Healthpeak Properties, Inc.

Thank you for standing by. My name is Eric and I will be your conference operator today. At this time, I would like to welcome everyone to the HealthPeak properties to report first quarter 2024 financial results and host conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Andrew Johns, Senior Vice President, Investor Relations. Please go ahead.

Welcome to HealthPeak's first quarter 2024 financial results conference call. Today's conference call contains certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, Our forward-looking statements are subject to risks and uncertainties that may cause actual results that differ materially from our expectations. A discussion of risk and risk factors is included in our press release and detail in our filings of 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 AKA we furnished to the SEC yesterday, we have reconciled all non-GAAP financial measures to most directly comparable GAAP measures in accordance with regular requirements. The exhibit is also available on our website at healthpeak.com. I'm out for the call of our president and chief executive officer, Scott Brinker.

Okay, thanks Andrew. Good morning and welcome to HealthPeak's first quarter earnings call. Joining me today for prepared remarks is Pete Scott, our CFO, and the senior team is available for Q&A. We are extremely pleased with our first quarter results and our momentum is positive on every key metric. We increased our 2024 earnings guidance by two pennies at the midpoint, driven by same store results. outperformance on merger synergies, and increased stock buybacks. The merger has proven to be a meaningful, positive catalyst for the company, and the integration is exceeding our expectations. Many public company mergers are done through auctions, which delays the ability to integrate the two companies. Our transaction was completely different. Neither company would have proceeded with the merger without high confidence in our ability to put the teams and platforms together in a way that one plus one could equal three. That meant having extensive conversations on people, process, systems, and capabilities before we agreed to proceed. Our integration planning was underway before we even announced the transaction. In the six months since that announcement, our combined team has done an exceptional job integrating every aspect of our business. The continuity and buy-in from JT and the senior team who joined HealthPeak has been critical to the integration, including key health system relationships. Property management internalization has been a huge success to date and is a good example of the merger augmenting our platform. Strategically, it was important to me that our own employees are interacting with our tenants every day. And financially, we're now capturing additional profit that flows through property level analyze. To date, we've internalized 10 markets covering 17 million square feet. We chose to accelerate the rollout given our success to date, and we expect to internalize an additional 4 million square feet by year end. Significant upside remains to be captured. We're evaluating 10 plus million square feet for internalization in 2025 and 26, which in aggregate would allow us to internalize more than 70% of our total footprint. The positive feedback from the property managers on the ground and our tenants further validates the strategic decision to internalize. Let me take a minute on the value proposition in our stock today, which we think is compelling. The baseline is a strong balance sheet, a high-quality portfolio with 3% to 5% same-store growth, and a mid-sixes dividend yield with a conservative payout ratio. Beyond that baseline, we've identified $80 million of NOI upside potential, none of which is included in our 2024 guidance from additional merger synergies and leasing up our active life science dev redef pipeline. We also see 30% upside by recapturing our discounted consensus NAV, which we expect to do through consistent earnings growth and smart capital allocation. Industry headlines notwithstanding, over the past two years, we grew FFO per share by 13%, and we expect to continue growing earnings moving forward. Moving to our outpatient business. The fundamentals have never been stronger. Patient volumes are increasing. Consumption is accelerated, and new development remains low. That's driving strong releasing spreads, retention, and NOI growth. In addition, progressive health systems have a strategic focus to grow their outpatient revenue. It's less expensive for payers, more convenient for consumers, and more profitable for the providers. We have the premier platform and relationships to capture this outpatient growth. whether on campus or off campus, and both locations are necessary to capture demand. We expect new supply to remain low given the cost of construction. Today our triple net equivalent rents are in the low 20s, while most new developments are $35 to $40 per foot. Turning to our life science business, IPO and venture capital funding have improved recently, which is driving demand for space. Our leasing pipeline today is up 80% from last quarter, We're increasingly optimistic the pipeline will generate lease executions for the balance of 2024 and into 2025. Roughly 70% of our pipeline is existing tenants, many of which are deals that don't come to the broader market, again, providing us a big advantage versus the new entrants who can't tap into an existing portfolio of growing tenants. We're also seeing a massive reduction in new construction starts that should extend for multiple years. creating a far more favorable leasing environment for landlords. Let me close with capital allocation. The strategic merger with Physicians Realty closed on March 1 and is accretive to our earnings, balance sheet, and platform. Year to date, we've sold $363 million of fully stabilized assets at a 5.8% cap rate, plus $69 million of loan repayments. The most recent sale was an R&D flex office portfolio in Poway, east of San Diego, that we sold to an affiliate of the tenant in an all-cash deal for $180 million, which was a 6% cap rate. We have additional asset sales in various stages of negotiation and execution, but given the environment, we'll provide details if and when they close. We took advantage of the disconnect in our stock price and repurchased $100 million of stock at an average price just above $17 per share, which represents an implied cap rate of 8%. The year-to-date asset sales are more than 200 basis points inside that level, delivering immediate value to shareholders. Our remaining authorization today is roughly $350 million and we'll continue to pursue buybacks as priority number one on capital allocation, obviously depending on our stock price and the arbitrage opportunity from asset sales. Priority two for capital is new outpatient medical development with key health system partners, provided there's strong pre-leasing and a positive spread to our asset sales. This capital recycling would be accretive to asset quality and stabilized earnings. We do have an attractive pipeline of such projects today in the $200-plus million range. Priority three is distressed opportunities in life science, which we are starting to see, especially development projects lacking capital and or leasing traction. These would be purely opportunistic and could be done on balance sheet or via joint ventures. Most of the distress won't be interesting to us, as we'll focus on our own core sub-markets where we can use our scale and relationships to drive out performance. I'll turn it to Pete for financial results and guidance.