah, and maybe just to jump to first quarter FFO it's probably down $0.03 pennies from where, we ended the year, so $0.47 is something closer to $0.43, so, maybe that helps give a little bit of context. I think the numbers that we're benefiting the fourth quarter will naturally come out as we start in the first quarter.

But Vic, I think that should give you some context in terms of the trajectory between Q4 to Q1 just to get right to it.

Okay, so there's some security deposit slash, term, letters of credit that still benefit you in 1Q and then they fully go away in 2Q onwards. Is that fair?

I think they largely go away in the fourth quarter, but you'll see the benefits that we got in the 4th quarter that were not related to vacates in our portfolio included some free rent burn off, so that benefit's coming in in the first quarter as well. So there are other natural benefits escalation from leases in 4Q that started to provide some incremental earnings benefit, you'll start to see in the first quarter as well. So not just those. Items that we're talking about around terminations and letters of credit, but you know that should hopefully give you enough context relative to the year, how the first quarter will start.

Okay, and then just on the life sciences occupancy build. Just to maybe give us a bit more context, do you mind giving us kind of where occupancy is either portfolio wide or same store like lease versus, economic date, and then just clarify again, I think you made a comment on expirations like what do you actually have baked in for renewal on the expirations in, 2026. Thanks.

A lot of questions in there.

What was the first question? Vikram, we didn't catch it.

Just the like leaves versus the like what's the leads versus occupied or like economic versus lease rate. So like what you've actually leased, which may not be like commenced, which may have been leased but not commenced, so the difference there, there's a difference between the two. So I think you had 77-ish total.

Portfolio we've got a couple 100 basis. We've got a couple 100 basis points of leases that have been signed that haven't yet commenced that should start in '27 that probably offsets most of the. Non-renewals, although Scott already said, we don't have full clarity on the renewals. A lot of them are back and weighted, so I'll just repeat that and I'll also repeat what I said earlier is we think total occupancy should increase from year end '25 to year end 2026. That is what is in our guidance.

Okay, and that's a combination of your, like you hope it's a macro comment, but it's also based on kind of micro where you look at the pipeline today and you can see a higher conversion rate perhaps than prior, is that fair? Like it's not just sort of a macro you need the macro to stay where it is, but you actually also see specific conversion.

Yeah, it's certainly fair to say we're looking at the macro, the submarket, the lease. I mean, from top to bottom, the Roman putting together our guidance, we're looking at all those components. Yes, that is fair to say.

Thank you.

Mike Mueller, JPMorgan.

Yeah, hi, what's embed anxieties for AFFO capbacks and capitalized interest for 2026 and multiclabacks split between the settlements?

And maybe we'll start in our guidance we had just over $500 million of CapEx in our plan, and that's a combination of redevelopment capital, non-recurring capital, development capital, so it incorporates everything, the timing of that spend is, naturally throughout the course of the year. Last year we had about $600 million. This year it's come down.

A decent amount and we'll be executing on that plan throughout the year. So the amount, I don't have it specifically in front of me just for the AFFO component of that, but I think we're going to be lighter on the capital spend this year than we were in 2025.

There's no material change in AFFO CapEx in '26 versus '25, Mike. So if you just look at the supplemental in the disclosure there, that's a good run rate for all three business segments.

Got it. Okay. And what about Capitalized interest?

Yeah, cap interest is flat actually, so no change to cap interest.

Okay, appreciate it, thanks.

Omotayo Okusanya, Deutsche Bank.

Yes, good morning, everyone. I wanted to go back to the Gateway Transaction. I'm really kind of understanding it's almost a little bit to Richard's, question, trying to understand exactly how you expect that to kind of ramp up over the next few years, and I guess I ask the question in the context of, you're kind of buying it at 60% occupied according to media reports and also buying it from kind of two other well-known, players in the space.

So it's like just kind of curing like exactly like what are you seeing versus like they're kind of exiting and you're kind of doubling down and I'm just trying to understand those dynamics a little bit and ultimately kind of, when you look at this investment three to five years down the road, how do you expect it to be performing?

Yeah, well, can't necessarily speak for others. I mean, they're in a joint venture. I think they made it public. They're looking to raise money in 2026 to fund various things, development pipelines, etc. We're in a much different situation, we're being opportunistic. Balance sheet's in great shape. We don't have the big development pipelines, so we're in a position to opportunistically acquire assets with a lot of upside, but also good current yield.

So I think that's the right way to think about it. [Low 6] is going in. A lot of capital has already been put into these buildings. The future capital that we would need to invest is really good news capital tied to leasing. So that's a positive thing. If we're investing capital into these buildings, it means we signed a lease. And we see high single-digit unlevered type return opportunity in this market. As it stabilizes, so that, that's pretty compelling in comparison to the things that we're selling.

That's actually very helpful context. And if I may just ask one more about, just like tiptoeing around Janus, I just, I mean, is, all your CCRC assets going to be going into this thing, or is it just the senior housing and stuff and the thing and then the skilled nursing and the memory care still kind of remains at healthy.

Yeah, Ty, let me clarify that. So, when we complete the IPO, all of our Senior Housing assets, whether entry fee or rental, would be contributed into Janus Living. So going forward, Healthpeak will not own any senior housing real estate, will just have an ownership interest in the stock of Janus Living.

Right, so the so the, the memory k and all the other stuff that's part of the CCRC is also going into Janus.

That's right, yeah, those are campuses that we can't break them up. That, that's that one asset, they can't be broken up.

Got you. Alright, and I guess over time you'll kind of share more details about the external management contract and things like that.

That's right. Outside of what has already been made public, Tayo, so if you have a question about what's been made public, I'm happy to address that here.

Got you. All right, sounds good. All the best. Thank you.

Thanks, Tayo.

Jim Kammert, Evercore.

Thank you. Good morning. With the Gateway Transaction behind you, what is the appetite, just generically, you still have some guidance in terms of billion plus or minus of acquisitions in '26. What's your appetite for opportunistic lab now that you've already got gateway under your belt?

Yeah, hey Jim, we've got, $1 billion of acquisition and stock buyback built into our guidance. We've already closed or under contract to just over $800 million between the gateway transaction and the senior housing opportunities that should close here in the first quarter. So you're right, there's a little dry powder, not significant, but we do have a pretty large pipeline of asset recycling, whether outright sales, recaps, loan repayments.

So there's at least the potential for that billion dollars to grow depending on whether we can recycle capital. We're obviously not looking to issue equity at our current stock price, but if we're more successful in selling assets or recapping assets, we would have additional dry powder to look at opportunistic life science investments.

There's a number that we're keeping our eye on, but certainly nothing that is ready to be disclosed or under contract, but it's fair to say that we'll be very disciplined in which assets in which submarkets we would pursue. That was the case even in the peak.

We did not get overly aggressive. We stayed disciplined. Our entire portfolio is in the three core markets that will continue. So anything we do, I think would have a lot of crossover or similarities to what we just did in Gateway. We're in a known submarket, a team that can execute, and what we feel is a real competitive advantage to drive lease up.

Fair enough, understood. And then so we haven't talked about, most of the synergies, relating to the physician's realty on the outpatient medical side, the synergy is basically in run rate today or late 25, I guess I should say, or should we sort of have some, maybe a little further margin implications for the outpatient medical across '26.

We've got another 2 million or 3 million square feet that we could internalize property management over the next one to two years. So there's still a little bit of opportunity, but it, it's not material. Most of that 70 plus million dollars of synergies are basically included in our not only fourth quarter '25 run rate, but our 2026 guidance as well, June.

Okay, thank you guys.

John Pawlowski, Green Street.

Hey, thanks for the time. My first question on the operator transition of the assets held in the sovereign wealth, JV. Do you expect, occupancy declines in the near term as the new operators take over, and how long do you expect for the properties to reach more of a stabilized market type of occupancy level?

Hey John, Scott here. Hopefully we can get those transitions done by April 1. That's at least the target. Teams are working hard to do that, including the operators, so we appreciate their cooperation. There could be a small decline, in occupancy, but I don't think it's material. We see significant upside, 50% plus NOI growth potential over the next two to three years in our view, highly aligned management contracts and. And operators that have a really good track record with us and in these markets, so pretty optimistic about the upside, but yeah, there could be a quarter or two of transition related occupancy loss, John.

Okay, and then last question maybe for Scott Bohn, I want to better understand the composition of tenants that have, other signed leases or that are in your pipeline kind of the post Labor Day. Can you give me like rough ballpark what proportion of tenants are more of the traditional wet lab users versus other perhaps AI or almost quasi traditional office users?

Yeah, it's a pretty good mix you know we did have some office related, users, signed leases in the fourth quarter, we did, one GMP manufacturing type space with an existing tenant of ours, in a redevelopment project, and then several wet lab spaces, so pretty good mix, we also signed one lease with a group who, we announced it on social media, but it was a actually, a drone manufacturer would just raised $600 million at, I think it was a $6 billion market cap, so a wide variety of uses, and I think that, underscores the ability, within our buildings for to capitalize on the robust infrastructure that's in those buildings, and be able to play, cast a wide net in our leasing, and especially in the Bay Area where we've seen a real convergence office demand increasing, AI and AI adjacent both in, office space but also on the lab front as well.

If you follow on there as you see that convergence, what are the implications for the rents those tenants are paying? Are they decent all else equal? Are they decently lower than the wet lab users is going to pay?

Yeah, I mean if you're just looking at a straight office space which you know we don't have all that much of, I mean that's obviously going to be a lower rent than a than a than a lab space but you know each field, different, overall rents and economic or net effect is ticked down a little bit, but.

And we've seen a little bit more free rent in in certain deals in certain markets, but it's all dealer specific. I mean it depends on the space, it depends on the build out of the space, we have been able to control the TIs quite well, if you look at our second generation leasing, our renewal leasing they were close to zero, and on our TIs on our new leasing take down as well.

So I think you, it's going to look at a little bit more than just the face rate on these deals, it's the total economic package, that, that's how we think about it.

Okay, thanks for the time.

Jamie Feldman, Wells Fargo.

Great, thanks for taking the question. I'm pinch hitting for John Kilichowski here. So we appreciate all the guidance and all the moving pieces on '26 for the key line items. As we think about, how those move throughout the year, is it safe to assume that '26 is a bottom for FFO, or do you think it can still be lower in '27? I know you, I mean, I'm not really asking to give guidance, but how should we think about like the key line items and how they. How they progress throughout the year and what that means for '27?

Oh hey Jamie, yeah, so two-third of the portfolio is doing really well, even if we're successful with the IPO, most of those, earnings will still flow through Health Peak's financial statements, so there really isn't any impact from the IPO there, which is one reason we really liked it, as an alternative outcome for shareholders.

The outpatient fundamentals are very strong. If anything, the growth outlook in '27 looks even more favorable, just given the leasing trajectory and occupancy trajectory, and we obviously see life science coming down. I mean, we've said, throughout this call, we see occupancy increasing a bit from a year in '25 to a year in '26. That should be a positive.

The variables are obviously what happens with interest rates, as Richard pointed out, we still have some. Refinancing to do over the coming years, but the building blocks of the actual portfolio sure feel like '26 absolutely would be a bottom.

Okay, great. That's super helpful. And then just how do you think about doing, an equity acquisition like you did versus some of the higher yielding med or loan to own deals you had done in the past at higher yields? Like why the transition to put so much capital into that type of investment versus more fixed income type stuff?

Yeah, I mean, we only did two of the loans. Those are just unique situations in San Diego about a year ago. We do like those in terms of the risk profile versus the return. So if those are opportunities in '26, we continue to look at those. This was just a unique opportunity to buy a campus we absolutely wanted to own from day one at a breakeven yield with the ability to capture a bunch of upsides. So it's just different dynamics. The two loans we did, those buildings were essentially empty. So just a very different return profile where we thought the loan with a pathway to ownership was the right structure for those two particular deals.

Okay. All right, great. Thank you for taking the question.

Yeah, thanks, Jamie.

This concludes our question-and-answer session. I would like to turn the conference back over to Scott Brinker for any closing remarks.

Thanks for your time, everyone. Hopefully we'll see you, tomorrow in Florida. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.