Healthpeak Properties, Inc.

Good morning, and welcome to the HealthPeak Properties, Inc. third quarter conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone 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 Andrew Johns, Senior Vice President, Investor Relations. Please go ahead.

Welcome to HealthBeak's third quarter 2022 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 risk and uncertainties that may cause actual results to differ materially from our expectations. The discussion of risk and risk factors is included in our press release and detailed in our filings of the SEC. We do not undertake an... a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on the call. In an exhibit that 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 Red 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 Brinker.

Okay. Thanks, Andrew. Good morning, and welcome to HealthPeak's third quarter earnings call. Joining me today for prepared remarks are Pete Scott, our chief financial officer, and Scott Bone, our chief development officer. The senior team will be available for Q&A. First, on behalf of the company, I want to thank Tom for his significant contributions over the past six years to position the company for future success. The challenges we faced were significant, and we needed every bit of his energy and attention to detail. I also want to thank the board for this opportunity and my teammates for their strong support. I could not have picked a better market backdrop, as tough conditions bring a unique opportunity to be your best. Financial results in the third quarter were very solid. We increased full year guidance for both earnings and same store. Pete will provide the details. Let's talk about the future of HealthPeach. Ten years from now, I want to look back and say that I was part of an entrepreneurial and collegial team with an intense focus on value creation activities and the related earnings growth. We'll be a real estate company at heart, immersed in the underlying businesses that support our portfolio, and I want us to enjoy the journey. I believe that mindset will produce strong returns for shareholders and be a rewarding experience for our team, and both are important to me. As for our strategy, this team was side-by-side on all the key decisions the past several years, so don't expect any major changes. We'll focus on life science and medical office, where we have the scale and expertise to maximize value creation while minimizing risk. These are both high-margin businesses that are aligned with the modern economy. Our real estate is and will be dedicated to human health, a highly valued asset now more than ever. Life science in the U.S. is a unique public-private partnership that leads the world in biotech innovation, with more than $200 billion per year spent on drug research, and accelerating science, we expect a long-term virtuous cycle that will support demand for our buildings. Meanwhile, the need for cost-effective and convenient healthcare will drive demand for our MOBs, especially as the population ages. There's strong continuity from our talented team and we enjoy working together. The board succession plan was thoughtful and disciplined and has now been implemented. Pete Scott is excited to continue as CFO It will have an even bigger role going forward as we streamline our approach to investor relations and the capital markets. We'll continue the transparent communication that you've come to expect from us. Tom Clarich has been running medical office for two decades and will continue to do so. There's no one in the MLB sector more knowledgeable than Tom. Scott Bone and Mike Doris have been running their portfolios for over a decade and will continue to do so as co-heads of LifeScience. They know every square inch of their local markets and have the support of the local tenant base. Scott Bone is also taking on the role of Chief Development Officer, having established a strong track record for creativity and execution in that important value driver of our business. Adam Mabry has been a critical member of our transaction team the past five years as we sold, acquired, and developed more than $15 billion of real estate. I'm excited to see him grow as our CIO. Jeff Miller stepped into the general counsel role, having served in that function for a decade of success at HCN. Our critical support functions, like accounting, finance, tax, and HR, will continue with existing leadership, which includes tenured members of the executive team, such as Lisa Alonzo and Sean Johnston. We've built out best-in-class process and procedure the past six years. We play in niche real estate sectors where operational expertise drives value. so that will remain a vital part of our strategy. The business segments will continue to report to me. This has worked well the past three years and allows me to remain tightly connected to what we're seeing on the ground. In fact, I plan to spend even more of my own time out in the market understanding trends and assessing opportunities. We'll remain committed to a strong investment-grade balance sheet and prioritize liquidity. Pete and the team have turned that into a competitive advantage and will carry that forward. We do expect near-term G&A savings given the streamlined management team. Moving to capital allocation, very purposefully, we were not aggressive on acquisitions or new development starts the past 18 months. In particular, we grew life science from 15% of our NOI in 2016 to 50% today through strategic acquisitions and highly accretive development, well before real estate values peaked. As a result, The balance sheet is in great shape and our funding commitments are manageable. We have no need to issue dilutive equity or to sell assets at the wrong time in the cycle. In fact, we're in a position to be opportunistic when the capital markets start to reopen, which is the best time to go on offense. To that end, we're advancing entitlements across all three of our life science markets. We expect to have the next wave of development ready to commence in the second half of 2023. though any decision to proceed will depend on market conditions at the time. Both life science and medical office benefit from having scale in a local market, and we have deep relationships to source opportunities. But we can't always control the timing, so my view is that we need a flexible funding plan. Our preference is to raise public equity at accretive prices and own assets 100%. But that approach isn't always available. At the same time, there are large and more consistent private capital flows including sovereign and pension funds, looking to partner with premier operators like HealthPeak. So we'll be dynamic in our capital planning and consider third-party capital when appropriate, but always with the goal of benefiting peak shareholders. We also expect to have a little bit bigger box to play in going forward, but still within our two core segments. An example is in medical office, where we've benefited from our on-campus concentration. That being said, we appreciate the convenience provided by certain off-campus buildings. So we'll be less dogmatic in our approach and open-minded to off-campus assets provided their strong health system affiliation. We also see the potential for additional synergies between the two segments as some of our health system partners are doing medical R&D in their local market. Turning to the CCRC portfolio, you might recall that in 2019, We dramatically reduced our Brookdale concentration when we traded TripleNet Senior Housing for their 51% interest in the CCRCs. That trade gave us full strategic control of the portfolio and a strong operating partner in LCS. Our capital allocation priorities are focused on life science and medical office, so we'll be opportunistic about our CCRC position. In the interim, that business has favorable supply and demand fundamentals, and we own high-quality assets concentrated in Florida. an attractive destination for seniors. To wrap up, I've been fortunate to learn under CEOs with unique skill sets, one for creative growth and another for operational excellence. My goal is to carry forward the best of both and create a company with best-in-class internal and external growth. Turn it to Pete to cover financial results and the balance sheet.