Earnings call transcript: Healthpeak Properties Q2 2025 misses EPS expectations

Healthpeak Properties, a leading player in the healthcare real estate sector with a market capitalization of $12.23 billion, reported its second-quarter 2025 earnings, revealing a mixed financial performance. The company’s earnings per share (EPS) came in at $0.05, missing the forecast of $0.064 by 21.88%. Revenue slightly exceeded expectations, reaching $694.35 million against a forecast of $689.32 million, contributing to a robust 15.91% year-over-year growth. Following the announcement, Healthpeak’s stock fell 6.73% to $18.38 in aftermarket trading, reflecting investor concerns over the earnings miss. According to InvestingPro analysis, the stock appears undervalued compared to its Fair Value, suggesting potential upside opportunity.

Key Takeaways

• Healthpeak Properties missed EPS expectations by 21.88%.
• Revenue exceeded forecasts by 0.73%.
• Stock dropped 6.73% in aftermarket trading.
• Strong liquidity position with nearly $2.3 billion available.
• Positive outlook for outpatient medical demand due to demographic trends.

Company Performance

Healthpeak Properties reported a challenging quarter, with EPS falling short of expectations. Despite this, the company maintained a strong liquidity position and reaffirmed its full-year FFO and same-store cash NOI expectations. The company continues to leverage its position as the largest outpatient medical portfolio holder, focusing on high-growth markets such as Dallas, Houston, and Nashville.

Financial Highlights

• Revenue: $694.35 million, slightly above forecast.
• Earnings per share: $0.05, below the forecast of $0.064.
• Liquidity: Nearly $2.3 billion available.
• Net debt to adjusted EBITDA: 5.2x.

Earnings vs. Forecast

Healthpeak Properties’ EPS of $0.05 fell short of the forecasted $0.064, missing expectations by 21.88%. In contrast, revenue surpassed expectations by 0.73%, reaching $694.35 million.

Market Reaction

Following the earnings announcement, Healthpeak’s stock declined by 6.73% to $18.38 in aftermarket trading. This drop reflects investor concerns over the EPS miss, despite the revenue beat and strong liquidity position.

Outlook & Guidance

The company remains optimistic about its outpatient and CCRC segments, driven by the aging population and consumer preference for convenient, lower-cost settings. Healthpeak is also exploring opportunities in AI integration and potential lab space acquisitions in core markets.

Executive Commentary

CEO Scott Berger highlighted the strategic success of internalizing property management, stating, "Our decision to internalize property management continues to be a strategic and financial success." CFO Kelvin Moses emphasized the company’s operational strategy, saying, "We’re implementing a strategic plan that enhances operating procedures, refines lease documents, strengthens training and support programs."

Risks and Challenges

• EPS miss could impact investor confidence.
• Life science segment faces capital market challenges.
• Potential regulatory changes in the biopharma sector.
• Market competition in high-growth areas.
• Economic pressures affecting tenant capital raising.

Q&A

During the earnings call, analysts raised questions about tenant capital raising challenges and occupancy declines in the life science segment. Executives also addressed potential opportunities in AI and healthcare real estate, along with acquisition strategies in core markets.

Full transcript - Healthpeak Properties Inc (DOC) Q2 2025:

Conference Operator: Good morning, and welcome to the Healthpeak Properties, Inc. Second Quarter twenty twenty five Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President of Investor Relations.

Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties: Today’s conference call will contain certain forward looking statements. Although we believe expectations reflected in any forward looking statements are based on reasonable assumptions, these statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations. Discussion of risk and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward looking statements. Certain non GAAP financial measures will be discussed on this call.

In an exhibit to the eight ks we furnished to the SEC yesterday, we have reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at healthpeak.com. I’ll now turn the call over to our President and Chief Executive Officer, Scott Berger.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: All right. Thanks, Andrew, and welcome to Healthpeak’s second quarter twenty twenty five earnings call. Our CFO, Kelvin Moses, is here with me for prepared remarks, and our senior team is available for Q and A. I want to start by thanking our entire team for another quarter of excellence in execution, one of our We Care core values. In addition to their normal responsibilities and strong financial results, our team completed an enterprise wide technology upgrade after more than a year of planning and testing.

The new platform will improve the integration and availability of data, increase productivity, and provide a foundation for rapid deployment of additional AI capabilities. All right. Let me touch on the political and regulatory environment. The reconciliation bill signed in early July should be a first step in reducing the uncertainty that has impacted our sector. As is often the case, the reality was far better than the attention grabbing headlines earlier this year.

We were pleased to see the changes made to drug pricing for rare diseases and favorable tax treatment for research and manufacturing. Both changes helped promote biopharma investment here in The U. S. In our outpatient business, the impact of the Medicaid cuts should be pretty immaterial given our locations and our tenants’ payer mix. More important is a recent proposed rule from CMS to the so called inpatient only list.

Current policy requires surgical procedures to be performed in a hospital unless explicitly approved by CMS for an outpatient setting. In other words, the default option is the hospital. The proposed rule would reverse that, and the default option would be to allow the outpatient setting. This would be very positive for our business. Our decision to internalize property management continues to be a strategic and financial success.

Next month, we’ll internalize 2,000,000 square feet in Boston and 1,000,000 square feet in Texas. One of my strategic goals has been to bring us closer to our real estate, and I love the fact that our own employees are now interacting with our tenants on a daily basis. We’ve been able to remove layers of oversight and bureaucracy, generate profit, and augment relationships with our tenants. Last week, we received our most recent tenant satisfaction scores, which showed year over year improvement and are well above industry averages. Our focus on customer service helps drive high retention rates and releasing spreads.

I’d like to give some color on second quarter results in each of our business segments, starting with outpatient medical. Same store growth, retention and releasing spreads were all near record levels. The aging population and consumer preference for convenient lower cost settings is driving demand for our buildings. Meanwhile, new supply is at the lowest levels we’ve seen in

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: two

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: decades. That dynamic is favorable for Healthpeak with the largest footprint in the sector and industry leading tenant relationships. By design, we have significant concentration in markets like Dallas, Houston, Nashville, Atlanta, Phoenix, Denver. We’ll continue to grow in these core markets, deepening our competitive advantage in geographies with the highest potential for internal and external growth. To that point, we recently closed on two large outpatient development projects in Atlanta, representing $150,000,000 of projected spend.

Atlanta is one of our biggest and most important outpatient markets, supported by our relationship with Northside Hospital, a fast growing and highly successful regional health system. The new developments are anchored by Northside outpatient services and physicians and are 78% pre leased before commencement of construction with a strong leasing pipeline behind that. We expect to achieve a mid-7s return on cost generating significant shareholder value relative to acquisition cap rates on such high quality assets. In our lab r and d business, we’re beginning to see at least a few leading indicators turn positive. Spec new supply is quickly going to zero and should remain there for quite some time.

A recent broker report showed more than 4,000,000 square feet of inventory being removed from the supply pipeline as certain landlords who lack scale and expertise pursue an alternative use. On the regulatory front, new leadership at the FDA are making changes to promote innovation and modernization. That amount of change creates a bumpy transition, but the landing point should be positive for the biopharma sector. In particular, the cost and time to bring a drug to market in The U. S.

Could come down, improving the return on cost for R and D taking place in our lab buildings. We’ve also seen a couple of $10,000,000,000 M and A deals recently, which allows capital to be recycled back into the ecosystem. Those M and A exits along with political and regulatory stability should help jumpstart public and private capital raising, which is the key to an improvement in new leasing. Moving to our CCRC business, which experienced record leasing volumes last quarter. Our strategic decision to increase affordability with our unique entry fee structure broadened our demand pool and differentiated our product.

The CCRC portfolio is residential housing for independent seniors with significant amenities and a continuum of care available on-site. Our net entry fee is just 60% of the local median home value, representing a strong value proposition for our residents. The portfolio is now generating approximately $200,000,000 of annual NOI, including cash entry fees, which incredibly is 50% higher than in 2019 before the pandemic. Our decision to bring in LCS as the operator has been an important part of that spike in performance. And with current occupancy at 86%, we have more upside to capture.

Okay, let me turn it to Calvin for financial results and the balance sheet.

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Thank you, Scott. I’ll begin with a brief update on how we’re positioning the operating platform to lead in this next phase of execution for Healthpeak. Today, we are a very different company than we were three years ago, with more than 60% of our team now directly engaged with our tenants and focused on delivering a differentiated customer experience across our properties. Our entire company is committed to enhancing our client service model, laying a strong foundation for sustained long term value creation through operational excellence. With the internalization of property management largely complete, we’ve shifted focus to scaling our real estate operations capabilities.

We’re implementing a strategic plan that enhances operating procedures, refines lease documents, strengthens training and support programs, and elevates brand service standards to deliver best in class experience for our clients and tenants. This commitment to operational excellence will further set Healthpeak apart from competitors and positions the platform to capture investment and leasing opportunities not available to the broader market. We’re also well underway in advancing a near term action plan to deploy artificial intelligence tools designed to optimize daily operations and enhance visibility into asset performance. These tools will empower our team with real time insights and will allow us to implement solutions that ensure consistent performance, deliver practical efficiencies, and streamline processes. We look forward to sharing relevant updates on progress on future calls.

Now moving into our second quarter results. We had another overall strong quarter of financial and operating results. We reported FFO as adjusted of $0.46 per share, AFFO of $0.44 per share and total portfolio same store growth of 3.5%. In our CCRC business, we reported same store growth of 8.6% driven by rate growth of 5% and higher entrance fee sales. We continue to be pleased with the execution by our operating partners, the strength of our team and the performance of our high quality portfolio of assets.

Moving to outpatient medical. Our results this quarter reflect the focus that our leadership team has placed on positioning our portfolio for success, cultivating the strongest tenant relationships in the sector and capitalizing on the continued strength and fundamentals we are seeing across the business. This quarter, we achieved 85% tenant retention, delivered a positive rent mark to market of 6% and reported same store cash NOI growth of 3.9%. During the quarter, we executed over 1,000,000 square feet of leases, including approximately 200,000 square feet of new leasing. That represents 2,000,000 square feet of execution through the 2025 and a strong pipeline to follow.

Additionally, we executed another 419,000 square feet of leases in July, and we have 682,000 square feet under LOI. And finally, last, we continue to focus on capturing outsized share of the available demand in the market and converting our pipeline into executed leases. For the second quarter, we reported same store growth of 1.5%, a positive rent mark to market of 6% and tenant retention of 87%. We executed 503,000 square feet of leases in the quarter, which included approximately 85% renewal leasing and brings our total lease executions for the 2025 to approximately 780,000 square feet. Additionally, we executed another 55,000 square feet of leases in July and we are under LOI for another 250,000 square feet.

Total occupancy declined by 150 basis points this quarter, primarily due to natural lease expirations and tenant departures following unsuccessful capital raises earlier in the year. On to the balance sheet. In June, we repaid $450,000,000 of senior notes with proceeds from our commercial paper program. We ended the second quarter with net debt to adjusted EBITDA of 5.2 times and nearly $2,300,000,000 of liquidity. As we look ahead to the remainder of the year, we will opportunistically monitor the bond market to refinance our commercial paper balances and further strengthen the balance sheet.

Balance sheet discipline will continue to be a core long term strategy and we expect to preserve optionality to invest where we have identified opportunities that will enhance our portfolio quality and generate attractive returns. Before we move into Q and A, we wanted to briefly touch on guidance. Based on our strong overall performance in the first half, we are reaffirming our FFO as adjusted and same store cash NOI expectations. Our CCRC portfolio continues to benefit from strong market fundamentals and with year to date same store growth of 12%, we are now on track to exceed the high end of our segment guidance. Outpatient Medical, our largest business segment, continues to achieve strong tenant retention and re leasing spreads, which were up to 6% in the second quarter.

That performance is supported by a robust leasing pipeline that positions this portfolio to the high end of our initial segment guidance. We remain confident in the execution from our team and the balance of our diversified portfolio, which we expect to deliver results within our overall same store growth range despite what we are experiencing broadly in the lab sector. Over the coming months, I look forward to continuing to meet and engage with our equity and fixed income investors. And with that, operator, we can move into questions.

Conference Operator: Thank you. We will now begin the question and answer session. To withdraw your question, please press star then the number one again. So that everyone may have a chance to participate, we ask that participants limit their questions to one and a related follow-up. If you have additional questions, please re queue.

And the first question comes from the line of Nikky Lico with Scotiabank. Please go ahead.

Nikky Lico, Analyst, Scotiabank: Thanks. Good morning. I guess first question is on the lab segment and the same store occupancy decline in the quarter. I was hoping you could just break it out a little bit more between you know, the impact from, as you said, expirations where there weren’t renewals. It felt like the retention ratio might have been lower than, like, your trailing twelve month number.

And then versus the bad debt or tenant default, issue that, seems like it

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: might have happened in the quarter? Thanks.

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Hey, Nick. This is Kelvin. So to to give you a little bit of context there, you know, over the quarter, we had about, 280 basis points, 290 basis points of same store occupancy decline. If think about it from a total occupancy perspective, you know, that breaks down to, you know, a component of that. About a third of that impact was a result of space that we’ve reabsorbed due to tenants that had expiring leases.

Another third of that was a result of some tenant migration that we did within the portfolio. We expanded some tenants, relocated some tenants, and took certain space back in that process. And then the kind of remaining component of that would be, attributable to tenants that were unsuccessful raising capital in the beginning of the year that ultimately, we had to work out of the portfolio. So it’s a probably a third or third or third impact with respect to the occupancy.

Nikky Lico, Analyst, Scotiabank: Okay. Thanks. And then, second question maybe for Scott is, you know, we just think about sort of

Jamie Feldman, Analyst, Wells Fargo: the focus of the company. I mean, you

Nikky Lico, Analyst, Scotiabank: you you know, you did launch some new developments in outpatient medical. How are you sort of thinking about using the balance sheet right now? You know, I I I know you put on pause some of the, debt investments or in lab. You were sort of waiting on some better opportunities maybe there from a pricing standpoint. The stock is weak today.

You have stock buybacks as an option as well. Just kinda latest thoughts on capital allocation. Thanks.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yeah. Hey, You cut out a little bit. Hopefully, I caught the gist of your question. But maintaining a strong balance sheet is priority number one on capital allocation, and we we have done that. We’ll continue to do that.

Sometimes that includes opportunistic asset sales. We did a lot of that last year. We could always consider that this year. I think the demand for outpatient medical in particular remains really strong in the private market, so there’s always things that we could do there. It’s a very high quality portfolio.

That would be in demand. Buybacks, obviously, we’ve been active. We’ve done 300,000,000 in the past, call it, fifteen months, and we do that opportunistically. If we have the balance sheet capacity, it’s something that we prioritize at a certain stock price, which which you’ve seen historically and you’ll continue to see as an as an option. The two outpatient developments were extremely attractive, and that’s one reason we try to maintain such a strong balance sheet is that so that we have the capacity on our balance sheet to capitalize on those opportunities, and and there’s more of that in our pipeline.

So those are interesting. And life science distress at the right time is gonna be an enormous opportunity. We’ve built up a pretty big pipeline, late in 2024 after a really solid year of leasing, and it looked like fundamentals are moving in the right direction. Obviously, the regulatory environment, the first six months of the year or so changed our outlook, our near term outlook. But if anything, it just makes that opportunity set bigger and ultimately more attractive.

So at the right time, that’s gonna be an enormous opportunity for us. But, you know, we’ll be patient and thoughtful and disciplined in terms of when we turn our attention to the distress that we’re seeing.

Scott Bowen, Executive, Healthpeak Properties: Okay. Thanks.

Conference Operator: Your next question comes from the line of Farrell Granite with Bank of America. Please go ahead. Thank you so much. So my first question

Farrell Granite, Analyst, Bank of America: is about you just mentioned the one third of unsuccessful capital raising for those tenants. Just trying to think about going forward for the second half of the year, how much foresight or maybe leftover impacts from those that specific bucket would you expect to maybe weigh on the occupancy?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Yeah. Maybe I’ll start with little bit of context from Scott’s earlier points. I think we’ve for the beginning of the year, we saw a little bit of a slowdown in the capital markets for life science, but there’s been a number of positive events, that are encouraging that have happened as of late. The m and a activity has been strong. You’ve seen some great prints there, from Merck and Sanofi.

You’ve also seen the secondary market open back up for tenants. So we think it’s important to highlight those kind of positive signs that we’re seeing in the capital recycling. But, you know, no doubt it’s been a a bit challenging for tenants to raise capital, and, you know, we have some tenants in our portfolio, small number of them that are relying upon raising capital at any given time. So, you know, those tenants could fail as a result of failed science. They could fail as a result of inability to access the capital markets and disproportionately so the capital markets were largely unavailable for a period of time.

So we’ll have some headwinds for for the balance of the year from an occupancy perspective, but to to quantify that at this point would be challenging.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Hey, Farrell. Let me give one additional perspective on this topic because the the the overall ABR from the company, including the CCRCs, I mean, you’re talking about 1.6, $1,700,000,000. The the vast majority of that is credit tenants. When you really look at the the portion of the portfolio that would be more at risk, you have to monitor. It’s small cap biotech in certain of our private tenants.

It’s 10% of the portfolio. The the look at the top 20 in our supplemental. The vast majority of those are credit tenants, whether they’re health systems or global biopharmaceutical companies. So it’s a very well diversified portfolio. The smaller biotech companies are clearly part of our business.

There’s a huge list of success stories there that start out at 10,000 feet, 20,000 feet, series a type companies that now have two, three, 400,000 feet in the portfolio. But they’re cyclical. They’re very dependent on capital raising and, obviously, scientific outcomes. It’s been a tough capital market, for the last six months, and and that’s had an impact. We get the benefit of that when the capital markets are strong, and I think you saw that in 2024.

The first six months of this year, we’re we’re we’re the opposite. And and, obviously, that’s flowing through, but keep in mind the diversified portfolio, and we just maintain our earnings guidance. So so I think we just wanna keep in mind the the broader perspective. This is a point in time that that same portfolio base of small and private biotech tenants could become very valuable, to us once the capital markets turn in our favor, and that obviously will inevitably happen. The last thirty days have been a lot more positive.

You know, we just reported second quarter results, which is April 1 to June 30. The month of July has been a lot more favorable, whether it’s the reconciliation bill, the XBI has traded more favorably, the commentary out of the FDA has been more favorable, a couple of very, very large m and a deals that allows capital to be recycled into the sector. Those are all really positive leading indicators. That doesn’t translate into second quarter results, obviously. But we feel a lot better about some of the building blocks that we’re seeing in the business today than we did three months ago.

Farrell Granite, Analyst, Bank of America: Definitely. And thank you so much for that extra color. But I and then also, I guess, then the other part of your portfolio, the MOBs, similar with how you maybe broke out what what kind of was going on in the lifetime, occupancy decline.

Conference Operator: Can you just speak a little

Farrell Granite, Analyst, Bank of America: bit more on MOBs and maybe some of the tenants that chose to not, or at least the type of tenant that chose to not renew?

Mark Thine, Executive, Healthpeak Properties: Hey, Pearl. This is Mark Thine. Our occupancy across the outpatient medical portfolio, you know, 91, 92% is a very strong occupancy. We typically have 80% retention. And, you know, the types of tenants that don’t renew, sometimes it’s, it’s tenants that I mean, we physically can’t accommodate their growth because the the occupancy of the building.

You know, there’s just some some retirements here or there across the building, but there’s not any, you know, one particular type of, of nonrenewal 10 across the portfolio. Our hospital retention is fantastic, and, we’re really focused on our leasing results, keeping strong retention, lease renewal spreads, and, and continuously create occupancy as we fill up the for portfolio.

Conference Operator: Great. Thank you so much. The next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Great. Thanks. Just going back to lab a little bit, Scott Brinker, I guess trying to sum it all up. I mean, much of these issues that you saw this quarter, credit issues at hand, do you view as backward looking and kind of will continue to work its way through the credit stream, if you will, versus you know, there could continue to be challenges for that 10% of the portfolio that you flagged if capital market volatility picks up again and and leasing new space just isn’t really, you know, a top priority versus preserving capital.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yeah. The interesting thing about the the tenants that didn’t make it is that they weren’t new companies. The average age of the companies that had early terminations was fifteen years. That was the median age as well. So this wasn’t a bunch of start ups that that were funded and should not have been in 2020 during the COVID boom.

These are companies that had very significant backing from brand name venture capital or, kind of the billionaire tech, backing, you know, very well known names that has, raised capital five, six, seven times in their lifespan during that fifteen years. And in many cases, the technology itself was was purchased out of the bankruptcy, meaning that it wasn’t a failure of technology, truly rescaling the business starting over from a lower cost basis. So, you know, when when companies fail, it’s either the science fails, and that does happen no matter what the capital markets are, or they can’t raise the money. And across the board, what we saw year to date is that the companies just couldn’t raise the money. So you can point directly to the capital raising environment, and, obviously, that could change quickly.

There’s still companies that we’re monitoring. It’s not gonna go to zero overnight. But if the last thirty days that we’ve seen the sentiment turning more positive, if that continues, that would be obviously hugely important to reducing the amount of bad debt in the portfolio, but more importantly, to turn the turn the direction on new leasing. That will happen. It’s a matter of time, but the last thirty days have been a lot more favorable and optimistic.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: That that makes sense. I guess it’s just trying to kind of ring fence the companies that have maybe yet to see a credit issue pop up. But like you said, you’re still monitoring how significant of that 10% is that figure and kind of the timeline that they have, three, six months until they need to be able to raise capital. And then separately, I’m just focusing on that new leasing within lab, the 503,000 square feet. I think you said 85% was renewal activity, which implies about 75,000 square feet of new leasing.

So for the bucket of renewals, which I think is about 425,000 square feet or so, how much of that was early renewal activity? And are those full or partial lease renewals for the out years? Thank you.

Scott Bowen, Executive, Healthpeak Properties: Yeah. So it’s Scott Bowen. You know, on the on the renewals, you know, they’re probably, like, little more more heavily weighted to, you know, in place renewals that are happening, you know, near the end of the expiration. We did do some, you know, a little bit further out where we had tenants who were who were looking to grow. We were able to expand them within within campuses in the portfolio, take additional space, and extend their existing lease term.

Yeah. Part of it

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: depends how you define early. I mean, I think you see in our supplemental, we we get a lot of information on the maturity profile for each business segment by year, and and the ’26, ’27, 28 maturities all came down this quarter in life science because we we addressed a number of those early, which is, you know, good portfolio management. Obviously, we get better terms on a renewal. So it’s just, I think, good proactive asset management, portfolio management on those early renewals.

Scott Bowen, Executive, Healthpeak Properties: Yeah. Those early renewals tend to come with with very low capital as well.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: How significant was the expansions that you saw? And and I guess, there any, you know, space givebacks? What’s kind of the net impact of that? I’m just trying to understand, you know, does that show up in the new leasing, that 75,000 square feet? Because it, you know, it is an expansion, or do you bucket that within the 85%?

Scott Bowen, Executive, Healthpeak Properties: The expansion space would show up in the new leasing. Correct.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Understood. Thank you.

Conference Operator: The next question comes from the line of Seth Berge with Citi. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: Thanks. It’s Nick Joseph here for Seth. Scott, you mentioned a few leading indicators turning positive for Life Science. One of those was supply coming offline. Did you deem that space as competitive?

Or was this more space that maybe was being marketed towards life science that that your leasing team wouldn’t have considered competitive for for tenants that you’re going after?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Mostly space that was less competitive. We haven’t seen any directly competitive space go offline, but we we have seen some directly competitive space start to market towards alternative uses. Whether they ultimately go in that direction, we’ll see. But there’s a much larger number than $4,000,000 that could ultimately go a different direction than lab.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: Thanks. And then just on MOBs, you mentioned the strong interest in the private market. You talked about the stabilized yields that you’re expecting. But where are you seeing cap rates kind of across different quality levels within MLBs today?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Most of the transactions for the types of assets we own will be in the 6% to 7% range. There may be some that break through 6%, but the vast majority of what we own are good quality assets. So that would be the range of of, I think, cap rates stabilized cap rates for assets in our portfolio. Life science is a lot harder to pin down as as we’ve said for a couple of years now. Certainly, long term leases with credit tenants in any locations are still in demand, and there’s a a buyer for that.

And there’s a buyer for upside opportunities, empty buildings, someone willing to take some risk and pursue a higher return. Everything else in between, there there just haven’t been, you know, as many trades. It’s a lot harder to specify a cap rate for something like that. Thank you.

Conference Operator: The next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: Hi, good morning. Was just hoping you could talk a little bit about the development pipeline. It looks like you lost a couple of pre leases of directors, Science Park and Point Grand. Just looking for a little bit of color there. As part of that, if you could talk about how we should think about capitalized interest going into next year.

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Yeah. On the Director’s Place project, we’ve been working with a tenant that’s been in our portfolio for about fifteen plus years that was in the process of raising capital. And we were planning alongside of that capital raise to relocate them to, directors, which was a lower cost space for them supporting their business, and they ultimately were unsuccessful raising capital for, reasons that we described earlier. So that, resulted in the preleasing come down for that project.

Scott Bowen, Executive, Healthpeak Properties: And at $20, I mean, the the tick down there is we delivered two assets, out of redevelopment there that were a 100% leased.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: And any comment on capitalized interest and how that should trend going forward just, given the the moving pieces? I think it’s fairly substantial this year.

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Yeah. As as the projects come online, it’ll trend down, and some of that’s gonna be offset by the leasing activity that we’ve we’ve had in the portfolio. But it’ll certainly start to trend down as some of these projects get started and come online. We’re in the process of entitling Vantage and, Cambridge Point in Alewife, and those are obviously large projects that are are in the early stages of entitlement and design. So, you know, as those commence over time, specifically as we get Heinz, to start working through the residential component of the Cambridge Point development, that’ll help, start to reduce the capitalized interest.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: And then just one other quick question on CCRCs. It looked like the occupancy on a same store basis dipped sequentially. Was there anything, to call out there that was a bit behind some of the the broader NIC data? So just curious on, the driver of that.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Nothing unusual. Just typical seasonality. I mean, all the profits from that business come from the independent assisted memory care components, but the continuum of care that we offer does include a a skilled nursing component. It’s a small number of units, but it it is seasonal. And we really don’t do Medicaid.

It it’s almost exclusively private pay in Medicare, about half and half. And the Medicare business is obviously seasonal and short term in nature for for the patients in terms of how long they stay. And every second quarter, we have a sequential decline. So there’s nothing unusual there. That business just continues to perform exceptionally well.

And our independent census was actually up quarter over quarter. It was up year over year. So the the leasing momentum there is still really strong, good pricing power, good expense control. So I wouldn’t read anything into the occupancy quarter over quarter other than typical seasonality and great performance with a lot more upside to capture in that business.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: Perfect. Thank you very much.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yes.

Conference Operator: The next question comes from the line of Vikram Malhotra with Mizuho. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Morning. Thanks for taking the questions. I guess just bigger picture, you mentioned the 10% of at risk. I’m not sure if that’s after the kind of 130 we’ve already seen impacted. But I guess the question is, like, if you if you assume you see another quarter of a similar amount of credit risk, you know, if what what do you need to see in the MOB side to keep sort of the overall guide intact for this year?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: I mean, the guidance range that we just reaffirmed includes the bookends of where we see potential outcomes for this year. Outpatient and CCRC continue to outperform. Hopefully, there’s more upside to capture. And life science, obviously, still has some downside risk, but it also has upside opportunity. We’ve got a fair amount of space that’s ready for occupancy that could commence fairly quickly if the capital markets turn around, and there’s some tenants that we’re still watching carefully that could go the wrong direction if they don’t raise the capital.

But guidance range we reaffirmed does include the two bookends for the potential outcomes we see.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Got it. That that’s helpful. Just on the the the, you know, 500,000 plus leasing, you know, that on the life sciences side, I guess, like, how much how much is new leasing versus sort of renewal and and early or or or future renewals, or early renewals? And do you mind like, is there a way you can give us some sense of how the pipeline looks?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Yeah. Vikram, I’ll take this one. I think in the prepared remarks, you may have missed that, you know, 85% of that 503,000 square feet of leasing was actually renewal leasing, and it’s followed up by a very strong leasing pipeline. And so you’re welcome to give some color on that pipeline. But, you know, we have 55,000 square feet of leases that we executed, to start the month of July and another 253,000 square feet under LOI and a pipeline of activity to follow that.

So we think, you know, given the number of green shoots that we’ve seen, that continues to be promising. This guy, anything to add?

Scott Bowen, Executive, Healthpeak Properties: Yeah. No. I mean, on the on the LOI side, I mean, the probably the favors, new deals over renewals, you know, in contrast to kind of what

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: we did this quarter.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Okay. Great. And sorry. Just one clarification. If you I don’t know if you can give us some, you mentioned the bookends of the guide, you know, create kind of the the I have the upside downside.

Just on the on the lower end, are you able to sort of give us a rough sense of how much more occupancy loss would have to happen to hit that low end in the life science segment?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Well, let me just say first on occupancy. We we have started giving a total occupancy number because that’s the number that we spend the most time on. Same store is a kind of an industry requirement and standard, but in our life science portfolio, have a fairly large development and redevelopment portfolio as a percentage, and that’s really what moves the needle for earnings. We could see some additional deterioration through year end. If you just look at the disclosure, we’ve got 500,000 feet left in the year for 2025 expirations, and roughly a 100,000 of that is either under LOI or in negotiations.

So there’s 400,000 that probably comes out. We do have some signed but not yet occupied leases, that we’ll get the benefit of through the balance of the year and then the the the tenants that we’re monitoring. And how many of those make it versus don’t will depend on the next six months in the capital market environment. So those are the moving pieces, but we probably will see a bit more occupancy deterioration through year end, Vikram.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Okay. Thank you.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: Yes.

Conference Operator: The next question comes from the line of James Feldman with Wells Fargo. Please go ahead.

Jamie Feldman, Analyst, Wells Fargo: Great. Thanks for taking my question. Filling in for John here. So I guess just to start, going back to some of your comments at the outset of the call, you talked about a software upgrade and improving your AI capabilities. Can you talk more about how you think AI can you know, what the impact of AI could be on your business, you know, over the years to come?

You know, what will change as a result across your business lines?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: Yeah. I’ll I’ll start on this one. No surprise that we’re all experiencing the evolution of AI real time, and it’s evolving very quickly every day. What we’re seeking to do as a company is to ensure that we are building our business alongside of the evolution of AI. And we we think about it in two ways.

One, how do we create practical efficiencies for the team and empower the team through, more approximate access to data and enhanced decision making through data analysis. And where we are today, I’d say, relative to many other of our peers, we’ve invested considerably over the years in our technology, and we’re we’re certainly not starting from zero to to take this next step. And we’ve been deploying very recently some of the commercially available artificial intelligence applications throughout our organization, including ChatGPT and Copilot. And we’ve built a strategic road map that’ll help us, really utilize our kind of structured data and accelerate the our platform with access to that data. So we’re building upon what’s commercially available, and we think that’s going to allow us as a company to get closer to our tenants, be more efficient team by team, but also to enhance our capabilities.

So there’s more to come on that as we make progress, but we’re very early on in the that kinda execution of that plan.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Jamie, can you quantify the life science?

Scott Bowen, Executive, Healthpeak Properties: Oh, sorry. Oh,

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: go ahead, Jamie.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: So I would say, is there

Jamie Feldman, Analyst, Wells Fargo: a way to quantify, you know, operating margins or, you know, revenue opportunities? But it sounds like you’re

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: There certainly could be some revenue opportunity that yeah. I think it’s a little bit too soon to to quantify those on this call, but certainly something that we’ll follow back up on. We think there’s tremendous opportunity to leverage AI throughout our business.

Jamie Feldman, Analyst, Wells Fargo: Okay. And then you kinda rattled off a laundry list of, you know, regulatory update, you know, some you know, mostly positive. So can you just talk about if there’s any way to quantify what you think the opportunity could be, whether it’s a shift in the business you focus on or just better revenue? I think you sounded most upbeat about the inpatient only list from CMS, if you could talk about that. And then the changes, drug pricing for rare diseases and the favorable track, tax treatment for research and manufacturing.

And then also we know that

Scott Bowen, Executive, Healthpeak Properties: we’re

Jamie Feldman, Analyst, Wells Fargo: still waiting on Trump to announce the most favored nation’s list for prescription drug pricing. So how do you think about the potential pressure from that on your business in life science investing?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yeah. That that was that was a long view as well. Let me try to remember those, Jamie. Those are good questions. They’re all very, important.

On on most favored nations, you know, we’ll see. That’s a complex topic. We have the benefit and the curse here of a a health care system that’s more a capitalism based model. That’s not the case necessarily overseas. That has pluses and minuses, but the reality is Americans do pay more for their health care, including drugs and therapeutics than overseas countries.

Even though most of the innovation is happening here, that probably isn’t completely fair. And if there’s a better allocation of, the profits moving forward, that should be, beneficial to US consumers and and perhaps even for, for the biopharma companies. But the the the, details of ultimately where that lands, that’s a very complicated dynamic that it it’s too early to speculate. But but some some better cost sharing of the revenue and the profit generation between The US and overseas, I think, would be healthy for The US and for the for the ecosystem. So that that feels like there’s some upside there, but highly complicated and would take some time.

The r and d expenses, I mean, think about the $400,000,000,000 a year of capital that is invested into research and development. That’s a rough number. There’s a pretty big impact between a one year depreciation schedule and a five year depreciation schedule for cash flow based investors. So that that’s huge. And the same is true of manufacturing.

You’ve seen hundreds of billions of dollars of announcements from numerous companies announcing plans to build manufacturing here in The US. And, obviously, those tax incentives are an important part of those plans. So that all feels positive in in the growth and stability of the biopharma business here in The US. All that should be beneficial for us. On the inpatient only rule, you know, when you when you change the default option, that does make a difference.

That does have an impact, and that’s exactly what our portfolio was built for. You know, we we don’t invest in strip strip centers with primary care physicians or dentist offices. I mean, no no offense to those businesses. Those are necessary parts of our health system, but we’ve really made a strategic focus on higher acuity, scale outpatient centers with imaging and surgery and higher acuity procedures, and that’s exactly what the inpatient only list is targeted towards. So we’ve seen orthopedics make a massive push toward an outpatient setting over the past five years really driven by COVID.

And then everybody found out, well, actually, this is more efficient. It’s lower cost. Patients prefer it. The outcomes are better. And now the vast vast majority of outpatient care, accommodates all the orthopedic procedures.

And there will be additional items added to that list. Cardiology is probably the next major category that moves into an outpatient setting, which is perfect for us.

Jamie Feldman, Analyst, Wells Fargo: Alright. Great. That was super helpful. And then, sorry, just as a follow-up on the r and d piece.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Are you like,

Jamie Feldman, Analyst, Wells Fargo: I know there’s a bunch of projects, but regionally, market wise, like, where do you think this where do you think the puck is going if you had to make, like, regional or even MSA bets and where you’ll see the most r and d construction?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: R and d or manufacturing? Just just to be clear

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: on your question.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yeah. Manufacturing, most of that probably goes to lower cost geographies. Those tend to be highly specialized build outs. I’m not sure how much that construction really matches up with our business, But that’s commercial scale manufacturing. You also have clinical scale manufacturing, and that could be an important part of our business.

That’s more likely to reside within or near the r and d headquarters, which is the three core markets. We’ve already seen a pickup in activity there. So that does feel like an opportunity where there’s manufacturing, but it’s not clinical it’s clinical scale. It’s much smaller versus the, you know, millions of square feet of commercial scale manufacturing. We have a few of those, but I I wouldn’t say that our business plan is to start developing highly specialized commercial scale manufacturing in the, you know, middle of Indiana.

I mean, no offense to Indiana. I love the Midwest, but that’s just not probably where we’re taking our business in in in life science. The r and d, we love our our market position in the three core markets given the increasing interconnection between technology, including AI, and science and and biology. Most of that talent happens to be in the three core markets, the the Bay Area in particular, but Boston secondarily, and probably San Diego as well. Those become inseparable as the business moves forward.

And the amount of talent in the Bay Area in particular to help accelerate the biotech business, I think, will prove to be a huge strategic advantage.

Conference Operator: The next question comes from the line of Michael Carroll with RBC Capital Markets. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Thanks. Scott, I wanted to

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties3: touch on your comments that many of your tenants in the life science space that defaulted during the quarter, they had their technology bought. I guess, if this was the case, how did they get out of your lease? I mean, did this happen in a bankruptcy scenario so they could reject the lease? Or just did it coincide with the lease expiration?

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties4: No. They they either went through

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: the bankruptcy process or the ABC process. So, I mean, it it there’s not much explanation other than that. That’s just the way our system works. You can essentially start over as a company from a liability standpoint and even asset standpoint. They’re just buying specific assets out of the bankruptcy process.

No more complicated than that.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties3: Okay. And I know it’s hard to quantify the potential credit headwinds that you guys might have in the second half of this year. But can you help us understand, I guess, what are the gives or takes here? I mean, how long have the tenants that you’re watching been trying to raise capital? And I guess what’s the reasons that they will or won’t be able to do it?

I mean, is it really driven by an improving macro backdrop and things loosening up? Or is it more company specific that they need to hit certain milestones and have certain data for people wanting to give them money?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: I I would say it probably has more to do with the macro backdrop. These companies are, out there currently in the process of seeking to raise the capital. And if, you know, interest rates move in favor, of the market and we continue to see, the public equity market respond the way that it has over the last couple weeks, that could create opportunity for folks to raise capital. But I I think it’s more of a a market driven exercise than it is specific milestones in their business.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties3: And then just last one for me, guess. What’s the quality of the space that you’re getting back from these move outs? I mean, are you going to have to put money in or put these in the redevelopment to kind of position them to release them to another tenant? And then I guess, Calvin, correct me if I’m wrong, isn’t there like a 275,000 square foot space that’s identified redevelopment? Is that included in the 189,000 of expirations you have left in 2025?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: I’m not specifically sure which space you’re referring to, but maybe to hit on your first question, it’s really a mix of spaces where where we have space that’s ready to be released when we get it back in great condition. And there’s others that tenants have been in for ten, fifteen, twenty years that’s gonna require some capital investment, so it’s really a mix on on that front.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: But almost exclusively core submarkets mostly on campuses. So it it it I think the the comment Calvin makes that would apply to the interior build out, but the submarket itself, these are high quality assets. I mean, I think you all know we can stray out into the tertiary areas, or do a bunch of conversions even at the market peak. So it’s a high quality portfolio. It will release.

Some will require some capital, but, you know, it’s not 2,000,000 square feet of availability that we can go lease up.

Scott Bowen, Executive, Healthpeak Properties: Hey, Michael. Great. I wanna wanna go back to your your second question on on the tenant fundings and the milestones. I mean, one thing that’s important to remember too is we we have a lot of tenants who have been able to raise capital. And we had two rate fundraisers or one fundraiser and a partnership that were announced yesterday within the portfolio.

So a lot of these tenants are, you know, whether it be milestone based or, you know, partnerships with with pharma are actually are are raising the capital they need to continue to to fund their business as well.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Okay. Great. Thanks.

Conference Operator: The next question comes from the line of Wes Golladay with Baird. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties4: Hey. Good morning, guys. Are you seeing much in the way of AI leasing demand in your submarkets that’s taken out competitive supply?

Scott Bowen, Executive, Healthpeak Properties: Yeah. I can take that. Hey, Wes. It’s Scott Bone. You know, obviously, leasing is our number one focus.

You know, our our focus is leasing our buildings to to lab tenants that are gonna utilize the robust infrastructure. You know, that said, we’ve cast a wide net. You know?

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties: So if

Scott Bowen, Executive, Healthpeak Properties: there is an office user, whether it be AI or traditional office, they have the appropriate credit, and we can, you know, the economics are accretive, it’s deal we’ll certainly look at. I think as a as a percentage of the total demand in in our core markets, you know, the material amount of material amount of demand coming from AI or or traditional office is is pretty low. I would say our buildings in the building infrastructure we had also works very well for for other r and d uses, you know, with less traditional lab or or r and d use in in r in r and d. And we’re actively in discussions with with users in those categories as well where it’s, you know, more dry lab, robotics, type of uses, but, you know, less AI within our our core market.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: It it is sucking up some of the vacant space in in the Barrie in particular, though. I mean, we our South City portfolio would have competed with Mission Bay. Historically, a lot of that, quote unquote, lab availability is being sucked up by AI demand. So that that should be a net positive for our South San Francisco portfolio in particular.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties4: Okay. And then I want to go back to that comment about the potential enormous opportunity in lab acquisitions. Would there be any market that you’re looking to add scale to gain better efficiency? And would you look to target recent developments or older assets?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: A bias towards newer assets and a bias towards our core submarkets. We have a very concentrated portfolio that’s allowed us to gain a competitive advantage versus competition over the years. We’d like to deepen that advantage. The the local scale has enormous benefits in the business as long as you’re in the right submarket, obviously, which we think we are. So they would likely, if not exclusively, be in markets that we’re already in.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties4: And just a quick follow-up on that. Would it be more like lean in more on Tory, East Cambridge, or anything more specific?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Well, we’re we’re pretty concentrated in the markets that we’re in. I mean, think we’re in six submarkets, essentially, even within three core markets. So I mean, those are the submarkets where we’re going to spend most of our time.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: Okay. Thanks.

Conference Operator: The next question comes from the line of Ronald Kamdem with Morgan Stanley. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties5: Hey, just had two quick ones. Just staying on some of the submarket commentary. I think all the things that you mentioned are positive for life science leasing demand. Just curious, are there any submarkets that you would expect to recover first? And which submarkets would have just overall the the biggest upside?

So just trying to understand which recovers first and which potentially has the biggest upside from sort of, like, the commentary you mentioned earlier.

Scott Bowen, Executive, Healthpeak Properties: Sure. I I can I can talk a little bit about kinda how we view each each of the sub market or markets in general? You know, in the Bay Area, we’ve seen generally stable demand. I think, you know, they’re obviously we have the most, the biggest magnitude of portfolio. We continue to capitalize on that, which brings us deals that we, you know, aren’t otherwise marketed.

You know, it’s a big area, South Jersey, too, especially with our portfolio, has has been pretty healthy and continues to be. You know, San Diego, we’ve seen an uptick in the past thirty days, certainly, in tour activity. The majority of

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: you know, the bulk of

Scott Bowen, Executive, Healthpeak Properties: that has been sub 25,000 feet or, you know, roughly. I think that, you know, we talked about the barbell demand going back, you know, the past several quarters. I think San Diego has, you know, the biggest barbell of demand. Mean, there’s been several large deals in in that market. You know, the one obviously got executed recently.

But I think our vacancy in that port in that portfolio in that market tends to be in the sub 25,000 square foot range from

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties: a suite perspective. So I

Scott Bowen, Executive, Healthpeak Properties: think we’re we’re in a in a good spot there. And then Boston generally continues to be low overall, but the top tier submarkets of Cambridge and Lexington, you know, where our portfolio is certainly seen the the greatest, demand. You know? So what’s gonna recover,

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: you

Scott Bowen, Executive, Healthpeak Properties: know, first and fastest? Hard to tell. But I think, you know, the submarkets that we’re in and the core submarkets are gonna certainly recover faster and see more demand than the kind of secondary and tertiary submarkets within those broader regions.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties5: Super helpful. My second one was just going back that you provide some really helpful commentary on the 489,000 square feet coming due this year. I guess I was just curious about the 413,000 coming due next year. Is there any early is there any known vacates or any market skew? Like, any color on that four thirteen coming due next year that you know now?

That could be helpful.

Scott Bowen, Executive, Healthpeak Properties: Yeah. Sure. Yeah. I think on that, you know, we’re we’re certainly working on, you know, the the ones that are coming in

Mark Thine, Executive, Healthpeak Properties: the earlier half of the year.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: The bulk of that tends

Scott Bowen, Executive, Healthpeak Properties: to it it falls in the back half of

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties: the year, so it’s a

Scott Bowen, Executive, Healthpeak Properties: little bit early on that. So, you know, working on it, probably a little too early, to give real great guidance on it, though.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties5: Great. Thanks so much.

Conference Operator: The next question comes from the line of Michael Stroerich with Green Street. Please go ahead.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Thanks and good morning. Maybe going back to tenant capital raising. I understand, like, 10% of your portfolios where tenants may be having trouble raising capital. But what percentage of that tenant base would you characterize as actually needing capital in in the very near term, call it maybe three to six months or so? Yeah.

Good question. Yeah. The 10% plus or minus, that that that’s the percentage of small cap and private biotech. That that’s not our watch list. I mean, there there’s a number of companies within that 10% that have a huge amount of cash on their balance sheet.

So those are two very different things, so don’t misinterpret. When I say 10% is is roughly in small cap and in private, that doesn’t mean they’re all at risk. Far from it. So that that that’s an important, distinction. So I’m glad you asked the question.

There’s a handful within those two buckets that that we’re monitoring more carefully, just given the amount of cash that they have on hand. Got it. Okay. And then just one question on rents. New lease signings in the quarter, rents were decently below last quarter and last year’s average.

I guess, how much of that is just a mix issue versus any real pressure on asking rents?

Scott Bowen, Executive, Healthpeak Properties: Yeah. I I think the new rents, you know, they’d be in in the south of this quarter. The commencements were they were slightly over the prior quarters. You know, that’s largely attributed to, you know, a a larger deal we did with the robotics r and d tenant, you know, so not not necessarily wet lab space. It it comes a little bit lower rent on that.

But, you know, that rent was a a space where we, you know, did a proactive termination of of another tenant to allow the expansion, and the rent we got on on the new deal was a 15% increase over the in place rent of the previous tenant. Got it. Thanks for the time.

Conference Operator: The next question comes from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: Yes. Good morning. Just a couple from me. Just sticking with the question around the tenant base that may be having some cash flow problems.

Scott Bowen, Executive, Healthpeak Properties: Could you just talk a little

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: bit about, again, when you’re kind of assessing against some of these smaller private companies? Again, how you kind of take a look at, you know, cash burn, percentage of cash they they have on your books when it gets to cash burn? And how many of those tenants today, if it’s quantifiable, actually have less than one year of cash burn out of your cash balance?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: This is Kelvin. The way that we tend to analyze cash runway for our tenants is is based on data that we receive directly from the tenant. We have a historical look, but we also communicate with them about a forward looking estimate. So it’s it’s relatively granular. And then with respect to the component of the portfolio, there’s not a specific number that I could give you.

I think Scott kind of addressed it earlier. It’s really a small subset, a handful of folks that we are focused on monitoring very closely at the moment, but we continue to to be hopeful around the capital markets environment and and these tenants’ ability to raise capital for the balance of the year.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: Gotcha. Okay. And then turning to the CCRCs front, again, I’m trying to still understand the the slowdown in cash same store NOI growth this quarter, at least on a sequential on a quarter over quarter basis. Again, when I take a look at year over year, occupancy was actually is actually up. The RevPAR growth was still pretty good at 5.2.

So it sounds like maybe there was a big jump in operating expenses, or just trying to understand a little bit more about why the slowdown to eight six versus 15 plus last quarter.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Eight eight point six is pretty good. Nothing grows at 15% forever. We also have, the burden of how we account for the the entry fees for purposes of FFO and and same store. It it’s based on amortization of the entry fees on a true cash basis. The growth rate was talking like 25%.

We’re having outstanding leasing results and cash flow generation in

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties1: that business.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: So I guess it’s that piece of the math that kind of grew the amortization piece that grew up meaningfully on a

Scott Bowen, Executive, Healthpeak Properties: year over year basis. Okay.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: That’s helpful. Then last one for me, kind of post 2Q leasing both for the life sciences portfolio and the MOB portfolio, could you give us a better sense of how much of that is new leasing

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: So on the the lab portfolio, our leasing activity for the quarter was about, 85% renewal, and our pipeline continues to be strong with a disproportionate number of those leases on new space. So that mix is is very good, and it’s arguably probably comparable. Our 85% retention on the outpatient medical business is consistent. 85% has been kind of our normal average. So we have a a heavier percentage of renewals, on the outpatient side, but some great new leasing activity as well in the pipeline.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties2: Okay. So if I could so for the lab space in particular, the post q two leasing, a lot of that is new leasing rather than renewal?

Kelvin Moses, Chief Financial Officer, Healthpeak Properties: The pipeline skews more towards the new side.

Scott Bowen, Executive, Healthpeak Properties: Okay. Perfect. Okay. Thank you.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: You.

Conference Operator: The next question comes from the line of Michael Mueller with JPMorgan. Please go ahead.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties6: Hi. Just a quick one. Back at NAREIT, I think you talked about sitting on the sidelines with acquisitions because you had a view that six months, twelve months or whatever it would be, values are going to be falling and a lot more attractive. I guess based on what you’re seeing, do you think that’s been playing out? And do you think you’re any closer to hitting the pivot point to really getting closer to deployment again?

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Yeah. I mean, that was, two months ago, so I think we’re two months closer for sure. I mean, the the the the the thesis was, this is challenging even for very well established incumbents with large portfolios, strong track records, good balance sheets, great tenant rosters, lot of credibility. If it’s tough for us, it’s infinitely tougher for the others, the new entrants that lack a lot of those attributes that tenants want. So that was the the thesis in stepping back.

I think it’ll prove to be the right thesis. It there aren’t too many days or weeks that go by that that we don’t get outreach from lenders, equity investors, etcetera, asking us to step in the situation. So the opportunity set is there.

Andrew Johns, Senior Vice President of Investor Relations, Healthpeak Properties0: Okay. Appreciate it. Thanks.

Conference Operator: And that concludes our question and answer session. I would like to turn it back to Scott Brinker for any closing remarks.

Scott Berger, President and Chief Executive Officer, Healthpeak Properties: Thanks for your time, everyone. Hope you enjoyed the last few weeks of the summer. Reach out to Kellen, Andrew and I with any follow-up questions. Take care.

Conference Operator: And the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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