Healthpeak Properties, Inc.

Please note that 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 HealthPeaks' fourth quarter 2023 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, forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from expectations. Discussion of risk and risk factors is included in our press release and detailed on our filings of the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures we discussed on this call. In an exhibit of the 8K we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to most directly comparable GAAP measures in accordance with the Reg G requirement. The exhibit is also available on our website at healthpeak.com. I'll now turn the call over to our President, Chief Executive Officer, Scott Brinker.

Thanks, Andrew. Good morning and welcome to HealthPeak's fourth quarter earnings call. Joining me today for prepared remarks is Pete Scott, our CFO. Joining for Q&A is John Thomas, the CEO of Physicians Realty Trust and our senior team. I want to start by thanking our entire team for their contributions in 2023. Public market volatility notwithstanding, your collaboration and winning mindset allowed us to produce record leasing volumes in two of our three business segments. and to exceed our initial same store and earnings guidance by 130 basis points and $0.05 per share, respectively. Last evening, we reported a strong fourth quarter, both operationally and financially. For the fiscal year, we grew same store NOI by 4.8% and FFO per share by 5.5%, driving our dividend payout ratio below 80%. The balance sheet remains in great shape with 5.2 times net debt to EBITDA at year end. We expect to close the strategic combination with Physicians Realty Trust on March 1. Since the announcement in late October, the two teams have been working side by side on culture, best practices, tenant relationships, technology, and every other area that will determine the success of the merger. We have the highest level of confidence that this combination will, in fact, augment our platform capabilities, relationships, balance sheet, and earnings. Just last week, we internalized property management in three markets, with up to six additional markets expected to go in-house by mid-year. We've had near 100% success bringing the existing third-party staff onto our team. Those employees, on average, have worked in these buildings for seven years, minimizing execution risk. As for synergies, We're confident we'll achieve the targets we outlined in late October, and they are contributing several cents per share to our earnings in 2024. Pete will expand upon the synergies and outlook in a few minutes. I want to share some thoughts on the operating environment for the two largest segments, starting with outpatient medical, where the sector is benefiting from demand exceeding supply. We have two decades of operating history in the sector, and in 2023, we were at or near all-time highs for leasing volume, retention, renewal spreads, and same store growth. Looking forward to 2024, our same store outlook includes the dock portfolio and is 75 basis points above our five year history for initial guidance. We expect to benefit from sector fundamentals that have never been stronger, high quality assets and operations, and internalization. Most important, we believe we're combining the two best outpatient platforms in the country to create an even bigger and better company to drive internal and external growth for the next decade plus. Today, more than 65% of the tenants in the combined portfolio are health systems. When they make leasing decisions, it's often driven by relationships and no one is better positioned than the combined company. It's a very different leasing dynamic than other real estate sectors who deal with tens of thousands of very small tenants. Relationships are absolutely critical in our sector, and the senior team of the combined company has more than 200 years of experience in the sector, creating an unrivaled relationship network. Our next generation coming behind them is learning from the best and bringing energy to continue innovating as the sector evolves. Let me turn to our lab business. The fundamental drivers of long-term growth are solidly intact, with both drug approvals and new drug applications at or near all-time highs. That means R&D funding is paying dividends, creating a virtuous cycle. Big Pharma is wrapping up partnership deals and M&A to replace looming patent expirations, and companies with good data have ready access to capital. At the same time, venture capital deployment and the IPO market remain soft, and boards are deferring leasing decisions when possible. Those dynamics will eventually turn in our favor and we'll be well-positioned to capitalize. We can also comfortably underwrite a massive reduction in new deliveries starting in 2025. Fortunately, even during the market exuberance for life science, we stuck to our strategy. As a result, we're highly concentrated in five of the best submarkets in the country, where we have significant scale and deep relationships to capture leasing demand. Moreover, 85% of our rent is from campuses with 400,000 feet or more, which allows us to offer a wide range of price points and space plans and to accommodate expansions, all of which are important to tenants. Year to date, we've signed 58,000 feet of leases with another 115,000 feet under LOI, plus active discussions across our portfolio, so an encouraging start to the year. Cyclical slowdowns create opportunity on the other side, and we're preparing accordingly. In the past few months, we've received approvals or entitlements that expand our land bank to more than 4 million square feet in two of the most important life science submarkets in the country. We're well positioned when new development begins to pencil. On a related point, we were pleased to close on the sale of the 65% interest at our Kellen Ridge development for a 5.3% cap rate, with rents essentially at market on a long-term lease. The sale was driven by favorable pricing, not a desire to reduce our lab exposure. we're actively evaluating capital recycling opportunities across the combined $20-plus billion portfolio, including outright sales and JV recaps. Any such proceeds would likely be used to fund a growing pipeline of relationship-driven opportunities across our core segments, though we could always consider stock buybacks or debt repayment depending on relative returns. I'll close by saying that the macro backdrop has been casting a shadow over the underlying strength of the company. We can't control that shadow but we're more confident than ever about what lies behind it, in particular our platform, portfolio, and balance sheet. I'll turn it to Pete.