Healthpeak Properties, Inc.

Good day, and welcome to the HealthPeak Properties Incorporated first quarter conference call. All participants will be in listening mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Barbette Rogers, Senior Director, Investor Relations. Ms.

Rogers, the floor is yours, ma'am. Thank you and welcome to HealthPeaks' first quarter financial results conference call. Today's conference call will contain certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. A 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 of the 8K we furnished with the SEC today, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. The exhibit is also available on our website at www.healthpeak.com. We recognize today is an incredibly busy day for all of you. We'd ask that you keep your questions to a maximum of two each. I will now turn the call over to our Chief Executive Officer, Tom Herzog.

Thank you, Barbette, and good morning, everyone. On the call with me today are Scott Brinker, our President and CIO, and Pete Scott, our CFO. Also on the line and available for the Q&A portion of the call are Tom Clerch, our Chief Development and Operating Officer, and Trenna Kenry, our Chief Legal Officer and General Counsel. As you are aware, during March and April, we provided three interim updates on the impact of the COVID-19 pandemic to our business. In the Outlook and Additional Information section of our supplement issued last night, we provided a framework to assist you in assessing our potential 2020 earnings. With that, let's discuss how we see our current state of play. The impact of COVID-19 will vary across our lines of business. 61% of our NOI is concentrated in life science and medical office, with an additional 5% in hospitals, all subsectors that we believe will be less severely impacted by COVID-19. Across our life science and MLB businesses, we recorded strong first quarter leasing results and April rent collections. In life science, we continue to see strong demand driven by the need for additional space for biotech research, and that subsector remains in good shape. The vast majority of our life science tenants have strong liquidity and have paid their rent on time, but we did see a number of requests for rent relief. As to life science construction, we are seeing on-again and off-again orders in San Francisco and Boston. which has resulted in slower completion of some of our development and tenant improvement projects. In medical office, many of our tenants experienced March and April cash flow reductions due to the temporary shutdown of elective procedures and surgeries, which are now beginning to reopen. As previously announced, we are offering a two-month deferral of rent for May and June to our non-hospital and non-health system medical office tenants, subject to certain conditions. Importantly, we feel confident about the high quality nature and viability of our predominantly on-campus specialty physician tenants, and over the last five years have experienced on average annual bad debt expense of only 20 basis points. Of all of our businesses, senior housing, which represents 34% of our NOI, has been the most impacted by COVID-19. When assessing the potential impact, the largest drivers are constricted leasing activity resulting in declining occupancy, an increased payroll expense, and personal protective equipment and supply usage costs. Our shop portfolio, which is 14.5% of NOI, has the highest impact from changes in operating fundamentals as a result of COVID-19. Our blended average length of stay for shop is around two years. which results in average move-outs of roughly 4% per month. Leasing activity is currently limited to virtual tours, so fewer move-ins with some offset from lower voluntary move-outs as seniors choose to shelter in place. Approximately 70% of our shop senior mix is assisted living and memory care, and the remaining 30% independent living. As assisted living and memory care seniors often have vital care needs that can no longer be met at home, some level of leasing continues, subject to required screening and quarantines. But independent living move-ins have been minimal during the crisis as they are primarily lifestyle-based. Accordingly, overall, we're estimating an attrition of 2% to 4% per month in shop occupancy for the duration of the pandemic. However, as we come out the other side of this crisis, we believe there will be pent-up demand that will increase move-ins beyond the average historical levels. Our triple net portfolio represents 7% of our NOI and consists primarily of four tenants that all have corporate guarantees and 8- to 10-year master leases. That will provide more details in a bit. In our CCRC portfolio, which represents 12.5% of our NOI, has a younger senior population and is supported by entry fees with an average length of stay of eight to 10 years. This means significantly lower monthly attrition, estimated at 50 to 100 basis points per month, and therefore a much slower decline in occupancy versus shop. Moving to the balance sheet. In short, our balance sheet is very strong and we have available liquidity of $3 billion. Our net debt to EBITDA is low, Our weighted average debt maturity is almost seven years, and we have no near-term maturities. Next, we maintain our second quarter dividend at 37 cents per share. This represented a Q1 payout ratio of 91%, although we expect our payout ratio will temporarily exceed 100% during the period of the pandemic. With consideration to the HealthPeak team, it is fully functioning and virtually connected. We are leveraging upgraded systems, infrastructure, as well as virtual and remote working technologies. This has enabled us to remain productive and connected both internally and with our key external partners. Additionally, in March, Pete Scott shifted his focus to dedicate 100% of his time to his vital CFO responsibilities, which are now more important than ever. Accordingly, Scott Brinker, in his role as president, will continue to have oversight of our seasoned life science leadership team but now more directly. And finally, we are fully confident that the essential nature of our high-quality portfolio and strong liquidity will allow HealthPeat to successfully navigate through this crisis, even if it is protracted. Our fundamental thesis remains unchanged, that is, ownership of high-quality real estate in the three private pay health care segments of life science, MLB, and senior housing, along with a conservative balance sheet. Demand for life science properties in the three epicenters of innovation remains compelling, and the pandemic has further underscored its importance. Demand for our medical office buildings will continue as our predominantly on-campus and heavily anchored portfolio is relatively immune to the recent surge in telemedicine, which has been expanding rapidly. And in senior housing, the wave of aging baby boomers will increase demand and need for this product over the long run. With that, I'll turn it to Scott.