• FFO as Adjusted: $0.45 per share

• AFFO: $0.41 per share

• Total Portfolio Same-Store Growth: 4.5%

• Outpatient Medical Same-Store Growth: 2.6%

• Lab Same-Store Growth: 2.7%

• CCRCs Same-Store Growth: 27%

• Net Debt to EBITDA: 5.2x post-quarter

• Liquidity: $3.1 billion

• AFFO Payout Ratio: Approximately 75%

• Stock Buyback: $100 million at an average price of $17 per share

• FFO as Adjusted Guidance for 2024: Increased by $0.02, range now $1.76 to $1.80

• AFFO Guidance for 2024: Increased by $0.02, range now $1.53 to $1.57

• Merger Synergies Forecast for 2024: $45 million

• Warning! GuruFocus has detected 8 Warning Signs with DOC.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you provide a breakdown of what's driving the increase to same-store cash NOI growth by segment? A: Scott M. Brinker, President and CEO of Healthpeak Properties, Inc., noted that all three segments are trending at or above the midpoint of the initial guidance, indicating good traction across the board. He mentioned that the CCRC segment was particularly strong this quarter, but he expects the growth rate to normalize for the rest of the year. In contrast, lab and outpatient medical are expected to see above-reported growth in the subsequent quarters.

Q: How are rents trending on what you're signing versus a few quarters ago, and what about TIs and concessions? A: Peter A. Scott, CFO of Healthpeak Properties, Inc., explained that rent and TIs have been steady for the last six months. Market rents are at a 5% to 10% premium compared to in-place rents, which average around $60 per square foot. New lease deals are seeing tenants seeking more turnkey spaces, which has increased the overall TI packages. Lease terms on renewal deals are typically 3-5 years, and new leasing deals are seeing terms of 7-10 years.

Q: You mentioned about 70% of the MOBs will eventually be internalized. What about the 30% that won't be internalized? A: Scott M. Brinker, President and CEO, clarified that the remaining 30% represents markets where Healthpeak does not have significant scale or markets where a large health system prefers to use their own in-house property management firm. He cited Atlanta as an example where the health system prefers to use their own people.

Q: What's driving the increase in guidance for same-store cash NOI growth? A: Peter A. Scott, CFO, mentioned that the 25 basis point increase in aggregate same-store guidance reflects improved performance in the lab segment. He noted that they had initially incorporated a bad debt cushion at the beginning of the year, which was probably too conservative given the capital raising activities observed.

Q: Can you provide more color on the Poway disposition and whether the cap rate is indicative of where lab might be trading today? A: Scott M. Brinker responded that the Poway disposition, which involved a mix of industrial lab and office space, is not indicative of traditional life science property cap rates. He emphasized that it was not in a traditional life science market and that the sale price was favorable, which led to the decision to sell.

Q: What are the potential risks that could affect the lab same-store NOI guidance, and why haven't you raised it yet? A: Peter A. Scott, CFO, explained that the biggest headwind is the occupancy decline observed from 2023 to 2024. Although they expect occupancy to increase as the year progresses, they are comparing it to the full-year number from last year. This comparison and the cautious approach to adjusting guidance amid potential market volatility are factors in their decision-making process.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.